The application of cisg in united states experience for vietnam

The necessity of the thesis The Vienna Convention 1980 of the United Nations CISG - Convention on Contracts for the International Sale of Goods was prepared by the United Nations Commis

HO CHI MINH CITY UNIVERSITY OF LAW

MANAGING BOARD

OF SPECIAL TRAINING PROGRAMS

BACHELOR’S THESIS INTERNATIONAL LAW MAJOR

THE APPLICATION OF CISG IN UNITED STATES

EXPERIENCE FOR VIET NAM

HO CHI MINH CITY, 2014

HO CHI MINH CITY UNIVERSITY OF LAW

THE APPLICATION OF CISG IN UNITED STATES

EXPERIENCE FOR VIET NAM

HO CHI MINH CITY, 2014

Ho Chi Minh City, July 22nd, 2014

TABLE OF CONTENTS

INTRODUCTION 1

Chapter 1 THE OVERVIEW AND RATIFICATION OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS IN UNITED STATES 6

1.1 The overview of the United Nations Convention on Contracts for the International Sale of Goods 6

1.1.1.The origin of CISG 7

1.1.2.The scope of application and General Provisions 10

1.1.3.CISG achievements 14

1.2 The ratification and implementation of the United Nations Convention on Contracts for the International Sale of Goods in United States 18

1.2.1.The ratification of CISG in United States 18

1.2.2.The relationships between the CISG and UCC 21

Chapter 2 THE APPLICATION OF CISG IN UNITED STATES AND EXPERIENCE FOR VIETNAM 29

2.1 Scope of application 29

2.1.1.The application of CISG on Scope of application in United States 29

2.1.2.Experience for Vietnam 34

2.2 Formation of contract 35

2.2.1.The application of CISG on Formation of Contract in United States 35

2.2.2.Experience for Vietnam 41

2.3 Obligation of the Seller 45

2.3.1.The application of CISG on Obligation of the Seller in United States 45

2.3.2.Experience for Vietnam 50

CONCLUSION 52 BIBBLIOGRAPHY

APPENDIXES

INTRODUCTION

1 The necessity of the thesis

The Vienna Convention 1980 of the United Nations (CISG - Convention on Contracts for the International Sale of Goods) was prepared by the United Nations Commission on International Trade Law (UNCITRAL)1 with an effort of unifying source of applicable law in international transactions As for 2014, CISG nowadays has 81 countries ratified2 and have achieved many great successes

Generally, each Contracting State has its own different way to adopt and implement the Convention.3 Whereas other countries ratify and implement the whole regulations of CISG, only few countries declared important reservations and United States is one of them In fact, just China (PRC), Czech Republic, Singapore, Slovakia and the United States, five over 81 countries declared that they would not

be bound by Article 1.1.b This declaration restricts the role of private international law in determining the applicability of the CISG when both contracting parties do not have their relevant places of business in Contracting States So, this fact definitely makes United States stand out from others

Some opinions may give doubt how we can earn experiences from United States However, the author finds United States is the country that worth studying the most for Vietnam in the future, provided that United States is the representatives

of the common law systems that is totally different from Vietnam legal systems The reasons are as followed

Firstly, United States is one of the earliest countries signed the Convention.4

Compared to the other Contracting States, United States definitely has more experiences in applying the CISG since this country has nearly 30 years in practicing So, the numbers of decisions and cases using CISG in United States is enormous compared to the remaining portion that all other contracting states

combine The pie chart in Appendix IV can prove the huge and diversity of United States‟ cases and precedents applying the CISG

Secondly, unlike the majority of nations in the world, United States had their

own domestic state law since 1952 The Uniform Commercial Code is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales As the results, despite adopting CISG, UCC still remains its importance in United States‟ legal system So, learning the relationship between the federal law (CISG) and the state law (UCC) can give us the clearer view of how CISG being applied in United States Consequently, it shall be the priceless lessons for Vietnam to predict the effect of CISG over the Vietnamese Commercial Law 2005

Thirdly, since 2005, United States continuously ranked as the country's

largest exporter of goods in Vietnam with the export turnovers rising by 100 times

in nearly 20 years Two-way trade turnover increased by an average of 20% / year;

2012, bilateral trade increased by 14% and reached 26 billion dollars Consequently, Vietnam is always a trade surplus position.5 So, understanding and gaining experience from United States is very fundamental for Vietnam nowadays

So far, many researches and projects have dealt with the issue of how CISG has been applied in one specific Contracting State.6 Nevertheless, the insufficiency still exists in the specific field of studying the application of CISG because none of these researches stating the relationship and effect CISG brings to the domestic state law or analyzing in-depth the cases to get the realistic view For all above reasons, I

am inspired to choose the tittle: “The application of CISG in United States –

Experience for Vietnam” to my bachelor thesis

2 Purposes of the Thesis

Studying the topic named “The application of CISG in United States – Experience for Vietnam”, the author seeks to achieve these following purposes:

5

Appendix IV.3 - Statistics

6

For instance, Hugo Charl (1999), The United Nations Convention on the International Sale of Goods:

Its scope of application from a South African perspective, 11 SA Mercantile Law Journal, page 1-27

Firstly, the thesis will provide a general understanding some fundamental

academic issues in regard to the overview of The United Nations Convention on Contracts for the International Sale of Goods (CISG)

Secondly, the ratification and implementation of United States will be figure

out Particularly, the thesis will study the relationship and the effect CISG bring to the domestic state law of United States

Thirdly, analyzing number of cases regarding to the reality of application

CISG in United States so that we can examine how CISG has been adopted and applied in practice

Finally, from all these presentations, the thesis will give the inestimable

experiences for Vietnam in the future in case Vietnam signs to be the official Contracting States to the Convention

3 Delimitation of the Thesis

With the restriction of time and ability of the author, the thesis is not intended to provide a comprehensively deep research and analysis on the application of CISG in United States because this is a wide field containing many researches and great efforts in order to have a truly in-depth view Moreover, the Convention has 101 articles and more than 80 countries ratified, including many aspects regarding to its application and its effects over the national legal systems

For that reasons, the thesis only concentrates on the application of CISG in United States and its effects over United States‟ national legal systems alone, especially in this situation is the Uniform Commercial Code (UCC) Moreover, to investigate thoroughly about the reality of implementation and the relationship between CISG and UCC, the author also analyses many cases in order to seek experiences for Vietnam

4 Research Methodology

Pursuant to the purposes stated above, there are three main methods as followed and all methods shall be used flexibly and continuously to attain the purpose of the thesis

First, description method is used fundamentally in Chapter 1 and Chapter 2

as well as to present definitions, perspectives, approaches, provisions and different opinions over the issues;

Second, comparison is utilized to clarify the relationship and interaction

between CISG and UCC in Chapter with the purpose of finding the effects of the Convention on one specific Contracting State‟s national legal systems

Third, analysis is also employed in all chapters, especially in Chapter 2, to

give the analytical view over some case studies and withdraw the characteristics, advantages, disadvantages and reach to the final conclusion

Fourth, system is mainly use in the whole thesis in order to select and

arrange the information so that they can be easy to follow and make the thesis linked and reasonable

