Why use cisg

The number of contracting states to the CISG has increased from 73 to 85 in the last five years. Article 95 of the CISG impacts upon the convention's scope of application and this provision's interpretation, therefore, is of paramount importance for correct application of the Convention. In light of the almost worldwide accession to the CISG, courts in contracting and non-contracting states alike are regularly faced with questions concerning its application.

South African courts and merchants should therefore pay heed to the correct interpretation of article 95 of the CISG. Article 95 of the CISG provides that any 'state may declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph 1 b of article 1 of this Convention'.

Even though the meaning of article 95 seems relatively clear at first glance, it has given rise to much controversy and its interpretation and application has generated considerable scholarly debate. Since article 95 was analysed in detail by the present author in a previous edition of this journal, 14 its background and history will not be repeated.

This article will engage with the Advisory Council's interpretation of this provision and focus on a remaining contentious matter, namely, the correct interpretation and application of the proper law of a contract. The terms 'reservation' and 'declaration' are used interchangeably in this contribution to denote a 'unilateral statement, however phrased or named, made by a State, when signing, ratifying, accepting, approving or acceding to a treaty, whereby it purports to exclude or to modify the legal effect of certain provisions of the treaty in their application to that State'.

The concepts lex causae governing law or applicable law and 'proper law of the contract' are used interchangeably and indicate the legal system that governs an international contract in whole or in part.

Renowned academics in the field of international commercial law and widely recognised as experts in the CISG were invited to become members of the Council.

The Council was established in and the late Peter Schlechtriem was elected as the first chairperson of the Council. Even though these interpretations do not count as 'official interpretations', they have been referred to by courts in contracting states and are held in high regard by other CISG commentators. Both these articles fall under Part IV of the Convention, termed 'final provisions'. In this contribution, the Opinion will only be analysed insofar as it addresses article Article 96 of the Convention concerns a permissible reservation in respect of a completely unrelated matter and is not of relevance for the present discussion.

The AC Opinion consists of the official opinion or interpretation of articles 95 and 96 - also referred to as the black letter text - followed by comments that elucidate the Council's interpretation.

The comments include an overview of the relevant article's drafting history, the scope of the reservation and the effects of the reservation. The text of the Opinion concerning article 95 reads as follows:. A declaration under [a]rticle 95 excludes the declaring [c]ontracting [s]tate's obligation under public international law to apply the Convention in accordance with article 1 1 b.

However, it does not prevent the courts of such a [s]tate from applying the Convention when the rules of private international law lead to the application of the law of a [c]ontracting [s]tate.

A declaration under [a]rticle 95 is without any effect for the Convention's applicability in accordance with [a]rticle 1 1 a. In applying [a]rticle 1 1 a , it is irrelevant whether the forum [s]tate has made an [a]rticle 95 declaration or whether one or both parties to the sales contract have their place of business in a [s]tate which has made an [a]rticle 95 declaration.

When the forum is in a [c]ontracting [s]tate that has made no declaration under [a]rticle 95, the Convention applies in accordance with [a]rticle 1 1 b even when the rules of private international law lead to the application of the law of a [contracting state that has made an [a]rticle 95 declaration.

Paragraph 1 of the AC's Opinion speaks to the effect of the reservation for courts in countries who have availed themselves of the option to exclude application of the CISG in terms of article 1 1 b when ratifying or acceding to the Convention.

The AC Opinion emphasises the fact that the reservation removes a reserving state's public international law obligation to apply the CISG under article 1 1 b. In this regard, the Opinion provides that a forum in a reservation state may elect to uphold a parties' direct choice of the CISG as governing law of their contract or the choice of a CISG contracting state. In such instances, it may be argued that the correct application of the proper law would require the domestic sales law of the chosen lex causae to be applied.

It seems as though certain reservation states give a more extensive interpretation to the article 95 reservation than what was intended by the drafters of the CISC. However, the Opinion makes it clear that the AC do not regard an article 95 reservation as having the effect that courts in reservation states should only apply the CISC if the requirements of article 1 1 a are met.

At the same time, the exporter could easily have trusted the validity of the CISG, which also applies in Brazil, Canada and Japan, and which is to be interpreted autonomously, i. To give up on this, especially against the background of all international legal uncertainties, is simply negligent. In particular, the CISG as an international treaty prevails over domestic law. Those who use the CISG are spared from any changes in law abroad. More legal certainty cannot be achieved in foreign business.

The exclusion of the CISG fails regularly. German companies typically believe that a small reference to their General Terms and Conditions GTC in emails or written offers is sufficient. These companies are in for a rude awakening because both are invalid. If this does not happen, the GTC are not part of the contract and choice of law clause and also the exclusion of the CISG is not effective. Incidentally, the same applies to the choice of forum clause in GTCs.

Too many companies have made and make this mistake. In terms of content, the CISG offers German importers a claim for damages similar to that of a guarantee. The CISG does not presuppose any fault on the part of the seller or a period for subsequent performance.

The seller is liable for breaches of duty, including defects of the purchased item and even lost profit. And this happens by virtue of law. Such liability does not apply in German law and it even cannot be stipulated in GTC. Why should the importer waive this claim, which is often simply not recognised because of a lack of knowledge of the CISG? According to German law, a supplier, whose customers entrepreneurs sell to consumers, must accept that the provisions concerning consumer protection apply also in relation to his the entrepreneur sec of the German Civil Code or BGB.

This prevents the entrepreneur from being subject to consumer protection regulations vis-a-vis the consumers, but at the same time not allowing the entrepreneur to be able to have recourse against the supplier because of the stricter trade law regulations.

An unsatisfying situation for the supplier, which can hardly be changed because these regulations are mandatory. So why exclude the application of the CISG? The aggrieved party may require performance, claim damages or avoid the contract in case of fundamental breach.

Additional rules regulate passing of risk, anticipatory breach of contract, damages, and exemption from performance of the contract.

Finally, while the CISG allows for freedom of form of the contract, States may lodge a declaration requiring the written form. The CISG applies only to international transactions and avoids the recourse to rules of private international law for those contracts falling under its scope of application.

International contracts falling outside the scope of application of the CISG, as well as contracts subject to a valid choice of other law, would not be affected by the CISG.

Purely domestic sale contracts are not affected by the CISG and remain regulated by domestic law. Moreover, its administration at the domestic level does not require a dedicated body and does not involve any reporting obligations. A Digest of those cases is also available.

Skip to main content. Welcome to the United Nations. Unless the contract expressly provides that CISG will not apply, it will apply automatically. The purpose of CISG is to provide rules governing the making and interpretation of international contracts for the sale of goods and to provide obligations and remedies for the parties.