By: John Michael Pierobon
Ignorantia juris non excusat is Latin for "ignorance of the law is no excuse".
The United Nations Convention on Contracts for the International Sale of Goods (CISG) has been recognized as the most successful attempt to unify a broad area of international commercial law. It reduces obstacles to international trade by creating even-handed and substantive rules governing the rights and obligations of parties to international sales contracts. It was written in plain language using common legal terms, avoiding words associated with specific domestic legal nuances, to facilitate its translation into the six official languages of the United Nations.
The CISG governs international sales contracts if both parties are located in contracting states. It applies to commercial goods and products only.
The CISG was signed in Vienna in 1980 and has been ratified by more than eighty countries. However, some countries have made declarations stating reservations about some of the clauses in the treaty.
Often international transactions are carried out without signing a contract. The CISG allows for a sale to be oral or unsigned. An example of an unsigned contract are clauses in a commercial invoice. A product warranty has terms and conditions, which in essence is an unsigned contract.
In some countries, contracts are not valid unless written. One can avoid doubts and misunderstandings concerning what has been agreed to if the terms and conditions are in writing. When dealing with international trade, especially where there are language differences, it is best to have a written contract in place.
An international contract is a document in which the rights and obligations of the exporter and the importer are stipulated.
An international contract should follow the CISG and have the following clauses:
- To identify the parties and the reason for the contract.
- This may include the quantity, the quality, inspection, and the packaging.
- This typically includes date and place for the delivery of the goods as well as who bears the cost for transporting the goods and the risk and responsibility for shipping the goods.
- This includes the amount and the currency. It may also include how price is determined: by size, by unit, by volume, by weight, etc.
- When, where and how payment will be made. It may list bank accounts. It may detail forms of payment such as letters of credit, documentary collection, open account, or cash-in-advance. It should also list who is responsible for paying duty, taxes, and fees.
- These may include: commercial invoice, packing list, insurance documents, certificate of origin, inspections certificates, customs declarations, etc.
- When do the goods transfer ownership. This may be spelled out by the Incoterm used. It may be defined in the documents clause of the contract.
- The buyer is obligated to pay the agreed price at the agreed time. Remedies are spelled out in this section if the buyer fails to comply. In some countries payment of interest is unlawful, or is subject to a legal maximum rate, or there is provision for statutory interest on late payments.
- The seller is obligated to deliver the goods at the agreed time. Remedies are spelled out in this section if the seller fails to comply.
- Goods could arrive damaged. This clause details what is lack of conformity. It could be lack of quality, lack of timing, or lack of quantity. This clause also describes how to notify the seller of lack of conformity and detail the appropriate remedies.
- How the parties determine that the contract has been broken.
- How and when the harmed party will be compensated for damages caused by the breach of contract.
- The party who relies on a breach of the contract must take reasonable measures to mitigate the loss resulting from the breach. If it fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.
- The parties should be free to consult each other in the event of a major change in circumstances particularly one creating hardship for a particular party. These circumstances are events that could not reasonably have been taken into account by the affected party at the time of conclusion of this contract or events which are beyond the control of the affected party.
- Force majeure means war means war, terrorist acts, industrial strikes, or acts of God such as an earthquake, a flood, or a hurricane. A party affected by force majeure shall not be deemed to be in breach of this contract, or otherwise be liable to the other party.
- How, in what language, and to whom each party must communicate and give notice.
- How long the contract is in effect. It could be an evergreen contract, or be non-renewable.
- How and in what court the dispute will be resolved.
- Questions relating to the contract that are not settled by the provisions contained in the contract itself shall be governed by the CISG.
— A preamble.
— A description of the goods.
— The delivery of the goods.
— The price.
— Payment conditions.
— Documents.
— Transfer of property.
— Buyer's non-performance to pay.
— Seller's non-performance to deliver the goods.
— Lack of conformity.
— Breach of contract.
— Restitution of damages.
— Mitigation of harm.
— Change of circumstances.
— Force majeure.
— Notices.
— Contract term.
— Dispute resolution.
— Applicable law.
Before signing an international contract consult with an international trade lawyer, read it carefully, and make sure it includes the clauses listed above.