- Joseph M Lookofsky, (2008), Understanding the CISG (3rd edition), Kluwer Law International: This book includes a representative sampling of the more than 2,000 CISG court judgments and arbitral awards that have been reported Concrete illustrations are provided to help clarify the way CISG rules work As it will provide law students with an effective CISG learning tool, no other CISG source is at once so authoritative and so succinct

- Peter Winship, (1984), The scope of the Vienna Convention on

international sales contracts in international sale of goods, Galston &

Smit Edition: This research is undoubtedly the in-depth analysis on the Scope of Application

7

The CISG came into force as a multilateral treaty on January 1st 1988

- Peter Huber, (2007), The CISG: A New Textbook for Students and

Practitioners, European law publisher: The book is primarily aimed at

students, academics, and practitioners who have not yet studied the Convention in detail From a comparative perspective, the book will be of particular interest as it combines a Civil Code view and a common law view

on the CISG

- Nguyen Trung Nam, (2010), Future of Harmonization and Unification in

Contract Law Regarding “Battle of Forms”, University of the West of

England: This research is another worth-reading since it is provides us the information and also analysis on the Formation of the Contracts and the Conflicts in this issue between the CISG and the UCC

- Nguyen Minh Hang and My Thi Loan Đinh (2010), De xuat Viet Nam gia

nhap Cong uoc Vien ve hop dong mua ban hang hoa quoc te (Study on Viet Nam’s accession to CISG (1980) – in Vietnamese), Hanoi, VCCI:

This articles the source information that focuses on the advantages, disadvantages and some experience Vietnam get from another countries in joining the Convention

However, researches, studies and articles that deeply, clearly and specifically pointed out the application of CISG in United States and its relationships with UCC are still rare Besides, almost researches have tendency to work on analyzing theoretically the CISG regulations rather than take an in-depth view toward cases in reality relating to applying the Convention

6 Structure of the Thesis

In addition to the Introduction and the Conclusion, in accordance with the purposes and delimitation stated above, the thesis is divided into two main parts as two following chapters:

Chapter 1: An overview and the ratification of The United Nations Convention on Contracts for the International Sale of Goods (CISG)

Chapter 2: The application of CISG in United States

Chapter 1 THE OVERVIEW AND RATIFICATION OF THE UNITED

1.1 The overview of the United Nations Convention on Contracts for the International Sale of Goods

The „CISG‟ is shorthand for the United Nations Convention on Contracts for the International Sale of Goods 1980 The CISG regulates the rights and obligations

of buyers and sellers in connection with contracts for the international sale of goods The Convention, which first entered into effect in 1988,8 is the first sales law treaty

to win acceptance on a worldwide scale As of this thesis, some of 81 CISG Contracting States9 account for more than two-third of all world trade.10 The amount of money involved is enormous.11 This Convention, which applies by default or by choice in the international sales context, has also impacted on sales legislation at both the national and regional levels.12 The particular importance of the Convention is underlined by 2,500 reported cases where the CISG has been held

to apply, thus evidencing the conduct of countless international traders who regularly subject their sales contracts to the Convention scope

The main purpose of this Chapter is to provide a brief introduction to the CISG: to sketch out its main field of historical perspective, as well as to highlight some key features and some achievements that the CISG gains through more than

Appendix I – CISG Contracting States (last updated June 1st 2014)

10 http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html , accessed May 11th2014.

11

Jan Ramberg (2002), International Commercial Transactions, Kluwer Law International, page 25

12

Joseph M Lookofsky (2008), Understanding the CISG (3rd edition), Kluwer Law International, page

10, citing Jenkins, S (2006), Contracting Out of Article 2: Minimizing the Obligations of Performance

and Liability for Breach, 40 Loyala of Los Angeles

1.2 The origin of CISG

1.2.1.1 Brief Historical Perspective

The “CISG” or “Convention” was drafted by the United Nations Commission on Trade Law international (UNCITRAL) in an effort towards unifying source of applicable law to the international contract of sale of goods The reason is simply because harmonization, unification, codification and reform in international commercial law have long been the center of international efforts to facilitate international commercial transactions with lower costs to enterprises and higher legal certainty.13

In fact, the unified effort was initiated first from the 30s of the 20th century

by UNIDROIT.14 UNIDROIT has given birth to two 1964 Hague Convention: first convention named "The Convention relating to a Uniform Law on the International Sale of Goods", the second called "the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods"15 Both of these multilateral treaties became effective in 1972.16 However, two 1964 Hague Convention have never been successful in establishing the working law of international sales.17 According to experts, there are four main reasons18 why all countries denied ULIS and ULFIS and wanted to develop a new convention: (1) Only 28 countries participated in Hague Convention with little representation from the socialist countries and the developing countries, so their text is not reflect the background and the perspective of legal and commercial experience from other

13

A Rosett (1992), Unification, Harmonization, Restatement, Codification and Reform in International

Commercial Law, 40 Am J of Comparative Law 683

14

UNIDROIT (the International Institute for the Unification of Private Law) is an intergovernmental organization on harmonization of private international law; its projects include drafting of international conventions and production of model laws As of 2014, UNIDROIT has 63 member states

Joseph M Lookofsky (2000), The 1980 United Nations Convention on Contracts for the International

Sale of Goods, Kluwer Law International, published by J Herbots editor, page 3 Available on website:

http://www.cisg.law.pace.edu/cisg/biblio/lookofsky.html , accessed June 25th 2014

18

Muna Ndulo (1989), The Vienna Sales Convention 1980 and the Hague Uniform Laws on

International Sale of Goods 1964: A Comparative Analysis, 38 The International and Comparative Law

Quarterly, page 3-4 Available on website: http://scholarship.law.cornell.edu/facpub/66/ , accessed July

1st 2014

regions in the world;19 (2) The treaty was ratified by no socialist and only one developing country so it is believed that these Conventions are in favor of developed countries;20 (3) The use of untranslatable Civil Code concepts, certain to

be rejected by the common law world;21 and (4) This Convention propensity to for trade between countries with common borders rather than trade-related international shipping

In 1968, based on the requirements of the majority of United Nations‟ members on expanding the international trade between countries with different legal systems, economics and politics, UNCITRAL has initiated the drafting an agreed Convention to replace two 1964 Hague Convention Developed based on two provisions of Hague Conventions, however, the 1980 Vienna Convention is renewed and basically more consistent This Convention was adopted in Vienna (Austria) on 11 May 1980 in the presence of representatives of about 60 countries and 8 international organizations CISG entered into force on 01/01/1988, after being ratified by 11 countries.22

1.2.1.1 CISG Ratification and Implementation 23

Since entering into force in 1980 until now, the Convention had spent more than 30 years with the expansion of the member states In the author‟s opinion, it can be roughly divided the wave of ratification toward the CISG into the following

4 period:

Period 1 (1980-1988): This is the first time the 11 countries ratified in

sufficient quantities to allow the Convention to take effect Particularly, they are: Argentina, China, Egypt, France, Hungary, Italy, Lesotho, Syria, United States of America, Yugoslavia and Zambia.24 It can be seen in the 11 member countries that

19

http://travel.state.gov/content/childabduction/english/country/hague-party-countries.html , accessed July 1st 2014

