CISG Provisions and Legal Issues in International Business Law

This report provides a detailed analysis of the United Nations Convention on Contracts for the International Sale of Goods (CISG). It begins with an introduction to the CISG, emphasizing its role in establishing uniform policies for international sales contracts. The report then delves into specific provisions, including the Statute of Frauds, warranty disclaimers, and the battle of forms, explaining their significance and practical implications. Furthermore, the report addresses legal issues related to the principle of autonomy for letters of credit and the solutions provided under UCP 600, exploring the obligations of banks in credit transactions. The analysis covers various aspects of the CISG, from the interpretation of agreements and the roles of parties to the effectiveness of acceptance and the obligations of sellers regarding product quality. The report highlights the advantages of the CISG, such as its contribution to economic development and protection against violations of basic rights, and concludes with a discussion of its impact on international trade practices and dispute resolution.

Law- International business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK ..............................................................................................................................................1
Question 1. Analysis of provisions of CISG..........................................................................1
Question 2: Discussion of legal issues related with principle of autonomy for letter of credit
and solution provided under UCP 600...................................................................................6
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

TASK
Question 1. Analysis of provisions of CISG
INTRODUCTION
Contracts for international sales of goods is regarded to be a treaty that aim to establish
uniform policies for providing successful draft of sales contract at international level. It
facilitates in setting many legal rights as well as associated obligations for selling and buying
under certain terms and conditions. These rules are automatically applied to those agreements
among nations which already have ratified this convention. Function of CISG is letting the
conduction of business to be performed with clients on global terms without an impact of any
local or internal parameters to be fulfilled in a legal perspective (Bridge, 2017).
It sets appropriate standardised rules that are applicable for contracting services or a product.
The following report consist of analysis of various provision related to Contracts for
International Sales of Goods that includes The Statute of Frauds, Warranty Disclaimers as well
as Battle of Forms. Apart from this, legal issues related with principle of autonomy for letter of
credit and solution provided under UCP 600 has been successfully depicted which comprises of
various obligations provided by bank on credit.
Convention of UN on Contracts for International Sales of Goods is regarded to be most
successful attempt for unifying every broad area of several commercial law at global level. This
is known as self- executing treat that aim for reduction in obstacles of commercial trade which is
conducted on international terms, especially those which are related to specific issues and are
governed by many rules and regulations which are handled by member of parties on global sales
contract. It has more than seventy states which are involved in contracts and represent
extraordinary economic, cultural and geographic diversity, respectively. CISG regulates these
contracts when both groups are involved in contracting state or possess some private individual
law that serves the application of Contracting state laws. There are various provisions among
which some of them are considered to be significant such as it provides interpretation of
agreement which is done between different commercial groups (Gillette and Walt, 2015). It
provides description of roles which are related to practices of the parties that are established and
also have international usage. There are several features and time duration of many offers. Apart
from this, effectiveness of acceptance, manner and timings of every agreement is described. It
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tends to serve modification in many contracts of sales that are conducted on global bases. Also,
obligations of seller in accordance to quality of commodities is determined. The date and venue
for payment is depicted with regulating authority to avoid any type of confusion or conflict
related to this aspect. Apart from this there are various remedies which are provide by his treaty
to the member state who are engaged in trade activities with each other for breaching any
contract. It can include many aspects such as rights for compelling the buyer for taking delivery
of paying the price; also, avoid of contract is initiated and damages are recovered accordingly.
Apart from this there are several measures which are followed such as transferring of risk which
are involved with the goods that are being sold, planned breach of contract is eliminated,
facilitation is provided for recovering interest sum on all arrears. There are various advantages
which can be associated with this treaty as it focuses on the development of trade aspect which is
regarded to be very necessary for economic development of nation. Apart from this, it protects
from violation of any kind of basic rights.
Contracts for Intentional Sales of Goods comprises of those provisions that includes
eradication of various requirements in written formats for conducting international contracts of
sales under its scope. It serves various 'Final Provisions' for addressing several matters like
ratification, approval, acceptance as well as accession (Hoefele, Schmidt‐Eisenlohr and Yu,
2016). Apart from this, interplay between CISG and other associated global agreements,
reservation and declarations are provided.
