Copyright © 2003 by Colorado Lawyer, Tom McNamara. Reprinted with permission of 32-FEB Colorado Lawyer 11-22 (February 2003) and the author.
Tom McNamara [a1]
The United Nations Convention on Contracts for the International Sale of Goods has been ratified in sixty-two nations (including the U.S.) and is the international functional equivalent of Article 2 of the Uniform Commercial Code. This article provides an overview of the Convention, contrasts the Convention with domestic sales law, and offers a series of practice pointers.
Fifteen years ago, the United Nations Convention on Contracts for the International Sale of Goods ("CISG" or "Convention") "entered into force" (became effective) between the United States and ten other nations. The CISG, a multilateral treaty that governs the rights and obligations of parties to international sales contracts, is the international functional equivalent of Article 2 of the Uniform Commercial Code ("UCC"). The Convention was designed to foster foreign trade by making it easier and more economical to buy and sell raw materials, commodities, and manufactured goods through a unified legal approach.
At its inception, diplomats, scholars, and even some practitioners hailed the Convention as a monumental achievement and notable example of international legal cooperation. The original expectation was that the CISG would achieve rapid acceptance and essentially supplant domestic sales laws that were not specifically tailored to international transactions.
The actual experience during the CISG's first decade was quite different as the optimism and promise of the early years eroded. By and large, most American lawyers were completely oblivious to the Convention's very existence. Traders continued to use pre-printed forms with typical domestic American choice-of-law provisions. Those attorneys who actually knew about the CISG almost uniformly tried to avoid it by "opting-out." The Convention "suffer[ed] from neglect, as well as ignorance and even fear." More charitably, the CISG's adolescent years were characterized, at least in the United States, by only small, incremental steps toward grudging acceptance.
However, at the fifteen-year mark, the Convention is finally starting to come of age. Growing from an original group of eleven countries in 1988, the Convention is now the law in more than sixty-two nations. CISG-signatory countries account for a staggering two-thirds of all goods moving in international trade  and encompass a majority of the world's population. In just the last two years, U.S. courts have issued as many published opinions concerning the CISG as in the previous thirteen years combined. The trend is worldwide. During the same two-year period, the United Nations' database of Convention case abstracts doubled. Scholarly literature on the CISG is now quite comprehensive. The leading American Internet resource for CISG materials has reported explosive growth in the number of Internet "hits"--from 100,000 hits per month during early 1999 to 330,000 hits per month by late 2000.
Now, more than ever, Colorado practitioners should become familiar with the CISG. A better understanding of the Convention is important for both Colorado transactional and litigation professionals. [page 11] Business lawyers need to be aware of the CISG and its nuances to properly counsel the increasing number of Colorado clients engaged in international commerce. Litigators should be aware that transnational commercial disputes may be governed by an entirely unfamiliar legal regime, which may affect the substantive outcome. Further, at least rudimentary knowledge is necessary, if for no other reason than to satisfy professional responsibility and to avoid the Convention "traps for the unwary."
The balance of this article briefly: (1) describes the history and development of the CISG; (2) identifies the principal signatory nations; (3) provides an overview of the Convention; (4) presents a substantive comparison of certain important differences between the CISG and the Colorado UCC; (5) explains the application of a companion treaty governing the limitations period for international sales of goods; and (6) offers some practical pointers and resources for CISG issues. The article's purpose is not to provide comprehensive information on all aspects of the CISG, but rather to highlight (at least superficially) the emerging importance of the Convention in keeping with the theme, "Learn the CISG, Whether You Like It or Not."
HISTORY AND DEVELOPMENT OF THE CISG
The CISG is an extraordinary example of international legal cooperation that represents the culmination of more than fifty years of work to construct a codified lex mercatoria for transnational sales. The Convention's origins may be traced to the late 1920s when scholars, lawyers, and traders (primarily from western Europe) began to explore the possibility of creating a uniform law to govern international trade. Draft uniform sales laws were presented and debated from 1926 through 1939 under the auspices of the Hague Conference on Private International Law ("Hague Conference") and the International Institute for the Unification of Private Law ("UNIDROIT"). Interrupted at various intervals by world events (including World War II), these efforts continued in the 1950s and 1960s.
The Hague Conference eventually adopted three conventions governing international sales: Convention on the Law Applicable to International Sales of Goods (June 15, 1955); Convention on the Jurisdiction of the Selected Forum in the Case of International Sales of Goods (April 15, 1958); and Convention on the Law Governing Transfer of Title in International Sales of Goods (April 15, 1958). Only one of these treaties (the Convention on the Law Applicable to International Sales of Goods) ever actually entered into force (and then only among one African and eight European nations).
Although the Hague Conference efforts had been partially successful, the resulting treaties were criticized for their primarily Eurocentric approach and failure to address the needs of the United States, the developing countries, and Eastern Europe. In 1965, the United Nations General Assembly created the United Nations Commission on International Trade Law ("UNCITRAL") to address important trade law issues on a more global basis. The development of an international sales law was at the forefront. The drafting and negotiation process, for what ultimately became the CISG, was quite inclusive. The United States and more than sixty-one other nations representing quite different legal systems (common law, civil law, and other types of legal systems) participated in the working groups and provided their input. Academics, corporations, traders, diplomats, and lawyers all played a role.
UNCITRAL unanimously approved the draft CISG and referred it to the United Nations General Assembly. The Convention was finalized at a diplomatic conference in Vienna in 1980, where it was again unanimously approved. The CISG is officially plurilingual in six languages: Arabic, Chinese, English, French, Russian, and Spanish.
PRINCIPAL SIGNATORY NATIONS
Since its finalization in 1980, the Convention has received ever-widening acceptance in the international community. Nineteen nations, including the United States, originally signed the Convention in 1980 and 1981. The United States ratified the treaty on December 11, 1986. All but two of the original signatory countries subsequently ratified the CISG. Pursuant to Article 99(1) of the CISG (which required ratification by at least ten nations prior to its effectiveness), the Convention "entered into force" and became effective on January 1, 1988, among a diverse group of eleven nations on five continents: Argentina, the People's Republic of China, Egypt, France, Hungary, Italy, Lesotho, Syrian Arab Republic, United States, Yugoslavia, and Zambia. As of December 3, 2002, sixty-two countries (including the United States) had signed and ratified the CISG ("Contracting States"). The CISG is in force with respect to most (but not all) of the United States' principal trading partners.
