International Sales Contracts. The UN Convention and Related Transnational Law

International Sales Contracts The UN Convention and Related Transnational Law

International Sales Contracts The UN Convention and Related Transnational Law Eldon H. Reiley Professor of Law Emeritus University of San Francisco Carolina Academic Press Durham, North Carolina

Copyright 2008 Eldon H. Reiley All rights reserved. ISBN: 978-1-59460-478-2 LCCN: 2008002580 Carolina Academic Press 700 Kent Street Durham, North Carolina 27701 Telephone (919) 489-7486 Fax (919) 493-5668 www.cap-press.com Printed in the United States of America

This book is dedicated to the twenty-nine law students who were in my CISG class in Prague in the 2007 summer abroad program of the University of San Francisco. These hearty folks endured the final pre-publication version of the book. They identified hundreds of matters ranging from typographical errors to areas requiring clarification or different emphasis. They also taught me several rules of punctuation. Much of this was done in small groups on hot July afternoons over countless pints of Budvar beer. I am grateful for their help. Such remaining error as survived this process, should be blamed on Budvar. E.H.R. May, 2008

Summary of Contents Preface xxiii Acknowledgment xxv Table of References to the CISG xix Chapter 1 Historical and Geographical Context of CISG 3 Chapter 2 Scope of Application of CISG 25 Chapter 3 Interpretation of CISG 61 Chapter 4 Basic Comparative Distinctions 85 Chapter 5 Contract Formation and Modification 105 Chapter 6 Excuse (Exemption) and Hardship 127 Chapter 7 Performance Issues: Warranty, Payment, Risk, Cure 149 Chapter 8 Remedies for Breach at Common Law and Under the UCC 171 Chapter 9 Remedies Under the CISG 187 Chapter 10 Specific Performance 219 Chapter 11 Dispute Resolution: International Arbitration 235 Chapter 12 Recent Developments: Electronic Transactions, Government Controls, Treaties 255 Chapter 13 Drafting International Sales Contracts 271 Summary of contract clauses by number and titles 271 Appendix A United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) CISG 289 Appendix B UNIDROIT Principles of International Commercial Contracts 2004 315 Appendix C Introduction to the Principles of European Contract Law 353 Appendix D United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) 357 Appendix E Convention on Choice of Court Agreements (2005) 363 Appendix F UNCITRAL Conciliation Rules 375 Appendix G UNCITRAL Arbitration Rules 383 Appendix H United Nations Convention on the Limitation Period in the International Sale of Goods (1974, 1980 Protocol) 397 Appendix I United Nations Convention on the Use of Electronic Communications in International Contracts (2005) 417 Appendix J Convention Relating to a Uniform Law on the International Sale of Goods (1964) and Annex ULIS 427 Appendix K Convention Relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (1964) and Annex UFL 451 Index 459 vii

Contents Table of References to the CISG xix Preface xxiii Acknowledgment xxv Chapter 1 Historical and Geographical Context of CISG 3 1.1 Contracting States and Treaty Acronym 3 1.2 International Treaty Process: Where do Treaties Come From? 4 1.3 Treaty Terminology 8 1.4 Historical Context of CISG 9 1.5 Reservations to CISG 11 1.6 Judicial Interpretation of CISG 12 CISG, Article 7 12 1.7 Judicial Interpretation in the United States 12 1.8 Jurisdiction of U.S. Federal Courts in CISG Cases 13 28 U.S.C. 1331 13 28 U.S.C. 1332 14 Implus I.D. International. S. L. v. Psion Teklogix, Inc. 14 1.9 Locating and Using International Authority 15 1.10 What Is International Law? 17 1.11 Discussion Problems 24 Chapter 2 Scope of Application of CISG 25 2.1 Introduction 25 Asante Technologies, Inc. v. PMC-Sierra, Inc. 26 2.2 Type of Transaction 28 2.3 Definition of Goods in Domestic U.S. Law. 29 UCC 2-105 (original). 29 UCC 2-103(k) (2003 revision). 30 UCC 9-102(a)(44)(revised). 30 2.4 Definition of Goods in CISG 31 2.5 Leases of Goods 32 2.6 Sales and Licenses of Software 32 2.7 Mixed Transaction Contracts 34 CISG, Article 3 34 2.8 Type of Issue 35 CISG, Article 4 36 CISG, Article 5 36 2.9 Validity 36 2.10 Property in Goods 39 2.11 Death or Personal Injury 40 CISG, Article 5 40 ix

