International Business Transactions Outline

Intl Business Transactions-Outline

I. International Sales of Goods

UN Convention on Contracts for the Intl Sale of Goods (CISG)

Governs transactions between US and 62 intl parties unless expressly opt out
US Reservation limits application of CISG when 2 K states are part of CISG-if other K party in non-CISG state then UCC governs
It is self-executing treaty.
Purpose-reduce legal obstacles to intl trade, and promote orderly development
Acts much like Article 2 of UCC of US law—differences marked at UCC portion of supplement.
Remember don’t use term “as is” in contract if CISG applies.

Sphere of Application of CISG

Main purpose to avoid conflicts of law problems
Sphere of application defined in first 6 Articles

Article 1-requires “sale of goods” K to be both intl and bear stated relation to K states

No definition of “contract,” “sale,” or “goods”
Intl-between parties whose places of business are in different states; location of goods or negotiation is not dispositive
Place of Business- Article 10A-permanent establishment required, neither warehouse nor office of seller’s agent qualifies; “that which has the closest relationship to K and its performance.” Limited to those circumstances known to parties before K formed

Permits parties to state in K which office is pertains

AND either both states are K states, or only 1 state is and private intl law choice-of-law rules lead to application of law of K state

US reservation strikes the latter, instead US law for domestic sales transactions would govern, typically UCC

Article 6-Opt out capacity is always available to parties to K

Choice of Law Clauses

Article 6-parties may expressly determine not to be governed by CISG (opt out)

Must be done unambiguously-CISG does not apply; X law does apply
If contract doesn’t have choice of law clause, then cts will look for place of contract formation and choice of law principles of the forum—important for K’s between US and a non-CISG party.

if under ECC Conv Art 4.2-looks at habitual residence of the corp forming the K; however, Art 4.5 looks at the circumstances in total

Other Scope Issues

Article 3-expressly includes K for the sale of goods not yet produced, unless buyer undertakes to supply “substantial part” of the necessary materials

Includes sales involving combo of goods and services, unless “preponderant part” of seller’s obligation concerns labor or other services

Article 2-expressly excludes K for sale of commercial paper, investment securities, ships, aircraft, hovercraft, and electricity

Perhaps similar to other “intangibles” or “immovables” but ambiguous
Software-important ambiguity; discs are goods, but K to develop is not

Article 2-expressly excludes intl sales of goods to consumers as to not conflict with consumer protection laws which are often “mandatory law”

Also execution sales and auctions are excluded

Article 5-CISG doesn’t govern causes of action against seller “for death or personal injury” even if arising out of sales transaction; conflicts mandatory law
Article 4-CISG governs only the formation of K and the rights and obligations of parties to the K

Held to pre-empt state law on promissory estoppel, but not tort law
Doesn’t govern validity of K, effect on title, or rights of 3rd parties

Contract of sale not definition-problems with consignments (buyer may return goods which cannot be sold), countertrade (goods are exchanged for other goods and not for money), and conditional sales (seller retains title to secured pmt)

General Provisions of CISG

Article 7-assists in interpreting the convention itself

Art 7(1)-Intended to stop local cts from applying local law to intl disputes
Art 7(1)-only refers to good faith in interpretation of CISG, not K, by cts

this is different from UCC §1-203 where there is good faith on each of the parties to a sale

Art 7(2)-gap fillers-since intl law may not have relevant answer, ct may default to their own applicable law or choice-of-law provision

in US this could mean UCC

Article 8-est rules for interpreting the K itself and its terms with 3 tier hierarchy

Where parties have common understanding or intent-should be used
Art 8(1)-If diverge, if one knew the other sides intent, that intent prevails
Art 8(2)-Unaware of divergence-stmts and conduct subject to “reasonable person” standard under
Art 8(3)-requires that ct give consideration to all relevant circumstances- clear direction to consider parol evidence even when there is subsequent written agreement

Ct can look to negotiating history of K and actual administration of term of K by parties

Art 9(1)-allows parties to include “any usage” to which they have agreed

Art 9(2)-allows for incorporation of usages by implication but only if “parties knew or ought to have known” of it, must be a usage in intl trade, must be widely known and must be “regularly observed”

Art 11-K for intl sale of goods is enforceable even if not written and can be proven by any means

No equivalent to statute of frauds

Art 12 and 96-allow contracting state to declare reservation that its local law shall govern the form requirements if the party has place of business in that state

If Art 96 reservation declared, parties may not circumvent under Art 10

Art 13-how to satisfy writing requirement; includes telex or telegram

Contract Formation (Part II of CISG)

Art 92-allows state to declare it will not be bound by section II of CISG
No consideration and no formality requirements
Offer (Art 14-17)

Art 14-definition offer with 3 reqs

Must be proposal for concluding K
Must indicate intention to be bound in case of acceptance

Art 14(2)-proposa