Regionally, the CISG has been universally adopted in North America (the United States, Canada, and Mexico). The Convention regime has achieved acceptance in most of Western and Eastern Europe (including the Russian Federation). The United Kingdom and Ireland are notable European exceptions and have not ratified the CISG. Latin America is split. Although Argentina, Chile, Columbia, Ecuador, and Peru have ratified the treaty, Latin America's largest economy, Brazil, has not. In the Middle East, the Convention has been adopted in Egypt, Israel,  Iraq, Jordan, Lebanon, and Syria. The CISG is in effect in only eight African nations. Similarly, the Convention has not achieved general acceptance in Asia. Only two (but very influential) Asian countries have ratified the CISG: the People's Republic of China (including Hong Kong) and Singapore.
While many countries have ratified the CISG, the Convention permits Contracting States to make certain "reservations" at their election. The reservations are deviations from the standard provisions of the CISG. For example, at least nine nations (mostly in Eastern Europe and Latin America, not including the United States) have declared that any provisions that would permit oral contracts do not apply in those nations. The United States and several other countries made a reservation stating that they will not be bound by a technical CISG provision that makes the Convention applicable under a choice-of-law analysis, even if one or both parties to the contract do not have a place of business in a Contracting State.
The current list of countries that have ratified the CISG (and their respective reservations and declarations) is published and updated periodically by the International Trade Law Branch of the United Nations Office of Legal Affairs servicing UNCITRAL and is available on the Internet. Every year, a few more nations join the CISG treaty regime. For a private international law treaty, the CISG's sign-up rate has been remarkable in a relatively short period of time. With respect to the thirty-four modern Hague Conference conventions on private international law, none has received more ratifications than the [page 13] CISG. Similarly, no UNCITRAL convention has more members than the CISG. The only private international law treaty more heavily subscribed to than the CISG is the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted in New York in 1958 (prior to UNCITRAL's formation).
With respect to Colorado, approximately two-thirds of Colorado's principal trade partners have ratified the Convention. The table below shows Colorado's main trade partners (by volume of Colorado export trade) and identifies their positions with respect to the Convention. Thus, Colorado companies that engage in international trade are likely to conduct business in fellow CISG nations.
OVERVIEW OF CONVENTION
The Convention is an international commercial legal code. According to a leading CISG scholar, the jobs of the UCC and the CISG are substantially the same:
"Both were designed to reduce the misunderstandings and controversies that can arise when one law governs the seller and a different law the buyer. They do the job in different areas: The UCC is designed to avoid the modest differences among the domestic laws of our fifty states, while the CISG is designed to overcome differences among the laws of the countries of the world."
At the risk of over-generalization, the CISG can be characterized as "generally consistent" with the UCC. The UCC and American input greatly influenced the Convention's provisions and text. Most scholars, lawyers, and traders have agreed that the CISG is well-drafted, fair, balanced, and generally reflects international business expectations and norms.
While similarities between the CISG and UCC predominate, the differences are quite important. Obviously, as with any multi-lateral negotiation, the Convention ultimately represents a series of compromises, including between common law and civil law concepts. Further, the CISG has a number of "gaps" that, by design or otherwise, simply were not addressed. As a consequence, the CISG "corresponds to the pre-CISG law of no country of the world." From the point of view of the Colorado practitioner, understanding the differences between the UCC and CISG, as well as the CISG's gaps, is critical.
for 2000 (in $US Millions)
|3. United Kingdom|
|10. Hong Kong|
|14. China (PRC)|
Scope of the Convention
The Convention is generally applicable to: (1) "contracts of sale"; (2) "of goods"; (3) "between parties whose places of business are in different [Contracting] States." In these requirements, the CISG is more straightforward than the UCC, which somewhat cryptically provides: "Unless the context otherwise requires, this article applies to transactions in goods ...."  Like the UCC, the Convention contains a series of application exclusions. The CISG does not apply to sales: (1) of consumer goods (bought for personal use and consumption by the purchaser); (2) by auction; (3) of securities or negotiable instruments; (4) of ships, vessels, or aircraft; or (5) electricity. The Convention also is not applicable to so-called "assembly contracts" where the party that orders goods "to be manufactured or produced" undertakes to supply a "substantial part of the materials necessary for such manufacture or production" of the goods.
Assuming that a particular transaction is not specifically "excluded" by the CISG, the principal issues of applicability of the Convention revolve around the meaning of the term "goods" and the phrase "between parties whose places of business are in different [Contracting] States." Unlike the UCC, the CISG does not specifically define the term "goods." However, by using the term "goods," the CISG (like the UCC) clearly makes a distinction between the sale of "goods" and the sale of "services or labor." The Convention does not apply to contracts in which the "preponderant part of the obligations ... consists in the supply of labour or other services." Thus, most agreements solely for distribution,  development, licensing,  leasing,  transportation, carriage (shipping), insurance, and financing are likely not covered by the Convention. Certain transactions may raise potentially difficult legal issues concerning the applicability of the Convention in the same way that such transactions are subject to some uncertainty under the UCC. These may include the development and sale of computer software  or both the sale of goods and services or "gray areas" (such as leases with purchase options).
The CISG's second primary scope requirement (that the sales contract be "between parties whose places of business are in different [Contracting] States") also merits close scrutiny. Contrary to the gut reaction of many American lawyers, the focus of the Convention is not on the "nationality" of the parties, but on the "places of business of the parties." This difference in approach may drive unexpected results.
Two illustrations make the point. Suppose a Delaware corporation that maintains its only place of business in California contracts to sell computer equipment to a Canadian corporation that maintains its only place of business in Vancouver. The CISG would presumptively apply to such a transaction.
Modify the example and suppose that a Delaware corporation that maintains its only place of business in California contracts to sell computer equipment to another Delaware corporation that maintains its headquarters in Vancouver and an office in Oregon. Under the CISG, even though the transaction is between two "American" companies (both Delaware companies), the transaction nevertheless may be governed by the CISG if the Canadian [page 15] headquarters of the Delaware corporation (rather than its Oregon office) had the "closest relationship to the contract and its performance."