20

Laszlo Reczei (1981), The Area of Operation of the International Sales Conventions, 29 American

Journal of Comparative Law, page 513-522

21

John Honnold (1988), The Sales Convention in Action-Uniform International Words: Uniform

Application, 8 Journals of Law and Commerce, page 207-212 Available on website:

http://www.cisg.law.pace.edu/cisg/biblio/honnold-sales.html , accessed July 1st 2014

United States is worth noticing because the United States is the largest economy in the world However, the fact that United States had declared reservations to Article 1.1.b, that the application of the CISG and the influence of these two countries significantly reduced.25

Period 2 (1989-1993): This is the 2nd wave of accession into the Convention, with 29 countries, including most of the countries from the European Union, in turn completed the ratification procedure to join the Convention This period also marked the collapse of the socialist system in Russia and Eastern Europe, these countries after the transition have rapidly integrated with the general trend of Western European countries joined the Vienna Convention Notably, during this time there are two new members are Australia and Canada, two countries with relatively developed economy and apply the common law system The participation

of the two countries have made common law system representatives in CISG increase and attract the attention of many other countries

Period 3 (1994-2000): During this period a lot of developing countries in

Africa and the Americas, as well as the national final of the EU26 (excluding the

UK27) as Belgium, Poland, Luxembourg, Greece completed the ratification procedures Singapore is the first Asian country joined CISG in 1995 Despite joining, the declaration that Singapore has at Article 1.1.b28 to limit the application

of the Convention, the CISG participate marked tremendous effort in participating unification of international trade law

Period 4 (2001-2010): This is the stage where the world economy has

witnessed strong growth and strengthens the role of the emerging developing countries, notably China, Brazil, and India CISG has experienced a quiet period in 2001-2004 when negotiations in the WTO framework is very stressful place for conflict of interests among developing countries with the developed countries

25

Joseph M Lookofsky (2008), Understanding the CISG (3rd edition), Kluwer Law International, page

14 – 15

26

Alison E Williams (2000-2001), Forecasting the Potential Impact of the Vienna Sales Convention on

International Sales Law in the United Kingdom, PACE Review of the Convention on Contracts for the

International Sale of Goods (CISG), Kluwer Law International, page 9-57

27

Sally Moss (2005- 2006), Why the United Kingdom Has Not Ratified the CISG, 25 Journal of Law

and Commerce, page 483-485

28

Appendix II – Declarations and state interpretations

Nevertheless, 2005 is the year witnessed the entry of important new Asian members

are Korean Finally, 2009 marked an important turning point of the CISG in Asia as

Japan, which has the 2nd largest economy in the world and the largest in Asia, has finally become an official member of the CISG without reservation With this event, United Kingdom will be the last developed countries of G7 +1 had not joined the Vienna Convention After Japan, certainly many other countries in Asia and ASEAN will consider soon ratify the CISG can apply to international commercial transactions proactively her, when major trading partners are already members of this Convention As of 2014, the Convention now has been ratified by 81 Contracting States

By ratifying the CISG treaty, all Contracting States have entered a „contract among nations,‟ and the courts in these States are bound by public international law

to uphold that contract and to apply the Convention rules to transactions within the treaty‟s scope However, certain countries have adopted the CISG subject to authorized declarations.29 Of the eighty-one Contracting States (at the time of this writing), twenty-two (almost a quarter) have made reservations, and in several cases, multiple reservations.30

1.2.2 The scope of application and General Provisions

1.2.2.1 The scope of application

CISG applies to contracts of sale either (1) between parties whose places of business are in different Contracting States first if these States have all ratified CISG or (2) when the rules of private international law lead to the application of the law of a Contracting State.31 Articles 1-6, 10 are the most important provisions for determining the Convention's sphere of application Articles 1, 10, and 95, read together, define the manner in which international sales fall within the Convention's scope; Articles 2-5 list transactions which remain without; and Article 6 affirms the drafter's fidelity to the principle of party autonomy In many jurisdictions, the CISG

is self-executing, obviating any need, after ratification, for separate municipal enabling legislation.32

In ratifying a treaty, a state will sometimes make a "reservation" or

"declaration" that it will not be bound by some part or aspect of the treaty.33 In order

to limit non-uniformity arising from such reservations, the drafters of the CISG provided in Article 98 that only reservations expressly authorized by the Convention are permitted.34 Namely, Articles 92-96 of the Convention authorize five reservations So, any Contracting States can reverses or declares parts of CISG regulation makes CISG become flexible and various in practices

Firstly, Article 92 of the CISG permits a Contracting State to declare that it

is not bound either by Part II of the Convention (Articles 14-24, governing contract formation) or by Part III of the CISG (Articles 25-88, governing the substantive rights and obligations arising from a sales contract) The four Scandinavian countries (Denmark, Finland, Norway & Sweden) have made declarations under Article 92 reserving out of the contract formations provisions (Part II) of the CISG

Secondly, Article 93 of the Convention permits a Contracting State to declare

that the Convention "extends to one or more but not all of the territorial units" of the State Four countries, namely Australia, Canada, Denmark and New Zealand, have made reservations

Thirdly, Article 94 of the Convention permits a Contracting State that shares

"the same or closely related legal rules" on sales with one or more other states to declare that the CISG does not apply to transactions involving parties located in those other states Denmark, Finland, Norway and Sweden have made the declaration authorized by this provision, in order to preserve the common sales rules

32

Peter Winship (1984), The scope of the Vienna Convention on international sales contracts, in

international sale of goods, Galston & Smit Edition, page 1 – 10 Available on website:

http://www.cisg.law.pace.edu/cisg/biblio/winship5.html , accessed July 1st 2014

33

Article 19 of CISG

34

Harry M Flechtner (1998), The Several Texts of the CISG in a Decentralized System: Observations

on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1), Journal

of Law and Commerce, page 187-217, citing Peter Winship (1990), Final Provisions of UNCITRAL's

International Commercial Law Conventions, 24 International Law, page 725 Available on website:

http://www.cisg.law.pace.edu/cisg/biblio/flecht1.html#t20 , accessed July 1st 2014

that they have developed for intra-Scandinavian trade.35 While the reservations permitted by Articles 93 and 94 do not change the text of the Convention in a literal sense, they produce what amounts to an alteration in the meaning of the term

"Contracting State" for purposes of the scope provision (Article 1) of the Convention For example, transactions between parties in Norway and Sweden are not governed by the CISG even though both these countries have ratified the Convention; in other words, because of their Article 94 reservations, Norway and Sweden (and the other Scandinavian countries) are in effect not "Contracting States" when they trade with each other

Most importantly, the reservation authorized by Article 95 has been made by

an interesting grouping of five countries: China, the Czech Republic, Singapore, Slovakia and the United States By their reservations, these countries have declared that they are "not bound by subparagraph (b) of Article 1.1" Article l.l.b provides that CISG applies to international sales transactions "when the rules of private international law lead to the application of the law of a Contracting State." The complexities of applying this reservation have been explored elsewhere.36 For the purposes of this article it is sufficient to note that the effect of the reservation is to remove a critical scope provision from the text of the CISG that is in force in five countries, including the United States The version of the Convention in force in those countries provides that the CISG applies only when the requirements of Article l.l.a are met when both parties to a sales transaction are located in Contracting States

