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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

The 1980 United Nations Convention on Contracts for the International Sale of Goods

Prof. dr. J. Lookofsky
University of Copenhagen

TABLE OF CONTENTS

The Author
List of Abbreviations 		3
15
Chapter 1. Introduction 17
§1. INTERNATIONAL SALES AND THE CISG 17
      I. The Law of Sales Under Domestic Law 17
            A. Sales Law as Contract Law 17
            B. Domestic Sales Law Applied to Domestic & International Sales 17
      II. International Sales Law: the CISG 17
      III. Convention Preamble: Objectives of Signatory States 18
      IV. Entry Into Force: Initial Ratifications 18
      V. Subsequent Ratifications: Two Thirds of World Trade 18
      VI. Major Significance 18
§2. HISTORICAL PERSPECTIVE: THE HAGUE SALES
CONVENTIONS AND THE CONFLICT OF LAWS 		 
19
      I. Purely National Sale Subject to Local Law 19
      II. International Sale: Problem of Selecting Applicable Law 19
      III. Pre-CISG: Choosing the Applicable Law 19
            A. Limited Acceptance of ULIS/ULF 19
            B. Choice-of-Law Rules Determine Applicable Domestic Law 20
            C. Concrete Illustration 20
            D. The 1955 Hague Convention 20
      IV. After 1 January 1988: New CISG Regime Applies in Courts and Arbitral Tribunals 21
Chapter 2. Convention Overview 22
§1. CONVENTION CONSISTS OF 101 ARTICLES: PARTS I - IV 22
§2. PART I: SPHERE OF APPLICATION AND GENERAL PROVISIONS 22
      I. Sphere of Application 22
            A. Main Rules of Application 22
                  1. Parties in Different Contracting States 22
                  2. Convention Applies by Virtue of Private International Law 23
            B. Contracts for the Sales of Goods 23
            C. Validity Issues and Third Party Rights Excluded 23
            D. Product Liability 24
            E. CISG and Contractual Freedom 24
      II. General Provisions 24
            A. Interpretation 24
            B. Usages of International Trade 25
§3. PARTS II AND III: STATES MAY RATIFY ONE OR BOTH 25
§4. PART II: FORMATION OF CONTRACT 25
      I. Offer and Acceptance 25
      II. CISG Offer: Requirement of Definiteness 25
      III. When Offer Effective; Revocable Versus Irrevocable Offers 25
      IV. Acceptance As Indication of Offeree's Assent 26
      V. Mirror Image Rule and Battle of Forms 26
§5. SALES OF GOODS: CISG PART III 26
      I. Obligations, Rights and Remedies 26
      II. Part III Provisions: Chapters 1-5 27
      III. Obligations of the Parties 27
            A. Obligations of the Seller 27
            B. Obligations of the Buyer 28
      IV. Remedies 28
            A. Supplementary Remedial Regime 28
            B. Enforceable Contracts and Remedies for Breach 29
            C. Three Basic Forms of Remedial Relief 29
            D. Relationship Among Remedies 29
            E. Specific Performance as Primary Convention Remedy 29
            F. Monetary Compensation as Primary Remedy in Practice 30
            G. Avoidance and the Right to Terminate 31
      V. Passing of Risk 31
      VI. Anticipatory Breach 31
§6. FINAL PROVISIONS: DECLARATIONS, ETC. 31
§7. OVERVIEW OF CHAPTERS 3-6 32
Chapter 3. Convention Scope and General Provisions 33
§1. SPHERE OF APPLICATION 33
      I. Internationality Under Article 1 33
            A. Parties' Places of Business in Different Contracting States 33
            B. Convention Application By Private International Law 34
            C. Article 95 Declaration 35
            D. Parties in Different States: Disregarded in Exceptional Cases 36
            E. Irrelevant Factors: Nationality, Civil-Commercial 36
      II. Transaction Must Be a 'Sale' of 'Goods' within Articles 1-3 37
            A. Article 1: Sales, Goods (e.g., Computer Software) etc. 37
            B. Sales Contracts Expressly Excluded: Article 2 38
                  1. Consumer Sales 38
                  2. Additional Exclusions 39
            C. Contract of Sale vs. Contract for Services: Article 3 40
      III. Issues Excluded from Convention Scope: Validity, Property and Delict 41
            A. Contractual Validity, Domestic Law & Concurrent Remedies 42
            B. Convention Not Concerned With Property in Goods 44
            C. Delictual Obligations Not Governed by CISG 44
            D. Product Liability 45
                  1. Liability for Death or Personal Injury 45
                  2. Damage to Buyer's Property Distinguished 46
                  3. Competition Between Convention and Domestic Delictual Rules 46
      IV. Freedom of Contract: Convention as Supplementary Regime 46
            A. Contracting Out 47
            B. Contracting In 48
§2. GENERAL PROVISIONS 49