This real-life example  shows that lawyers and their clients must carefully consider the scope of the CISG, especially in transactions involving multi-national corporations with several "places of business." The focus should be on "place of business" rather than "nationality" of the parties.
Freedom of Contract Under the CISG
Many Convention commentators have argued that the most fundamental provision of the Convention is the "freedom of contract" principle. CISG < Article 6 permits the parties to "derogate from or vary the effect of any of its [CISG] provisions." Thus, the CISG does not deprive buyers and sellers from the freedom to mold their contracts to their own needs and to modify the presumptive CISG provisions. Instead, the Convention is primarily designed to provide dependable solutions for things not specifically considered by the parties (that is, a "default setting"). The CISG provisions always should yield to specific contrary contract terms. Accordingly, to the extent that parties desire provisions different than the CISG, they simply need to agree by contract.
Automatic Application and Opting Out of CISG
Although not widely known within the international trade and legal communities, as a general matter, the Convention presumptively and automatically governs all international trade transactions within the CISG's scope (an international sales contract). Indeed, U.S. courts are unanimous that the CISG preempts domestic sales law for covered international transactions.
However, after completing a careful analysis of the comparative benefits and detriments of domestic law and the CISG with respect to a specific transaction, parties may determine that they should "opt-out" of the CISG. The Convention permits the ultimate freedom of contract deviation: complete exclusion of the Convention. Under CISG Article 6, "the parties may exclude the application of this Convention ...." Parties desiring to exclude application of the CISG must be extremely cautious in fashioning the exclusion provision. For example, simple (but common) domestic choice-of-law provisions, such as the following, likely will not effect an exclusion of the Convention as governing law:
The rights and obligations of the parties under this contract shall be governed by and construed under the laws of the State of Colorado.
The laws of the State of Colorado shall govern in connection with the formation, performance, and legal enforcement of this purchase order.
Any dispute arising out of this contract shall be determined in accordance with the laws of the State of Colorado.
Even though the parties to such contracts specifically identified the "laws of the State of Colorado," international treaties such as the CISG are the supreme law of the United States and, therefore, would likely be construed as part of the law of the State of Colorado.
If the parties desire to effectively exclude application of the Convention, such exclusion should be explicit and state the alternative applicable law. For example, the following provision should effect an exclusion of the CISG:
The rights and obligations of the parties under this contract shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. Instead, the rights and obligations of the parties under this contract shall be governed by the laws of the State of Colorado (without regard to principles of conflict of law), including the Colorado Uniform Commercial Code.
SUBSTANTIVE COMPARISON OF CISG AND UCC DIFFERENCES
This section identifies and analyzes some (but not all) of the most important differences between the CISG and UCC. With respect to any particular international transaction, competent legal advice should be obtained to assist in comparing the relative differences between the CISG and UCC.
Statute of Frauds and Parol Evidence
One significant difference between the Convention and the UCC concerns the "statute of frauds" or oral contracts. With respect to the domestic sale of goods, the UCC "statute of frauds" generally provides that "a contract for the sale of goods for a price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought ...."  Furthermore, any amendment or modification to a contract must be in writing if the underlying contract is required to be in writing.
The UCC approach has historical roots going back several centuries to English law. The "no oral contracts" law represents a policy decision designed to avoid the misunderstandings and differing recollections, which often are inherent in oral transactions. Advocates argue that by requiring the parties to reduce their agreement to writing, the terms of the agreement are more accurate and definite and less prone to subsequent dispute. In actual practice, there are many exceptions to the "statute of frauds." As a result, while the UCC establishes a presumption against the enforcement of oral contracts, such oral contracts may be enforced in certain circumstances (such as reasonable reliance, promissory estoppel, and performance).
The Convention departs from the UCC formal requirement of a written agreement. CISG Article 11 states: "A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proven by any means, including witnesses." Furthermore, in the absence of a specific clause otherwise, the Convention generally permits oral amendments or modifications to contracts.
The oral contract issue was quite divisive in the negotiations for the CISG. The United States, certain other common-law nations, Latin American countries, and Eastern European nations all pressed for a written agreement requirement. On the other hand, many civil law countries had no such requirement and advocated the recognition of oral contracts. In the end, the CISG followed the more liberal civil law approach and allowed enforcement of oral agreements. Notably, however, several nations (mostly in Eastern Europe and Latin America, but not the United States) have made Article 96 "declarations" concerning oral contracts and continue to insist that international contracts for the sale of goods must be in writing.
The "statute of frauds" differences between the CISG and UCC are related to another potential area of difference: the "parol evidence" rule. In the United States, oral testimony of witnesses concerning the terms of a contract and intent of the [page 16] parties that contradicts or varies from the terms of a written contract is generally inadmissible in evidence. The CISG does not expressly address this issue. However, given the CISG's willingness to endorse oral contracts, some courts and most commentators believe that the CISG abandons the parol evidence rule in favor of a more liberal approach that permits testimony, even if it contradicts or varies from the terms of a written contract. The two United States appellate decisions that have considered the issue reached opposite results concerning whether the parol evidence rule is applicable to CISG disputes. However, more recent decisions suggest a definite trend away from the parol evidence rule in CISG cases.
Battle of the Forms
The Convention and UCC also differ in their approaches to the "battle of the forms." The typical battle of the forms (there are many variants) occurs when a buyer sends a seller a purchase order that includes numerous terms and conditions (usually in small print, legalese on the back side of the form) that the buyer desires to include in the contract. The seller sends back an acknowledgment that adds a different series of terms and conditions to the buyer's original purchase order. These forms (the purchase order and acknowledgment) usually conflict because each party (through its lawyer) has developed form terms that are most favorable for that party. While the front sides of the various forms may agree on important terms such as price, transportation, and quantity, the back sides are in confusing disarray.
