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The CISG: a fair balance of interests around the globe

Today the CISG has 84 member states. Nine out of the ten leading trade nations are CISG Member States, the United Kingdom being the sole exception. Already today the CISG potentially governs more than 80% of the world trade. By grouping the member states into the three categories of developed, transitioning and developing countries we find that each category roughly accounts for one third of the whole number of member states. This in itself suggests that the CISG is a suitable legal instrument for parties from countries around the globe without privileging the one or the other.

What features make the CISG such a unique international convention? The CISG tackles issues of the often-cited Common law-Civil law divide. The CISG achieved to reach successful compromises between the different approaches to legal problems in many core areas of sales law. Today it may be fairly called the “lingua franca” of sales law. Furthermore, the CISG balances the interests of the seller and the buyer in a better way than any domestic legal system. Finally, the CISG has a simple and lucid structure that makes it easily understandable to anyone.

Two core areas where the CISG aspires a fair balance of interests are the rules on conformity of the goods and the possible remedies for a breach of contract.

The CISG adopts a very broad notion of conformity. The key concept laid down in Article 35 CISG treats any defect in quality, quantity, kind as well as packaging alike. The starting point to determine the conformity of the goods is the contract itself. It is up to the parties to clearly specify the standard that the goods have to live up to. Such specifications make the expectations of both parties very predictable.

If the parties have not agreed to specific features in their contract the CISG provides for a balanced default system based on objective criteria. First of all, the CISG requires the goods to be fit for any particular purpose the buyer made expressly or impliedly known to the seller at the time of the conclusion of the contract. This leaves ample room to consider the individual facts of each case and to adequately balance the interests of the buyer and the seller. Furthermore, the buyer must have reasonably relied on the seller’s skill and judgement. This formula additionally provides the flexibility to take into account if the parties come from different parts of the world.

Two core areas where the CISG aspires a fair balance of interests are the rules on conformity of the goods and the possible remedies for a breach of contract.

Furthermore, the CISG has introduced a provision containing a notice requirement that is unknown to any legal system. In order to meet the concerns of developing countries the buyer is not precluded from any remedies if he manages to demonstrate a reasonable excuse for not notifying the seller about a lack of conformity. Although the buyer may not claim loss of profit in such a case, he still is entitled to all other remedies, namely the reduction of the purchase price and damages. Thus the buyer is granted at least minimum remedies to make up for the non-conformity of the goods.

Analysing the provisions on examination and notice reveals the CISG’s quest for fairly balancing the opposing interests of seller and buyer. Establishing an examination and notice requirement is, in the first place, in the interest of the seller. However, if the seller does not deserve such a protection the scale tips towards the buyer. And if the buyer itself is not blameworthy for not giving notice the loss that has ultimately been caused by the seller’s breach of contract is distributed between both parties.

The CISG’s simplicity of structure and balancing of interests is particularly evident in its remedy system. It abandons the common differentiation made in many Civil law countries between impossibility, late performance and defective performance and its subtle and often crucial differences which are not suited to today’s international business needs anymore. Instead the CISG follows the breach of contract approach of Common law descent without, however, preserving the intricacies that can be found in these countries. Rather, the CISG develops a remedy system of its own with clear rules being perfectly suited for international trade. Systematically, the provisions on duties of the seller are followed by the buyer’s remedies in case of breach of contract by the seller. Likewise the duties of the buyer are followed by the seller’s remedies. Avoidance of the contract requires a fundamental breach of contract but no fault. However, in case of an impediment beyond the sphere of risk of the breaching party, the CISG provides the possibility of an exemption.

The CISG may be called a true story of worldwide success which is not only proven by the ever increasing number of member states around the world but also by the fact that during the last 20 years the CISG has served as a decisive blueprint for law-making in the area of contract law on the international as well as on the domestic level. It is most of all its remedy mechanism that makes the CISG such an attractive international sales law. As has been shown, the rules of the CISG are flexible enough to accommodate the interests of the seller as well as the interests of the buyer, whatever economy in the world they may be located.

Feature image credit: ‘Doors on Life’, by GlynLowe. CC-BY-2.0 via Flickr.

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