      I. Convention Interpretation: Uniformity and Good Faith 49
      II. Convention Interpretation: Matters Governed But Not Settled 51
      III. Interpretation of Statements By Parties 55
            A. Subject Matter of Article 8: Statements and Conduct 55
            B. Subjective and Objective Tests 56
            C. Due Consideration to All Relevant Circumstances 56
            D. Common Law Parol Evidence Rule and Article 8 56
      IV. Commercial Custom and Usage 57
            A. Express Agreement and Inter-Partes Course of Dealing 58
            B. Implied Incorporation of Commercial Usage 58
      V. Place of Business: Rules for Exceptional Cases 59
      VI. No Writing Requirement for CISG Contract 59
            A. Relation to Formal Requirements Under Domestic Law 59
            B. Declarations in Derogation of Article 11 60
      VII. Definition of 'Writing' 60
Chapter 4. Sales Contract Formation 62
§1. THE OFFER 62
      I. Minimum Requirements 62
            A. Definiteness & Intention to be Bound. Offer Addressed to Specific Persons 62
            B. Problem of Price-Gap 64
            C. Invitation to Make Offers Distinguished 65
      II. Time Offer Takes Effect; Right to Withdraw 65
      III. Offeror's Right to Revoke 66
            A. Revocability is General Rule 66
            B. Modification: Offer Indicating Irrevocability 67
            C. Offer Fixing Time for Acceptance 67
            D. Modification: Action in Reliance 68
      IV. Effect of Rejection 68
§2. ACCEPTANCE UNDER ARTICLES 18-22 69
      I. Acceptance: Indication of Assent 69
      II. Time Acceptance Takes Effect 69
            A. When Assent Reaches Offeror 69
            B. Receipt Theory 70
            C. Acceptance Within Time Fixed or Reasonable Time 70
            D. Assent By Performance of Act 70
      III. Mirror Image and Battle of Forms 71
            A. Introduction 71
            B. Non-Matching Reply is Rejection and Counter-Offer 71
            C. Independent Communication Not Rejection 72
            D. Limited Exception to Mirror-Image Rule 72
            E. The Battle of Forms 72
                  1. Introduction 72
                  2. Materiality Test 73
                  3. Materiality Defined 73
                  4. Cases Not Resolved By Article 19 74
      IV. Time Period for Acceptance: Default Rules 75
      V. Official Holidays, Etc. 75
      VI. Exceptions to Timely Acceptance Rule 75
            A. The Rule and the Exceptions 75
            B. Notification by Offeror Accepting Late Acceptance 76
            C. Acceptance Timely in Normal Circumstances 76
      VII. Withdrawal of Acceptance 76
§3. ACCEPTANCE EFFECTIVE; CONTRACT CONCLUDED 77
§4. DECLARATION OF INTENTION: DEFINITION OF 'REACH' 77
Chapter 5. Obligations, Risk and Remedies
§1. SALE OF GOODS: FIVE CHAPTERS IN CISG PART III 78
§2. GENERAL PROVISIONS 78
      I. Introduction 78
      II. Avoidance and Fundamental Breach 78
            A. Fundamental Breach Defined 78
            B. Substantial Detriment 79
            C. When Avoidance Declaration Effective 79
      III. Delay or Error in Transmission 80
      IV. Specific Performance 81
            A. Specific Performance and Forum Law 81
            B. Award of Specific Performance: 2-Step Process 81
      V. Modification and Termination Scope 82
            A. No Formal Requirements 82
            B. Relationship to Consideration Under Common Law 82
            C. Contract Requiring Written Modification or Termination 83
§3. OBLIGATIONS OF THE SELLER AND BUYER'S REMEDIES FOR BREACH 84
      I. Introduction 84
      II. Summary of Seller's Obligations 84
      III. Delivery of the Goods and Handing Over of Documents 85
            A. Introduction 85
            B. Place of Delivery 85
                  1. Gap-Filling Rules 85
                  2. INCOTERMS 85
                  3. Contracts of Carriage: Delivery to First Carrier 86
                  4. Cases Not Involving Carriage 86
                  5. Notice of Consignment 87
            C. Time of Delivery 87
            D. Contracts of Carriage: Documents 88
      IV. Conformity of the Goods and Third Party Claims 88
            A. Conformity of the Goods 88
            B. Distinction Between Contractual and Delictual Claims 88
            C. Conformity With Express Contractual Requirements (Description, Guarantee Etc.) 89
            D. Supplementary Convention Obligations 90
                  1. Introduction: Implied Obligations, Express Disclaimers Etc. 90
                  2. Fitness for General Purposes 91
                  3. Fitness for Particular Purposes 93
                  4. Conditions and Warranties Under National Law Distinguished 93
                  5. Sample or Model; Packaging 94
            E. Seller's Knowledge of Defect Irrelevant 94