x CONTENTS 2.12 Location of Parties 40 CISG, Article 1 41 2.13 CISG Applicability under Article 1(1)(a) 41 2.14 CISG Applicability under Article 1(1)(b) 43 2.15 Other Grounds for Applicability 49 2.16 Opting Out of the CISG 50 CISG, Article 6 50 2.17 Opting into the CISG 52 UCC 1-105(1). 53 UCC 1-301 (c) and (f) (revised). 53 2.18 Governing Law Clauses 55 2.19 Discussion Problems 56 Prime Start Ltd. v. Maher Forest Products Ltd. 57 Chapter 3 Interpretation of CISG 61 3.1 Relationship between CISG, UNIDROIT Contract Principles and Principles of European Contract Law 62 1. CISG was first in time. 62 2. Differences in Scope of Application 62 3. Hard Law or Soft Law? 63 4. Concerns for American Lawyers 63 5. Use of UNIDROIT Contract Principles in Cases within CISG 65 3.2 Interpretation: Context of the Transaction 67 3.3 Interpretation: Understanding Article 7 69 CISG, Article 7 70 3.4 Commentaries on Article 7 71 3.5 Distillation of the Commentaries 73 3.6 Illustrative Examples 75 Example 3.1 (standing timber as goods) 75 Example 3.2 (addition of arbitration clause) 76 Example 3.3 (addition of arbitration clause followed by performance) 76 Example 3.4. (time to fix currency exchange rate) 77 Schmitz-Werke GmbH & Co. v. Rockland Industries, Inc. 77 Example 3.5 (attempt to recover attorney fees in U.S. court) 78 Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., Inc., 79 CISG-AC Opinion No. 6, excerpt 80 Example 3.6 (limitation of damages) 81 Berry v. Ken M. Spooner Farms, Inc. 81 3.7 Of Maps and Gaps, External or Ethereal? 82 3.8 Role of Foreign Law in U.S. Courts 83 3.9 Discussion Problem 83 Chapter 4 Basic Comparative Distinctions 85 4.1 CISG and the Statue of Frauds 85 CISG, Article 11 85 CISG, Article 29 85 CISG, Article 96 86 CISG, Article 12 86 4.2 CISG and the Parol Evidence Rule 88

CONTENTS xi UCC 2-202 (Pre-2003 text). 89 CISG, Article 8 89 Filianto, S.p.A. v. Chilewich Int Corp. 90 Beijing Metals & Minerals Imports/Export corp. v. American Bus. Ctr. Inc. 90 MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D Agostino 90 4.3 CISG and Consideration 95 CISG, Article 11 96 CISG, Article 29 96 Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc. 97 UNIDROIT Contract Principles, Article 3.2 99 4.4 CISG and the Perfect Tender Rule 99 Prescott & Co. v. J.B. Powles & Co. 100 UCC 2-601. 100 UCC 2-508. 100 UCC 2-612. 101 4.5 Discussion Problems 103 Chapter 5 Contract Formation and Modification 105 5.1 Introduction 105 5.2 Indefiniteness: Definition of Offer: Open Price Term 106 CISG, Article 14 106 UCC 2-305. 106 CISG, Article 55 106 UNIDROIT Contract Principles, Article 5.1.7 107 (Price determination) 107 5.3 Revocation of Offers 108 Restatement (Second) Contracts, 87, Option Contract 109 Uniform Commercial Code, 2-205. Firm Offers 109 CISG, Article 15 110 CISG, Article 16 110 CISG, Article 17 110 5.4. Mail Box Rule 111 Adams and Others against Lindsell and Another 112 5.5 Mail Box Rule and Definition of Issues 113 Morrison v. Thoelke 114 5.6 Mirror Image Rule : Battle of the Forms 116 CISG, Article 19 118 CISG, Article 9 120 UNIDROIT Contract Principles, Article 2.1.19 120 (Contracting under standard terms) 120 UNIDROIT Contract Principles, Article 2.1.22 121 (Battle of forms) 121 UNIDROIT Contract Principles, Article 2.1.12 121 (Writings in confirmation) 121 UCC 2-207 (original). 121 UCC 2-206(3) (revised). 122 UCC 2-207 (revised). 122