Finally, the reservation authorized by Article 96 is, by a considerable

margin, the most popular of the CISG declarations Ten countries, namely Argentina, Belarus, Chile, China, Estonia, Hungary, Latvia, Lithuania, the Russian Federation and the Ukraine, have opted for it.37 To understand the consequences of

an Article 96 reservation one must first be aware that Articles 11 and 29 of the

35

John Honnold (1989), Documentary History of the Uniform Law for International Sales, Kluwer Law

and Taxation Publisher, §469

36

John Honnold (1989), Documentary History of the Uniform Law for International Sales, Kluwer Law

and Taxation Publisher, page 47 Available on website: http://www.jstor.org/discover/10.2307/40706411?uid=3739320&uid=2&uid=4&sid=21104268915287 , accessed July 1st 2014

37

Appendix II – Declarations and State Interpretations

Convention affirmatively eliminate any requirement that sales contracts governed

by the CISG (or modifications thereof) be in writing in order to be enforceable The effect of an Article 96 reservation on this elimination of writing requirements is specified in Article 12

In conclusion, the CISG has been drafted and entered into force since 1988.38Any country wants to ratify the Convention shall not have a chance to give opinions

or negotiate any rules Fortunately, the CISG still has its own flexibility and diversity by offering the Contracting States the right to declare in Articles 92-96, offering a wide range of possibilities for contracting states to restrict the application

of parts of the Convention Significantly, the Article 95 reservation has made the sphere of application the CISG becomes even more various

1.2.2.2 General Information

The CISG contains a total of 101 Articles, and these rules are organized in four main Parts (I- IV) So, CISG is divided into three principal parts which deal respectively with the following topics:39

PART I- Sphere of Application and General Provisions (Arts.1-13)

PART II-Formation of the Contract (Arts 14-24)

PART III-Sale of Goods (i.e substantive provisions of contract of sale):

Chapter I - General Provisions (Arts 25-29)

Chapter II - Obligations of Seller (Arts 30-52)

Chapter III - Obligations of Buyer (Arts 53-65)

Chapter IV - Passing of Risk (Arts 66-70)

Chapter V - Provisions Common to the Obligations of the Seller and of the Buyer (Arts 71-88)

38

UNITED STATES: Domestic legislative history documents (1983) U.S Senate proceedings: Message of President transmitting to U.S Senate text of UN Sales Convention and legal analysis of Convention prepared by U.S Department of State Senate Treaty Document No 89, 98th Cong., 1st Session Available on website: http://www.cisg.law.pace.edu/cisg/biblio/reagan.html , accessed July 1st

2014

39

http://www.cisg.law.pace.edu/cisg/text/cisg-toc.html , accessed July 1st 2014

PART IV- Final Provisions (Arts 89-101)

In particular, Parts I, II and III of the Convention are clearly and simply written in non-technical language and, for the most part, one does not need to be comparatives to understand them adequately although no doubt knowledge of comparative law would be helpful This does not of course mean that there may not

be differences of opinion with respect to the precise interpretation of particular sections An official commentary would have been very helpful The UNCITRAL secretariat prepared an unofficial commentary on the draft convention40 but, regrettably, no official commentary was approved or authorized to be prepared by the diplomatic conference.41 Moreover, Part IV contains rules which deal with signature, ratification, acceptance or approval, and accession to the Convention Part IV also contains the important federal state clause specifically requested by Canada (Art 93) and the provision (Art 94)

The success of the 1980 Vienna Convention is confirmed where in practice more than 2500 cases related to the application and interpretation of the Vienna

Convention 198044 has been reported Interestingly, these cases have not been raised only by the member states, but also in countries not yet been its members, where the contracting parties to the contracts chose CISG as the law applicable to the contract,

or by the court, by reference to arbitration to resolve disputes.45 For instance, Vietnam also had experiences on applying the CISG even though we are not yet a Contracting States of the Convention.46

There are many factors why the CISG is a convention in the unity of the most successful private law:47

First of all, the CISG was drafted and implemented under the protection of

the United Nations For that reasons, CISG not only create trust between the countries, but also receive the trust from large enterprises These are essential elements for the success of a convention which have the obligation to harmonize many differences between countries

Second, how the CISG drafting showed real effort in creating substantive

regulations on the International Sale of Goods In fact, representatives of the countries belonging to the different legal systems (Civil Law and Common law), in different continents, and different politics and economics (developed countries and developing countries) were invited to participate in the drafting of the terms of this Convention The historical documents on the different sessions of UNCITRAL48shows that the negotiation process for drafting the CISG has gone through a lot of difficulties due to the different national legal systems to participate in the drafting of

a uniform substantive law conventions like the CISG.49 Each of the provisions in the final document is the result of the process discussed in detail, with the full and proper consideration of the requirements and practices of the trade

http://www.uncitral.org/uncitral/fr/uncitral_texts/sale_goods/1980CISG_travaux.html , accessed July

1st 2014

49

Nguyen Trung Nam (2010), Future of Harmonization and Unification in Contract Law Regarding

“Battle of Forms”, University of the West of England, page 9 Available on website:

http://www.cisg.law.pace.edu/cisg/biblio/nam.html , accessed July 1st 2014

For example, there is mandatory offers must have pre-determined price or not? This is the question that the representatives of the Civil Law and Common Law have been controversy The representatives of France and Germany for that price to

be determined or can be determined in advance Meanwhile, according to the law Common law countries (UK, USA), if the offer is not made in the contract price, this does not affect the validity of the offer.50 Of the contract price will be determined by the reasonable prices on the market at the time of delivery To harmonize the conflicts between Common law and Civil Code, the drafters of the CISG has had very cleverly by giving two valuation clauses in the contract of sale Article 14 requires prices to be clearly defined and must be determined under the terms of the offers,51 while Article 55 provides that if the conditions under Article

14 of the price cannot be satisfied it shall remain in effect and shall be construed contract price is the market price at the time of delivery, at the place of delivery.52

One other thing to note is in the process of drafting the Convention as well as the body of the Convention, the composer always uphold the international character

of the Convention and, therefore, try to use simple and neutral language by avoid using the concepts of any legal systems Pursuant to avoid the maximum reference

to national law, Article 7 of the Convention requires writers also included the interpretation and application of the CISG to consider its international nature.53With this way of drafting, the express terms of the CISG is the unity and harmony

of the different rules in the national laws involved in the preparation and reflects general concerns of the countries For more convincing evidence for the fact that CISG is a successful harmonization, the author concerns CISG Advisory Council

50

Article 8 of the Sale of Goods Act 1979 of the UK: The price is not specified or cannot be determined; the buyer must pay a reasonable price

Article 2-305 UCC: Under the agreement, the parties may not include price provision in the contract

In this case, the contract price would be a reasonable price at the time of delivery

53

Article 7.1 of CISG: In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade

Declaration No 1 that proves The CISG is Regional Harmonization with six clear arguments.54

