Go to Database Directory || Go to Bibliography

Presented in "Celebrating Success: 25 Years United Nations Convention on Contracts for the International Sale of Goods" (Collation of Papers at UNCITRAL -- SIAC Conference 22-23 September 2005, Singapore), published and copyright by the Singapore International Arbitration Centre at 165-168. Reproduced with permission of the SIAC.

Implications of Korea's joining the CISG Regime in Terms
of Legal Framework Governing International Sale
Transactions among China, Korea and Singapore

Chang-Sop Shin [*]

  1. Korea's joining the CISG
  2. The differences between the CISG and Korean Civil Code
    in dealing with certain contractual issues
    1. Formation of contract
    2. Place of delivery
    3. Negligence in breach of contract
    4. Avoidance of contract
    5. Foreseeability in determining the extent of damages
  3. Conclusion

I.  KOREA'S JOINING THE CISG

After years of discussion, the Korean government finally decided to ratify the United Nations Convention on Contracts for the International Sale of Goods ('CISG') in 2004 and the CISG became effective in Korea as of 1 March 2005. Korea's joining the CISG has been broadly welcomed by business people involved in international trade as well as legal scholars who have been closely following the developments in the international trade law area in Korea.

Korea's entry into the CISG regime means that as a domestic law it will govern any contracts for the international sale of goods to which the Korean law applies unless the parties, of course, agree otherwise.

China accepted the CISG as early as 1987 and Singapore in 1995. As Korea has become a Contracting State of the CISG, international sale of goods among these three countries will normally be governed by the CISG. Since Korea, China and Singapore together enjoy a substantial volume of trade among themselves,[1] Korea's joining the CISG has important implications in terms of the legal framework that would govern contracts for the sale of goods arising from the trade among these countries. The unification of the law governing the sale of goods among these countries brought about by their joining the CISG regime and the predictability made possible thereby will undoubtedly contribute to the promotion of trade among these countries. In this sense, Korea's joining the CISG should be welcomed as further invigorating the already vibrant trade among China, Korea and Singapore. [page 165]

It would seem that this is exactly what the United Nations Commission on International Trade Law ('UNCITRAL') and such institutions as the Singapore International Arbitration Centre have been trying to make happen when they work so hard to have the CISG and also the Model Law on International Commercial Arbitration accepted worldwide.

It is important to remember, however, that the fact that the CISG is effective in China, Korea and Singapore does not necessarily mean that it will apply to every international sale transaction among these countries. As the CISG itself provides in Article 6, it is always possible for parties to exclude the application of the CISG to their transactions. In those cases, relevant domestic laws, as determined by the rules of private international law, will apply. This is why it is still important that business people and lawyers involved in international trade should keep on their efforts to have a certain level of understanding of relevant laws of those countries with which they are trading.

As part of an effort to emphasise the importance of understanding the domestic laws that govern the international sale of goods in these important countries, a brief overview of the differences that may be found between the CISG and Korea's Civil Code ('KCC')[2] when they address certain issues arising from international sale transactions will be given below. This paper is not intended to give a comprehensive comparative study of the CISG and KCC, but only to reiterate the importance of having some knowledge of the domestic sales laws of other countries despite the dawning age of uniform sales law that is being introduced by the success of the CISG.

II.  THE DIFFERENCES BETWEEN THE CISG AND KCC IN DEALING WITH CERTAIN CONTRACTUAL ISSUES

1. Formation of contract

With respect to the time of formation of contract, the CISG provides in Article 23 that a contract is concluded at the moment when an acceptance of an offer has become effective and in Article 18(2) that an acceptance of an offer becomes effective at the moment the indication of assent has reached the offeror. The KCC in Article 531, on the other hand, provides that an acceptance becomes [page 166] effective at the time when it is dispatched.[3] Therefore, a contract will come into existence when the acceptance has been dispatched under the KCC.

