INTERNATIONAL SALES • Conflict rule: • Obligational aspects: see Conflict rules; but see Art. 1 CISG • Transfer of property: lex rei sitae • Degree of harmonisation : • CISG, Succesful, limited to international business sales of movables • Applicable national law: domestic sales and non-business sales • EU law has harmonised some aspects of consumer sales (and very few aspects of other sales) • Result: fragmentation of sales law • But influence of CISG on developments outside its scope is huge.
SALES – UNIFORM LAWS • Predecessor: ULIS & ULFIS (Hague conventions 1964, Unidroit) • Replaced by Vienna Sales Convention 1980 (Uncitral, 1 convention), in force 1988, in 2011 already 77 countries (map outdated, i.a. Japan joined)
CISG – SCOPE OF APPLICATION • Ratione materiae: A « contract for sale » requires an obligation to transfer property and one to pay a price (monetary consideration) (no barter) • Art. 2: This Convention does not apply to sales: • (a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; • (b) by auction; • (c) on execution or otherwise by authority of law; • (d) of stocks, shares, investment securities, negotiable instruments or money; • (e) of ships, vessels, hovercraft or aircraft • (f) of electricity. • Only corporeal movables; incl. gas
CISG – MIXED CONTRACTS • Art. 3 on mixed contracts: • (1) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. > “substantial part of materials”: criterion is economic (value); plans & know how are as such not materials (CISG advisory council Opinion n° 4) • (2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services. > if preponderant part is labour, services (turn key etc.) > again “economic” criterion • Distribution / Agency agreements ? - The framework agreement ≠ actual sale
CISG – TERRITORIAL APPLICATION • Ratione loci: only « international sales », more specifically in 2 cases : a) Direct application: parties whose places of business are in different States and both States (of place of business) are Contracting States (i.e. have ratified CISG), or b) Indirect application: when the rules of private international law of the forum lead to the application of the law of a Contracting State (possible reservations, Art. 95 CISG) (includes the choice of the law of a contracting state, and usually when sellers place of business in a contracting state, for the EU see Rome-I-Regulation) No other requirement (as e.g. cross-border delivery or payment) Problem of interpretation of place of business (comp. Rome-I-Regulation) Exception in para (2): different place of business not apparent More than one place of business > Art. 10 -
CISG – OPT-OUT & DEROGATION Art. 6 : The parties may: • exclude the application of this Convention (opt-out - domestic law then applies, incl. an optional sales law if domestic law so allows) • or • derogate from or vary the effect of any of its provisions (remaining CISG articles apply) (no mandatory law in CISG)
CISG – REGULATED MATTERS • Regulated matters : • Only law of obligations, no property law. • No procedural law, esp. burden of proof • Only formation (incl. question of writing), performance, non-performance and associated questions. • Does include passing of risk. Some (deliberate) lacunae such as price revision, interest rate, ... • Some CISG provisions not applicable in certain states because of reservations made
CISG – REGULATED MATTERS • Matters of the law of obligations NOT Regulated : • legal capacity • validity and invalidity of the contract (see next slide) • damage consisting of death or personal injury • prescription (separate Convention NY 1974 as modified Vienna 1980) • assignability of rights and effect of assignment in relation to the assigned debtor (Assignment & Factoring Conventions); subrogation; • set-off; • plurality of debtors; • authority of agents (1983 Unidroit Convention, not in force, 5 ratifications) • Choice of law useful for matters not regulated
CISG – REGULATED MATTERS • Validity is not regulated by CISG, including • legal capacity • defects of consent, other invalidities (Unidroit Convention without success; see general contract law principles) • invalidity of specific clauses (nullity of penalties, exemption clauses, unfair clauses ...) • (except.: writing requirement falls under CISG, art. 11) Discussion about negative reflex effect of CISG provisions on possibility to invoke invalidity. esp. non-conformity and mistake/misrepresentation (comp. Also UPICC art. 3.7)
GENERAL CONTRACT LAW • Conflict rules: • Most national legal systems have no specific rules for cross-border transactions or international contracts in general • International instruments ? Some Conventions on specific transactions, eg factoring (on assignment) • Other instruments - Soft law and some model laws on specific questions: • Soft law: Unidroit « Principles », PECL (Lando-commission), possible Optional instruments*. Conflict rule will determine whether accepted as « law » or merely as contract clauses • Model laws, e.g. Uncitral model law electronic commerce; Draft Common Frame of reference (DCFR) • *Examples of existing optional instruments: CISG, European trademark, societas europea, international last will, european procedures.