Third, the content of the Convention is considered to be modern, flexible,

and suitable for practical international sale of goods In general, experts assess the CISG is the set of rules quite modern, express the great balance between the buyer and the seller in sales in international trade This is shown, for example, in terms of Article 66 to Article 69 of the detailed rules of risk transfer The solution that the CISG has given is quite reasonable Or the provisions of the validity period of the offer55, about the main terms of the contract,56 in the case of a termination57, the concept of fundamental breach58 are designed to create the highest level consistent with the practice contracts of international sale of goods

In particular, the flexibility of the rules is one of the factors that make the success of the CISG This flexibility is primarily expressed in the provisions of declarations Furthermore, Article 6 allows parties to exclude the application of the Convention to his contract, even if the party is now in the member states of the Convention

Fourth, the CISG has been great support from the international arbitration

and the ICC As can be easily seen, the cases laws relating to the CISG have a lot of rulings of international arbitration Furthermore, the CISG applied arbitration under Article 1.1.b of the Convention59 This support of the international arbitration makes the application of the Convention as wide as possible, especially when the trend of settlement disputes by arbitration is increasingly popular ICC also expressed its support for the unified text of this law by introducing the CISG in terms of the

applicable law in the contract form purchase and sale of the ICC Model International.60

1.3 The ratification and implementation of the United Nations Convention

on Contracts for the International Sale of Goods in United States

1.3.1 The ratification of CISG in United States

As the world's largest power in economics and international trade, during the first 12 years of implementation of the Convention, the United States contributes to the library about 25 CISG case law precedents,61 much lower than scale commercial transactions of this country Notably among them are many cases where the U.S court invoked Article 6 of the CISG to reject the application of the Convention.62Similarly, most lawyers and legal consultants in the United States encourage customers not apply CISG provisions in its trade agreements.63 In addition, in other cases when the CISG applies, the judge U.S tend to use the term of the Uniform Commercial Code (UCC) to interpret the Convention despite the requirements of its international character.64 This according to many experts is explained by the following 03 reasons and the reasons for the same is true for most countries follow the common law system as New Zealand, Canada, Australia, and Singapore:

Firstly, UCC published in 1952 in the United States is a much detailed set of

rules on the contract of sale of goods, which are widely applied in 50 out of 51 states in the United States.65 For example, UCC's Article 2 is simply entitled 'Sales', which contains over 100 sections.66 The U.S government took a very long time to unify the law on trade under the UCC, so the application of the CISG for international sale of goods exists parallel to the UCC has created huge disturbance

60

Model International Sale Contract- Manufactured Goods Intended for Resale (1997), ICC Publication

No 556 Available on website: Sale-Contract-Manufactured-Goods-Intended-For-Resale.pdf , accessed July 1st 2014

http://store.iccwbo.org/content/uploaded/pdf/ICC-Model-International-61

http://www.unilex.info/dynasite.cfm?dssid=2376&dsmid=13354 , accessed July 1st 2014

62

Orbisphere Corp v United States (1990) U.S Court of International Trade 726 Federal Supplement,

1344 Available on website: http://cisgw3.law.pace.edu/cases/891024u1.html

The United States has used UCC since 1952 and if the CISG applies, they will have

to change some habits and the way of business has been practiced for a long time among U.S traders and foreign traders Definitely, this is something they do not want So, in general trading conditions, they are excluded from the application of the Vienna Convention 1980 by stating in the contracts to contain an express exclusion In detailed, a specific reference such as the following is recommended:

“The parties hereby agree that the United Nations Convention on Contracts for the

International Sale of Goods will not apply to this contract.”67 And if they have power and strength over the partners in negotiations, they often apply the provisions

of the UCC or any State law that the United States instead of using the CISG, even when CISG is the applicable law The representative prove for this fact is the

precedent namely Beth Schiffer Fine Photographic Arts, Inc v Colex Imaging Inc.,

Werner Wadon, and PoliElletronica S.p.A 68, where CISG is applied automatically between parties from United States and Italy, which are both Contracting States towards CISG However, in this case, because the CISG does not address the rights

of third-parties, the treaty does not provide a cause of action for remote purchasers but also does not preempt applicable state common law or Article 2 of the UCC that otherwise govern the rights of remote purchasers.69

Secondly, the CISG does not seem to gain enough attention of academic

researchers as well as international practices in the United States In fact, the United States attorneys also do not want to advise clients using CISG because United States does not have many cases law applying the CISG as precedents in the period of decade from 1990 to 2000.70 Besides, the numbers of students, lawyers and even the judges have much knowledge about the CISG compared to EU countries such as

67

Karen A.Monroe (2011), The CISG: The tool or trap for contracts of sale of goods, Wilk Auslander

LLP Available on website: bd170ae90a44 , accessed July 1st 2014

http://www.lexology.com/library/detail.aspx?g=0919f0e3-32a3-4cbe-a571-68

District Court New Jersey (19 March 2012) [10-05321] Beth Schiffer Fine Photographic Arts, Inc.,

v Colex Imaging Inc., Werner Wadon, and PoliElletronica S.p.A Available on website:

http://cisgw3.law.pace.edu/cases/120319u1.html , accessed July 1st 2014

69

Henry Deeb Gabriel (2009), Contracts for the Sale of Goods: A Comparison of U.S and Int'l Law

(2nd edition) stated: “A manufacturer that sells to an American wholesaler may have an agreement subject to the CISG, but if the wholesaler sells to a retailer under an agreement that is governed by the UCC, and the applicable state law provides for direct actions under the UCC against an upstream seller, the manufacturer may be subject to a claim by the downstream purchaser under the applicable state law."

70

Appendix IV.2 - Statistics

France, Germany, and Italy Research conducted by American scholars, Charles Sukurs71 showed that the CISG is not taught in courses on commercial contracts; only about 30% of judges in Florida have a moderate knowledge of the CISG Of the 10 United States lawyers have asked the CISG, the percentage of 80 to 90% answered that they really do not know what the CISG is, some people have suggested that the CISG is an international treaty concerning the relationship U.S deals have always been engaged since UCC law is applied resources.72 In another study of Ubartaite73 assuming the International Court of the United States, he found that there is clear distinction between the perception of the student groups from Europe such as Germany, Italy, Spain, and South Africa, and the United States students The students come from Europe are very familiar with the Vienna Convention 1980 and considered it as an important part of his legal knowledge In contrast to most American students do not know about the existence of the CISG, and less than 20% of the students were taught about the CISG.74

Thirdly, a number of rules and basic concepts of the CISG differs from the

corresponding provisions of the United States, which makes the trial become difficult For example, the concept of "good faith" in the CISG does not appear in the U.S legal system.75 So even judges also confused the application of the CISG and have tendency to avoid apply the CISG

However, in the past 10 years, due to the large pressure to join the international community, the situation applies to the Vienna Convention in the United States has improved significantly Only in the 10 years from 2001 to 2010,

71

Nguyen Trung Nam (2010), Future of harmonization and Unification in Contract Law Regarding

“Battle of Forms”, University of the West of England, page 4, citing Charles Sukurs (2001), Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods, Vand Journals of Transnational

Law 1481

72

CISG (1980) Countries: a Colorful Picture - in Vietnamese CISGVN (Ho Chi Minh City, Viet Nam)

