University International Business Law: CISG and Contractual Violations

This report provides an analysis of international business law, specifically focusing on the United Nations Convention on Contracts for the International Sale of Goods (CISG). The report examines how CISG addresses challenges in international contracts, including internal and external impediments. It explores Article 79 of the CISG, which deals with unforeseen difficulties and impediments, and analyzes the application of case law such as Scafom International BV v. Lorraine Tubes S.A.S. and Delchi Carrier, SpA v. Rotorex Corporation. The report then addresses a scenario involving a contract violation between two parties, Vanilla and Cinnamon, and assesses whether damages should be incurred, referencing cases like Bettini v Gye and Hadley v Baxendale, along with Article 74 of the CISG. The analysis considers the impact of unforeseen events, such as the attack on a ship by pirates, and its effect on contractual obligations. The conclusion underscores the CISG's self-sufficiency and its ability to navigate international business disputes. The report provides a comprehensive understanding of the CISG's role in international trade and contract enforcement.

Running head: INTERNATIONAL BUSINESS LAW
INTERNATIONAL BUSINESS LAW
Name of the Student
Name of the University
Author Note

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Question One
Introduction
During the execution of contracts, particularly international contracts, usually everything
go as planned, although regardless of the good intentions difficulties and challenges arises. The
‘United Nations Convention on Contracts for the International Sale of Goods’, also known as
CISG is regarded as an international law relating to sales that is intended and designed to manage
such situations. Since the year of 1980 this particular regulation has served as a tool to unify
international sales legislation. Article 79 (1) administers the circumstances in which any
particular unforeseeable or unpredictable difficulty, or an impediment, has ascended and that
particular impediment is distressing a party involved in a contract who may not be able to
rationally overcome that impediment1. This paper shall provide an analytical view relating to the
requirements forwarded by aforementioned article of CISG in order to overcome the gaps or
impediments.
Discussion
There is a difference between the external and the internal impediments or gaps in
relation to the CISG. Internal gaps or impediments shall be considered to be those matters that
may be governed and administered by CISG, although such matters are not settled by CISG in an
expressed manner. These internal gaps or impediments must be resolved with the help and
utilization of the underlying principles as provided in the CISG. An instance in relation to an
internal gap or impediment is reasonability standard. The gap relating to reasonability standard is
that numerous articles as provided in the CISG suggest a reasonability assessment, however, the
1 Kim, Sang Man, and Jongho Kim. "Can a Change of Circumstances Qualify as an Impediment under Article 79 of
the CISG?." (2019) Chinese Journal of International Law 18.1: 129-163.

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more exact and specific criteria and definition has not been forwarded. The external gaps or the
impediments are considered to be those matters that are not at all encompassed by CISG. The
rules relating to the private international law are utilized in order to search for the national law,
which may be applicable, and which may be used for filing the external gaps or to overcome the
external impediments. A particular instance of an external gap or impediment shall be considered
to be the issue relating to contract validity that is particularly kept beyond the scope of CISG2.
The case of Scafom International BV v. Lorraine Tubes S.A.S. HvC 19.6.20093 shall be
considered to be a relevant case in this regard. This case has confirmed the tenacious difficulties
that may ascend from the conflicting and inconsistent interpretations regarding the CISG
between the common law and civil law nations functioning inside the equivalent international
legal outline or structure.
The Principles of UNIDROIT are considered as the ‘International Commercial Practice’,
and hence, these principles can be applied as a tool for filling the gaps that may be utilized in
relation to the interpretation of CISG. This may be in accordance to article 7 (1) of CISG.
However, it may be said that in relation to the filling of the gaps, priority must be given
regarding the wording of article 7 (2), and a particular method must be chosen by the interpreter,
that is, the interpreter may choose either the underlying principles as provided in CISG or he
may choose the applicable national law. The selection may depend on whether the gap or the
impediment is external or internal. The case of Delchi Carrier, SpA v. Rotorex Corporation
USCA 2nd Circuit 6.12.19954 must be regarded as a significant case in this regard. In this case, it
was stated that the Convention or CISG has made abundantly clear that the involved parties may,
2 Nwafor, Ndubuisi, and Chidi Lloyd. "Re-imagining the Doctrines of Hardship and Exemption/Force Majeure
under the cisg and unidroit Principles of International Commercial Contracts." (2019) Global Journal of
Comparative Law 8.1: 52-79.
3 Scafom International BV v. Lorraine Tubes S.A.S. HvC 19.6.2009.
4 Delchi Carrier, SpA v. Rotorex Corporation USCA 2nd Circuit 6.12.1995.

