Understanding the Contract for International Sale of Goods Treaty (CISG)

The Contract for International Sale of Goods Treaty (CISG) governs the rules and standards for international sale of commercial goods. It impacts cross-border transactions and provides benefits such as reducing uncertainty and disputes. However, it does not apply to all legal elements of international sale of goods. Learn more about CISG on Desklib.

Essay

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

MAIN BODY
The contract for international sale of goo treaty was signed in year of 1980 and was
developed by United Nations commissions on International Trade Law. The main function of
CISG is set out the rules for sale of commercial good at international level. Although it mainly
applies to parties that are involved in transaction and their business are at different countries.
Moreover, it can also be applied to both of the countries that are contracting to states or treaty.
On the contracting state to treaty private international law is also applied 1. Moreover, CSIG
also set out the rules and standards for contract formation and rights of seller and buyer while
trading. The CISG rules does not apply trading between customer or service arrangements but
instead it applies to sales of good between merchant. Furthermore, it also has CISG Advisory
council which is a private initiative that aims at promoting a uniform interpretation of CISG.
Although it does not add participant of various country but it has admitted scholars that
contributes in understanding of issues related to the UNCISG 2. It is also known by the name of
Vienna Convention which is a treaty that helps in providing uniform body of laws that relates
to the sale of goods between the countries. The agreement of CISG aims at reducing threats
at international sales by implementing modern, substantive rules that helps in governing rights
of the parties involved international sales contract. This treaty has been adopted by various
countries and it is considers as prat of their laws. In other words it aims at simplifying process
of selling and buying goods in international commerce.
Furthermore, the CISG law is useful to international businesses as the laws governs sales
from one country to another. Although it is very confusing for the country about governing the
agreement. Thus, due to that it may cause conflict while conducting the international trade.
Moreover, this agreement has been created in order to reduce and remove the uncertainty and to
provide body of rules that will deal with commercial dealing as well as provide remedies for
the parties to international transactions3. Although by applying the CISG the parties that are
1
(Akalanka, 2020)
2 (Gragl and Fitzmaurice, 2019)
3 (Ulfstein, 2020)

involved in it can avoid conflict of law issues as well as fill gaps in contract. Along with this,
the important provision of CISG deals with sellers obligations regarding quality of the goods,
buyers remedies for breach of contract by the sellers. The another crucial aspect is buyers
obligations to take delivery and to examine goods and provide notice of any lack of conformity.
The convention will only apply to sale contract between two parties it does not apply
for sales service alone and it does not apply to the sale of goods purchase for personal use.
This rule is applied in few cases when CISG might applies when both parties to the sales
contract are from different countries that have adopted the contracting states 4 . It can be
apply automatically to the transaction. Along with this, it can be apply when one party is from
contracting state and the contract express that law of contracting state will govern the
agreement. Along with this, when both the parties are not from contracting state but it both
mutually agree in their agreement to apply CISG.
Furthermore, CISG is made by UN commissions of trade law and it came into force in
year 1988 and was adopted by 50 states but in current year 94 states has implemented this act.
Although it was implemented in order to remove the unsuccessful conventions of sale and to
make contract of trade. This act was brought into force in UK by the uniform laws of
international sales Act 1967 (Park, 2021). However, UK has not adopted the CISG yet but the
department of trade is thinking of making a contract for the adoption. The trading partner of
UK like Japan is trying to become contracting state in future. Along with this, sales is
international when buyer and seller are from different country, when the parties are of the
contract reside in different states or none of the party is not related to contractual state.
Although the definition of international sales is different from international supply contract in
the unfair contract terms act 1977. In addition to this, it does not apply to all type of contract of
sale of good and it is limited to commercial. In the sense of non consumer sales I do not apply
to trade of ships, electricity and aircraft or auctions held by authority of law. It can be
implemented to contract in which seller manufactures products to the purchased under special
order and it can also be apply to work and materials contracts. It does not deal with all of the
issues that falls under sales of goods act. It exclude misrepresentation and mistake and
transfer of risk. Although it will not apply to claims for personal injury or death.
4 (Liu and Wang, 2022)