xii CONTENTS 5.7 Modification of Existing Contracts 122 UCC 2-209. 122 CISG, Article 29 123 Chateau des Charmes Wines Ltd. v. Sabante USA Inc. 123 Berry v. Ken M Spooner Farms, Inc. 124 5.8 Discussion Problems 126 Chapter 6 Excuse (Exemption) and Hardship 127 6.1. Excuse at Common Law 127 Paradine v. Jane 128 Taylor v. Caldwell 129 Carroll v. Bowersock 131 Albre Marble & Tile Co. v. John Bowen Co. 132 6.2 Excuse under the UCC 134 UCC 2-613. 134 UCC 2-614. 134 UCC 2-615. 135 UCC 2-616. 135 UCC 2-615. 136 6.3 Exemption under the CISG 137 CISG, Article 79 138 CISG, Article 80 138 Raw Materials Inc. v Manfred 140 6.4 Hardship and Force Majeure under UNIDROIT Contract Principles 141 UNIDROIT Contract Principles, Article 7.1.7 141 (Force Majeure) 141 UNIDROIT Contract Principles, Article 6.2.3 142 (Effects of hardship) 142 6.5 Relationship of UNIDROIT Contract Principles on Hardship to CISG, Art. 79 142 Summary 145 6.6 Discussion Problems 146 Chapter 7 Performance Issues: Warranty, Payment, Risk, Cure 149 7.1 Warranties of Quality and Title 149 UCC, 2-313. 150 UCC, 2-714. 150 CISG, Article 35 152 CISG, Article 51 152 7.2 Payment Provisions: Letters of Credit, UCP 153 7.3 Passing of Risk: Delivery, Title, Insurance, Incoterms 155 7.4 Contract Interpretation: Usage, Course of Dealing, Course of Performance 158 CISG, Article 8 159 CISG, Article 9 159 7.5 Performance Problems 160 7.6 Future Performance Concerns 161 UCC 2-609. 161 UCC 2-610. 162

CONTENTS xiii UCC 2-611. 162 CISG, Article 71 163 CISG, Article 72 163 7.7 Withholding Performance 164 7.8 Tender and Cure 165 UCC 2-508 (original). 165 CISG, Article 37 166 CISG, Article 48 166 CISG, Article 47 167 CISG, Article 39 167 7.9 Installment Contracts. 167 UCC 2-612(2). 168 CISG, Article 73 168 7.10 Summary of Approach to Remedies 169 Chapter 8 Remedies for Breach at Common Law and Under the UCC 171 8.1 Severity of Breach 171 8.2 Common Law Contract Remedies 171 8.3 Judicial Limitations on Expectancy 173 Hadley v. Baxendale 175 Victoria Laundry Ltd. v. Newman Industries, Ltd. 177 Restatement (Second) Contracts 351 178 8.4. Structure of Remedy Provisions in the UCC 179 1. Buyers remedies under UCC Article 2. 179 UCC 2-711. 179 UCC 2-712. 180 UCC 2-713. 180 UCC 2-714. 180 UCC 2-715. 181 UCC 2-717. 181 2. Sellers Remedies under UCC Article 2 181 UCC 2-704. 182 UCC 2-703. 182 UCC 2-708. 183 UCC 2-710 (original). 184 8.5 Contractual Control of Damages 184 UCC 2-718. 184 UCC 2-719(3). 185 Chapter 9 Remedies Under the CISG 187 9.1 Generally 187 CISG Part III. Sale of Goods 188 9.2 Right to Avoid; Fundamental Breach; Consequences of Avoidance 189 CISG, Article 47 191 CISG, Article 49 191 CISG, Article 51(2) 193 9.3 Damage-Type Remedies in CISG 193 CISG Article 74 193 9.4 Relationship between Articles 74 and 75 and 76 194