Before the advent of the UCC, most American (and English common law) jurisdictions generally had followed a "last shot doctrine" or "mirror image rule." This means that if the terms of the acknowledgment varied from the terms of the purchase order, the varied acknowledgment became not an acceptance but a counter-offer. As long as the parties did not actually perform, no contract would be formed and either party could "get out" of the arrangement. Normally, however, even in spite of the conflicting forms, the seller would deliver and the buyer would receive the goods. When the transaction was thus completed by performance, the common law assumed that a contract had been formed. Subject to many exceptions, the terms of the contract generally consisted of the terms of the original offer, subject to the modifications contained in the acceptance.
The UCC changed the common-law "mirror image rule." CRS § 4-2-207 creates a default provision whereby a final form that is not intended specifically as a counter-offer will act as an acceptance, even though it contains different or additional terms to those contained in the prior form. The additional terms are considered as proposals for additions to the contract and, as between merchants, become part of the contract, unless: (1) the offer expressly limits acceptance to the terms of the offer; (2) the terms materially alter the offer; or (3) notification of objection to the terms already has been given or is given within a reasonable time after notice has been received. The normal result under the UCC is to reverse the common-law presumption that the last form governs and replace it with the result that the second-to-last form usually governs.
Consider the following example. A Chinese company sends a purchase order to a Colorado company offering to purchase 10,000 cowboy hats for $1 million. The back [page 17] of the purchase order states that the seller must provide a full ten-year warranty and that all disputes shall be resolved in Shanghai in the Chinese language. The Colorado company responds by sending its acknowledgment sales order to the Chinese company. In many respects (such as price and quantity), the acknowledgment sales order and the purchase order are the same; however, on the back side of the acknowledgment sales order, the Colorado company has included a warranty disclaimer and a provision requiring that all disputes shall be resolved in Denver in the English language. No further forms, communications, or objections are exchanged. A few weeks later, the Colorado company ships the cowboy hats to China.
Under the common-law "mirror image" approach, no contract would have been concluded (prior to performance) because the purchase order and acknowledgment sales order were materially different with respect to warranties and dispute resolution. However, after the cowboy hats were sent to China and received, a contract would exist. The terms of the contract would likely follow the Colorado company's acknowledgment sales order form (the "last shot"). Dispute resolution would be in Denver in English without any warranties because the Chinese company assented to the "last shot" by accepting the cowboy hats.
Under the UCC approach, a contract would have been concluded earlier -- when the Colorado company delivered its acknowledgment sales order. The terms of the contract would likely follow the Chinese company's purchase order because the Colorado company's acknowledgment sales order materially altered the offer. Thus, dispute resolution would be in Shanghai in Chinese with full ten-year warranties. The CISG departs from the UCC approach and, instead, is consistent with the old common-law "mirror image" rule. CISG Article 19(1) states:
"A reply to an offer which purports to be an acceptance but contains [material ] additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer."
Thus, (at least prior to performance), either party may be able to claim successfully that no enforceable contract exists under the CISG. After delivery and acceptance, a contract will undoubtedly be deemed to have existed. Although the terms of the contract may be subject to dispute, the CISG generally favors the last party to submit materially different terms. Put another way, the CISG "retrogresses to a pre-UCC view that typically favors the seller"  in the battle of the forms.
Warranties and Disclaimers of Warranties
The UCC and the Convention have similar provisions for warranties, but differ with respect to disclaimers of warranties. Under the Convention, the seller has a four-fold warranty obligation and "must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract." Goods do not conform with the contract unless they "are fit for the purposes for which goods of the same description would ordinarily be used" and "are fit for any particular purpose expressly or impliedly made known to the seller ...."  Although the CISG's merchantability, fitness, and title warranties are not identical to the UCC provisions,  they are substantially similar and would likely lead to similar results.
However, the CISG contains no provisions comparable to the disclaimer procedures that sellers are authorized to use under the UCC. For example, under the UCC, an effective disclaimer of the implied warranty of merchantability must mention "merchantability" and must be in conspicuous writing.  Similarly, an effective disclaimer of an implied warranty of fitness must be in writing and conspicuous. The UCC proposes language such as: "There are no warranties which extend beyond the description on the face hereof." The Convention is less formalistic and appears to permit disclaimers of warranties as long as the "parties have agreed" in writing or orally.
Perfect Tender Rule
Under the UCC, a buyer is generally entitled to reject goods (under a one-delivery contract of sale) that fail in any respect to conform to the contract. This is known as the "perfect tender" rule. Under the rule, a buyer (subject to good faith and certain other requirements) may reject goods and cancel the contract, even if a defect in tendered goods is not serious and the buyer would have received substantially the goods for which it bargained.
The CISG departs from the perfect tender rule and makes rejection, revocation of acceptance, or cancellation more difficult. Under the Convention's provisions, a buyer may "declare the contract avoided" only if the failure by the seller to deliver goods constitutes "a fundamental breach" of the contract. A breach of contract is "fundamental" only "if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract" and even then, only if the seller foresaw, or a reasonable party in the seller's position would have foreseen, such a result.
Notice of Non-Conforming Goods
The CISG provides that "the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or should have discovered it." The buyer bears the burden to establish that notice of non-conformity was given within a "reasonable" time frame. Whether notice was given within a "reasonable" time depends on the facts and circumstances of the transaction, including the type of goods (for example, notices concerning perishable goods should be given more promptly). Disputes over the notice of non-conformity requirement (including timing and specificity) have been the subject of almost 20 percent of the reported CISG decisions worldwide.
Although the analogous UCC provision  also requires notice within a "reasonable" time, the CISG approach has been construed far more narrowly and restrictively than the UCC. Under the UCC, the buyer is afforded "a reasonable opportunity to inspect the goods." However, under the CISG, the buyer must inspect the goods "within as short a period as is practicable under the circumstances." Based on these differences, the "reasonable" time periods for notices of non-conformity have been construed as quite short under the CISG. Further, the specificity mandated by the CISG appears more restrictive than under the UCC (especially so in German decisions). As a result, effective notice of non-conformity under the CISG should be timely and very detailed.
Unilateral Price Reduction
The CISG contains many of the same damages remedies as available under the UCC. Generally, a buyer may claim damages if the seller fails to perform. Such damages consist of a sum equal to the loss, including the loss of profit, suffered as a consequence of the breach. These provisions [page 18] resemble the direct, incidental, and consequential damages under the UCC.
