What is Contracts on International Sale of Goods(CISG)
What is CISG
The United Nations Convention for Contracts on International Sale of Goods (CISG) is an international trade agreement adopted in 1980 at the Vienna Convention for the International Sale of Goods. Its purpose is to eliminate any ambiguity caused by different domestic laws concerning the international sales of goods. Through this agreement, international trade becomes increasingly hassle-free, and the potential for disputes is reduced. The CISG applies to contracts between companies located in different countries. It is a uniform law relating to sale of goods all over the world.
CISG is noted for its simplicity and was ratified by the United States in 1988, which in turn prompted other countries to ratify the convention. The laws within CISG supersede domestic trade laws. Even if CISG is not mentioned specifically within a contract between two companies in countries that have ratified the convention, the companies are bound by the agreement. In order to have parts of the convention excluded, the contract has to explicitly mention the convention or the parts of it that parties have adopted this agreement.
The CISG went into effect on January 1, 1988, with the United States as a party. Most Western countries are now signatories to the CISG
Significance of CISG
The CISG can be both a discretionary and mandatory set of rules. It is discretionary when both parties agree to be bound by its rules; it has mandatory application when the parties do not choose to use it but become bound to it by virtue of its automatic application. As a result of the mandatory application of the CISG, most international sale of goods contracts with parties in western countries will be subject to the CISG, unless specifically excluded in accordance with the CISG's terms.
One of the main benefits of CISG is its unified code of rules and regulations, making importing and exporting and other facets of international trade easier. Instead of dealing with the domestic laws for international trade in several foreign countries, companies can readily apply CISG. The convention is also a great way to build trust. Domestic laws within a foreign country can be interpreted in different ways, while the interpretations of CISG are static.
METHODS USED IN RESOLVING DISPUTES RELATING TO CISG
Litigation, arbitration and mediation are some of the methods used for resolving disputes relating to CISG. But the most preferred method is Arbitration.
Under the CISG, the buyer must examine the goods as soon as practicable and notify the seller of any lack of conformity within a reasonable time after a defect has been discovered, or at the latest, within 2 years of delivery. Failure to conduct this examination or make the complaint forfeits the buyer's right to reject the goods and, more significantly, the right to claim damages or a price reduction. The notice must be sufficient to specify the nature of the defects. The UCC also contains provisions that allow the buyer to refuse deliveries of nonconforming or defective goods. These remedies are known as "rejection" and "revocation of acceptance" while they are referred to as "avoidance of the contract" under the CISG. In both cases, these terms refer to a party's right to cancel contract.
The following are the instances where the CISG provisions apply:-
According to art.1,
(1): "This Convention applies to contracts of sale of goods between parties whose places of business are in different States;
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law of a Contracting State"
Before they conclude the contract, the parties must be aware of the fact that the headquarters are in different states. Contracting states, in the sense of the CISG, means the signatory states (art.91).
According to Article 11 of CISG: "A contract of sale need not be concluded in or evidenced in writing and is not subject to any other requirement as to form. It may be proved by any means, including witness.” However it is highly recommended, even more than in the case of a domestic contract, that be included in the contract.
Currently there are 73 signatory countries to this convention. India is not a signatory to the convention for Contracts on International Sale of Goods (CISG).
The provisions in the CISG attempt to facilitate the successful completion of an exchange of international goods by discouraging contractual breakdowns, even when events go awry. In this respect, the CISG goes far beyond the legal architecture of the Universal Commercial Code (UCC). Many provisions encourage, or even require, communication and reasonable conduct between the parties to resolve problems before a total contractual breakdown. In this respect, the CISG promotes freedom of contract over the regulation of private international behavior. In doing so, it allows businesspersons to operate more efficiently in the growing international marketplace by replacing potentially litigious legal regimes, such as the UCC, with a set of laws that allows for self-regulation.