xiv CONTENTS 9.5 Mitigation 195 CISG, Article 77 195 9.6 Interest 196 CISG, Article 78 197 CISG, Article 84 (1) 197 UNIDROIT Principles, Article 7.4.9 197 9.7 Currency issues 198 UNIDROIT Principles, Article 7.4.12 198 9.8 Reduction of Price by Buyer 199 CISG, Article 50 199 UCC 2-717. 199 1. Calculation under Article 50 199 2. Steps to Invoke Article 50 200 9.9 Contractual Control of Damage Remedies 201 1. Liquidated Damages Clauses 201 UNIDROIT Contract Principles, Article 7.4.13 202 (Agreed Payment for non-performance) 202 2. Clauses Limiting Remedies 202 9.10 Buyer s Remedies for Breach by Seller 203 9.11 Breach Due to Lack of Conformity 204 9.12 Definition of Conformity 204 CISG, Article 35(2) 205 9.13 Duty to Examine and Give Notice 205 1. Time to Comply 206 CISG-AC Opinion no. 2 207 2. Extent of Examination 207 3. Sufficiency of Notice 207 4. Consequences of Failure and Excusing Provisions, Art. 40 and 44 208 CISG, Article 40 209 CISG, Article 44 209 9.14 Seller s Right to Cure Lack of Conformity 210 9.15 Restitution Obligation Following Avoidance 211 CISG, Article 81 (2) 211 CISG, Article 82 (1) 211 CISG, Article 82 (2) 212 9.16 Breach due to Delivery Failures 212 CISG, Article 52 213 9.17 Breach due to Conflicting Rights of Third Parties 213 CISG, Article 43 214 CISG. Article 40 214 9.18 Roadmap (Checklist) of Buyer s Remedies and Duties 214 Roadmap of Buyer s Remedies under CISG 216 9.19 Seller s Remedies for Breach by Buyer 217 9.20 Duty to Preserve the Goods 217 CISG, Article 85 217 CISG, Article 86 218 Chapter 10 Specific Performance 219 10.1 Specific Performance at Common Law 219

CONTENTS xv 10.2 Is the Irreparable Injury Rule Dead? 221 10.3 Current American Law and Specific Performance 222 10.4 UCC Article 2 and Specific Performance 223 UCC 2-709. 223 UCC 2-716. 223 UCC 2-716(1) (Revised) 224 10.5 CISG and Specific Performance 224 CISG, Article 46 225 CISG, Article 62 225 10.6 The Article 28 Compromise 225 CISG, Article 28 226 10.7 What is Meaning of would do so? 226 10.8 What is Meaning of a court? 226 10.9 What is Meaning of under its own law? 227 10.10 What is Meaning of similar contracts of sale? 227 10.11 May Parties Waive Article 28? 228 10.12 How Should American Courts Apply Article 28? 228 Magellan International Corp. v. Salzgitter Handel GmbH 229 10.13 Other Limits on Right to Specific Performance Under CISG 229 10.14 CISG Article 77 and Specific Performance 230 10.15 CISG Article 79 and Specific Performance 231 CISG, Article 79 (5) 231 10.16 CISG Article 82 and Specific Performance 232 CISG, Article 82 232 10.17 UNIDROIT Contract Principles and Specific Performance 232 UNIDROIT Contract Principles, Article 7.2.2 233 (Performance of non-monetary obligation) 233 10.18 Discussion Problems 233 Chapter 11 Dispute Resolution: International Arbitration 235 11.1 Overview The Treaty Background 235 New York Convention, Article II 236 Choice of Court Convention Article 8 Recognition and Enforcement 237 11.2 Overview Ethical Obligations 237 11.3 Overview Dispute Resolution Alternatives 238 1. Renegotiation 238 2. Mediation and Conciliation 239 3. Litigation in U.S. Courts 239 4. Litigation in Foreign Courts 240 5. Forum Selection Clauses 240 11.4. Arbitration of Private Transnational Disputes 241 11.5 Drafting Arbitration Clauses 243 1. Whether to Arbitrate 244 2. Should Mediation/Conciliation be a Pre-condition? 245 3. Scope of Issues Subject to Arbitration 245 4. Institutional Supervision or Ad Hoc Arbitration? Rules of Arbitration 246 5. Number, Selection and Replacement of Arbitrators 247 6. Location of Arbitration 247 7. Language of Arbitration 248