Moreover, the purpose of the CISG is to make it easier and more economical to
purchase and sell raw materials and manufactured goods in international commerce. Along
with this, without this agreement there is higher chance of uncertainty and disputes. The sales
of law of one country usually differs from one country to another. Although in international
trade there is generally high doubt which law of nation will be implemented this lead confusion
between the parties regarding the right and obligation 5. Moreover, CISG contains rules that
govern and make interpretation of international contract of sale of goods. It also provides rules
that govern obligations as well as remedies of the parties. Along with this, on this contract
rules can be modified by the parties and can be applied to it.
Cross border trade is one of the biggest business opportunities in current market situation and
it is increasing day by day. In simple words cross border transaction means selling goods and
services from one country to another in order to maintain business. Along with this, it is any
transfer of property, services and goods between the individual or business entities that reside
in different jurisdictional. Although the transaction can be simple in form such as buying
products on internet.
A cross border arrangements include the member state of UK or any third country and
it will make use of the hallmark give by government of United Kingdom. In China it the
question related to article 2 (a) has been address of CISG in the case of Yang v.Yucheng
Huayau Machinery Manufacturing Co. Ltd., 2021. The case address about how can CISG is
applied to cross border e- commerce transaction 6 The chinese court declare that when tow
parties is involved in the case for business purpose then CISG is apllied. Thus, the court
declare that when paties are doing business together rather than for a consumption purpose the
United Nation Convention on contract for international sales of goods is applied. Moreover, on
25 April 2021 the court of Dezhou intermediated people in china has mentioned in the
judgement that CISG can be applied to the contract for Canadian farmer to buy material from
Chinese supplier for purpose of business. Although the trade will not involve the sales of
goods for personal or family use and it should fall in the scope of CISG.
Yang Jianbing v. Yucheng Huayu Machinery Manufacturing Co., Ltd. (2021)
5 (Zhang and et.al., 2018)
6 (Yusika, 2020).

In March 2019, the plaintiff Yang Jiabing runs a farm in Canada and it is connected
to sales of staff of defendant Yucheng Huayu Machinery Manufacturing Co., Ltd which is
located at china and it was connected through messaging tool. Along with this, Plaintiff
purchased agriculture material from sales executives and it asked defendant to export the goods
to Canada (CISG Apply to Cross-Border E-Commerce Disputes., 2022.). The delivery method
was selected by the parties was door to door so that product is given to plaintiff address.
Moreover, the plaintiff is given defendant the price of the goods as well as travel and
transportation from Qingdo Port of china. The custom declaration also stated that export of the
product declare that transaction is concluded on FOB terms. In addition to this, on date of 15
april good was arrived at the port but custome clearance was not completed because of
quarantine rules. Moreover, both the parties of case and freight has an argument reagrding the
payment of subsequent expenses occurred. The goods was not cleared due to the default
payment of such expenses and result of that material were shipped back to the auction.
However, on 10 october 2020 the plaintiff has field a law suits in the court of china for
terminating the contract of sale with the defendant and the return of payment of CNY 170156
for goods 7. However, defendant denied the plaintiff's claims as transaction method which
has been agreed upon the parties was decided in which transportation of goods as well as risk
was need to be handle by plaintiffs. And fright charges was on the hand of plaintiff's. The
goods was cleared the export condition and it was successfully cleared at Qingdao customs.
The defendant has also performed the obligation of delivering qualified goods.
Moreover, the court view at first instance agreed that when both the parties of the
case was from the different countries then it should have make use of international contract
of sales of goods. The CISG contract need to be implemented in order to avoid the challenges
while sales. Although CISG is over domestic law in this case considering FOB as it was
presented in the court as evidence. According to the trading rules of FOB the risk of goods
were transferred on the plaintiff when the defendant carried the goods at first carrier. Although
it was liable to pay the freight tax and bear the risk of the customs if product are failed to
cleared. Along with this, court held that defendant is not liable to pay the inability to clear the
goods and there was no reasonable ground for terminating the contract by plaintiffs. Thus, jury
7 (Islam, 2019)

rejected the appeal of plaintiff at first instant 8. Although plaintiff again filled an appeal and
stated that it purchased goods for household use and the delivery address was of home. Thus,
according to article of CISG 2 (a) do not apply to sales of personal, family and household use
goods. Thus, FOB and CISG does not relate to it and do not apply to the transaction.
However, court in the second instant held that plaintiff has purchased agriculture material in
bulk and it was not for house hold but also for operation and production of its farm. This
transaction clearly defines that the transaction was held for commercial purpose. Thus, it does
not fall under the Article 2 (a) of CISG. Moreover, in the end court passed the decree which
stated that CISG should be applied in the case of cross border transaction and in this particular
case. Along with this, FOB terms will also be applied in this transaction. However, defendant
has fulfilled the obligation of FOB terms without any breach of contract.
Furthermore, it has been concluded that in the case so far that Chinese Court have
address the interpretation of Article 2(a) of the CISG. The judgment of the case suggest that
CISG contract targets the purchase of goods for consumption purposes and even goods is
brought for household but with intention of businesses purposes the CISG still apply to it.
Thus, this case represent that CISG can be implemented in cross border e- commerce
transaction when business purpose is mentioned even if the party involved is an individual
instead company.
Moreover, the challenges that is faced during the cross border transaction but it can be
managed and overcome 9 The individual can manage logistics and shipping so that timely
and efficient delivery can be managed set up a business across international area. The company
can also maintain transparency between the customer by letting them know about any additional
international shipping and handling costs. Along with this, it is important to manage the
professional image. This means that product needs to be maintained appropriately in order to
increase the sells. Although the parties of the contract need to have logistic partner in each
country in order to ensure timely delivery. If item do not meet customer expectations then it
wont be returns in such situations. However, multi logistic partner with wide network will
contribute in handling large number of orders as well as it will improve cost efficiency.
Along with this, while making the contract there can be confusion between the party
8 (Oktaviandra, 2018)
9 (Tinh, 2019).