            F. Caveat Emptor and Inspection of Goods 95
            G. Disclaimer and Limitation of Liability 95
                  1. Introduction 95
                  2. Incorporation of Disclaimer 96
                  3. Interpretation of Disclaimer 97
                  4. Validity of Disclaimer 97
                  5. Examples of the Application of Domestic Validity Rules 97
                  6. Validity vs. Substance 98
                  7. Convention as Validity 'Yardstick' 98
            H. Time of Conformity Determination 99
                  1. Introduction 99
                  2. The General Rule 99
                  3. Subsequent Non-Conformity 100
            I. Seller's Right to 'Cure' Defects 101
                  1. Cure in Context 101
                  2. Relationship to Avoidance and Fundamental Breach 101
            J. Notice of Non-Conformity Required 102
            K. Examination of Goods 102
                  1. Timely Examination 102
                  2. Nature of Examination 103
                  3. Contract of Carriage: Examination May Be Deferred 104
            L. Notice of 'Discoverable' Defects & Consequences of Failure to Notify 104
                  1. The General Rule 104
                  2. Notice of 'Discoverable' Defects & Consequences of Failure to Notify 104
                  3. 'Latent' Defects Under Article 39(1) 106
            M. Absolute (2-Year) Cut-Off Rule 107
            N. Application of 2-Year Rule to Latent Defects 107
            O. Express Contractual Cut-Offs and Periods of Guarantee 108
            P. Relation to Prescription Convention, Statutes of Limitation 108
            Q. Seller Aware of Defect 109
            R. Obligation to Deliver Goods Free of Third Party Claims 110
                  1. Introduction: Article 41 110
                  2. Third Party Rights Distinguished 110
                  3. Article 42: Claims Based on Industrial or Intellectual Property 111
                  4. Seller's Knowledge of Third Party Right or Claim 112
                  5. Buyer's Risk 112
                  6. Consequences of Failure to Notify 112
                  7. Seller Aware of Third Party Right or Claim 113
            S. Excuse for Failure to Notify of Section II Breach 113
                  1. Nature of the Exception 113
                  2. Reasonable Excuse 114
      V. Remedies for Breach of Contract by the Seller 114
            A. Introduction 114
            B. Performance, Avoidance and Damages for Breach 115
            C. No-Fault Liability Based on Breach 115
            D. Relationship Among Remedies 116
            E. No Grace Period in CISG Context 116
            F. Specific Performance 116
                  1. Right to Require (Specific) Performance 116
                  2. Specific Performance and the Duty to Mitigate Damages 117
                  3. Specific Performance Limited by Forum Law 117
                  4. Require Delivery of Substitute Goods 118
                  5. Right to Demand Re-delivery Limited by Forum Law 119
                  6. Buyer's Right to Require that Seller Remedy of Non-conformity (Cure) 119
            G. Nachfrist Warning: Fixing an Additional Performance Period 120
            H. Seller's Right to Cure After the Delivery Date 121
                  1. Introduction 121
                  2. Relation Between Cure and Avoidance Under Article 49 122
                  3. Proposals and Notice by Seller Regarding Cure 122
            I. Buyer's Right to Avoid for Seller's Breach 123
                  1. Avoidance for Fundamental Breach 123
                  2. Declaration of Avoidance 124
                  3. Relationship to Cure; Avoidance as to Part 125
                  4. Avoidance for Non-Compliance with Nachfrist Notice 125
                  5. Limitations Regarding Goods Delivered 125
                  6. Consequences of Avoidance 126
            J. Proportionate Reduction in Price 126
            K. Partial Non-Conformity and Remedies for Breach 127
            L. Avoidance: in Part or in Full 127
            M. Delivery Before the Date Fixed 127
            N. Delivery of Excess Quantity 128
§4. OBLIGATIONS OF THE BUYER AND SELLER'S REMEDIES FOR BREACH 128
      I. Introduction 128
      II. Summary of Buyer's Obligations 128
      III. Payment of the Price
            A. Introduction 128
            B. Steps to Enable Payment of the Price 129
            C. Contract With 'Open' Price Term 129
            D. Price Fixed by Weight 130
            E. Place of Payment 130
            F. Time of Payment 131
            G. Contracts Involving Carriage 132
            H. Buyer's Right to Inspect Before Payment 132
            I. Payment Due Without Request or Formality 133