3 November (2011) Available on website: http://cisgvn.wordpress.com/2010/11/03 , accessed July 1st

2014

73

Nguyen Trung Nam, (2010), Future of harmonization and Unification in Contract Law Regarding

“Battle of Forms”, University of the West of England, page 10, citing Edita Ubartaite, (2005) Application of the CISG in the United States, 7 Eur J.L Reform, page 277-302

74

Nguyen Trung Nam, (2010), Future of harmonization and Unification in Contract Law Regarding

“Battle of Forms”, University of the West of England

75

John P McMahon (2009), Applying the CISG- Guides for Business Managers and Counsel, Guide for

Managers and Counsel Available on website: http://www.cisg.law.pace.edu/cisg/guides.html , accessed July 1st 2014

the number of CISG case law of the United States was reported in UNILEX has increased more than 3 times higher than 12 years earlier (1998-2000), many scholars and practicing law in the United States has raised the need for unification

of the international law of the contract of sale of goods within the framework of international CISG volume due to the growing trade between the member countries

of the Convention Appendix IV.2 indicates the line graph showing the number of cases United States used the CISG in the period of 26 years (from 1988 to 3/2014).76 This graph definitely shows the trend of changes in United States over CISG and it would help Vietnam the most because Vietnam in the past did not give any concern on the Convention but now, like United States, we should consider and participate for the best growth in economics

1.3.2 The relationships between the CISG and UCC

There have been many books, researches as well as journals relating to the subject of analyzing the relationship between the international convention CISG and the domestic sale law of one Contracting nations.77 This thesis is not an exception to this interesting subject First of all, the author shall give an overview of the Uniform Commercial Code and then, on the second part discussing the effect that CISG brings to how United States applies UCC nowadays

1.3.2.1 An overview of The Uniform Commercial Code

The Uniform Commercial Code (UCC), first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America The UCC is a comprehensive set of laws governing commercial transactions between U.S states and territories These transactions include borrowing money, leases, contracts, and the sale of goods.78

76

http://www.cisg.law.pace.edu/cisg/text/casecit.html#us , accessed June 2nd 2014

77

In Canada: Alison E Williams (2000), Forecasting the Potential Impact of the Vienna Sales

Convention on International Sales Law in the United Kingdom, PACE Review of the Convention on

Contracts for the International Sale of Goods (CISG), Kluwer Law International

In Japan: Taniguchi (2013), Deepening Confidence in the Application of CISG to the Sales

Agreements Between the United States and Japanese Companies, 12 Richmond Journal of Global Law

& Business, page 277-298

78

§ 2-102 of UCC: Scope; Certain Security and Other Transactions Excluded From This Article

The UCC is the longest and most elaborate of the uniform acts Although UCC is not a federal law, the Code has been a long-term, joint project of the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI),79 who began drafting its first version in 1942 Judge Herbert F Goodrich was the Chairman of the Editorial Board of the original 1952 edition,80 and the Code itself was drafted by some of the top legal scholars in the United States, including Karl N Llewellyn,81 William A Schnader,82 Soia Mentschikoff,83 and Harrison Tweed.84

The goal of harmonizing state law is important because of the prevalence of commercial transactions that extend beyond one state The UCC therefore achieved the goal of substantial uniformity in commercial laws and, at the same time, allowed the states the flexibility to meet local circumstances by modifying the UCC's text as enacted in each state.85 The UCC primarily deals with transactions involving personal property (movable property), not real property (immovable property) Other goals of the UCC were to modernize contract law and to allow for exceptions from the common law in contracts between merchants.86

The 1952 Uniform Commercial Code was released after ten years of development, and revisions were made to the Code from 1952 to 1999.87 The Uniform Commercial Code deals with the following subjects under consecutively numbered Articles:88

1 General Provisions Definitions, rules of interpretation

2 Sales Sales of goods

3 Negotiable Instruments Promissory notes and drafts

(commercial paper)

4 Bank Deposits Banks and banking, check collection

process

4A Funds Transfers Transfers of money between banks

5 Letters of Credit Transactions involving letters of

credit

6 Bulk Transfers and Bulk Sales Auctions and liquidations of assets

7 Warehouse Receipts, Bills of

Lading and Other Documents of

Title

Storage and bailment of goods

8 Investment Securities Securities and financial assets

9 Secured Transactions Transactions secured by security

interests

1.3.2.2 The relationships between the CISG and UCC

It comes as a great surprise to many American businesses and lawyers that the United Nations Convention on the International Sale of Goods (CISG) – and not the UCC - may be the law applicable to a contract Because the United States has signed and ratified the CISG, its provisions qualify as American federal law, thereby pre-empting state law Unless specifically excluded, the CISG – and not the UCC – is applicable to any contract that falls within its scope.89

89

Karen A.Monroe (2011), The CISG: The tool or trap for contracts of sale of goods, Wilk Auslander

LLP, page 1

Depending on the country, the CISG can represent a small or significant departure from local legislation relating to the sale of goods As the results, this can provide important benefits to companies from one contracting state that import and export goods into other states that have ratified the CISG So, it is the truth that we cannot deny the important role of the Convention in international trade in United States these days But the question raised here is that whether there are differences with the United States legislation, particularly the UCC? And moreover, is that the CISG is the model for UCC Article 2 revision? The answer can be analyzed to give

us the clearer view through the relationship between the CISG and UCC in US legal system

Firstly, in the U.S., all 50 states have adopted common legislation referred to

as the Uniform Commercial Code ("UCC") The Article 2 of UCC is generally similar to the CISG Nevertheless, The UCC differs from the CISG in some respects, such as the following areas that tend to reflect more general aspects of the U.S legal system:90

(1) Terms of Acceptance – Under the CISG, basically, acceptance occurs when it is received by the offeror.91 By contrast, the U.S legal system often applies the so-called "mailbox rule"92 by which, acceptance, can occur at the time the offeree transmits it to the offeror;93

(2) "Battle of the Forms"94 – Under the CISG, a reply to an offer that purports to be an acceptance, but has additions, limitations, or other modifications,

is generally considered a rejection and counteroffer.95 The UCC, on the other hand, tries to avoid the "battle of the forms" that can result from such a rule, and allows an expression of acceptance to be operative, unless the acceptance states that it is

Article 16, 17, 18 and 19 of CISG

conditioned on the offeror consenting to the additional or different terms contained

in the acceptance.96

(3) Writing Requirement – Unless otherwise specified by a ratifying State, the CISG does not require that a sales contract be reduced to a writing.97 Under the UCC's statute of frauds (inherited from the common law), contracts selling goods for a price of $500 or more are generally not enforceable unless in writing.98Nevertheless, because the U.S has ratified the CISG, the CISG in the U.S has the force of federal law and supersedes UCC-based state law under the Supremacy Clause, which is is the provision in Article Six, Clause 2 of the U.S Constitution that provides these are the highest form of law in the U.S legal system, and mandates that all state judges must follow federal law when a conflict arises between federal law and either the state constitution or state law of any state; and

(4) Parol evidence rule:99 One of the most important differences between the UCC and CISG involves the parol evidence rule.100 There is no parol evidence rule under CISG, and evidence may be admitted that contradicts the written contract Interpretation of contract language under the UCC is based on the standard of what

a reasonable person would have understood the words to mean under all of the surrounding circumstances Under CISG, however, evidence of the subjective intention of the individual parties may even trump a document signed by both parties.101