like which law of country will be applied. In the cross border transaction company has to
follow the rules and regulation of other country in order to avoid the government intervention.
Thus, in order to deal with the issues of law suits United Nation come up with the idea of
CIGS so that international issues can be faced easily 10. In addition to this, the CIGS treaty
directly impacts on the purchase and sales of goods between CISGS members or country
partner. Thus, understanding the concept of Vinnea convention is necessary so that enterprises
enter into international sale of good agreement. This basically governs the sale of
commodities betwee two parties which places of business are at different location and have
different legal system. Although there are some condition that need to be followed by the
parties like it should be contracting state. When the rules of private international law is related
with contracting state.
Moreover, CISG do not govern all legal elements of international sale of good but few
of them are rights and obligations of the parties, Remedies for breach of contract, passing the
risk and exemption from the liabilities to pay damage. However, there are certain areas where
CISG cannot be applied like goods brought for personal, family and household or at any time
. It is not also applicable at auctions, executions, stocks, ships sales, electricity or aircraft.
Moreover, it do not apply to contract for supply of goods for the production requires labour or
other services.
It is very beneficial in arising from the adoption of the CISG as it helps in saving and
avoiding the dispute on the choice of applicable law during contract negotiations. There is no
disadvantage even if there unequal position of the partner 11. It also reduce the number of cases
in which contract negotiation fails due to disagreement about applicable law. Along with this,
it improves the defending power of party in foreign court even if dispute arises. This contract
generally have strict rights and interest and it do not have unsecured model contract in past.
Along with this, it is one of the most appropriate and best in solving the international sales
contract. CISG is not only to maintain harmonization in law or to facilitate cross border sales
as well as to reduce transaction cost but to bring mutual understanding amongst nations and
people. Along with this, it is true fact that CISG is ease agreement negotiations by making is
easier for the parties involved. It also helps attorney from other jurisdiction to understand each
10 (Omlor, 2020)
11 (Haeruddin and et.al., 2020)

other as well as it avoid the application of complex conflicts of law rules. The spirit of CISG
is to be build connection between nations of the world as well as it helps in building culture
between the parties.
The purpose of the CISG is to provide modern and uniformity at cross border
transaction as well as international sales of goods 12. It also contributes mainly in introducing
commercial exchanges and decreasing in transaction costs. Along with this, law is relevant in
cross border transaction as contract of sale is backbone of the international trade in various
countries. It is crucial irrespective of the fact related to legal tradition or level of economic
development. Thus, it is considers as international trade agreement as it can be adopted by
any country. Moreover, the act provides a balance between seller and buyers as well as to
inspired contract law at national level. The CISG is applied to treaty for international sales
of goods
Along with this, cross border transaction is related to financial transaction in which
payer has to pay the recipient based on various country 13. It does covers both retail payments
and wholesale and remittances. The cross border is also known as movement across borders of
countries of goods, money and people. The finance across the nations requires the lender or
provider to acts as an agent between the business as well as customer and suppliers.
Moreover, the challenges that are faced during cross border finance transaction are high costs
as it is expensive because of number of intermediaries involved while transferring the goods
to another country. The fees are also charged with the services like FX fees in order to convert
one currency into another 14). It is a challenge to banks and financial institution as it has to offer
competitive rate to maintain the customer. Along with this, another challenge is slow transaction
as transferring money through traditional format generally require two to five days process
which is very slow compare to virtual instant transaction. It also includes so many entities in
single transaction such as if someone wanted to transfer money to Ukraine then it has to
transfer money to Sri Lanka or other intermediaries in Russia or Germany. This is a very
lengthy series to complete cross border payments that delay in result. In addition to this,
security has Moreover, another issues is security in which consumer wants to maintain their
12 (Hayward, Zeller and Andersen, 2018)
13 (Gojani and Curri, 2021)
14 (Checkley, 2019)