With respect to revocability of a proposal, the CISG provides in Article 16(1) that until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. The KCC in Article 527, however, provides that a proposal may not be revoked once it has reached the offeree, unless the proposal explicitly states that it is revocable.

In relation to the formation of contract, the CISG in Article 55 admits of the possibility of a contract being formed even when it does not expressly or implicitly fix or make provision for determining the price. In contrast, according to the KCC a contract will not be formed as long as the price terms are missing, unless there is at least an implicit agreement concerning the price terms.

2. Place of delivery

With respect to the seller's obligation to deliver goods, which is probably the most important among his obligations, the CISG provides in Article 31(c) that the seller has to place the goods at the buyer's disposal at his (that is, the seller's) place of business at the time of the conclusion of the contract. The KCC in Article 467, on the other hand, provides that any delivery of goods should be made at the buyer's place of business.

When a contract of sale involves carriage of the goods and the seller is not bound to deliver the goods at any other particular place, Article 31(a) of the CISG provides that he completes his duty to deliver by handing the goods over to the first carrier for transmission to the buyer. Since the KCC does not have any provision similar to Article 31(a) of the CISG, however, the seller in the same situation will still have to perform his delivery at the buyer's place of business.

3. Negligence in breach of contract

The CISG does not require the presence of fault or negligence on the part of the party who has failed to perform in order to give the breached party any remedy. The KCC in Article 390, on the other hand, provides that the party to a contract is liable for his failure to perform only when he intentionally or negligently fails to do so.[4] Under the KCC regime, therefore, the breached party will have to prove the breaching party's negligence as well as his breach. [page 167]

4. Avoidance of contract

In principle, the CISG in Article 49(1)(a) allows the breached party to avoid his contract when the other party's breach is fundamental, regardless of whether his breach was intentional or negligent. Since the party is liable only when his breach is intentional or negligent under the KCC, however, the breached party is allowed to avoid his contract only when the other party's breach is intentional or negligent.

5. Foreseeability in determining the extent of damages

With respect to the extent of damages, Article 74 of the CISG provides that damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach, and limits it by requiring that such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract. Similarly, the KCC in Article 393, dividing damages into two categories, ordinary damages and extraordinary or special damages, requires that damages due to extraordinary circumstances may be recovered only when they were foreseen or ought to have been foreseen.

Though both the CISG and KCC require the presence of foreseeability, however, it is determined at the time of the conclusion of the contract under the CISG while it is at the time of the breach under the KCC.

III. CONCLUSION

As more countries accept the CISG as their domestic law, it will definitely play an increasingly dominant role in international sale transactions, and it should be embraced as being good not only for international trade but also for the development of international trade law.

Though the emergence of the CISG as a uniform sales law is to be welcomed, this paper has tried to demonstrate that despite these positive developments, those involved in international trade would still need to have some knowledge of domestic sales laws of other countries. [page 168]


* Chang-Sop Shin is Associate Professor of Law at the College of Law, Korea University. Professor Chang has a JD from George Washington University, National Law Center (1993); an LLM from the University of Pennsylvania, Law School, (1990); an LLM from Korea University, Graduate School of Law (1987); and an LLB from the Korea University, College of Law (1985). He is an Attorney-at-Law, New York State, USA. He is also an Arbitrator of the board of the Korea Arbitrators Association and an Executive Director of the Korea International Trade Law Association.

1. According to the statistics of Korea International Trade Association, China has emerged as the biggest trade partner of Korea in 2004 and Singapore was the ninth largest trading country in the same year. <http://stat.kita.net>.

2. Korea's Civil Code is the principal body of law which applies to sale transactions including international ones in Korea. Its Commercial Code supplements or revises the Civil Code, when it is deemed necessary.

3. However, an acceptance will lose its effectiveness if it does not reach the offeror.

4. When he has delivered defective goods, however, he is liable for damages regardless of the presence or absence of intention or negligence.


Pace Law School Institute of International Commercial Law - Last updated May 26, 2006
Go to Database Directory || Go to Bibliography
Comments/Contributions