It generally covers all counterpart for Uniform Commercial Code and leads to apply
generally on all transactions which are related to sales and parties have their particular places of
conduction of business in several contracting states. There are several Key provision which are
covered under CISG treaty.
The Statute of Frauds- This is associated with those requirements that are required for
certain types of agreements which can be memorialised in a written format as well as signed by
those parties who are needed to be charged. It is regarded to be modern statute and provides the
advantage of guiding the parties who practice it and other scholars whose concern is related to
experience which is prior to sales and can be seen throughout the globe. As a result, it generally
focuses on the completion of every expectation of several business communities. For example,
this treaty has restricted U.C.C.'s in order to adopt some formalistic approach of this specific
statute. It has proclaimed that a practical approach tends to recognise certain freedom of contract
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which is an agreement that is done for sale and is not be concluded in or should be evidenced
through procedure of writing and does not subject to other kinds of requirement is not subjected
for other kinds of requirements for formation.
This treaty focuses on identifying those obstacles which restricts successful and honest
dealings between contacting states and provides solution for the misconduct which helps to
provide support for victims. When a trade is conducted among global traders, there are minimum
levels of sophistications which are provided in order to presumed as well as there can be several
reasons which are for disregarding a particular contract due to absence of written document
regarding that deal (DiMatteo, 2014). As people who are related to business conduct commercial
activities without the presence of any kind of restraints that can be imposed through several
requirements that can relates to diverting their attention and efforts from decided goals and
objectives which are needed to be accomplished. Under the practice of oral agreements that does
not include any written arguments, has to prove their existence through providing different types
of evidences which are needed to be resolved to overcoming that oral contract in CISG.
Warranty Disclaimers- Warranty is regarded as a promise done by selling party to
other buying party. It can include several aspects that can be related to merchantability, fitness
for specific purpose and non-infringement. It acts for disclaiming or denying any kind of
warranty that can be applicable to particular product or service (Carr and Sundaram, 2016). It is
regarded as an essential part of sales contract that is performed in beginning. CISG does not
leads to adhere on any strict rules that is related with the disclaimer of warranties. Under the
body of U.C.C. which is regarded to be a disclaimer of warranty related to merchantability and is
very effective. It is related to the assurance of fitness of a particular product which is associated
to the purpose for which agreement came into existence. It is regarded to be effective when it is
provided in written format. It is very important to determine the appropriateness of the deal
which can successfully accomplish the objectives for which it is been conducted. There are
certain guidelines or assurance that is needed to be provided to other party for clarifying every
aspect of deal that develops an effective relationship between them. Both the parties needed to
agree in this competitive world that focuses on the criteria of fitting to the purpose for which
goods has been manufactured. It includes many aspects such as manufactured under legal
licensed and are tested by certain authority which can guarantee the quality of commodity.
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Under the guidance of CISG, there are certain presumption which are needed to be
implemented in order protect the buyer from any kind of deal that contains defected products.
There are various benefits of applying this obligations of parties who are involving in the
contract of selling. As it helps to promote transaction of goods in distant markets. It generally
reduces the risk of any conduct of fraud that can be related to deal. Apart from this, it provides
elimination of any kind of risk which is associated with non- confirmation of deliveries where no
imposing or negligence is involved (Jin and et.al., 2018). It initiates in serving every information
which is related to commodities and can be obtained by them any time.
Contracts for Intentional Sales of Goods tries to maintain the standard of products which
are delivered in member states. Also, with the declamation of warranty one can establish a
relation of trust between two commercial parties that can lead to foster trade activities. With the
increase in commercial deals, nations would be provided several advantages which can be
beneficial for economic as well as financial growth.