confidentiality that their money is safe while making international transaction. Although bank
do not provide guarantee related to border payment or any kind of stolen funds. It is protected
by high level of security as well as various country have their own regulations of being
hacked whenever money enters a country with security.
In addition to this, SME's face challenges like high fees the international payment is
very expensive, processing fees other charges is consistently high. In emerging market cost of
transaction is high due to us of intermediary currencies to process transactions. For example if
an Thus, double conversion means higher fees and it is constant struggle for SME's and act as
a barrier in the growth of firm 15. In addition to this, another challenge is long processing times
as in international business it require up to 2 weeks and it is a barrier to small business as it
delays the speed of their operations. For example, in internation transaction goods cannot be
shipped if payment is not settle or received in full. The longer the payment process the more
time it will be required to takes for the goods to arrive. Thus, it is challenging for the small
business has it may lead to loss in revenue as there is high chance that customer is not patient.
Along with this, there is complicated processes in cross border transaction as it require lot of
paper work and long process.
The law of CISG helps in maintain the healthy relation with the countries and allow
them to conduct their business transaction with each other. The law mainly set the guidelines
that helps in dealing with the cross border transaction16. This act was introduce to solve the
problem and the challenges that has been faced by other nations while transacting. This law
only deals with goods and services act which have monetary benefits and not on the transaction
that deals in sales of ships and aircraft. It deals with business of two country and smooth the
function of international trade 17. This law makes agreement between the parties that include
compensation of goods and services in case of damages as well as case can be filed in
domestic court or international related to discharge of any condition. In addition to this, due to
agreement between party they are bound to follow the condition in order to maintain the smooth
flow of transaction. The main reason for dealing with this act is that every country have their
own laws for international trade so to maintain the uniformity this law has bee implemented so
15 (Duke, 2019)
16 (Hayward, Zeller and Andersen, 2018)
17 (.Osmani-Sadriu, 2019)

that while doing cross border transaction each country will follow this norm. It gives modern
framework to the contract of sale which is a backbone of international trade in various
countries. In this act parties that are involved range from least economically and most
developed as well as follows world tradition in order to survive in international area of market.
There has been increase in cross border transaction dispute during the globalization so
there is need of international act to govern the contract of international sale of goods like CISG
and it is very useful. As it helps in providing neutrality between parties that contributes in
solving the disputes between parties as well as their rights and obligations. It only governs the
formation of the contract of sale and the rights of the seller and buyer that area arising from
contract as well as it does not govern the validity of the contract 18 This contract is mainly
applicable top parties and there should be valid contract of international sale of good as well as
dispute between parties. Although there are two types of breach under CISG like fundamental
breach of contract or any other ordinary breach of contract.
For example in case of Austrian- Chinese dispute over unfit sample an ICC tribunal
and held it as fundamental breach of contract. Along with this, in this case Swiss federal
Supreme court held that breach is fundamental even after various ways of solving problems.
CONCLUSION
From the above report it can be concluded that various countries take part in internation
trade transaction and it has been increasing day by day. Along with this, for maintaining the
uniformity between the nations this law has been introduced. The United Nation has made in
this act in which various countries have participated. In addition to this, the term of CIGS is
known as United Nations Convention on contracts for the international sales of goods. It is a
binding agreement between the nations as it establish rules that govern certain act that make
performance of everyday commercial agreements between buyer and sellers that have their
business at different nations. Although by adopting this countries will treat the conventions rules
as part of the laws. Along with this, the purpose of CISG is to make it easier and making it
more economical to buy and sell raw material and manufactured good in international
commerce. Without this agreement there was dispute and uncertainty in international market as
sales law of one country is differed from another. However, it has been summarized that
18 (Obeidat, 2018).

international transaction there is always a doubt about which nations law need to be
followed or control.
The CISG contains rules governing and making as well as interpretation of contracts for
the sales of goods. It also provides rules that govern the remedies and obligation of the parties
to such transaction. Although this act allows parties to have freedom regarding making changes
in their specification of contract and the rule established by the conventions. Moreover, this
kind of contract and where the parties have their relevant places of business has determined
the applicability of the CISG. It can be applied in contrast of domestic as well as international
market. Along with this, it does not apply to contract of services as well as it does not relate to
sale of goods that are brought for personal and family use. For example, it doses not apply to
sale of ships, aircraft or contract that covers the sale of electricity. Moreover, this contract
governs the sale of good between the buyer and the seller that have relevant place of businesses
in different country as well as it should be part of contracting states.

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Online
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