However, the CISG includes a novel (for Americans), unilateral price reduction remedy. Under CISG Article 50, "[i]f the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that the conforming goods would have had at that time." This pro-purchaser, self-help remedy stems from civil law and generally has not been available in common-law jurisdictions such as the United States and England. It is not available if the seller is able to cure non-conformity without causing unreasonable delay or inconvenience to the buyer.
Although the CISG was designed to create a general substantive law of sales governing international contracts, the Convention does not cover all issues that may arise in such transactions or subsequent dispute resolution. Gaps in the CISG include, the following, among others:
For example, with respect to trade terms, the UCC contains some definitions of common trade terms, such as F.O.B., F.A.S., C.I.S., and C.I.F. The CISG contains no provisions concerning trade terms. The parties may develop their own trade terms to specify the obligations of the parties. However, in the international context (given varying meanings and nuances), the parties may best achieve clarity by incorporating trade terms from commonly accepted trade term regimes such as the International Chamber of Commerce Official Rules for the Interpretation of Trade Terms ("Incoterms").
Although the CISG contains specific provisions for the award of interest,  the Convention does not specify the rate of interest or which nation's laws should apply to selecting the applicable rate of interest. The interest issue, while relatively mundane-sounding, has been the subject of up to 30 percent of total CISG cases worldwide. In the absence of direction, courts have often awarded interest according to the applicable law of the forum jurisdiction.
The CISG does have substantial "gaps." If the CISG will be the applicable sales law, practitioners should consider supplementing the Convention with the domestic laws of the American or foreign jurisdiction to "fill in the gaps."
STATUTE OF LIMITATIONS UNDER CISG
The CISG has no general statute of limitations provision requiring that dispute resolution be initiated within a certain time frame. However, a separate treaty governs the issue: the United Nations Convention on the Limitation Period in the International Sale of Goods. That convention was originally completed in 1974, but was amended in 1980 through a Protocol to make it consistent with the CISG (as amended, the "Limitations Convention"). Fewer nations have ratified the Limitations Convention than have ratified the CISG. As of December 3, 2002, at least [page 19] some version of the Limitations Convention (that is, the 1974 version or 1980 Protocol) had been ratified in twenty-four nations, including the United States (compared to sixty-two countries that have ratified the CISG). Accordingly, if a CISG-governed transaction is conducted with a non-signatory of the Limitations Convention and the contract does not specify a limitations period, the applicable statute of limitations may be uncertain.
The key limitations period under the Limitations Convention is four years  after the claim accrues -- usually the date of breach of the contract;  under certain limited circumstances, the period may be extended, but in no case beyond ten years. The statute of limitations is longer than the three-year period of limitations generally applicable under the Colorado UCC. As a general matter, the Limitations Convention operates in a similar fashion to the UCC in terms of determination of the commencement of the limitations period and other related matters. As with the CISG, application of the Limitations Convention is automatic for covered transactions between signatory nations. Also similar to the CISG, the Limitations Convention provides that the parties may expressly "opt-out" of the Limitations Convention. Since the Limitations Convention is broadly similar to the UCC, most American traders have not elected to routinely "opt- out." From the perspective of a Colorado company, an "opt-out" would seem to make sense only if the parties desired to have a limitations period shorter than four years.
PRACTICAL CISG ISSUES FOR COLORADO PRACTITIONERS
The CISG is a complex code for international trade law that has advantages and disadvantages for Colorado businesses, depending on the unique international transaction being considered and the special facts and circumstances of each case. The following are general advantages and disadvantages.
Practical Transaction Issues
Each international transaction is different. The parties should carefully analyze whether the CISG applies or should be excluded, based on the unique factors, facts, and circumstances of the trade. However, U.S. parties may wish to consider the following practical issues: 
Practical CISG Litigation Issues
The need for familiarity with the CISG is just as important for Colorado litigators as for transactional attorneys. While business counsel may put the international deal together (and should be careful on the front end to assess the advantages and disadvantages of the CISG for the particular transaction), trial counsel will need to work on the back end prosecuting and defending CISG-based claims.
CISG-governed transactions may raise interesting litigation questions concerning state and federal jurisdiction. Colorado state trial courts technically may have general jurisdiction to entertain disputes under the Convention. However, almost all of the reported U.S. jurisprudence is at the federal level. Since the Convention is a "treaty of the United States," federal courts likely have "federal question" jurisdiction over all CISG-governed international sales disputes. While many CISG-oriented cases undoubtedly would have been amenable to "federal diversity" jurisdiction anyway because such disputes typically involve "citizens of the United States and citizens or subjects of a foreign state,"  the CISG has expanded and "federalized" jurisdiction in the area of international transactions.
After assessing the jurisdiction issues (and other threshold matters such as personal jurisdiction, forum, and comity), litigation counsel will need to be (or become) familiar with the substantive CISG sales law issues. Unfortunately, for a variety of reasons, the application of the CISG is often ignored. For example, a review of court records of several disputes in state and federal courts (including in Colorado) concerning the international sale of goods between CISG signatories reveals that, almost invariably, neither party has raised the CISG as applicable law. Instead, counsel appear oblivious to the CISG and generally debate whether domestic U.S. or foreign law should apply. Failure to identify the CISG as the applicable law in appropriate circumstances (especially if differences between the CISG and UCC may affect the ultimate result) could harm client interests and raise issues of professional responsibility, ethics, and even legal malpractice. Generally, if the parties do not raise the CISG as the applicable law in litigation, domestic courts will likely revert to the law in their own jurisdiction.
Assuming that the CISG is applicable to a dispute, Colorado practitioners may be faced with the issue of establishing or proving CISG law to the court through precedent or otherwise. In the absence of any reported case law in Colorado state and federal courts, lawyers will likely need to rely on other reported decisions in the United States and on treatises, articles, and other commentary. Another interesting avenue of addressing CISG issues that [page 21] are novel in the United States is that of precedent from other CISG countries, on which American courts have started to rely. This trend may lead to a more unified approach to CISG legal issues. As with other international litigation, CISG-governed cases will pose many other interesting challenges.