UNIDROIT PICC • Unidroit Principles for International Commercial contracts • « Principles », i.e. no Convention or Model Law • First edition 1994 • Enlarged edition 2004 • Endorsed by Uncitral 2007 • Intended field of application: international commercial contracts • Regulated matters: Formation (incl. Representation), Validity (defects of consent, specific clauses), Interpretation, « Contents », Performance Non-performance and remedies, Set-off, Contractual Assignment of rights, Transfer of obligations, Limitations of Actions (Prescription) • Additional chapters 2011: conditions, other grounds of invalidity, plurality of debtors or creditors, restitution after invalidity • Not regulated: non-contractual assignment
UPICC PREAMBLE • Preamble: Purpose of the Principles) • These Principles set forth general rules for international commercial contracts. • They shall be applied when the parties have agreed that their contract be governed by them. • They may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like. • They may be applied when the parties have not chosen any law to govern their contract. • They may be used to interpret or supplement international uniform law instruments. • They may be used to interpret or supplement domestic law. • They may serve as a model for national and international legislators. • See also 1.4. : applicable insofar as the conflict rule allows it
CISG – INTERPRETATION AND GAP-FILLING (1) • First question: matter governed by CISG or not • If not governed by CISG = « external » gap > national law applicable by virtue of the conflict of law rules • If governed by CISG: either interpretation or « internal» gap • Art. 7 (1) CISG – Autonomous interpretation - elements: internationality, need for uniformity, promotion of good faith in international trade - no duty to act (perform) in good faith ! Good faith only for interpretation of CISG itself
CISG – INTERPRETATION AND GAP-FILLING (2) • Art 7 (2) CISG – Gap-filling (for internal gaps) • 1° Usages and practices (Art. 9) • 2° Gap can be filled according to Art. 7, 2 on the basis of the « underlying principles » • 3° Gap cannnot be filled on the basis of underlying principles / in the absence of such principles, applicable national law (e.g. interest rate, ...) • Examples: • Place of payment of compensation: internal gap • Electronic communication as writing ? Internal gap. See CISG Advisory Council n° 1: yes. • Interest rate: gap; disputed whether internal or external gap • Hardship: disputed, see discussion further
UPICC– INTERPRETATION AND GAP-FILLING • Art. 1. 6 (Comp. 7 CISG) – Autonomous interpretation (Interpretation and supplementation of the Principles) (1) In the interpretation of these Principles, regard is to be had to their international character and to their purposes including the need to promote uniformity in their application. (2) Issues within the scope of these Principles but not expressly settled by them are as far as possible to be settled in accordance with their underlying general principles. • But ALSO duty to act in good faith: Art. 1.7 (Good faith and fair dealing) (1) Each party must act in accordance with good faith and fair dealing in international trade. (2) The parties may not exclude or limit this duty. • And art. 1.9 Usages and practices
CISG – GENERAL PROVISIONS JURIDICAL ACTS (1) • No duty to act according to good faith (see Art. 7) • How intention is determined – interpretation of acts : Art. 8 - (1) intent known or not unaware of > intent • (2) subsidiary: reasonable person, taking into account all circumstances , incl. later conduct (can be excluded: « No Oral Modification » clause in art. 29, 2 CISG, however, estoppel can apply to that clause) • Not incorporating plain meaning rule, parol evidence rule (CISG AC Opinion n° 3) • Usages and practices – Art. 9
CISG – GENERAL PROVISIONS JURIDICAL ACTS (2) • No formal requirements for formation or evidence – Art. 11 But reservation can be made (art. 12) and was made by several countries • Modification: by mere agreement, Art. 29 (but see 29 II for « no oral modification clause ») • Merger clause or Four Corners: is a deviation from CISG default rules • Other general rules can be deduced from specific ones e.g.: when notice becomes effective (art. 24, 26, exception in 27), meaning of silence or inactivity (art. 18,1), etc.
