Assignment - Article 19 of CISG

Added on - Oct 2019

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:Article 19 of the CISG explicitly states that Additional or different terms relatingamong other things, to the “settlement of disputes” are considered to materiallyalter the terms of the contract. (Article 19:Spagnolo,, 2014) In the present case, thequestion arises whether inclusion of the arbitration terms constitutes materialalteration of the terms of the contract. Here, the ESS is based in South Korea andRTI in the US. Having chosen to apply the CISG as a binding law on the parties theconflict resolution has to be chosen through an arbitrator. As an established tradeusage, arbitration is a common method of settlement of dispute as specified underArticle 19(3) of the CISG Rules. Therefore, in cases where the arbitration clausereflects the parties’ practices or an applicable trade usage, it does not result inmaterial alteration of the contractual agreement between the parties to thecontract. However, the question here is that RTI has chosen a third country as theseat of arbitration, questioning the fact whether it could lead to material alterationin case the parties do not agree on the place of dispute resolution can causematerial alteration of the contract case.Applying the general rule the place of the contracting parties has to be convened asthe seat of arbitration proceedings. Article 1(a) (b) stipulate that wherein thequestion occurs regarding the contract of sale of goods states where the two stateshave their places of business in the contracting states, designation of a third statecan take place only in case of litigation which took place in the third contractingstates.[ CITATION CIS15 \l 1033 ]This ensures that the place of hearing has to be that ofthe contracting states. Any addition of third place causes material alteration in theclauses and negates the principles of battle of forms.As has been held by thecourts in a number of cases, that where there is discrepancy as to the place wherethe process of arbitration will take place, general acceptable principles of contractlaw, including the Uniform Commercial Code will be applicable. In the case of LeaTai Textile Co. v Manning Fabrics[ CITATION 7541 \l 1033 ], the court laid down the factwhereinthe arbitration clause is introduced, the parties have to resolve theirconflict before the domestic courts. In this case, it has to be either South Korea orUnited States. Introducing a new place will therefore constitute material changes inthe contract under the Convention.Hence in the present case, while adding the arbitration clauseper sedoes not byitself cause material alteration of the contract, but introducing a third place otherthan that of the contracting parties can lead to material alteration of the clauses ofthe contract.
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