Almost certainly, more words have been written in more languages about the CISG than any other private international law convention. Colorado practitioners faced with CISG-related issues will be surprised at the breadth of available resources. In addition to the numerous texts already cited in this article, there are several English-language treatises and comprehensive practice-oriented materials.
The Internet has revolutionized the spread of information about the CISG. The best single source for information concerning the CISG is undoubtedly the website of the Institute of International Commercial Law at Pace University School of Law ("Pace Website"): <http://cisgw3.law.pace.edu>. The Pace Website contains a truly impressive array of materials including: annotated texts of the CISG (in multiple languages); texts of earlier international sales law conventions; a listing of current signatories; guides to each CISG article; drafting histories; legislative histories; scholarly articles; practice-oriented articles and guides; and comprehensive bibliographies listing hundreds of additional articles.
The real gold mine is the jurisprudence portion of the Pace Website. The Pace Website currently includes approximately 1,000 "case presentations" (basically case digests) from more than thirty CISG signatory nations or international dispute resolution bodies (such as the International Chamber of Commerce Court of Arbitration and the Arbitration Institute of the Stockholm Chamber of Commerce). The "case presentations" are fully integrated with the UNCITRAL "Case Law On UNCITRAL Texts" database ("CLOUT"). The Pace Website also contains a large collection of full-text CISG decisions from English-language jurisdictions (United States, Australia, and Canada), as well as original full-text decisions from other jurisdictions in their respective native languages. A large (and ever-increasing) number of the decisions originally rendered in foreign languages has been translated into English. The case presentations and full English-language texts are searchable by country, topic, and CISG article.
In addition to the Pace Website, another excellent source for CISG materials is UNCITRAL. The UNCITRAL Internet website, <http://www.uncitral.org>, is a plurilingual site (six languages) that includes official texts of the CISG and comprehensive bibliographies. Further, UNCITRAL developed the CLOUT database, which contains abstracts of almost 500 judicial decisions (most of which relate to the CISG). English-language case abstracts are prepared by the UNCITRAL Secretariat and published through the database. The Pace Website system links with CLOUT.
Finally, various legal scholars from around the globe have coordinated in creating the "Autonomous Network of CISG Websites." This system is a worldwide collection of Internet websites dedicated to the CISG and organized on a national basis. Each of the respective participating jurisdictions is charged with collecting all CISG case law in the jurisdiction and publishing the decisions through the network. To date, the Autonomous Network contains websites with original materials from Austria, Belgium, Denmark, France, Germany, Israel, Italy, Mexico, Spain, and the United States, as well as certain other countries. Internet links to the Autonomous Network are available on the Pace Website.
The Convention is finally starting to come of age. The CISG is now the international sales law in sixty-two nations and presumptively governs almost two-thirds of the world's trade. An ever-increasing number of courts are applying CISG law. Now, more than ever before, Colorado lawyers, both transaction- and litigation-oriented, need to become aware of the CISG and its nuances to properly advise their Colorado clients engaged in international transactions and dispute resolution.
Legal disclaimer. This article is designed to provide general information concerning the United Nations Convention on Contracts for the International Sale of Goods. It is provided with the understanding that the author is not giving legal advice. This article should not be used as a substitute for professional legal advice in specific situations. If legal advice is required, a legal professional should be engaged to render such advice. Although this article is designed to provide accurate information as of December 2002, the rules and laws described herein may change. Attorneys dealing with specific legal problems should conduct independent legal research. [page 22]
a1. Tom McNamara is a partner with Davis Graham & Stubbs LLP -- (303) 892-9400 -- and current president of the Colorado Bar Association International Law Section. His practice focuses on international litigation and dispute resolution.
1. S. Treaty Doc. No. 9, 98th Cong. 1st Sess. 22 (1983), reprinted at 15 U.S.C. App. 52 (2002). The text of the CISG also is readily available from electronic sources: <http://www.uncitral.org> (official text in English, Arabic, Chinese, French, Russian, and Spanish); <http://cisgw3.law.pace.edu>. CISG Articles, cited throughout this article, can be found by accessing these electronic sources.
2. CRS §§ 4-2-101 et seq.
3. E.g., The Colorado Lawyer published a timely article on the CISG in 1989: Blodgett, "The U.N. Convention on the Sale of Goods and the 'Battle of the Forms,"' 18 The Colorado Lawyer 421 (1989). The author characterized the CISG as an "integral part of the United States law" and warned that "lawyers who deal with international sales transactions must study the [CISG] and be able to use it." Id. at 429.
4. Murray, "The Neglect of the CISG: A Workable Solution," 17 J. L. & Comm. 365 (1998).
5. McMahon, "Applying the CISG: Guide for Business Managers and Counsel" (Feb. 2001), available at: <http://cisgw3.law.pace.edu/cisg/guides.html>.
6. United Nations Commission on International Trade Law CLOUT database, available at <http://www.uncitral.org>.
7. Guide to the Pace Database on the CISG and International Commercial Law, available at <http://cisgw3.law.pace.edu>.
8. See Newman and Burrows, "U.N. Sales Convention: Traps for Unwary?" The Practice of International Litigation (New York, NY: Transnational Juris. Pub., 1992).
9. Del Duca and Del Duca, "Practice Under the Convention on International Sale of Goods (CISG): A Primer for Attorneys and International Traders (Part II)," 29 U.C.C. L.J. 99, 157 (1996) (hereafter, "Del Duca Part II").
10. Many authors have documented the history of the Convention. See, e.g., Farnsworth, "Formation of International Sales Contracts: Three Attempts at Unification," 110 U.Pa. L.Rev. 305 (1962).
11. Copies of the texts of the treaties are available at <http://www.hcch.net>.
12. Hancock, ed., Guide to the International Sale of Goods Convention 101.002 (Chesterland, OH: Bus. Laws, Inc., Supp. 2002) (hereafter, "CISG Guide").
13. Thus, the CISG is sometimes referred to as the "Vienna Sales Convention," especially by European and Eastern European parties.
