UNIFORM LAW FOR THE INTERNATIONAL SALE OF GOODS

International trade historically has been subject to numerous domestic legal systems, mainly by virtue of the rules of private international law. The disputes arising out of international sales contracts have been settled at times according to the lex loci contractus, or the lex loci solutionis, or the lex fori. This diversity of the various legal systems applied has hindered the evolution of a strong, distinct, and uniform modern lex mercatoria. Such legal diversity creates legal uncertainty and imposes additional transactional costs on the contracting parties.

The idea of a unified international trade law represents the revival of an ancient trend toward unification that can be traced to the Middle Ages and that had given rise to the “law merchant.” Historically, international trade law has developed in three stages: the old “law merchant,” its integration into municipal systems of law, and finally, the emergence of the new “law merchant.”

The 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG) represents the most recent attempt to unify or harmonize international sales law. The Convention creates a uniform law for the international sale of goods.

This is clearly stated in the Preamble9 that introduces the Articles of the Convention:

INTRODUCTION

CISG Article 58 is located in the Convention's Part III “Sale of Goods,” Chapter III “Obligations of the Buyer,” Section I “Payment of the Price”; the stated provision governs the time for the buyer's payment of the purchase price in relation to performance by the seller.

In essence, CISG Art. 58 regulates the important matter of when must the buyer pay the price for the purchased goods. There are, however, several related questions concerning payment that are answered in Art. 58: is the seller obliged to hand over the goods before he is paid, how does a contract that calls for carriage of the goods affect the payment of the price against the handing over of the goods, and whether the seller may require the buyer to pay the purchase price before the latter has an opportunity to examine the goods.

The counterpart provisions of the PECL dealing with similar matters are located in the Principles Chapter 7 “Performance,” Articles 7:102 “Time of Performance” and 7:104 “Order of Performance.”

EXCHANGE OF GOODS FOR PRICE: THE PRINCIPLE OF SIMULTANEOUS PAYMENT OF THE PRICE AND HANDING OVER OF THE GOODS (CISG ART. 58(1))

The general rule stated in CISG Art. 58(1), first sentence, is that, subject to a contrary arrangement agreed by the parties to the contract, the buyer is obliged to pay the price at the time the seller makes the goods available to the buyer, by placing either the goods or documents controlling their disposition at the buyer's disposal.

INTRODUCTION

In Part III entitled “Sale of Goods,” the Convention provides and regulates the respective obligations and rights of the parties to an international sales contract governed by the CISG, including the remedies available to a party for breach by the other party of the latter's corresponding obligations (duties) arising under the Convention.

In Chapter II, “Obligations of the Seller” (Art. 30), Sections I,“Delivery of the Goods and Handing over of Documents” (Arts. 31–34), and II, “Conformity of the Goods and Third Part Claims” (Arts. 35–44), the Convention sets forth the seller's obligations to the buyer. The buyer's remedies for the seller's breach of these obligations are set forth in Section III, “Remedies for Breach of Contract by the Seller” (Arts. 45–52).

In an exercise of structural, as well as substantive, equality between the parties to the contract, in Chapter III, “Obligations of the Buyer” (Art. 53), Sections I, “Payment of the Price” (Arts. 54–59), and II, “Taking Delivery” (Art. 60), the Convention sets forth the buyer's obligations to the seller. The seller's remedies for the buyer's breach of the corresponding obligations are set forth in Section III, “Remedies for Breach of Contract by Buyer” (Arts. 61–65).

The present analysis focuses on the right of a party to require the other party to perform his obligations to the former pursuant to the Convention's provisions (CISG Arts. 28, 46, and 62).

PERIOD FOR ACCEPTANCE FIXED BY THE OFFEROR: CISG ART. 20 AND PECL ART. 1:304

In the situation where the offeror fixes a precise date by which the offeree must accept the offer (e.g., “no later that 31 August”), there are no special problems regarding the period allowed for acceptance of the offer by the offeree. However, in the situation where the offeror merely indicates a period of time for acceptance (e.g., “fifteen days”), problems may arise as to when that period begins because of possible uncertainty in whether the period starts to run from the time the communication was prepared by the offeror, the time it was sent, or the time it was received by the other party.