UPICC– GENERAL PROVISIONS JURIDICAL ACTS • Art. 1.1: Freedom of contract • Art. 1.2: No form required (unless ...) • Art. 1.3: Binding character of contract • Art. 1.7: Duty to act according to good faith & fair dealing; art 1.8. Estoppel (venire contra factum proprium) • How intention is determined – interpretation of acts: Art. 4.1 and 4.2 • (4.1. for contracts, 4.2 for unilateral acts) – Quid merger clause – No oral modification clause • Usages and practices – Art. 1.9 • Rules on notices in 1.10
E-COMMERCE • Uncitral model law 1996 (1998), i.a. - « Data messages » cover EDI, e-mail, telegram, telex and telecopy - Art. 5: Information shall not be denied legal effect merely because it is in the form of a data message - Art. 6: Writing < accessible so as to be usable for subsequent reference - Art. 7: Signature - Art. 8: Whether a data message can be an « original » - Art. 13: Attribution of data messages (who is the sender) - Art. 15: (1) time of dispatch and (2) of receipt • CISG Advisory Council Opinion No. 1 • UN Convention on the Use of Electronic Communications in International Contracts 2005 (not in force) • EU Directive 1999/93 on electronic signatures: - different degrees of e-signature; legal effects • EU Directive 2000/31, framework directive e-commerce - Art. 9 Treatment of contracts: equivalence (some exceptions) - Rules relating to information duties, conclusion contract, receipt, ...
CISG – FORMATION OF CONTRACT (1) • Formation of the contract by offer and acceptance (Mirror model) • Offer: Art. 14 – definition/minimum content. Differs from proposal: addressed to specific person(s); sufficiently definite (goods and price determinable, see art. 55 for price determination); intention to be bound if accepted • «effective» (not necessarily irrevocable) when it reaches the offeree (unless withdrawal reaches earlier or at the same time) (Art. 15) • But still revocable (until dispatch of acceptance), unless irrevocability indicated (eg period for acceptance) or reasonably relied upon (Art. 16) • If accepted during period of validity (and before revocation) (rules concerning the calculation of the period in Art. 20, 21) a contract is formed when the acceptance becomes effective (Art. 23)
CISG – FORMATION OF CONTRACT (2) • Formation of the contract by offer and acceptance • Acceptance: not by mere inactivity (Art. 18) • effective when it reaches the offeree; possibly already when an act is performed; • Modified acceptance (Art. 19): do they « materially» alter the terms of the offer ? Yes > counter-offer; no > accepted with modifications unless protest. • No special rules for battle of forms. Case law diverges (art. 19 >< knock out)
UPICC– FORMATION OF CONTRACT • Very similar to CISG • 2.1.1.: conclusion of the contract by offer and acceptance or byconduct of the partiesthat is sufficientto show agreement. • Rules on offer and acceptance similar to CISG • Art. 2.1.12 (Writings in confirmation) • Art. 2.1.14 (Contract with terms deliberately left open) • Art. 2.1.17 and 2.1.18 on merger clauses and clauses on modification in a particular form. • Going beyond CISG: Art. 2.1.15 on liability for negotiations (or breaking off) in bad faith • Specificrulesforbattle of forms (2.1.22) (NB. Comparativelaw: usuallyknock out; Engl = last shot; NL = first shot)
UPICC– AUTHORITY OF AGENTS • Not in CISG , inspired by Unidroit Convention (not in force) • Deals with authority, i.e. external relationship • Not internal relationship (e.g. agency contract) (2.2.1) • Authority by grant (express or implied) (2.2.2); authority based on belief caused by the principal (2.2.5 (b)) • Direct relationship in case of disclosed agency (2.2.3) • In principle no direct relationship in case of undisclosed agency (2.2.4) • Liability if the agent acts outside authority: positive interest (2.2.6)
UPICC– AUTHORITY OF AGENTS • Art. 2.2.7 on conflicts of interest, • Art. 2.2.9 on ratification • Art. 2.2.10 on effect of internal termination of autority