14. Ghana and Venezuela signed but never formally ratified the CISG.
15. The Convention recently was ratified by Israel and entered into force February 1, 2003.
16. See <http://www.uncitral.org>.
17. Based on recent data from the U.S. Census Bureau, Foreign Trade Division, reprinted in Colorado Int'l Trade Directory 2001-2002 (Denver, CO: World Trade Center-Denver, 2001).
18. Honnold, "The Sales Convention: From Idea to Practice," 17 J. L. & Comm. 181 (1998).
19. See Cook, "CISG: From the Perspective of the Practitioner," 17 J. L. & Comm. 343, 349 (1998) (CISG is "good law that promotes fair and honorable solutions without affording any obvious or hidden advantages to either side.").
20. Del Duca and Del Duca, "Practice Under the Convention on International Sale of Goods (CISG): A Primer for Attorneys and International Traders (Part I)," 27 U.C.C. L.J. 331, 337 (1994) (hereafter, "Del Duca Part I").
21. CISG Article 1(1), supra, note 1.
22. CRS § 4-2-102(1).
23. CISG Article 2, supra, note 1.
24. Id. at Article 3. Further, the CISG does not purport to govern personal injuries caused by goods. See CISG Article 5, supra, note 1.
25. See CRS § 4-2-105(1) (Colorado UCC definition of "goods"). For that matter, the CISG generally does not include specific definitions of terms.
26. CISG Article 3(2), supra, note 1. The "predominant part" requirement under the CISG is quite similar to the "predominant purpose" test used by most U.S. courts under the UCC. See CISG Guide at 103.1, supra, note 12.
27. See Helen Kaminsky Pty. Ltd. v. Marketing Australian Products, Inc., 1997 WL 414137 (S.D.N.Y. 1997) (unpublished opinion) (CISG did not apply to distributorship agreement because lacked expression of definite terms for sale of specified goods); Viva Vino Import Corp. v. Farnese Vivi S.r.l., 2000 WL 1224903 (E.D. Penn. 2000) (unpublished opinion) (same).
28. See Lockhart and McKenna, "Software License Agreements in Light of the UCC and the Convention on the International Sale of Goods," 70 Mich. Bar J. 646 (July 1991).
29. The CISG does not purport to cover leases, and no other international treaty in force in the United States exists with respect to leases. This gap is in contrast to UCC Article 2.5, a recent UCC addition on the topic. See CRS § § 4-2.5-101 et seq.
30. CISG Guide at 103.1, supra, note 12.
31. See Primak, "Computer Software: Should the U.N. Convention on Contracts for the International Sale of Goods Apply?" 11 Computer L.J. 197 (1991).
32. CISG Article 1(3), supra, note 1 ("Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention.").
33. CISG Article 10(a), supra, note 1 ("[I]f a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known or contemplated by the parties at any time before or at the conclusion of the contract.").
34. The modified example is based on Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F.Supp.2d 1142 (N.D.Cal. 2001). In Asante Technologies, the court determined that the CISG governed the sales transaction between two Delaware companies because one of the Delaware companies maintained its headquarters in Canada and the Canadian headquarters had the "closest relationship" to the contract. See also Note, "Contracts for the International Sale of Goods: Applicability of the United Nations Convention," 69 Iowa L.Rev. 209, 224 (1983) ("[A]contract between two American firms that is to be negotiated and performed within the United States possibly could be subject to the Convention's terms if one of the parties has a place of business in another country and the contract is to be performed in that country.").
35. CISG Guide at 100.005, supra, note 12.
36. Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc., 201 F.Supp.2d 236, 285-86 (S.D.N.Y. 2002); Usinor Industeel v. Leeco Steel Products, Inc., 209 F.Supp.2d 880 (N.D.Ill. 2002); Asante Technologies, supra, note 34 at 1151.
37. A review of form purchase orders routinely used by many Colorado companies in their domestic and international transactions shows that almost all of the purchase orders contained similar provisions without specific reference to opting-out of the CISG.
38. U.S. Const. Art. VI(2) ("This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land."); see also Asante Technologies, supra, note 34 at 1150. Asante Technologies involved two purchase orders. The American purchase order stated: "The validity and performance of this order shall be governed by the laws of the state shown on Buyer's address on this order [California]." The Canadian purchase order stated: "The contract ... is made, governed by, and shall be construed in accordance with the laws of ... British Columbia and the laws of Canada ...." The Asante Technologies court determined that "the choice of law clauses here do not evince a clear intent to opt out of the CISG." Id. Accordingly, the substantive law of the CISG was applied to the transaction.
39. Possibly, a clause such as the following might work to effect an opt-out because the reference to the UCC shows some intent for a specific applicable law of sales: "The rights and obligations of the parties under this contract shall be governed by and construed under the laws of the State of Colorado including the Colorado Uniform Commercial Code." Nevertheless, the prudent course is to make the "opt-out" more explicit by referring specifically to the CISG.
40. CRS § 4-2-201(1).
41. CRS § 4-2-209(3).
42. The United States' adherence to the statute of frauds is a distinct minority position in the present international legal community. Even Great Britain has rejected the doctrine.
43. CISG Article 29, supra, note 1.
44. CISG Article 96, supra, note 1, permits such declarations. The countries that have made CISG Article 96 declarations include Argentina, Belarus, Chile, Estonia, Hungary, Latvia, Lithuania, Russian Federation, and Ukraine.
45. See MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino, S.p.A., 144 F.3d 1384, 1389 (11th Cir. 1998) (parol evidence rule does not apply in CISG action); Beijing Metals & Minerals Import/Export Corp. v. American Business Center, Inc., 993 F.2d 1178, 1183, n.9 (5th Cir. 1993) (same).
46. The Beijing Metals holding has been roundly criticized by CISG commentators, and the trend is in the opposite direction. See MCC-Marble, supra, note 45 at 1384; Calzaturificio Claudia S.n.C. v. Oliveri Footwear Ltd., 1998 WL 164824 (S.D.N.Y. 1998) (unpublished opinion) ("contracts governed by the CISG are freed from the limits of the parol evidence rule, and there is a wider spectrum of admissible evidence to consider in construing terms of the parties' agreement.").