There are various positive aspects of this provision as it leads to provide extensive
protection against the cost of repairing. Disclaimer of warrantee safeguards the deal from
liquidity in case of a kind of break down (Niepmann and Schmidt-Eisenlohr, 2017). It is
regarded as a plan of high reliability. It focuses on enhancing the value product and financial
concession of claim. CISG has impelled member states to focus on management of warranty as it
serves strategic advantages. The confidence of other party rises that promotes opportunity for
earning a great revenue. This treaty has contributed in lessening of disputes which can rise due to
many malpractices that are performed in sales contract.
Battle of Forms- The aspect of offer and the acceptance has various additional terms
which are needed to be fulfilled for successful deal. While conducting the contract of sales
between two parties some terms and conditions are decided that are agreed upon mutual consent
of both commercial in a written format which is very essential to avoid any kind of dispute
among them. As conflict has the tendency to spoil business relation between two states that can
affect their trade relationship. Outcomes of this scenario can be considered as disadvantages.
It provides the base of contract on which it has been established as it is very important to
decide limitations under which an agreement of sales has to be performed. It works on the mirror
rule which includes that acceptance should be unconditional, communicative as well as
unequivocal. A contract is born majorly for acceptance, offerings and its considerations
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(LaFrance, Lange and Myers, 2018). These factors are regarded to be very important for
determining the existence of an agreement. Scope of acceptance should be matching to the
respective offer which is been provided. Contracts for Intentional Sales of Goods focuses on
providing criteria of justice.
It enforces numerous terms that are proposed by particular group over another that might
lead to cause unfair advantages for other. There are problems that are generated due to lack of
basic understanding which has not been effectively addressed. When both the commercial
parties are ready for performing agreement and criteria has been assigned then CISG comes in an
important role for monitoring and ensuring successful completion of all conditions which are
written in document on mutual consent. It provides guidance related to those terms which are
involved in an agreement.
The conditions which are decided for conducting trade activities can have complete
description about commodities which will be produced, the appropriate amount that has to be
sent according to the need of buyer and the price which has been decided on the mutual consent.
In this, Contracts for Intentional Sales of Goods follows common laws which are obsolete.
Meetings are often organised in order to make sure about every softening every harsh and
extreme positions which can occur in conduction of trade. It generally provides an option of not
avoiding agreement by making it optional for accepting those acceptances which are added after
the signing of contract.
It provides the chance to seller for offering such offers that can extra beneficial for the
property but on the other side, party that might be buyer has right to accept or deny those
conditions in accordance to their preferences (Fren and Frechtling, 2015). Treaty attempts to
resolve every impossible predicament that has been created due to battle between those
commercial groups.
There are various solutions which are provided by CISG for avoiding any kind of
conflict due to battle of forms through these resolving methods:
Negotiation- It is regarded to be very convenient method for solving disputes which
occurs due to battle of firm. As a meeting is organised in which both parties are invited and in
that both represent their expectations and their requirement from the contract as it lays to make
understanding power of both groups to be very strong and a mutual decision is taken upon the
several factors which are needed to be implemented for betterment of the trade agreement and
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helps to facilitate business activities among different states with no restriction. This solution has
the high success rate and prevents to finish contract in hard circumstances.
Acknowledging about Exceptions- While signing of contract, CISG reminds both
parties regarding all terms and exceptions that are involved and can affect the deal. Therefore, no
member states get affected due to this aspect and provides the vision for analysing benefits and
disadvantages which are associated with agreement.
These provisions are provided to those states who are regarded to be member of CISG.
There are several benefits which are associated with opting Contracts of International sales of
goods because this law is known to be very flexible which tends to promote sales of products and
also respects the freedom of associated parties for conducting a successful an effective sales
contract. Fair as well as honourable solutions are provided for several disputes which are
common in trade activities (What is the CISG?, 2018).
There are default features which are provided to states after joining this treaty that serves a
tremendous amount of comfort for those who disagree or postpone the selection of several
choices related to certain policies. With this group every state has observed a tremendous growth
in the economy which has provided them an opportunity for earning great revenue that can be
used for investing in other commercial activities such as exporting and importing that can boost
up the development of national market and would lead to provide an international recognition in
global arenas for selling product and services without any kind of barriers (Jin and et.al., 2018).