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with the help of the contract, select to be obligated to any particular law other than CISG, for
instance the ‘Uniform Civil Code’. In this case, the term ‘homeward trend’ was explained.
Homeward trend is a particular term that is utilized to explain the natural proclivity of the
professionals of the law to construe foreign and new legal mechanisms from the perception of
the national legal structure. The primary advantages in relation to an international legislation and
law (such as international neutrality and predictability) shall not be present if the understanding
and construal of the said legislation or law is reliant on the nation, where the interpreter obtained
his or her legal education and knowledge or performed as legal expert or professional5.
The internal factors like organizing, negligence, efficiency or administration,
inadequacies or deficiencies in planning and the technical difficulties are generally regarded as
inside the ‘sphere of control’ of the involved party. The ‘sphere of control’ of an involved party
is considered to be very extensive and wide. Any particular probable problem in relation to the
business operations and production regarding a party, for instance subcontractors, is presumed to
come within the ‘sphere of control’ of the party. The external factors like natural phenomena or
act of god (floods, storms), accidents, power outages and interruptions relating to road traffic
does not come within the ‘sphere of control’ of the party. However, the evaluation of each
instance should be done in order to determine and conclude if a particular party could have
foreseen and overcome the impediment during the time when the contract was being concluded6.
Conclusion
In conclusion, it may be said that the CISG is regarded as self-sufficient, independent and
autonomous, and such feature or facet helps to increase, boost and augment its internal as well as
5 Liu, Chengwei. "Force majeure-Perspectives from the CISG, UNIDROIT Principles, PECL and Case Law,[: Case
annotated update (April 2005)]." (2019).
6 Fillers, Aleksandrs. "Application of the CISG to Arbitration Agreements." (2019) European Business Law
Review 30.4 (2019): 663-693.

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universal identity. Although, certain external and internal gaps or impediments are present in
relation to the CISG. This paper has forwarded an analytical view relating to the requirements
forwarded by aforementioned article of CISG in order to overcome the gaps or impediments.

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Question Two
Issue
The primary issue in relation to the given scenario is whether Vanilla has committed a
violation of the sales contract in relation to Cinnamon, and whether damages should be incurred
by Cinnamon from Vanilla.
Rule
The case of Bettini v Gye (1875) LR 1 QBD7 shall be considered to be a significant case
in relation to the provided circumstance. The issue in this particular case was whether the pre-
requisite to reach the city of London six days prior to the rehearsals shall be considered to be a
condition in relation to the contract, and hence, whether Gye would be able to terminate the
contract based on the violation of the aforementioned term. It was held that the pre-requisite
mentioned above shall not be considered to be a condition, rather it shall be considered to be a
warranty. Therefore, Gye shall not be able to rescind the contract on the ground that the
condition of the contract has been violated. A violation in relation to the aforementioned
warranty shall not be regarded as a negation of contract, and Gye shall have the right only to
claim compensation or damages through an action.
The case of Hadley v Baxendale (1854) 156 ER 1458 must be regarded as a relevant case
in relation to the provided circumstance. The issue in this specific case is whether the loss
regarding the profits was so remote that claim cannot be made by the claimant. It was held by the
court that any particular party shall be able to successfully claim damages regarding losses that
7 Bettini v Gye (1875) LR 1 QBD.
8 Hadley v Baxendale (1854) 156 ER 145.

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may stem from the violation of a contract, and where the loss (if reasonably perceived) is the
natural outcome of such violation.
Article 79 as provided in the CISG states that if any particular party is able to
demonstrate that it failed to perform the contract because the circumstances were beyond the
control of that party, and it was impossible for the party to reasonably foresee such an
impediment during the establishment of the contract, then that particular party shall not be held
to be accountable for any violation of the contract9. This concept is similar to that of the notion
of frustration as per the common law. In the case of Taylor v Caldwell (1863) 3 B & S 82610, it
was stated that in certain situations, a particular contract shall be ended due to the occurrence of
any supervening event, which may be outside the control of the involved parties.
Article 74 as provided in the CISG states that regardless of whether the violation is non-
fundamental or fundamental, an injured party shall have the entitlement in relation to the
damages and compensation, which shall be equivalent to the amount arising out of the loss of the
party. It may also encompass ‘loss of profits’11.
Application
In the given scenario, a violation of the contract was caused by Vanilla due to which
Cinnamon suffered loss.
The case of Bettini v Gye (1875) LR 1 QBD12 shall be applied in relation to the provided
circumstance. It was held that the pre-requisite in the given contract shall not be considered to be
a condition, rather it shall be considered to be a warranty. Therefore, Gye shall not be able to
9 United Nations Convention on Contracts for the International Sale of Goods, 1980.
10 Taylor v Caldwell (1863) 3 B & S 826.
11 United Nations Convention on Contracts for the International Sale of Goods, 1980.
12 Bettini v Gye (1875) LR 1 QBD.