xvi CONTENTS 8. Interim Relief 248 9. Party Contact with Arbitrators 249 10. Procedural Rules; Discovery 249 11. Reasons for Award 249 12. Confidentiality of Award 249 13. Calculation of Interest 250 14. Allocation of Costs 250 15. Currency of Award and Conversion Rate 251 16. Governing Law 251 11.6 Anatomy of an International Arbitration 251 UNCITRAL Arbitration Rules, Article 15 252 11.7 Litigation/Arbitration Compared 252 Chapter 12 Recent Developments: Electronic Transactions, Government Controls, Treaties 255 12.1 Electronic Transactions 255 1. Issues Relating to Electronic Signatures 256 2. Issues Relating to Agency 257 3. Issues Relating to Location of Parties 257 4. Issues Relating to Place and Time of Contract 257 5. Issues Relating to Consumer Contract Exclusion in CISG art. 2(a) 258 6. Issues Relating to Contract Terms 258 12.2 National Government Controls over International Sales 260 12.3 U.S. Laws 261 12.4 Foreign Law 264 12.5 Overview of Treaties Relevant to Transnational Sales 265 1. Limitation Convention 265 2. Cape Town Convention and other Treaties Relating to Security Interests 266 3.Treaties and Laws Relating to Trans-Border Insolvency Proceedings 268 Chapter 13 Drafting International Sales Contracts 271 13.1 Introduction: To Be a Copy Cat Is a Good Thing To an Extent 272 13.2 Clauses Discussed in Prior Chapters 273 13.3 Governing Law Clauses: Opt-In, Opt-Out and Back-Up 274 13.4 Opting Into the CISG 276 13.5 Opt-out of CISG 277 13.6 Governing Law Clause in Arbitration Agreement 277 13.7 Merger Clause to Preserve Parol Evidence Rule: No Oral Modifications 278 13.8 Revocable and Irrevocable Offers 279 13.9 Force Majeure and Hardship Clauses 279 13.10 Clauses Relating to Incoterms, UCP and Usage 280 13.11 Clause Providing for Retained Security Interest to Secure Payment Obligation 281 13.12 Clauses Relating to Remedies 283 1. Interest rate 283 2. Time of Currency Conversion 284 3. Exclusion of CISG Article 50 285 4. Contractual Right to Require Specific Performance 285

CONTENTS xvii 5. Attorney Fees 285 6. Limitation of Damage Remedies 286 7. Liquidated Damages 287 13.13 Dispute Resolution Clauses 287 13.14 Signatures on Multiple Copies 288 Summary of contract clauses by number and titles 271 CLAUSE 1. Recommended Governing Law Clause for contracts within the CISG (specifying UNIDROIT Contract Principles as back-up law.) 275 CLAUSE 1A. Alternative Governing Law Clause for contracts within the CISG, specifying domestic law as back-up law. 276 CLAUSE 2. Opt-in Clause for contracts not within the CISG specifying UNIDROIT Contract Principles as back-up law. 276 CLAUSE 2A. Alternative Opt-in Clause for contracts not within the CISG specifying domestic law as back-up law. 276 CLAUSE 3. Opt-out clause. 277 CLAUSE 4. Governing law clause for arbitration agreement. 278 CLAUSE 5. Merger clause (AC opinion no. 3). 278 CLAUSE 5A. Alternative merger clause excluding negotiations, practices and usages. 278 CLAUSE 6. No oral modifications clause. 279 CLAUSE 7. Irrevocable Offer with expiration date. 279 CLAUSE 7A. Alternative Irrevocable Offer 279 CLAUSE 8. Revocable Offer with expiration date. 279 CLAUSE 9. Force Majeure. 280 CLAUSE 10. Hardship 280 CLAUSE 11. Incoterms. 281 CLAUSE 12. UCP 281 CLAUSE 13. Derogation from trade usage. 281 CLAUSE 14. Retention of purchase money security interest. Sale by foreign seller to U.S. buyer. 282 CLAUSE 14A. Retention of PMSI by U.S. seller 282 CLAUSE 15. Specific interest rate. 284 CLAUSE 15A. Generic rate of interest. 284 CLAUSE 15B. Generic rate of interest established by UNIDROIT formula. 284 CLAUSE 16. Currency exchange (UNIDROIT Contract Principles) 284 CLAUSE 17. Exclusion of CISG article 50. 285 CLAUSE 18. Agreement for specific performance 285 CLAUSE 19. Attorney fees allocated to losing party. 286 CLAUSE 19A. Attorney fees borne by each party. 286 CLAUSE 20. Damage exemption clause. 286 CLAUSE 20A. Damage exemption clause extending definition of conformity and time for identifying non-conformity. 286 CLAUSE 21. Liquidated damages clause 287 CLAUSE 22. Exclusive forum selection clause. 287 CLAUSE 22A. Non-exclusive forum selection clause. 287 CLAUSE 23. Signatures on counterparts. 288

