Cisg Vs Domestic Law: How Far Does It Reach?

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is a binding agreement or contract between nations. It establishes a set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different countries.

The CISG does not apply to contracts to provide services alone. Generally, it does not apply to sales of goods bought for personal, family or household use.

The CISG can apply to contracts between domestic corporations, if their relevant places of business are in different Contracting States.

Courts are facing the task of deciding whether the CISG preempts the respective right stemming from domestic law.

The CISG does not preempt claims sounding in tort.

The CISG does not preempt a private contract between parties; instead, it provides a statutory authority from which contract provisions are interpreted, fills gaps in contract language, and governs issues not addressed by the contract.

Exclusion of the CISG by choice of the law of a non-Contracting State

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is a binding agreement between nations that establishes a set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different countries. The CISG applies to contracts of sale of goods between parties whose places of business are in different states when the states are contracting states or when the rules of private international law lead to the application of the law of a CISG contracting state.

Article 6 of the CISG states that the parties may exclude the application of the CISG or derogate from its provisions or effects. A choice-of-law clause indicating a domestic code or statute is generally considered a sufficiently clear indication of intent to exclude the CISG. However, the CISG Advisory Council (CISG AC) notes that a choice of the law of a non-contracting state has been upheld as an implicit exclusion.

The CISG AC further clarifies that a choice of law clause indicating a domestic code or statute is sufficiently clear to indicate an intent to exclude the CISG. This is because the CISG is part of the law of contracting states, and a choice of a non-contracting state's law would generally indicate a clear intention not to be bound by the CISG.

In the case of *Asante Technologies, Inc. v. PMC-Sierra, Inc.*, the court held that the CISG can apply to contracts between domestic corporations if their relevant places of business are in different contracting states. The CISG can also apply to contracts between parties whose respective "home" countries are signatories to the CISG, even if they choose to apply the law of the country of one of the parties.

However, the CISG does not apply to contracts to provide services alone, sales of goods bought for personal, family, or household use, sales of ships, vessels, or aircraft, or contracts covering the sale of electricity.

To exclude the application of the CISG, parties can include a clause in their contract, such as "The provisions of the United Nations Convention on the International Sale of Goods shall not apply to this Agreement."

Exclusion of the CISG by choice of the law of a territorial unit of a Contracting State

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is a binding agreement between nations that establishes a set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different countries.

The CISG does not apply to contracts to provide services alone, or to sales of goods bought for personal, family or household use.

The CISG can apply to contracts between domestic corporations, if their relevant places of business are in different Contracting States.

The CISG forms part of the legal order of the Contracting States. It is the substantive law for international sales contracts. However, there is still some scholarly disagreement as to how this treaty interacts with choice-of-law clauses.

The choice of the law of a territorial unit of a Contracting State, such as a U.S. state, could be understood as selecting the domestic sales law of the chosen state, e.g., New York’s Uniform Commercial Code (UCC), and excluding the Convention. Alternatively, it could be understood as designating the law that would be applicable in the chosen state, irrespective of its international, federal, or state origin.

The majority of contract drafters in the U.S. seem to subscribe to the former understanding and expect the domestic sales law of the chosen state to apply. U.S. courts, by contrast, have mostly adopted the latter interpretation, holding that the CISG is part of federal law and thus applies throughout the United States. The mere choice of the law of a state does not suffice to conclude that the parties wanted to exclude the Convention.

Courts and tribunals apply a strict standard for intent to exclude in relation to ex ante exclusions. Awareness of the CISG’s applicability is not considered relevant in the context of ex ante choice of law clauses.

A minority of cases and commentators view the selection of the law of a territorial unit or province within a Contracting State as an exclusion. However, most courts and tribunals recognize that as part of the law of the Contracting State, the CISG is, by extension, the law of its territorial units.

A clear choice of non-CISG domestic law would evince an intent to exclude the CISG, but whether this is achieved by reference to a particular domestic statute or code in a choice of law clause has been controversial.

A choice of a contractual term associated with a particular jurisdiction is not considered a choice of that jurisdiction’s law, nor an implicit exclusion of the CISG.

A jurisdiction clause will not imply exclusion of the CISG where the forum selected is located in a Contracting State.

The CISG allows the exclusion of the application of the Convention as a whole or the derogation of almost all provisions by explicit or implicit party agreement.

The requirements for an implicit exclusion of the CISG are not everywhere easy to meet. Some courts require a clear expression of intent to exclude the CISG. Thus, the mere choice of the law of a Contracting State is not regarded as an implicit exclusion of the CISG as the CISG forms part of each domestic law of a Contracting State. Likewise, the choice of two laws of two territorial units bound by the CISG (by declaration of Article 93 CISG), neither excludes the CISG.