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rescind the contract on the ground that the condition of the contract has been violated. A
violation in relation to the aforementioned warranty shall not be regarded as a negation of
contract, and Gye shall have the right only to claim compensation or damages through an action.
Therefore, in the given scenario, Cinnamon shall not be able to rescind the contract if the pre-
requisite in the given contract is not considered to be a condition, and instead it is considered to
be a warranty. A violation in relation to the warranty shall not be regarded as a negation of
contract, and Cinnamon may only claim compensation through an action.
Applying the case of Hadley v Baxendale (1854) 156 ER 14513 in the given scenario, it
may be said that Cinnamon shall be able to successfully claim damages regarding losses that
may stem from the violation of a contract, and where the loss (if reasonably perceived) is the
natural outcome of such violation.
Applying article 79 as provided in the CISG in the given scenario, it may be said that if
Vanilla is able to demonstrate that it failed to perform the contract because the circumstances
were beyond control, and it was impossible for Vanilla to reasonably foresee such an
impediment during the establishment of the contract, then Vanilla may not be held accountable
for any violation of the contract14. The case of Taylor v Caldwell (1863) 3 B & S 82615 must be
stated in this regard. Therefore, in the given scenario, where the ship was attacked by the pirates,
such a circumstance could not have been foreseen by Vanilla, and hence the delay in delivery
due to such unforeseen occurrence, shall not make Vanilla accountable for any damages.
Although, where Vanilla violated the contract by providing less quantity to Cinnamon, not due to
13 Hadley v Baxendale (1854) 156 ER 145.
14 United Nations Convention on Contracts for the International Sale of Goods, 1980.
15 Taylor v Caldwell (1863) 3 B & S 826.

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the less yield in harvest, but because Vanilla established a contract with another organization
namely Nutmeg and gave priority to Nutmeg in order to win it over as another customer.
Applying article 74 as provided in the CISG, it may be said that regardless of whether the
violation is non-fundamental or fundamental, Cinnamon shall have the entitlement in relation to
the damages and compensation, which shall be equivalent to the amount arising out of the loss. It
may also encompass ‘loss of profits’16.
Conclusion
To conclude, it can be said that Vanilla has committed a violation of the sales contract in
relation to Cinnamon, and damages should be incurred by Cinnamon from Vanilla.
16 United Nations Convention on Contracts for the International Sale of Goods, 1980.

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Bibliography
Bettini v Gye (1875) LR 1 QBD.
Delchi Carrier, SpA v. Rotorex Corporation USCA 2nd Circuit 6.12.1995.
Fillers, Aleksandrs. "Application of the CISG to Arbitration Agreements." (2019) European
Business Law Review 30.4 (2019): 663-693.
Hadley v Baxendale (1854) 156 ER 145.
Kim, Sang Man, and Jongho Kim. "Can a Change of Circumstances Qualify as an Impediment
under Article 79 of the CISG?." (2019) Chinese Journal of International Law 18.1: 129-163.
Liu, Chengwei. "Force majeure-Perspectives from the CISG, UNIDROIT Principles, PECL and
Case Law,[: Case annotated update (April 2005)]." (2019).
Nwafor, Ndubuisi, and Chidi Lloyd. "Re-imagining the Doctrines of Hardship and
Exemption/Force Majeure under the cisg and unidroit Principles of International Commercial
Contracts." (2019) Global Journal of Comparative Law 8.1: 52-79.
Scafom International BV v. Lorraine Tubes S.A.S. HvC 19.6.2009.
Taylor v Caldwell (1863) 3 B & S 826.
United Nations Convention on Contracts for the International Sale of Goods, 1980.