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Reproduced with permission of the American Bar Association from 29 International Lawyer 525-554 (1995)

excerpt from

Changing Contract Practices in the Light of the United Nations Sales Convention: A Guide for Practitioners

Peter Winship [*]


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Revising Contract Forms and Practices

Sellers and buyers are not bound to accept the "default settings" found in the Convention. Article 6 of the Convention explicitly endorses the principle of freedom of contract:

Article 6

"The parties may exclude the application of this Convention or, subject to article 12, derogate or vary the effect of any of its provisions."

Parties to a sales contract may allocate obligations and risks between themselves without having to worry about whether the contract terms are consistent with the Convention.

With few exceptions, contract forms drafted before the Convention came into force may continue to be used. Professor E. Allan Farnsworth has concluded, for example, that "[a]lthough a careful review is necessary, drafters likely will not need to engage in thorough rewriting or oust the Convention entirely by choosing another law."[26]

A. Excluding (or Including) Application of the Convention

1. Excluding the Convention

Having determined that the Convention is applicable to a particular contract, an enterprise may ask how to exclude application of the Convention The enterprise should keep two general points in mind: (a) the exclusion should be explicit because some commentators question whether the Convention may be excluded by implication; and (b) the contract term should both exclude application of the Convention and state what law is to govern.

Sample clauses

The rights and obligations of the parties under this agreement shall not be governed by the provisions of the 1980 United Nations Convention on Contracts for the International Sale of Goods; rather, these rights and obligations shall be governed by the law of the State of Connecticut, including the Uniform Commercial Code as enacted in Connecticut.

This Contract shall be governed by and construed under the laws of the Commonwealth of Pennsylvania, not including the 1980 United Nations Convention on Contracts for the International Sale of Goods.[27]

The validity and performance of this Agreement shall be governed by the internal law of the state of California without regard to its rules on conflicts of law. The parties exclude the application of the 1980 United Nations Convention on Contracts for the International Sale of Goods if otherwise applicable. . . .[28]

This Agreement shall be construed and governed in accordance with the Laws of the State of ____ applicable to agreements entered into in ____ between residents of ____ , [insert if international] and without reference to the U.N. Convention on Contracts for the International Sale of Goods.[29]

1051.18 Disclaimer of UN Convention on Sale of Goods. PURSUANT TO ARTICLE 6 OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (UN CONVENTION), THE PARTIES AGREE THAT THE UN CONVENTION SHALL NOT APPLY TO THIS AGREEMENT.[30]

Illustration. Importer has its place of business in Virginia; Exporter has its place of business in Argentina. (Argentina is a party to the Convention.) Exporter and Importer enter into an international sales contract. The written contract provides: "This contract shall be governed by the law of Virginia." Importer now asks whether the Convention has been effectively excluded? The federal Constitution clearly requires Virginia courts to enforce the Convention as the supreme law of the land.[31] Reference to the "law of Virginia" is, therefore, ambiguous. When the parties used the phrase, however, they may have intended to have domestic sales law govern rather than the Convention. Importer may be able to persuade a court of this intent, but why force a law suit when it could be avoided by express exclusion of the Convention?

2. Making the Convention Applicable When It Would Not Otherwise Apply

The Convention is silent about whether parties may choose to have the Convention apply to transactions that do not fall within its sphere of application. The Convention might not apply because the transaction is not "international" within the scope of article 1(1) or because the transaction or the property involved are expressly excluded from the Convention's coverage. Unless contrary to public policy, courts should enforce the parties' choice. It may be contrary to public policy, however, to apply the Convention to consumer sales or sales on execution of judicial process.

Sample clauses

The rights and obligations of the parties under this agreement shall be governed by the United Nations Convention on Contracts for the International Sale of Goods.

The rights and obligations of the parties under this agreement shall be governed by the United Nations Convention on Contracts for the International Sale of Goods notwithstanding that the rules of private international law (choice-of-law rules) might otherwise lead to the application of some other law.

Illustration. Importer in Illinois enters into a sales contract with Buyer in Nevada for the sale of computer equipment imported by Importer from Sweden pursuant to a contract governed by the Convention. The Importer-Buyer sales contract provides: "This contract shall be governed by the United Nations Convention on Contracts for the International Sale of Goods." Will an Illinois (or Nevada) court enforce this choice of law? The Convention does not apply by its own terms because the sale is not between parties whose places of business are in two different Contracting States. A court should, however, enforce the agreement. The contract term may be read as incorporating the Convention's provisions by reference.[32] Query, however, whether an Illinois or Nevada court will enforce all the Convention's provisions, including its remedy provisions?