UPICC– VALIDITY (1) • Not in CISG • Deals with defects of consent giving rise to a right to avoid (4) • Negative refelex effect of rules on non-performance in Art. 3.7. Esp. important for sales (CISG rules on non-performance not displaced by UPICC rules on e.g. mistake) • Mistake(art. 3.4. and 3.5) • 4 cases of mistake (shared, caused, left in error, contract not yet relied upon) • + requirement of material difference, no gross negligence, risk not assumed or to be bourne • Error in expression or transmission: treated as mistake of the sender (3.6) • Fraud (3.8)
UPICC– VALIDITY (2) • Deals with defects of consent (cont.) • Fraud (3.8) by incorrect information or by withholding information + fraudulent intention • Threats (3.9) (comp. « violence ») • Gross disparity or excessive advantage (with abuse of circumstances) (3.10)
UPICC– VALIDITY (2) • General rules on « avoidance » and its effects (in CISG avoidance means termination; here avoidance means annullment) • Attribution of acts or omissions of third parties: 3.11 • Exercise of the right: • by unilateral declaration (3.14) • within a reasonable period (3.15) • not anymore after confirmation (3.12) • Effect= retroactive; restitution = non-contractual obligation • Possibility of damages in case of culpa in contrahendo (3.18)
CISG - SELLER’S OBLIGATIONS (1) • Art. 30 - Obligations: delivery (incl. documents), transfer of property, conformity • Obligation of delivery: • Place of performance (Art. 31) • Carriage involved : first carrier; if not and place of the goods known: place of the goods (ex works); if not: seller’s place of busines. See also Incoterms (infra). • Additional duties (Art. 32) related to specification, carriage, insurance • Time of performance (Art. 33) • Delivery of documents (Art. 34) • Duty to preserve the goods if buyer fails to take delivery (Art. 85 ff.)
CISG - SELLER’S OBLIGATIONS (2) • Obligation of conformity in respect to the goods - Art. 35 – • There is conformity only of the goods are : 1) in conformity with specifications of the contract (quantity, quality, packaging) 2) fit for ordinary purposes 3) fit for particular purpose made known to seller 4) in conformity with the qualities of the sample 5) adequate packaging • Exception: visible non-conformity at the time of conclusions (35, 3)
CISG - SELLER’S OBLIGATIONS (3) – PASSING OF RISK • Unless caused by the buyer itself, conformity has to be present at the time of passing of risk (Art. 36); • lack of conformity arising later ? Seller liable if consequence of breach, or if guarantee (to remain fit or maintain qualities for a period). Implicitly limited to 2 years unless longer contractual period of guarantee (39, 2) • Relevance of « Passing of risk » is thus 1° risk of force majeure (Art. 66); 2° time to judge conformity (or rather cause of lack of conformity) (Art. 36, 1) • When does risk pass ? As agreed; • Otherwise Art. 69: in principle at delivery; if buyer refuses to take delivery, at that time. Presupposes that the goods are identified to the contract (67, 2). • Specific rules in case of carriage of the goods (67); in case of goods sold in transit (68)
CISG - SELLER’S OBLIGATIONS (4) • Art. 38: Buyer must examine the goods within a short period (no real obligation in itself) • Art. 39 (1): Buyer must give notice of non-conformity (if unknown to seller) as soon as discovered or ought to have discovered (CISG AC Opinion 2) • Sanctions: loss of remedies (see infra) • Delivery in parts : examination of each part required • Art. 44: in case of reasonable excuse, limited remedies available (price reduction, damages)
CISG - SELLER’S OBLIGATIONS (5) transfer of property • The seller is obliged to transfer property of the goods • And to transfer them “free from any right or claim of a third party” (Art. 41) • (see additional rules on next slide) • When is the obligation fulfilled ? Requirements for an effective transfer of property not in CISG, question of (national) property law.