Secondly, answering the question that whether Article 2 of UCC should be

revised to harmonize with the CISG, the National Conference of Commissioners on Uniform State Law, the American Law Institute or the Drafting Committee chose

Article 2 - § 2-201 of UCC: Formal Requirements; Statute of Frauds

99

CISG Advisory Council Opinion No 3, Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG Available on http://www.cisg.law.pace.edu/cisg/CISG-AC-op3.html , accessed July 1st 2014

100

The “Parol evidence rule” is a substantive common law rule in contract cases that prevents a party to

a written contract from presenting extrinsic evidence that discloses an ambiguity and clarifies it or adds

to the written terms of the contract that appears to be whole The term of art parol means "oral" and

comes from Anglo-French, Anglo-Norman, or Legal French Citing Professor Helen Scott (1999), Parol

Evidence Rule: www.law.nyu.edu/sites/default/files/upload_documents/scott_f98_e.rtf , accessed July 1st

2014

101

Article 8 of CISG

not to adopt CISG as a model for the revision of Article 2 of UCC102 due to these following reasons:103

(1) Absence of compatible background law: Article 2 was drafted and operated within a context of established principles of domestic law To the extent not displaced, there are fall-back principles that reduce the need for complete elaboration of all aspects of contract law in a code.104 On the other hand, CISG has

no fall- back base to fulfill the missing gap in interpretation

(2) Article 2 is a part of an integrated commercial code: Article 2 is part of a commercial code, there are common definitions and policies and sense of functional unity in the UCC.105 However, CISG does not present a comprehensive international commercial treaty network

(3) Nature of the code: Article 2 is part of the code drafted in common law legal system CISG, in contrast, is the settlement and concession between the common law and Civil Code system

(4) Limitation in scope: Both CISG and Article 2 of UCC fail to cover all aspects of sales transaction But CISG is less comprehensive than Article 2 For instance, CISG does not cover the sale of goods “bought for personal, family or household use”106 or “apply to the liability of the seller for death or personal injury”107

and CISG only limit to two party commercial contracts However, Article

2 is also accentuates the differences by incorporating a number of consumer protection provisions108 and by accelerating the gradual decline requirement in warranty disputes.109

102

The Revision of Uniform Commercial Code on Article 2 – Sale, (July 25th – August 1st 1997), Meeting in its one-hundred-and-sixth year, Sacramento, California Available on website: www.uniformlaws.org/shared/docs/ucc2and2a/ucc2am97.pdf , accessed July 1st 2014

103

Richard E Speidel, (1996), The Revision of Article 2, Sales in the light of The United Nations

Convention on Contract for the International Sale of Goods, Northwestern Journal of International Law

and Business, Volume 16, page 171 – 190

104

Article 2 - § 1-103 of UCC

105

Richard E Speidel, (1996), The Revision of Article 2, Sales in the light of The United Nations

Convention on Contract for the International Sale of Goods, Northwestern Journal of International Law

and Business, Volume 16, page 171 – 190, citing Julian B McDonnell (1995) Definition and Dialogue

in Commercial law, 89 Nw L Rev 623

(5) Differences in drafting process: Article 2 under the National Conference and the American Law Institute and CISG under UNCITRAL However, Article 2

of UCC is adopted by the states of US and CISG by ratification And most importantly, CISG process involved representatives from different legal systems and economic regions of the world That is why the result is the compromise among nations On the other hand, UCC process only involved representative of the same legal system and responded to domestic transactional realities

(6) Technological and transactional obsolescence: Both CISG and Article 2 are behind the technological times, in that they all fail to respond to the current reality of domestic and international sales made by computer For example, there is

no term defined in CISG110 and UCC.111

In conclusion, CISG should not serve as a model for the revision of Article 2 because there are too many differences CISG shall adjust the international transaction of United States, except for the transaction in declaration Article 1.1.b and Article 2 with domestic contract law and sometimes international contracts in the concept of reservation of the Convention What needs to be clear is that United States has signed and ratified the CISG, its provisions qualify as American federal law, thereby pre-empting state law Unless specifically excluded, the CISG – and not the UCC – is applicable to any contract that falls within its scope So, the relationship between the UCC and CISG is that they are many differences in surmount but they did not eliminate the application of each other and in many cases

of United States, the UCC is usually the source of law to interpret the CISG in US However, that is just on theory, in the next chapter, the author shall study and analyze in deed the practice of applying CISG and truly the tendency of the court, lawyers or arbitrators toward both CISG and UCC in the cases But as long as we concerns, the Americans are more familiar and favorable with UCC through the lyrics of CISG songs which indicates the reality in United States:

“We didn't have no C-I-S-G

If we bought or sold in another State we didn't know what the law would be

But now there's a Convention to make global trade more free

Except them U.S courts just treat it like the U-C-C.” 112

CONCLUSION OF CHAPTER 1

The CISG has been regarded as a success for the UNCITRAL, as the Convention has been accepted by states from "every geographical region, every stage of economic development and every major legal, social and economic system".113 Countries that have ratified the CISG are referred to within the treaty as Contracting States Of the uniform law conventions, the CISG has been described as having "the greatest influence on the law of worldwide trans-border commerce and the most successful international document so far in unified international sales law,”114

in part due to its flexibility in allowing Contracting States the option of taking declaration to certain specified articles So, many countries that have signed the CISG have made declarations as to the Treaty's scope and United States is not

an exception The reservation of United State in Article 1.1.b or Article 95 CISG is considered to be device to protect the US domestic law such as UCC to be applied

more in the international transaction

112

The CISG Song was written by Professor Harry Flechtner for CILE's November 2005 conference

titled "The CISG and the Business Lawyer: The UNCITRAL Digest as a Contract Drafting Tool." Available on website: http://www.law.pitt.edu/academics/cile/cisgsongpage , accessed July 1st 2014 113

John Felemegas (2000), The United Nations Convention on Contracts for the International Sale of

Goods: Article 7 and Uniform Interpretation, Kluwer Law International, page 10 Available on website:

http://www.cisg.law.pace.edu/cisg/biblio/felemegas.html , accessed July 1st 2014

114

LLM Ngô Thụy Hải Xuân and students (2013), Công ước của Liên hiệp quốc về hợp đồng mua bán quốc tế, Ho Chi Minh University of Economics, page 5

Chapter 2 THE APPLICATION OF CISG IN UNITED STATES AND

The first chapter of the thesis is only the theory view through considering the ratification and implementation of United States with the Vienna Convention 1980 Pursuant to achieve more practical view from the application of CISG in United States, the author shall studied in deeper level by analyzing many realistic cases and decisions of judges and arbitrations In order to study in a scientific way, the author shall divided the application of CISG in United Stated into three main issues: (1) Scope of application; (2) Formation of contract and last but not least (3) Obligation

of the Seller

2.1 Scope of application

2.1.1 The application of CISG on Scope of application in United States

Practically, in 2976 CISG cases, the Judges always consider and find answers for the most important question: In this case, whether or not applying CISG

to the disputes and certainly there is no exception for United States‟ judges to decide the application of CISG in about 169 cases However, due to the limitation

of the thesis, I only select the model cases which impress the harmonization and codification of CISG when applying in US law and judgment