xviii CONTENTS Appendix A United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) CISG 289 Appendix B UNIDROIT Principles of International Commercial Contracts 2004 315 Appendix C Introduction to the Principles of European Contract Law 353 Appendix D United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) 357 Appendix E Convention on Choice of Court Agreements (2005) 363 Appendix F UNCITRAL Conciliation Rules 375 Appendix G UNCITRAL Arbitration Rules 383 Appendix H United Nations Convention on the Limitation Period in the International Sale of Goods (1974, 1980 Protocol) 397 Appendix I United Nations Convention on the Use of Electronic Communications in International Contracts (2005) 417 Appendix J Convention Relating to a Uniform Law on the International Sale of Goods (1964) and Annex ULIS 427 Appendix K Convention Relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (1964) and Annex UFL 451 Index 459

Table of References to the CISG (Primary discussions are indicated by bold face.) Art. 1: 31, 32, 33, 41, 54, 63 1(1)(a): 14, 41, 42, 43, 48, 58, 59, 87 1(1)(b): 10, 14, 41, 43 49, 58, 59, 87 1(2): 42, 257 1(3): 42 Art. 2: 67 2(a): 28, 258 2(b): 28 2(c): 28 2(d): 28 2(e): 28, 29, 76 2(f): 28, 29 Art. 3: 34, 35, 3(1): 34, 35 3(2): 34, 35 Art. 4: 35 36, 63, 143, 274, 286, 287 4(a): 35 39, 81, 97, 98, 123, 151 4(b): 36, 39, 153, 213 Art. 5: 36, 40, 63 Art. 6: 26, 50, 51, 53, 54, 61, 65, 67, 69 75, 82, 160, 228 Art. 7: 67 73 7(1): 12, 32, 65, 69, 70, 71, 72, 73, 76, 82, 143, 230, 276 7(2): 14, 65, 69, 70, 71, 72, 73, 76, 77, 82, 102, 143, 145,197, 202, 276 Art. 8: 74, 89, 94, 158, 159 8(1): 91, 159 8(2): 159 8(3): 89, 94, 104, 159 Art. 9: 120, 158, 159, 281 9(2): 143, 160, 281 Art. 10: 41, 42, 56 Art. 11: 85 88, 96 Art. 12: 86, 87 Art. 13, 256 Art. 14: 106, 107, 108 Art. 15: 110, 116, 256 Art. 16: 110, 279 Art. 17: 110 Art. 18: 18(2): 116 Art. 19: 118, 151 19(1): 76, 119 19(2): 119 19(3): 119, 124 Art. 25: 65, 189 191, 264 Art. 26: 168, 189 Art. 27: 189 Art. 28: 225 229, 285 xix