CISG - SELLER’S OBLIGATIONS (6) • Obligation of conformity in respect to rights requires also (Art. 41): • “free from any right or claim of a third party based on industrial property or other intellectual property” under some conditions: • a) IP right in the country of the seller or place of resale if contemplated, b) (constructive) knowledge of the seller and not of the buyer • c) not resulting from compliance with instructions (drawings etc.) of the buyer (Art. 42) • Similar duty to give notice (if unknown to seller) within a reasonable time after he has become aware or ought to have become aware of the right or claim (Art. 43). Sanction: loss of some remedies • Which remedies survive ? In case of reasonable excuse still price reduction or damages (Art. 44).
CISG – BUYER’S OBLIGATIONS • Obligations of the buyer : specify, take delivery, pay the price, examine • If the contract provides so: specify the form, measurement or other features of the goods (Art. 65) • Taking delivery (Art. 60). Place & time, see supra delivery. Buyer may refuse or accept early delivery (52, 2). Buyer may accept (and pay) or refuse excess quantity (52, 2)
CISG – BUYER’S OBLIGATIONS (2) • Payment of the price: Price not fixed nor mode of determination ? Normal price (Art. 55) Place of payment (Art. 57): seller’s place c.q. place of handing over Time: when control given to buyer, if opportunity to examine (Art. 58) concrete rule will depend on clauses (often payment against documents) Payment instruments: no provisions in CISG. See further. • Examination & notice, see supra. • Duty to preserve the goods if buyer intends to reject them (Art. 86-88)
SALES -Incoterms • « International commercial terms »: standard abbreviations, often three letter words (FOB, CIF, etc.) • Defined as usages by the ICC (sinds 1936, several revisions; since Jan 1, 2011 : version 2010 (schemes on next slides are version 2000) • Now (2011) 11 Incoterms (version 2000: 13 terms) • Each summarising obligations of the parties in relation to 10 typical points • Applicable when inserted in the contract, expressly or impliedly • Four basic categories : • C-terms : seller pays carrier to agreed destination, but does not bear risk during carriage (attention: in CIF buyer must pay before inspection) • D-terms: sellers bears cost of carriage and risk until arrival at agreed destination – thus some « arrival duties » on the seller • E-terms: ex works of the seller • F-terms: delivery to the person paid by the buyer
SALES –Incoterms 2010 Rules for any mode of transport: • EXW Ex Works • FCA Free Carrier • CPT Carriage Paid To • CIP Carriage And Insurance Paid To • DAT Delivered At Terminal • DAP Delivered At Place • DDP Delivered Duty Paid Rules for sea and inland waterway transport: • FAS Free Alongside Ship • FOB Free On Board • CFR Cost And Freight • CIF Cost, Insurance and Freight
SALES -Incoterms • Each term summarising the obligations of (A) the seller and (B) the buyer in relation to 10 typical points: • 1. mainobligation: provision of goods, payment of the price • 2. licenses, authorisationsandformalities • 3. contracts of carriageandinsurance • 4. delivery andtaking delivery • 5. transfer of risks • 6. division of costs • 7. noticestobegiven • 8. proof of delivery, transport document • 9. checking, packaging, marking, inspecting • 10. other
UPICC– CONTENTS OF CONTRACTS IN GENERAL • Various rules • Under interpretation: supplying an omitted term (Art. 4.8) where important for the determination of their rights and duties • Art. 5.1.2: implied obligations stem from (a) the nature and purpose of the contract; (b) practices established between the parties and usages; (c) good faith and fair dealing; (d) reasonableness. • Art. 5.1.3. Duty to co-operate • Art. 5.1.4. Distinction duty result / merely best efforts • Art. 5.1.7. Price determination mechanisms: normal price; unilateral unless manifestly unreasonable; third party decision • Art. 5.1.8. Contract for an indefinite period: ending by notice with reasonable time • Art. 5.2.1. ff. Contracts in favour of third parties; rule on defences