3. Designating the Branch with the Closest Relationship

Inclusion or exclusion of the Convention may be accomplished indirectly. When an enterprise has more than one branch it may wish to specify in its agreements the branch that has the closest relationship to the contract or its performance.[33] By doing so when the facts allow, the enterprise may designate indirectly whether it is deemed to act from a Contracting State for the purposes of determining whether the Convention applies to its sales contracts. Even if the parties agree on whether the Convention should apply, the addition of such a clause may be useful to reinforce the parties' agreement.

Sample clause

The parties agree that Seller will perform this contract through its branch in [the United Kingdom] and that consequently this branch has the closest relationship to this contract.

4. Derogating from the Convention

When parties to a sales contract agree to specific contract terms, their agreement will be enforced even if the terms differ from Convention provisions (i.e., the contract derogates from the Convention). If parties agree, for example, to require a buyer to give notice of a defect no later than one year after delivery, this term will be enforced even though the Convention provides for a two-year period in the absence of agreement.[34]

B. Choice of Law, Forum, and Language Clauses

Even if the parties agree that the Convention should govern their sales contract they should consider the advisability of including choice-of-law, choice-of-forum, and choice-of-language clauses in their contract.

1. Choice-of-Law Clauses

Gaps in the Convention may be filled by reference to applicable domestic law.[35] To fill these potential gaps it may be advisable to select a back-up domestic law.

Sample clauses

Notwithstanding that the United Nations Convention on Contracts for the International Sale of Goods governs the rights and obligations of the parties to this contract, disputed issues not settled by the Convention or by the general principles on which it is based shall be resolved by application of the law of the State of Texas, including the Uniform Commercial Code as enacted in Texas.

This Contract shall be governed by and construed under the 1980 United Nations Convention on Contracts for the International Sale of Goods, or, to the extent that the Convention does not settle the rights and obligations of the parties, the law of the State of Delaware.[36]

This Contract shall be governed by and construed under the law of the State of Delaware including, when it is, by its own terms, applicable, the 1980 United Nations Convention on Contracts for the International Sale of Goods.[37]

2. Choice-of-Forum Clauses

The Convention does not address what forum is to hear disputes that arise from an international sales contract governed by the Convention. Parties frequently choose to arbitrate these disputes, but they may also provide in their sales contract that a particular judicial forum will (perhaps exclusively) hear their disputes. The enforceability of these contract terms will be governed by non-Convention law.

3. Choice-of-Language Clauses

The official text of the Convention is equally authentic in each of the six U.N. languages: Arabic, Chinese, English, French, Russian, and Spanish. In addition, the Convention has been translated into other languages, including German and Italian. Attorneys in the United States are unlikely to be fluent in all of these languages. Under a generally accepted rule of public international law, differences of meaning in official texts should be reconciled by looking to the object and purpose of the Convention provision.[38] This rule may be difficult to apply in practice. One way to limit the risk of surprise is to provide that the English language (or some other language) version shall govern in case of differences in the six authentic language versions.

Sample clauses

When a comparison of the authentic texts of a provision of the United Nations Convention on Contracts for the International Sale of Goods reveals a difference of meaning that cannot be reconciled by looking to the object and purpose of the Convention provision, the English-language version shall prevail.

The rights and obligations of the parties under this agreement shall be governed by the authentic English-language text of the United Nations Convention on Contracts for the International Sale of Goods to the exclusion of the other authentic language versions.

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Go to entire text of Winship commentary


FOOTNOTES

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*James Cleo Thompson Sr. Trustee Professor of Law, Southern Methodist University, Dallas, Texas.

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26. E. Allan Farnsworth, Review of Standard Forms or Terms under the Vienna Convention, 21 Cornell Int'l L.J. 439, 447 (1988); see also B. Blair Crawford, Drafting Considerations under the 1980 United Nations Convention on Contracts for the International Sale of Goods, 8 J.L. & Com. 187 (1988).

27. Crawford, supra note 26, at 193.

28. Davis, supra note 20, at 386.

29. Charles I. Weissman, Counselling the Small Business, in PLI, Representing the Small Business para. 8.8 (1993).

30. Ronald E. Myrick & Penelope Smith Wilson, Licensing Rights to Software, in PLI, Technology Licensing and Litigation 1993, at 585 (1993).

31. U.S. Const. art. VI.

32. Cf. U.C.C. § 1-105, cmt. 1 ("an agreement as to a choice of law may sometimes take effect as a shorthand expression of the intent of the parties as to matters governed by the agreement, even though the transaction has no significant contact with the jurisdiction chosen").

33. See CISG art. 10(a).

34. CISG art. 39(2).

35. CISG Art. 7(2) ("Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.").

36. Crawford, supra note 26, at 193-94.

37. Id. at 194.

38. Vienna Convention on the Law of Treaties art. 33(4) (A/CONF.39/27) (1969).

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Pace Law School Institute of International Commercial Law - Last updated August 16, 1999
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