The Sale of Goods - Part I General Principles and Contract Formation

1
The Sale of Goods - Part IGeneral Principles and
Contract Formation
2
What Are Goods?

• Physical things, not services
• Airplanes Ships
• Microchips
• Agricultural products, including animals
• Raw materials
• Oil
• Coal
• Iron Ore
• Bauxite (Aluminum)
• Pharmaceuticals

3
Long History

• Trade in goods as old as history
• Textiles
• Spices
• Amber from Baltic Sea Region
• Gold, silver, iron

4
Domestic Sales

• Slovenian Civil Code
• United States
• Uniform Commercial Code 2
• 49 States
• Every Country has law
• Similar

5
International Sales

• UN Convention on Contracts for the International
  Sale of Goods (CISG)
• Some aspects of domestic law combined with CISG
• Domestic law of one country

6
Choice of Law Principles

• Treaty of Rome applicable to EU
• Parties select in Contract
• All issues related to the formation, performance
  or breach of this Contract shall be governed by
  the law of _________
• Law of State (Country) which has most significant
  relationship to the transaction and the parties
• Place of Contract formation
• Place of negotiations
• Place of performance
• Location of subject of Contract
• Residence of the Parties

7
Parties to U.N. Convention on International Sale
of Goods

• Argentina 1/1/88
• Australia 1/4/89
• Austria 1/1/89
• Belarus 1/11/90
• Belgium 1/11/97
• Bosnia Herzegovina 6/3/92
• Bulgaria 1/8/91
• Burundi 1/10/99
• Canada 1/5/92
• Chile 1/3/91
• China 1/1/88
• Colombia 8/1/88
• Croatia 8/1/92

• Cuba 12/1/95
• Cyprus 4/1/06
• Czech Republic 1/1/93
• Denmark 3/1/90
• Ecuador 2/1/93
• Egypt 1/1/88
• El Salvador 12/1/07
• Estonia 10/1/94
• Finland 1/1/89
• France 1/1/88
• Gabon 1/1/06
• Georgia 9/1/95
• Germany 1/1/91
• Ghana 4/11/80

8
Parties to U.N. Convention on International Sale
of Goods

• Greece 2/1/99
• Guinea 2/1/92
• Honduras 11/1/03
• Hungary 1/1/88
• Iceland 6/1/02
• Iraq 4/1/91
• Israel 2/1/03
• Italy 1/1/88
• Kyrgyzstan 6/1/00
• Latvia 8/1/98
• Lesotho 1/1/88
• Liberia 10/1/06
• Lithuania 2/1/96
• Luxembourg 2/1/98

• Mauritania 9/1/00
• Mexico 1/1/89
• Moldova 11/1/95
• Mongolia 1/1/99
• Montenegro 6/3/06
• Netherlands 1/1/92
• New Zealand 10/1/95
• Norway 8/1/89
• Paraguay 2/1/97
• Peru 4/1/00
• Poland 6/1/96
• Republic ofKorea 3/1/05
• Romania 6/1/92

9
Parties to U.N. Convention on International Sale
of Goods

• Russian Federation 9/1/91
• Saint Vincent/Grenadines 10/1/01
• Serbia 4/27/92
• Singapore 3/1/96
• Slovakia 1/1/93
• Slovenia 6/25/91
• Spain 8/1/91
• Sweden 1/1/89
• Switzerland 3/1/99
• Syrian ArabRepublic 1/1/88
• Former YugoslavRepublic ofMacedonia 11/17/91

• Uganda 3/1/93
• Ukraine 2/1/91
• United Statesof America 1/1/88
• Uruguay 2/1/00
• Uzbekistan 12/1/97
• Zambia 1/1/88

10
UN Convention on Contracts

• Arrangement of CISG
• Interpretation Articles 7-13
• Formation of Contract Articles 14-24
• General Provisions Articles 25-29
• Delivery by Seller Articles 30-34
• Warranties/Conformity of Goods Articles 35-44
• Seller Remedies Articles 45-52
• Payment by Buyer Articles 53-60
• Buyer Remedies Articles 61-70
• Anticipatory Breach Articles 71-77