xx TABLE OF REFERENCES TO THE CISG Art. 29: 85, 86, 96, 122 126 29(1): 123, 124 29(2): 123, 278 279 Art. 31: 213 Art. 32: 213 Art. 34: 103 Art. 35: 149, 151, 152, 204 207 35(1): 204, 205 35(2): 152, 204, 205 Art. 36: 151 Art. 37: 166, 192, 201, 204, 207, 208, 210 Art. 38: 205 208, 210, 213 Art. 39: 152, 205 208, 213 39(1): 167 Art. 40: 205, 208 210, 213, 214 Art. 41: 151, 153, 203, 213, 214 Art. 42: 151, 214 Art. 43: 151, 153, 203, 206, 213 214 Art. 44: 205, 206, 208 210, 213 Art. 46: 169, 188, 224, 225 46(1): 230 46(2): 140, 152, 188, 189, 207, 225, 230 46(3): 140,152, 188, 207, 225, 230 Art. 47: 167, 188, 190, 191, 192, 201, 211 Art. 48: 65, 166, 191, 192, 193, 201, 207, 208, 210, 211 Art. 49: 166, 169, 189, 191 192, 193, 201,203, 208, 211, 230 49(1)(b): 192, 203, 213 49(2)(a): 192, 213 49(2)(b): 192, 211 Art. 50: 152, 169, 198, 199 201, 215, 230, 285 Art. 51: 152, 192, 213 51(1): 204 51(2): 192, 193 Art. 52: 102, 166, 169, 203, 213 Art. 55: 105, 107, 108 Art. 61: 217 Art. 62: 188, 217, 225 Art. 63: 188, 191 Art. 64: 169, 189, 203, 217 Arts. 66 70: 156 Art. 66: 156, 157 Art. 67: 157, 189 Art. 68: 157 Art. 69: 189 Art. 70: 157 Art. 71: 102, 162, 163, 164, 191 Art. 72: 162, 163, 168, 189, 191 72(2): 163, 189 Art. 73: 102, 168, 173, 193 73(3): 193 Art. 74: 74, 78, 79, 80, 141, 169, 178, 193 195, 215, 230, 285 286 Art. 75: 169, 193, 194, 195, 211, 217 Art. 76: 169, 193, 194, 195, 211 Art. 77: 169, 195 196, 230 231, 233 Art. 78: 65, 169, 196 198, 283 284

TABLE OF REFERENCES TO THE CISG xxi Art. 79: 137 147, 233, 280 79(1): 138, 140 79(2): 139 79(3): 139 79(4): 140 79(5): 65, 137, 139, 140, 231 232, Art. 80: 137, 138 Art. 81: 147, 163, 193 81(2): 211 Art. 82: 211, 212 82(1): 211, 230, 232 82(2): 211, 212, 232 Art. 84: 169, 193, 198 84(1): 169, 197 84(2): 212 Arts. 85 88: 217 Art. 86: 217, 218 Arts. 89 101: 8, 10 Art. 91: 91(4): 8 Art. 92: 11 Art. 93: 11 Art. 94: 11 Art. 95: 11 Art. 96: 11, 86 Art. 98: 11 Art. 99: 8 99(1): 8 Art. 85: 217

Preface This book has had a long gestation period. I first taught a CISG-related course in Shaghai in May 1989. (That course finished on the Friday before the weekend events in Tiananmen Square but that is another story.) The East China School of Law had asked me to teach a course comparing the common law of contracts to the UCC. I added a component on the U.N. Convention on Contracts for the International Sale of Goods to which both the U.S. and China were parties and which had taken effect a year earlier. Over the next nineteen years the materials from that course gradually evolved into what is contained in the following chapters. The present text is designed to support a 2 or 3 credit course on Sales Law applicable to transnational transactions. It also may be used as a source of materials to be drawn on to provide a CISG supplement for basic JD contract courses. However, while writing, I found that I was constantly thinking about what discussion would be most useful to that group of young (compared to me) U.S. attorneys who had not had a course on the CISG but were confronted with international sales issues. (During its first decade, 1988-1998, the CISG was largely ignored by both U.S. courts and U.S. legal education.) For that group I hope this book might be useful as a research starting place. I also hope it might encourage American attorneys to draft governing law clauses that affirm the applicability of the CISG instead of drafting clauses that seek to opt-out. The first three chapters consider the nature, function and sources of international law, the scope of application of the CISG, and the highly structured rules for interpretation of the CISG, including the relationship of the Convention to the UNDROIT Contract Principles. The fourth chapter is a celebration of the absence from the CISG of common law anachronisms (namely the Statute of Frauds, Parol Evidence Rule, Consideration and the Perfect Tender Rule.) The focus then turns to formation (and modification) excuse, and remedies including specific performance. I attempt to identify and separate issues which are clearly determined under the CISG from those issues as to which the outcome is not so clear. As to the latter, I attempt to present the reader with contrasting points of view in the actual words of various international scholars. The final chapters of this book endeavor to consider CISG transactions in the context of a larger body of rapidly developing transnational law. This includes treaties dealing with dispute resolution, electronic communications, limitation periods, secured transactions and insolvency. The complex structure of national import/export laws and regulations is also noted. The Appendix is very large. I thank the publisher for permitting me to include the full text of a number of related treaties, including the twin predecessor treaties to the CISG (the ULF and the ULIS), the New York Arbitration Convention and the 2005 Choice of Court Convention. A set of arbitration rules and conciliation rules is also included. Most importantly, the full text of the CISG is accompanied by the full text of xxiii