It is an important element of certainty for parties who contemplate entering into a contract that there is a clear point of time at which the period fixed by the offeror for acceptance of the offer commences.

In Part II of the Convention, entitled “Formation of the Contract,” CISG Article 20 provides the rules for calculating when that period begins to run in situations where the commencement of the period of time during which an offer can be accepted by the offeree has not been expressly fixed by the offeror.

PECL Article 1:304, entitled “Computation of Time,” seems to have a slightly broader scope than CISG Art. 20: the former provides the rules for computing the commencement of a period of time “set by a party in a written document for the addressee to reply or take other action,” whereas the CISG deals specifically with the “time for acceptance fixed by the offeror.”

INTRODUCTION

In Part II of the Convention, entitled “Formation of the Contract,” Article 21 deals with the issue of late acceptance by an offeree, the response to that by the offeror, and the effect that a late acceptance has in the context of contract formation.

The UNIDROIT Principles, Chapter 2, entitled “Formation,” includes Article 2.9, entitled “Late Acceptance. Delay in Transmission,” which regulates the same issues concerning late acceptance in contract formation.

The Convention provides that a late acceptance can nonetheless be effective as an acceptance, and so do the UNIDROIT Principles. Both the Convention and the Principles deal with the issue of late acceptance – whether the offeree accepted the offer late or the acceptance was late merely because of a delay in its transmission – in almost identical terms.

LATE ACCEPTANCE OF OFFER TO CONCLUDE CONTRACT

Art. 21 of the Convention “deals with acceptances that arrive after the expiration of the time for acceptance.” Therefore, Art. 21 must be viewed in the context of the basic rule of the Convention that a late acceptance is ineffective.

Honnold states that CISG Art. 21, “like Article 20, extends and elaborates the basic rule” for late acceptances by providing the answer to some related, important questions that can arise when an acceptance does not reach the offeror within the time he has fixed for acceptance.

INTRODUCTION

In Part II of the Convention, entitled “Formation of the Contract,” Article 21 deals with the issue of late acceptance by an offeree, the response to that by the offeror, and the effect that a late acceptance has in the context of contract formation.

Article 2:207, found in the PECL, Chapter 2 “Formation,” Section 2 “Offer and Acceptance,” regulates the same issues concerning late acceptance in contract formation.

The Convention provides that a late acceptance can nonetheless be effective, and so do the Principles. Both the Convention and the Principles deal with the issue of late acceptance – whether the offeree accepted the offer late or the acceptance was late because of a delay in transmission – in almost identical terms.

LATE ACCEPTANCE OF OFFER TO CONCLUDE CONTRACT

Art. 21 of the Convention “deals with acceptances that arrive after the expiration of the time for acceptance.” In that sense, Art. 21 must be viewed in the context of the basic rule of the Convention that a late acceptance is ineffective.

Honnold states that CISG Art. 21 “like Article 20, extends and elaborates the basic rule” for late acceptances, by providing the answer to some related, important questions that can arise when an acceptance does not reach the offeror within the time he has fixed for acceptance.

CISG Art. 21 makes a distinction in the rules applicable to a late acceptance, depending on whether the acceptance was sent late by the offeree or the lateness of the acceptance was caused by delays in its transmission.

INTRODUCTION

Article 18(2) of the Convention provides that “[a]n acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror […].” Article 22 of the Convention, however, allows the possibility that an offeree may withdraw an acceptance “if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective.” In other words, CISG Art. 22 provides a final time for withdrawal of an acceptance.

The UNIDROIT Principles, Article 2.10, provide a similar regime for the effective withdrawal of an acceptance.

PERMISSIBILITY OF WITHDRAWAL

In Part II of the Convention, entitled “Formation of the Contract,” Article 22 deals with the withdrawal of an acceptance by an offeree. As such, the Convention provides to an offeree the opportunity to permissibly withdraw an acceptance of an offer to conclude a contract.

CISG Art. 22 provides the rule on the timing for an effective withdrawal of an acceptance. This provision must be analyzed in the context of the basic rule of the Convention that an acceptance cannot be withdrawn after it has become effective. Further, it complements the rule in CISG Art. 23 that a contract is concluded “at the moment when an acceptance of an offer becomes effective.”