The CISG offers the possibility to declare not to be bound by part II or III of the CISG (Article 92) or that Article 1(1)(b) CISG is not applicable. Furthermore, Contracting States can limit the application in relation to certain other States (Article 94) or within their borders for certain territorial units (Article 93).

Exclusion of the CISG by choice of a domestic code or statute

The CISG is a treaty that has been ratified by 81 countries and is intended to provide a uniform body of international sales law. The CISG automatically applies to any contract for the sale of goods between parties whose principal places of business are in different CISG countries. However, parties may agree to "opt-out" of the CISG.

A common mistake made by businesses and attorneys is to assume that a standard choice of law clause is sufficient to opt out of the CISG. However, selecting the law of a particular state will not bar the application of the CISG as the CISG qualifies as American federal law and pre-empts or supersedes state law, including the UCC.

Instead, courts have held that the choice of law provision must expressly exclude the application of the CISG. For example, the CISG Advisory Council has opined that a clear intent to exclude the CISG should be inferred from an express exclusion of the CISG, the choice of the law of a non-contracting state, or the choice of an expressly specified domestic statute or code that would otherwise be displaced by the CISG's application.

Differences between the CISG and the UCC

Failing to appreciate the requirement to expressly exclude the CISG can result in an unintentional application of the CISG, which differs from the UCC in several material aspects. For example, the CISG does not contain an equivalent to the statute of fraud or the parol evidence rule.

Exclusion of the CISG by choice of a contractual term

The CISG can be excluded by a contractual term, but the exclusion must be clear and explicit. The CISG Advisory Council has opined that a clear intent to exclude the CISG should be inferred from the express exclusion of the CISG, the choice of the law of a non-contracting state, or the choice of an expressly specified domestic statute or code that would otherwise be displaced by the CISG's application.

The choice of the law of a contracting state, without more, will not exclude the CISG as it forms part of the law of the contracting state. However, the choice of a territorial unit or province within a contracting state, such as a US state, may be seen as an exclusion. A clear choice of non-CISG domestic law would also evince an intent to exclude the CISG.

The CISG Advisory Council has also opined that a choice of law clause indicating a domestic code or statute may be seen as evincing a clear intent to exclude the CISG. This is because the CISG is incorporated into the domestic law of contracting states, and so a reference to a domestic code or statute may be seen as a reference to the CISG. However, this approach has been criticised, and it has been suggested that a reference to a specific domestic sales law is required to exclude the CISG.

The choice of a contractual term associated with a particular jurisdiction will not constitute a choice of that jurisdiction's law, nor will it be an implicit exclusion of the CISG.

Examples of the CISG being excluded by choice of a contractual term

• A clause providing for the "exclusion of UNCITRAL law" was upheld as manifesting an intent to exclude the CISG.
• Choice of law of a non-contracting state has been upheld as an implicit exclusion.
• A choice of the Uniform Commercial Code or California Commercial Code has been held to be an implied exclusion.
• A choice of the law of a contracting state, followed by an express exclusion of the CISG, has been held to exclude the CISG.
• A reference to INCOTERMS has been held to be insufficient to demonstrate intent to exclude the CISG.

Exclusion of the CISG by conduct of proceedings

The CISG Advisory Council (CISG-AC) has published an opinion on the interpretation of the CISG, which is highly relevant to the question at hand. The CISG-AC is an academic initiative by the Institute of International Commercial Law at Pace University, New York, and the Centre for Commercial Law Studies, Queen Mary University, London. The CISG-AC's main goal is the promotion of uniform interpretation of the CISG and, to further this aim, the Council prepares and publishes interpretations of complex or controversial provisions of the CISG. Even though these interpretations do not count as 'official interpretations', they have been referred to by courts in contracting states and are held in high regard by other CISG commentators.

The CISG-AC has published an opinion on the interpretation of Article 6 of the CISG, which deals with the exclusion of the CISG. The CISG-AC opinion states that the parties to the international sales contract, where the Convention applies, may agree to exclude its application in the course of litigation, though two prerequisites must be fulfilled. First, the Convention may be excluded during litigation, on the condition that this is allowed under the particular procedural law of the lex fori. Second, as stated before, the parties must both intend to and reach an agreement to exclude the Convention. Consequently, an exclusion must amount to a mutual and conforming agreement, or an agreement to modify the previous agreement in this respect: accordingly, an agreement to exclude the Convention, which would meet the requirements of Articles: 6, 11, 14–24, and 29 of the CISG.

The CISG-AC opinion also states that the parties' intention to exclude may not be inferred merely from a failure by one or both parties to plead or present arguments based on the CISG. This applies irrespective of whether or not one or both parties are unaware of the CISG's applicability.

The CISG-AC opinion also provides that the domestic principles of waiver should not be used to determine the parties' intent to exclude the CISG.

Frequently asked questions