The United Nations Convention on Contracts for the International Sale of Goods – PART 1 What does it mean and how does it affect Texas businesses?
The United Nations Convention on Contracts for the International Sale of Goods (CISG) is an international treaty providing a uniform international sale law for buyers and sellers of goods with places of business in different Contracting States. The CISG will also apply if only one party to the transaction is located in a Contracting State, if the terms of the contract, or operation of applicable “conflicts of laws” provisions, specifies that the Contracting State’s laws will govern the transaction. The CISG was initially adopted by 11 countries in 1988, including the United States. It has been subsequently ratified by more than 60 additional countries,excluding, notably, the United Kingdom and India. Countries that have ratified the CISG are referred to as “Contracting States”.
The purpose of the CISG is to provide a uniform regime for contracts for the international sale of goods, thereby introducing certainty and confidence in commercial exchanges. The idea is that such certainty would increase the volume of international trade, for the benefit of all Contracting States. In furtherance of that goal, the drafters of the CISG provided that the terms of the CISG are deemed to supersede the laws of the Contracting States with respect to sales transactions covered by the CISG, unless the application of the CISG is expressly excluded.
In other words, if you are a located in Texas, for example, and engaged in buying goods from, or selling goods to, a party located in another Contracting State, the terms of that transaction are likely governed by the CISG, even if the contract states that the laws of another jurisdiction (such as Texas) apply — unless the contract governing the transaction specifically says that the CISG does notapply. In my experience, many Texas businesses engaged in international sales transactions, if not most, have never heard of the CISG and do not realize that these transactions are governed by the CISG — until a problem arises.
What are the implications of the CISG for a Texas-based business involved in international sales transactions? When is it appropriate to specify that the CISG does not apply to a particular transaction — and how is that accomplished? We’ll explore those answers to those questions in part 2 of the article.