The UNIDROIT Principles in Chapter 2, entitled “Formation,” include Article 2.10, entitled “Withdrawal of an Acceptance,” which is a similar provision dealing with the timing for an effective withdrawal of an acceptance by an offeree.

INTRODUCTION

Article 18 of the Convention provides that “[a]n acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed […].”

It is an important element of certainty for parties who contemplate entering into a contract that there is a clear point of time at which the period fixed by the offeror for acceptance of the offer commences. In the case where the offeror fixes a precise date by which the offeree must accept the offer (e.g., “no later than August 31”), there are no special problems regarding the period allowed for acceptance of the offer by the offeree. However, in the case where the offeror merely indicates a period of time for acceptance (e.g., “ten days”), problems may arise as to when exactly that period begins, due to possible ambiguity and uncertainty whether the period starts from the time the communication was prepared by the offeror, the time it was sent, or the time it was received by the other party.

CALCULATING THE PERIOD FOR ACCEPTANCE FIXED BY THE OFFEROR

In Part II of the Convention, entitled “Formation of the Contract,” Article 20 deals with the interpretation of the offeror's time limits for acceptance of an offer to conclude a contract. CISG Article 20 provides a mechanism for calculating when that period begins to run in cases where the commencement of the period of time during which an offer can be accepted by the offeree has not been expressly fixed by the offeror.

GENERAL SCHEME OF INTERPRETATION AND SUPPLEMENTATION IN THE CISG AND PECL

The nature and content of PECL Art. 1:106, as well as its function within the instrument to which it belongs, are very similar to those of CISG Art. 7. In both cases, the respective provisions provide the built-in interpretation and supplementation mechanism that the drafters have embedded in their corresponding instruments. The relevant provisions provide that the interpretation of the law in both instruments must pay regard to the concept of good faith.

The Notes to PECL Art. 1:106(1) confirm that the basic elements found in the structure of Art. 1:106 either are virtually identical or express similar ideas to the ones of the corresponding provision in CISG Art. 7(1).

GOOD FAITH AND FAIR DEALING IN THE INTERPRETATION OF THE CONTRACT

The concept of “good faith and fair dealing” does not operate merely as a rule of interpretation of each PECL article. The duty of good faith, as this is embedded in PECL Art. 1:201, is mandatory on the parties.

In contrast to CISG Art. 7(1) (or any other CISG provision), PECL Art. 1:201 imposes upon each party a positive duty of good faith and fair dealing in exercising its rights and performing its duties under the contract. The PECL Comments to Art. 1:201 not only refer to good faith as “a basic principle running through the Principles” but also expressly state that “[g]ood faith and fair dealing are required in the formation, performance and enforcement of the parties' duties under a contract, and equally in the exercise of a party's rights under the contract” (see PECL Comment A).

INTRODUCTION

The CISG provisions dealing with contract formation can be found in Part II of the Convention. For the purposes of contract formation, during the exchange of communications of offer and acceptance between the parties, many of the applicable CISG Articles provide that a communication becomes effective when it “reaches” the other party (i.e., the addressee).

It has been correctly identified that “[p]ractical problems of proof would arise if the applicability of [those] provisions depended on evidence that a communication came to the personal attention of the addressee.”

To address such problems, CISG Art. 24 provides the elements of what constitutes an effective communication to an addressee under Part II of the Convention.

The UNIDROIT Principles (UP), like the Convention, adopt the offer and acceptance model of contract formation, which contemplates the exchange of notices and other communications between the parties. In Chapter 1, entitled “General Provisions,” the UP include Article 1.9, entitled “Notice,” which is a provision similar to its CISG counterpart regarding the effectiveness of a notice or other communication of intention between the parties.

TIME WHEN A COMMUNICATION “REACHES” THE ADDRESSEE: CISG ART. 24 AND UP ART. 1.9

Article 24 of the Convention provides that the communication of offer and acceptance – any indication of the intention of the parties in the context of contract formation under the CISG – reaches the addressee “when it is delivered to him, not when it is dispatched.”