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When to apply CISG?

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Zuza Peplowska

on 20 October 2015

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Transcript of When to apply CISG?

CISG's application
first possibility of application
That means most commonly CISG will be applicable since both parties to the sales contract have their places of business in the country which ratified the convention.

example: contract between Polish seller and American buyer

but partial exclusion of application by will of some states -see art. 92, 93, 94 and 96.
But how to define a place of business?
To decide whether two parties have places of business in the contracting states you should take into account:

1) art 1 (2) of the CISG: The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.

2) art 10 of the CISG: For the purposes of this Convention:
(a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;
(b) if a party does not have a place of business, reference is to be made to his habitual residence.
Remember however that according to art. 1(1)(b) the convention applies also when the rules of private international law lead to the application of the law of a Contracting State.

f.ex. British seller (Great Britain is not a CISG's party) and French buyer (France ratified CISG) choose the law applicable to their contract - French law. Since Great Britain has not acceded to the convention CISG may not be applicable on basis of previously discussed art. 1(1)(a). However parties chose the French law as the the law governing the contract. France is a party to the CISG. Thus, the rules of private international law lead to application of the French law - the law of a Contracting State. CISG is applicable.

That finishes the basics of CISG's application. We will continue this issues at class.
When to apply CISG?
First step: look at art. 1 of the CISG's

(1) This Convention applies to contracts of sale of goods between parties whose places of business are in different States:

(a) when the States are Contracting States; or

(b) when the rules of private international law lead to the application of the law of a Contracting State.
Second possibility of application
Mind you, some states have however declined application of art. 1(1)(b) if the contract has been formed by parties having places of business (basis - art. 95). Most notable being United States of America and China. Therefore, a contract of sale between British seller and American buyer, even if American law is applicable will not be governed by the CISG

Sales contract
According to art. 3 CISG applies solely to the sales contract. No definition is provided, however:

(1)  Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a 
substantial part
 of the materials necessary for such manufacture or production.

(2)  This  Convention  does  not  apply  to  contracts  in  which  the 

preponderant part
 of the obligations of the party who furnishes the goods consists in the supply of labour or other services.

Thus, CISG does not apply to:
- contracts in which Buyer supplies important/valuable part of materials
- mixed contracts in which service part is preponderant
- barter contracts
- contracts which do not consider goods

exclusions by CISG itself
Mind you, CISG states a list of goods which are excluded from the convention's application:
(a)  of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use;
  (b)  by auction;
  (c)  on execution or otherwise by authority of law;
  (d)  of stocks, shares, investment securities, negotiable instruments or money;
  (e)  of ships, vessels, hovercraft or aircraft;
  (f)  of electricity.
exclusion by parties to
the contract
According to art. 6 parties may exclude application of the CISG; possible exclusions:
- express (preferred)
- implied
*photo by Maersk Line, CC BY-SA 2.0 at https://creativecommons.org/licenses/by-sa/2.0/, last visited on 22.10.2014
* 023/2013 Container Ship photo by Ian Barbour, CC BY-SA 2.0 at https://creativecommons.org/licenses/by-sa/2.0/
last visited 22.10.2014
Full transcript