Apart from this, staff is trained about the benefits of joining this treaty which might lead to
understand its crucial presence in world.
Both UK and India are signed under the treaty of CISG. Economy of UK is dominated by
public sector but there are few restrictions on the trade activities which are conducted in nation.
Apart from that, there are very strict rules which are related to sales and are needed to be
followed. They focus this agreement of Sales of goods only on ascertain goods. It involves rules
for ascertaining intentions, rights of disposal and passing of risk which is related to goods. They
have a compliance institution which monitors all these contracts. Within the treat of CISG, they
facilitate trades with other member nation with less amount of cost for exporting or importing
several commodities. Apart from that, they can complain regarding any misconduct which is
done by other nation. Solutions for these conflicts are effectively solved through mutual consent
of both countries.
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While in India is a mixed Economy, there are more flexible aspect in Sales contract which
has enhanced their trade activities in the economy. As they have converted themselves in open
market economy .Therefore, this has lead to flourish their country with many contracts of sales
with other nations. They have certain branches that regulates every contract of sales and focuses
on facilitating trade activities and solutions for every dispute with other member country.
Case Example:
Hillas v Arcos (1932,HL)
It included a contract of wood supply for one year and permitting the customer for buying
more in coming years but no terms were defined for supplying.
Judgement was passed which stated it as a vague offer and clarification was needed to
form both dealing parties according to customs and practices. It was needed to provide every
specification which should be related to supply of goods, time and cost factor and other return or
continuing policies.
CONCLUSION
From the above report it can be concluded that, UN convention for sales of goods is
considered as a very important attempt for success of global trade and commerce. This
convention aims at reduction of obstacles in international trade. With introduction of this
convention the legal formalities and procedures were eased out so that the parties and nations
involved in trade and commerce can operate their work without fulfilment of many legal
obligations. Contracts for international sales of goods Act lays down many provisions that
eradicated requirement of written formalities.
The CIGS also presented global agreements and provide guidelines for reservations and
declarations required under global contracts. The letter of credit is a documentary credit provided
to parties to contract under international trade. The seller /importer receives payment on behalf
of buyer by importer's bank. This have reduced financial obligation among parties to
international trade contracts.
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Question 2: Discussion of legal issues related with principle of autonomy for letter of credit and
solution provided under UCP 600
Introduction: to secure the payment and risk associated with international trade
transactions, letter of credit method is used for making payment. This is a method in which
buyer's bank make a payment for a transaction between importer and exporter, the importer's
bank consult with an advisory bank before payment and upon receipt of all relevant documents a
payment is done to exporter. The present report will define all regulations related with it and
UCP 600.
Letter of credit in international sales Transactions:
This is a mechanism used for making payments under international trade contract. This
technique uses for payment allocate the risk taken by contracting parties. A letter of credit is also
known as banker’s commercial credit and documentary credit. In this arrangement usually a bank
in importers country agrees to pay for a shipment on submission of all requisite documents by
exporter with in a stipulated time. The documents an exporter is required to submit are bill of
lading, certificate of insurance and origin. In other words, it can be defined as a practice which is
followed by parties to sales contract in international trade. This means both buyer and seller
belongs to different countries (Brown, 2017). The payment in such agreements are made with
involvement of banks. The buyers bank generally provides a letter of credit to exporters and
when seller submits all relevant documents with importer's bank, the bank makes a payment to
seller. This is a guarantee given by bank of buyer that payment will be received by seller on time
for correct amount.
The letter of credit has become an important aspect in international trade contract because
of existence of various factors such as distance, different laws in respective countries, difficulty
in knowing personally each party, etc (Letter of credit for importer and exporter, 2018). The
letter of credit is a negotiable instrument in which the issuing banks beneficiary in this case the
seller or exporter. In case letter of credit is transferable it payment will be made to a third party
or to a corporate parent, as beneficiary will assign them for payment.