UPICC– CONTRACT IN FAVOUR OF THIRD PARTY • Art. 5.2.1. ff. Contracts in favour of third parties; rule on defences
UPICC - PERFORMANCE • Modalities of (performance) of the obligation: • Time of performance (Art. 6.1.1.) • Order of performance (Art. 6.1.4.) in principle simultaneous • Place of performance (Art. 6.1.6) - Money: creditor’s place (« obligee ») - Other: debtor’s place (« obligor ») • Monetary obligations: means of payment, currency etc. (6.1.7 ff.) • Rules where public permission required for performance • Hardship (change of circumstances) Art.: 6.2.1 ff. • Performance as extinction of an obligation • Art. 6.1.12-13: imputation of performance
CISG – REMEDIES - OVERVIEW • Overview of remedies for non-performance: - Specific performance - Suspend performance - Avoidance and price reduction • Damages • General principles • Free choice, no hierarchy of remedies (« pari passu ») (but sometimes fundamental breach required) • Combinability, esp. of damages and other remedies • Largely self-help (unilateral declaration) • By notification (usually within a reasonable time)
UPICC – REMEDIES FOR NON-PERFORMANCE • Overview of remedies for non-performance: • Withholding performance • Specific performance • Termination and price reduction • Damages • General principles: • Free choice, no hierarchy of remedies (« pari passu ») (but sometimes fundamental breach required) • Combinability, esp. of damages and other remedies • Largely self-help (unilateral declaration) • By notification (usually within a reasonable time)
CISG – GENERAL RULES ON NON-PERFORMANCE • Remedies for non-performance: separately mentioned for buyer and seller. But basically a unitary concept of non-performance (« breach »). • Some remedies require a « fundamental breach » (Art. 25). Interpretation: CISG AC Opinion n° 5 • Fault or strict liability ? - damages excluded if exemption: failure due to an impediment beyond control (art. 79) (+ give notice to other party). Hardship ? See next slide. - other remedies: strict liability - a party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission (Art. 80).
CISG – HARDSHIP • Does art. 79 include a rule on hardship ? • Hardship is a « matter governed by CISG », but disputed whether: a) excluded by Art. 79 (Cass.Fr. 2004, Behr v. Romay in a specific case: third party buyer no longer interested); b) included in Art. 79 but gap as to more precise rules (Cass.B. 19 June 2009 – steel price plus 70 %) – in line with CISG AC Opinion n° 7 c) internal gap which can be filled by principles; d) internal gap which can not be filled by principles. Which principles: only « internal » to CISG, or also « external » such as UPICC ? (Cass. B. 19 June 2009: also UPICC)
UPICC – GENERAL RULES ON NON-PERFORMANCE (Cont.) • « Non-performance » of an obligation as general (unitary) concept) (Art. 7.1.1, shift from «(breach of) contract» to « obligation ») • In view of the available remedies distinction between: - non-performance caused by the creditor itself (7.1.2): no remedy - non-performance excused under 7.1.7 (force majeure): only withholidng performance, termination and interest on money due - non-performance cured without delay (7.1.4): only withholding performance, damages - non-performance not excused: all remedies • Rule on exemption clauses: only if not grossly unfair (7.1.6)
CISG – SPECIFIC PERFORMANCE • (Specific) performance requested by buyer: • Whether buyer can claim specific performance depends upon domestic law of the forum (art. 28) • Lost if incompatible remedy requested before (46,1) • If specific performance is available, it includes claiming a) substitute goods if breach is fundamental, or b) repair if not unreasonable (Art. 46) • If seller offers repair (« cure »): Art. 48 • Seller can claim specific performance: payment and taking delivery (62) • Creditor can fix an additional period of reasonable length for cure (function: termination allowed afterwards) (« Nachfrist « ) (Art. 47 & 63) • If buyer does not give specifications: seller may specify (Art. 65)