      IV. Taking Delivery 133
      V. Remedies for Breach of Contract by the Buyer 134
            A. Introduction 134
            B. Performance, Avoidance and Damages for Breach 134
            C. No-Fault Liability Based on Breach 134
            D. Relationship Among Remedies 135
            E. No Grace Period in CISG Context 135
            F. Specific Performance 135
                  1. Right to Require (Specific) Performance 135
                  2. Other Convention Limitations 136
                  3. Specific Performance Limited by Forum Law 136
            G. Nachfrist Warning: Fixing an Additional Performance Period 137
            H. Avoidance 137
                  1. Seller's Right to Avoid for Buyer's Breach 137
                  2. Declaration of Avoidance 138
                  3. Avoidance for Non-Compliance with Nachfrist Notice 138
                  4. Limitations Regarding Goods Delivered 139
                  5. Consequences of Avoidance 139
            I. Seller's Right to Supply Specifications 139
§5. PASSING OF RISK
      I. Introduction 140
      II. Legal Effect of the Passing of Risk 140
      III. Use of Trade Terms (CIF, C & F, FOB, FAS, CPT, CIP, etc.) 141
      IV. Contracts Involving Carriage: the CISG Gap-Filling Rule 143
      V. Goods Not Identified to the Contract 144
      VI. Goods Sold in Transit 144
      VII. Passage of Risk in Other (Non-Carrier) Cases 145
      VIII. Buyer to Take Goods at Seller's Place of Business (Ex Works) 145
      IX. Buyer to Take Goods at Another Place 146
      X. Identification Required 146
      XI. Seller's Fundamental Breach: Affect on Risk 146
§6. PROVISIONS COMMON TO THE PARTIES' OBLIGATIONS
      I. Introduction 147
      II. Anticipatory Breach and Instalment Contracts 147
            A. Introduction 147
            B. Right to Suspend Performance: Generally 148
            C. Goods Dispatched: Stoppage in Transit 148
            D. Notice: Adequate Assurance of Performance 149
            E. Right to Avoid for Prospective Fundamental Breach 149
            F. Damages for Prospective Fundamental Breach? 150
            G. Adequate Assurance of Performance 150
            H. Instalment Contracts: Avoidance for Fundamental Breach 151
      III. Damages for Breach 151
            A. Introduction 151
            B. CISG Liability: Basis, Extent and Exemptions 152
            C. Expectation Protection: the General Rule 152
            D. Foreseeability as a Limitation 154
            E. The Contact/Cover Differential 155
            F. No Cover if Seller's Supply Exceeds Demand 156
            G. The Contract/Market Differential 157
            H. Mitigation: No Recovery for Avoidable Loss 158
            I. Interest 158
            J. Liability Exemptions for Failure to Perform 160
                  1. Introduction 160
                  2. Freedom of Contract and the Gap-Filling Rule 160
                  3. Requirements for Exemption and the Burden of Proof 161
                  4. Non-Performance Due to Failure of 'Third Person' 164
                  5. Duration of Exemption 165
                  6. Notice of Impediment 166
                  7. Exemption Applies Only as Regards Damages 166
                  8. Non-Performance Caused by Other Party 166
      IV. Effects of Avoidance 167
            A. Introduction 167
            B. Release from Obligation 167
            C. Damages for Breach, Arbitration Clauses, etc. 167
            D. Restitution 168
            E. Buyer's Obligation to Return Goods in Condition Received 168
            F. Exceptions to the Return-of-Goods Rule 169
            G. Retention of Other Remedies Notwithstanding 170
            H. Accounting for Interest and Other Benefits Received 170
      V. Preservation of the Goods 170
            A. Introduction 170
            B. Seller's Duty to Preserve Goods on Buyer's Behalf 171
            C. Buyer's Duty to Preserve Goods on Seller's Behalf 171
            D. Deposit in Warehouse; Sale of Goods Preserved 171
Chapter 6. Final Convention Provisions 173
§1. OVERVIEW 173
§2. SIGNATURE, RATIFICATION, ENTRY INTO FORCE 173
§3. RELATIONSHIP TO 1955 HAGUE CONVENTION 173
§4. RESERVATIONS 174
      I. Introduction 174
      II. Article 92 Declarations 174
      III. Contracting States with Territorial Units 176
      IV. States Having Closely Related Legal Rules 176
      V. 'Private International Law' and Article 1(1)(b) 177
      VI. Preservation of Formal Requirements 178
§5. RELATIONSHIP TO ULF/ULIS 178
§6. CONTRACT FORMATION: ENTRY INTO FORCE 178
§7. SIX AUTHENTIC TEXTS 179
APPENDIX
SELECTED BIBLIOGRAPHY 183
INDEX 187

Pace Law School Institute of International Commercial Law - Last updated March 28, 2005
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