Parties under letter of credit:
 Importer: Applicant
 Exporter: Beneficiary
 Importer's bank: Issuing bank
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 Exporter's bank: Advising bank
 Confirming bank: Advising bank or 3rd party bank
The applicant applies to a bank for making payment on its behalf under a transaction
between applicant and a seller from other country. Upon fulfilment of certain requirement bank
agrees for payment (Alavi, 2016). Then seller (beneficiary) is needed to submit all documents
related with transaction such as bill of lading, certificate of insurance and origin of goods. The
issuing bank will check documents in detail and after satisfying with accuracy of documents
bank makes a payment to beneficiary.
Arrangement for letter of credit and a contract of international sales contract:
A sales contract be it national or international is between two parties that is buyer ans
seller or importer and exporter. A contract includes all implied and expressed terms related with
execution of the obligation by both parties. The terms explicitly define terms related with
insurance, payment, mode of transport etc.
Two basic principle of letter of credit:
1. The doctrine of strict compliance: the documents submitted by beneficiary in order to
receive payment must be checked very strictly wit terms of letter of credit before making
a payment.
2. The autonomy of letter of credits: this principal states that a letter of credit is separate
from and independent from terms of sales contact between importer (buyer) and exporter
(seller).
Article 4- Credit v/s Contracts, UCP 600
 This is an independence principle which defines letter of credit is a separate transaction
from underlying sales contract between importer and exporter.
 Any attempt to make contract an integral part of Letter of credit shall be discouraged by
bank.
Letter of credit is a part of sales contract but it is considered as a separate undertaking for
sales agreements between buyer and seller (Ding and Zeller, 2018). This distinction is defined
under Article 4 of UCP 600. with applicability to principle of autonomy of letter of credit it can
be clearly stated that a letter credit does not take any influence from international trade contract
between applicant and beneficiary. Its work is limited up to thoroughly checking the documents
submitted by exporter and to make a payment on behalf of importer who have undertaken a
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contract for sales transaction. As long as banks restricts its work for scrutinizing of documents
irrespective of transaction underneath letter of credit, their work orientation is significantly
becoming simple. Bank, not bound by terms of contract between applicant and beneficiary:
The issuing bank is given a right under article 4 of UCP 600 that letter of credit
arrangement does not have any relevance with the underlying transaction for which such
arrangement is made (Chhina, 2016). In other words, irrespective of nature of contract and
transaction between parties/ the bank is only concerned with terms under letter of credit it has no
relevance with terms and condition of contract between applicant and beneficiary.
Applicant: the borrower or applicant uses his/her existing credit relationship with bank
in order to avail required credit for a payment outside country. The applicant is given a guarantee
by bank in respect of debt to applicant for a payment outside his country. In case applicant is
unable to make payment and perform his/her obligation the bank will pay on his behalf. Apart
from this bank is not liable for any obligation of buyer to seller. There can be many other
obligations which needs to be performed by buyer under the contract between them but the bank
is not responsible for any of such obligation of importer. This power is vested to bank through
principle of autonomy under Article 4 of UCP 6.
Beneficiary: the beneficiary is liable to receive payment for transaction undertaken by
him and buyer of other nation. Other than this seller does not owe any liability by bank. The only
obligation between bank and exporter is that seller is required to submit all documents related
with sales, transport and insurance to bank in order to receive payment (Kant, 2016). Bank
scrutinises document in detail in order to check authenticity of documents and paper work
submitted by seller in order to release payment in favour of him/her.
This can be expressed that with application of Article 4 of UCP 600, the obligation and
liability of bank has been restricted which is done significantly simplify work of banks in
international trade transaction.
Legal issues related with Principle of Autonomy:
Fraud Exception: with the principle of autonomy letter of credit have achieved an
authentic position in international trade. This is considered as a principle tool for financing in
global business (Mugarura, 2014). There is still one exception to this principle which is fraud
exceptions. There no general provision to deal with fraud yet it is recognised in many cases
related with letter of credit. The banks are not legally bound to make any payment when it is
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