First of all, „internationality‟ is the label sometimes used to refer to the

requirement that the relevant places of business of the parties be in different States, and this requirement is common to both subparagraph (a) and (b) of Article 1.1.115

By its terms, the CISG applies to any contract for the sale of goods between parties whose places of business are in different countries that are parties to the CISG (Party States) The “place of business” should be construed to mean a permanent and regular place for the transacting of general business.116 Under Article 10 of CISG, there is an overwhelming cognizance that the place of business is where "has

115

Article 1.1 of CISG: This Convention applies to contracts of sale of goods between parties whose places of business are in different States

116

Allison E Butler (2002), Interpretation of "place of business": Comparison between provisions of

the CISG (Article 10) and counterpart provisions of the Principles of European Contract Law, section 2

- "Place of Business" in the interpretation of the contract Available on website: http://www.cisg.law.pace.edu/cisg/biblio/butler.html#ab8 , accessed July 1st 2014

the closest relationship to the contract and its performance," which links the contracting party to the State where the business is conducted, provided the party has autonomous power.117

Case 1: Valero Marketing & Supply Company v Greeni Oy & Greeni

Trading Oy118 between Greeni Trading (Finland) and Valero (United States) The short fact of the case is that on early August 2001, Greeni Trading contacted Valero

to advise him of the availability of a quantity of naphtha119 which Greeni owned and was interested in selling After that both parties entered into contracts orally Unfortunately disputes happened when the goods delivers is not qualified In the District Court of New Jersey stated that CISG shall be applied to settle the dispute

So, as can be clearly seen, in the cases, two parties has their own “place of business” – Greeni Trading in Finland and Valero in United States because they are regular places for the transacting of general business of both parties Moreover, both Finland and Valero are Contracting States of CISG.120 So, undoubtedly the CISG regulations are applied to settle this case This precedent represents the application

of Article 1.1.a of CISG in United States

However, there are several cases that although CISG must clearly apply due

to its international characteristic, the judges in those cases are somehow avoided to use the CISG regulations As the results, the UCC was applied A closer look at this concept is necessary, since unfortunately CISG, not unlike its predecessor,121 has not defined “place of business But despite the apparent differences in conceiving a definition of the "place of business," it is here suggested that it is possible to identify some elements which allow for a better determination of its essence, even

117

Franco Ferrari (1995) Specific Topics of the CISG in the Light of Judicial Application and Scholarly

Writing, 15 Journal of Law and Commerce, Section II 4 "The 'Place of Business' under CISG" Citing

German Federal Supreme Court's interpretation of "place of business" in ULIS Article 1 Judgment of June 2, 1982

118

District Court New Jersey (15 June 2005) [Civ 01.5254 (DRD)] Valero Marketing & Supply

Company v Greeni Oy & Greeni Trading Oy Available on website: http://cisgw3.law.pace.edu/cases/050615u1.html , accessed July 1st 2014

Grigera Naon (1980), The UN Convention on Contracts for the International Sale of Goods, in the

transnational law of International Commercial Contracts

though one must not forget that there is no general abstract definition: the "place of business" has to be defined on a case-by-case basis.122

Case 2: Beth Schiffer Fine Photographic Art, Inc., v Coleximaging, Inc.,

Werner Wadon, and Po-Lielettronica, S.p.A.123 The factual background is that Beth Schiffer Fine Photographic Art (“Beth Schiffer”) is a New York corporation that provides professional photographic laboratory services to commercial and professional photographers In September 2005, Beth Schiffer purchased a photograph printing and processing machine through Werner Wadon, and Po-Lielettronica, which is representative of Italy corporation in the United States So, the problems had been raised through the Judge‟s decision is that whether it should

be concerned Werner Wadon and Po-Lielettronica as an Italy companies

In this case, the author can point out the main issue: we must answer the questions whether the “internationality” existed in this case As the author‟s opinion, there was actually existed the international characteristics in this case because the Buyer, Beth Schiffer, is the New York corporation so there is no argument that the Buyer has its place of business in United States However, for the Werner Wadon, and Po-Lielettronica which has their offices in New York but actually this company is the representatives of Italy‟s company In other word, the real company that the Buyer worked with was in Italy and the company in New York only acted as agents So, it is clear that the Seller had their place of business in Italy As the results, Article 1.1.a of CISG should be applied to this case due to the place of business of both parties.124 Surprisingly, unlike the usual thought, the Judges‟ decision is to eliminate the application of CISG The New Jersey Supreme

Court has explained that an "agency relationship is created when one person (a

principal) manifests assent to another person (an agent) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests

122

Gian Alberto Ferretti (1989), Article 10, Nuove Leggi Civili Commentate, page 43

123

District Court New Jersey (19 March 2012) [10-05321] Beth Schiffer Fine Photographic Art, Inc., v

Coleximaging, Inc., Werner Wadon, and Po-Lielettronica, S.p.A (Photograph printing machine case)

Available on website: http://cisgw3.law.pace.edu/cases/120319u1.html , accessed July 1st 2014

124

In fact, in the case, Beth Schiffer filed its Amended Complaint reasserting claims against the Italy Seller So, in both parties‟ mind, they admit the real position of the Italy Seller in this case

assent or otherwise consents so to act."125 And the court stated that the question of whether the distributor is acting as an agent of the manufacturer or as an independent buyer "depends upon whether the parties agree that his duty is to act primarily for the benefit of the one delivering the goods to him or is to act primarily for his own benefit." After considering, the court decided to dismiss the claim to the Italy Seller and used the UCC to settle the case instead of CISG

In conclusion, as two cases mentioned, although the internationality in both cases are similar, the decisions are totally different somehow This is only a small example to show the judges in U.S tendency to use the UCC despite the existence

of international character.126 Because the United States has signed and ratified the CISG, its provisions qualify as American federal law and the UCC is only the state law but many American businesses, lawyers and judges are in favor of UCC rather than CISG

Secondly, subparagraph (b) of Article 1.1, it can trigger CISG application

even if only one of the parties has its place of business in a CISG Contracting State United States, however, ratified the Convention subject to an Article 95 declaration For that reason, U.S is not bound by subparagraph (b) of Article 1.1 of CISG

Case 3: Prime Start Ltd V Maher Forest Products Ltd Et al.127 This case for short is a contract dispute involving an approximately $1 million purchase of Western Red Cedar siding for use at a construction site in Russia Plaintiff Prime Start, Ltd is a British Virgin Islands corporation entered into a contract with Defendant Maher Forest Products, Ltd ("Maher"), a Washington corporation At time the disputes raised, the parties did not include choice-of-law clauses as terms

to the contracts Thus, the question rose in the court is that can the CISG be the applicable law to solve this dispute In nature, Prime Start, Ltd is a British Virgin Islands which is not a signatory state to the CISG so Article 1.1.a cannot provide a

District Court Washington (17 July 2006) [C05.1195C] Prime Start Ltd V Maher Forest Products

Ltd Et al Available on website: http://cisgw3.law.pace.edu/cases/060717u1.html , accessed July 1st

2014