47. The "battle of the forms" issue is treated far more comprehensively than this article in Gabriel, "The Battle of the Forms: A Comparison of the United Nations Convention for the International Sale of Goods and the Uniform Commercial Code," 49 Bus. Law. 1053 (May 1994), and Blodgett, supra, note 3 at 424-27.
48. "Material" terms under the CISG include price, payment, quality and quantity of goods, place and time of delivery, extent of liability, and dispute resolution. CISG Article 19(3), supra, note 1.
49. This conclusion makes broad-brush strokes and risks over-generalization. Specific results will depend on the nuances of factual development. See Gabriel, supra, note 47 at 1062 ("The CISG and the common-law rules obviously favor the last party to submit terms.").
50. Murray, supra, note 4 at 372.
51. CISG Article 35(1), supra, note 1.
52. Id. at Article 35(2)(a) and (b).
53. CRS §§ 4-2-312 to -316.
54. CRS § 4-2-316(2).
56. CISG Article 35(2), supra, note 1. But see Supermicro Computer, Inc. v. Digitechnic, S.A., 145 F.Supp.2d 1147, 1151 (N.D.Cal. 2001) (court found issue of warranty disclaimer under CISG Article 35 was "unsettled," especially since one party claimed it was not aware of disclaimer).
57. CRS § 4-2-601.
58. CISG Articles 49(1) and 64, supra, note 1.
59. Id. at Article 25.
60. Id. at Article 39(1).
61. Del Duca Part II, supra, note 9 at 134 (notice issues were raised in twenty-seven of 142 CISG cases).
62. CRS § 4-2-607(3)(a).
63. CRS § 4-2-606(1)(a).
64. CISG Article 38(1), supra, note 1.
65. Id. at Articles 74-77.
66. CRS §§ 4-2-714 and -715.
67. CISG Article 50, supra, note 1.
68. CRS §§ 4-2-319 to -322.
69. The Incoterms recently have been revised, and the most current version became effective on January 1, 2000. Information about the Incoterms is available at <http://www.iccwbo.org>. In a recent decision, St. Paul Guardian Ins. Co. v. Neuromed Medical Systems & Support, GmbH, 2002 WL 465312 or 2002 U.S.Dist. LEXIS 5096 (S.D.N.Y. 2002) (unpublished opinion), the court determined that reference to CIF in a CISG-governed transaction demonstrated the parties' intent to incorporate Incoterms, even though the contract itself did not refer to Incoterms.
70. CISG Articles 78 and 84(1).
71. Del Duca Part II, supra, note 9 at 134 (interest issues were subject of forty-two of 142 reported CISG decisions).
72. Id.; see Delchi Carrier, S.p.A. v. Rotorex Corp., 1994 WL 495787 or 1994 U.S.Dist. LEXIS 12820 (N.D.N.Y. 1994) (unpublished opinion), aff'd in part, rev'd in part, 71 F.3d 1024 (2nd Cir. 1995) ("Because [CISG] Article 78 does not specify the rate of interest to be applied, the court in its discretion awards ... pre-judgment interest at the United States Treasury Bill rate.").
73. See <http://www.uncitral.org>.
74. Limitations Convention Article 8, supra, note 73.
75. Id. at Articles 1(3)(d) and 10(1) ("breach of contract" means "the failure of a party to perform the contract or any performance not in conformity with the contract"; the claim "... shall accrue on the date on which such breach occurs").
76. Limitations Convention Articles 13-23, supra, note 73.
77. CRS §§ 4-2-725 and 13-80-101. Colorado departed from the four-year limitations period suggested in the model UCC. Thus, the Limitations Convention four-year period is different than Colorado law but consistent with UCC law in most other states in the United States.
78. See Hill, "A Comparative Study of the United Nations Convention on the Limitation Period in the International Sale of Goods and § 2-725 of the Uniform Commercial Code," 25 Tex. Int'l L J. 1, 3 (1990).
79. Limitations Convention Article 3(3), supra, note 73.
80. Should the parties agree to "opt-out" of the Limitations Convention, they should specify either a specific limitations period applicable to the transaction or an alternative law of limitations, such as the Colorado UCC.
81. Among the more useful sources of practical information concerning drafting contracts under the CISG is Winship, "Changing Contract Practices in Light of the U.N. Sales Convention: A Guide for Practitioners," 29 Int'l Law. 525 (1995). Practitioners delving into international trade for the first time also may benefit by considering model forms. See The ICC Model International Sale Contract (Paris, France: ICC Publishing S.A., 1997).
82. Colo. Const. Art. VI, § 9.
83. 28 U.S.C. § 1331.
84. 28 U.S.C. § 1332(a)(2).
85. E.g., an illustration in the "Scope of Convention" section of this article involved a transaction between a Delaware corporation with its principal place of business in California and a Delaware corporation with its principal place of business in Canada. Almost certainly, "federal diversity" jurisdiction would be lacking because the parties are both Delaware corporations. See 28 U.S.C. § 1332(a)(1) and (c). However, because the transaction is CISG-governed, the case may be subject to "federal question" jurisdiction. Thus, the CISG may expand the role of the federal courts into international transactions. See Asante Technologies, supra, note 34 at 1150- 51 (applying federal question jurisdiction to CISG dispute).
86. See China Nat'l Metal Products Import/Export Co. v. Apex Digital, Inc., 141 F.Supp.2d 1013, 1022, n.6 (S.D.Cal. 2001) (court applied California law to U.S.-China transaction, in part, because parties never presented to court how CISG would apply).
87. See Medical Marketing Int'l, Inc. v. Internazionale Medico Scientifica, S.R.L., 1999 WL 311945 or 1999 U.S.Dist. LEXIS 7380 (E.D.La. 1999) (unpublished opinion) (citing German precedent); St. Paul Guardian, supra, note 69 (citing German precedent); Usinor Industeel, supra, note 36 (citing Australian precedent).
88. The following materials on the CISG are useful resources: Lookofsky, Understanding the CISG in the USA: A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods (Kluwer Law Pub., 1995); Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (Kluwer Law Pub., Supp. 1994); Kathrein and Magraw, The Convention for the International Sale of Goods: A Handbook of Basic Materials (Chicago, IL: American Bar Association, 1990).