Adopted by eighty five countries, CISG is an important legal mechanism enabling further globalization of contract & trade legislation & allowing for more predictability in the realm of international trade. Some of its most prominent signatories include Germany, Switzerland, the US, and China. Interestingly, Great Britain is not included on that list.
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Normally, if a sales agreement is concluded, counterparties who sign it can include a provision in it whereby legislation of either of their countries will be applicable to the agreement. However, if their countries have affixed their signatures to CISG, it is CISG, and not their respective country’s legislation, that is going to be applicable to the contract. For instance, CISG takes precedence over state legislation in America, which is also a signatory to the convention. It is frequently forgotten that a deal involving 2 companies from the identical country can be governed by CISG, and not legislation of the country those 2 companies originate from. It is particularly true of situations where the goods sold under the agreement get delivered from a warehouse or store located outside their home country, and more specifically, in a country which has signed CISG.
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Pros & Cons
The advantages of choosing the CISG over domestic laws include:
- underdevelopment of domestic laws
- unfavorability of domestic laws
The disadvantages of choosing the CISG over domestic laws include:
- lesser familiarity of lawyers with the CISG
- potential issues arising from application of the CISG
It is the so-called ‘conflict of forms’ that is often cited as the number reason for the CISG’s lesser popularity with international traders. For instance, to make a purchase, the purchaser should come up with an offer containing information about the terms & conditions of the deal. Upon receiving the said offer, the seller should notify the purchaser of its receipt by sending them their own form (the so-called acceptance) which also contains the conditions & terms conditions of an upcoming deal.
Under CISG, two rules are applicable to this process - one which is referred to as ‘mirror reflection’, and the other which is commonly known as ‘final shot’. The idea behind is that if the acceptance & offer have any differences, the latter will be automatically regarded as a counter-offer & considered accepted by means of performance of the contract. After that, the second rule comes into effect whereby the terms of the counter-offer are going to apply.
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Can CISG be Applied to Unwritten Contracts?
CISG can be applicable if counterparties are unable to come up with a written copy thereof. That said, CISG stipulates that an agreement can be considered null and void if no price has been specified or the price is undeterminable.
According to CISG, no contract in writing is necessary for CISG to come into effect, which is why counterparties need to ensure that their email correspondence isn’t considered as a contract.
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CISG was meant to eliminate confusion resulting from unexisting or specific legal terms being misinterpreted in various languages & various jurisdictions. For instance, if contract is concluded in the English language & its signatories speak a different language, then some of the very specific terms contained in it may end up taking on a different meaning after being translated.
Given the ongoing globalization processes & further internalization of trade-related legislation, CISG is getting increasingly made use of in various corners of the earth. What CISG does is foster the development of international ties by eliminating any differences resulting from erroneous interpretation of domestic legislation and ensures more predictability in the realm of international trade.
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