xxiv PREFACE the UNIDROIT Principles of International Commercial Contracts. I hope the reader will find this mini-reference library a useful supplement to the discussions in the text. I wish to thank the folks at Carolina Academic Press, especially Keith Sipe, Karen Clayton, Reuben Ayres, Kelly Miller and Martha Hopper, for their patience and assistance. Thanks also to University of San Francisco Law School Deans, Jay Folberg and Jeff Brand, who supported me in developing and teaching a number of CISG related courses over the long gestation period of this book. USF law reference librarians Lee Ryan and John Schaffer provided significant research assistance. Finally, I wish to acknowledge the contribution of my partner, Stefan Ziegler, whose presence at my side for the last 15 years has, in no small measure, made the completion of this book possible. E.H.R. May, 2008

Acknowledgment I wish to acknowledge various permissions to quote from a number of prior publications. Foremost among these is Albert Kritzer, Executive Secretary of the Institute of International Commercial Law at Pace University School of Law for permission to quote from various articles on the Pace CISG database and, more generally, for his supervision of that database. The Pace database is an enormously useful reference tool which makes a huge reservoir of scholarly writings and judicial opinions on the CISG freely available and only a computer click away. Additional acknowledgment is expressed to Professor Douglas Laycock of the University of Texas with respect to his article on the Irreparable Injury Rule; Professors Clayton Gillette, New York University, and Steven Walt, University of Virginia, with respect to their book on Sales Law, Domestic and International; Charles Routh, Seattle attorney, with respect to his comments about arbitration; and Professor Harry Flechtner at the University of Pittsburgh, who I thank not only for permission to quote from his article on the MCC-Marble case, but even more significantly for THE CISG SONG (discussed on page 4 of the text). There should be more areas of law where we have something to sing about! Additional acknowledgment is express for permission to reprint: Selected sections from Restatement, Second, Contracts, copyright 1981 by the American Law Institute. Reprinted with permission. All rights reserved. Selected sections from Restatement, Second, Conflict of Laws, copyright 1971 by the American Law Institute. Reprinted with permission. All rights reserved. Selected sections from Uniform Commercial Code, copyright by the American Law Institute and the National Conference of Commissioners on Uniform State Laws. Reproduced with the permission of the Permanent Editorial Board for the Uniform Commercial Code. All rights reserved. The UNIDROIT Principles of International Commercial Contracts, copyright 2004 by the International Institute for the Unification of Private Law. Reprinted with permission. All rights reserved. Selected excerpts from Commentary on the UN Convention on the International Sale of Goods (CISG) (2005) edited by Schlechtriem & Schwenzer. By permission of Oxford University Press. This work is discussed in Chapter 1, 1.9 at pages 16 and 17. The Hague Convention of 30 June 2005 on Choice of Court Agreements. By permission of the Hague Conference on Private International Law (www.hcch.net). United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958), and United Nations Convention on the Limitation Period in the International Sale of Goods (New York, 14 June 1974) together with Resolution 31/98 adopted by General Assembly on 15 December 1976, and United Nations Convention on the Use of Electronic Communications in International Contracts and xxv

xxvi ACKNOWLEDGMENT UNCITRAL Conciliation Rules, and UNCITRAL Arbitration Rules. All of the foregoing by permission of United Nations Commission on International Trade Law (UNCI- TRAL). The format of this book is such that it contains numerous references to or short quotations from other works. Some of these are not specifically mentioned above because they are included in the general permission from the Pace CISG database or because the references were such that it was deemed that specific copyright permissions were not required. Nevertheless, the author wishes to acknowledge his indebtedness to the authors of the vast and rich literature on International/Transnational Sales Law from which this analysis has benefited. My indebtedness to the thinking of others extends far beyond the works quoted or specifically cited in the text and footnotes.