11
UN Convention on Contracts

• Arrangement of CISG
• Payment of Interest Article 78
• Exemptions Avoidance Articles 79-84
• Obligation to Preserve Goods Articles 85-88
• Implementation of CISG Articles 89-101

12
UN Convention on Contracts

• Application
• Applies to International Sales where Convention
  applies because it is Law of State or Parties
  adopt

13
UN Convention on Contracts for the International
Sale of Goods

• Sphere of Application Art. 1
• This Convention applies to contracts of sale of
  goods between parties whose places of business
  are in different States
• when the States are Contracting States or
• when the rules of private international law lead
  to the application of the law of a Contracting
  State
• 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

14
UN Convention on Contracts for the International
Sale of Goods

• Neither of the nationality of the parties nor the
  civil or commercial character of the parties or
  of the contract is to be taken into consideration
  in determining the application of this
  Convention.
• Parties Can Exclude Application
• Article 6
• The parties may exclude the application of this
  Convention or, subject to article 12, derogate
  from or vary the effect of any of its provisions.

15
UN Convention on Contracts for the International
Sale of Goods

• Sphere of Application Art. 2
• This Convention does not apply to sales
• 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
• by auction
• on execution or otherwise by authority of law
• of stocks, shares, investment securities,
  negotiable instruments or money
• of ships, vessels, hovercraft or aircraft
• of electricity.

16
UN Convention on Contracts for the International
Sale of Goods

• Only to sales of goods, not services
• Sphere of Application Art. 3
• 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.
• 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.

17
UN Convention on Contracts for the International
Sale of Goods

• Does not govern validity of property rights or
  personal injury
• Article 4
• This Convention governs only the formation of the
  contract of sale and the rights and obligations
  of the seller and the buyer arising from such a
  contract. In particular, except as otherwise
  expressly provided in this Convention, it is not
  concerned with
• the validity of the contract or of any of its
  provisions or of any usage
• the effect which the contract may have on the
  property in the goods sold.
• Article 5
• This Convention does not apply to the liability
  of the seller for death or personal injury caused
  by the goods to any person.

18
UN Convention on Contracts for the International
Sale of Goods

• International Character General Provisions
  Art. 7
• 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.
• Questions concerning matters governed by this
  Convention which are not expressly settled in it
  are to be settled in conformity with the general
  principles on which it is based or, in the
  absence of such principles, in conformity with
  the law applicable by virtue of the rules of
  private international law.

19
UN Convention on Contracts for the International
Sale of Goods

• Intent Art. 8
• For the purposes of this Convention statements
  made by and other conduct of a party are to be
  interpreted according to his intent where the
  other party knew or could not have been unaware
  what that intent was.
• If the preceding paragraph is not applicable,
  statements made by and other conduct of a party
  are to be interpreted according to the
  understanding that a reasonable person of the
  same kind as the other party would have had in
  the same circumstances.

20
UN Convention on Contracts for the International
Sale of Goods

• Intent Art. 8
• In determining the intent of a party or the
  understanding a reasonable person would have had,
  due consideration is to be given to all relevant
  circumstances of the case including the
  negotiations, any practices which the parties
  have established between themselves, usages and
  any subsequent conduct of the parties.

21
UN Convention on Contracts for the International
Sale of Goods

• Trade Usage Art. 9
• The parties are bound by any usage to which they
  have agreed and by any practices which they have
  established between themselves.
• The parties are considered, unless otherwise
  agreed, to have impliedly made applicable to
  their contract or its formation a usage of which
  the parties knew or ought to have known and which
  in international trade is widely known to, and
  regularly observed by, parties to contracts of
  the type involved in the particular trade
  concerned.

22
UN Convention on Contracts for the International
Sale of Goods

• Not necessary to be in writing Art. 11
• A contract of sale need not be concluded in or
  evidenced by writing and is not subject to any
  other requirement as to form. It may be proved
  by any means, including witnesses.

23
UN Convention on Contracts for the International
Sale of Goods

• Not necessary to be in writing Art. 96
• A Contracting State whose legislation requires
  contracts of sale to be concluded in or evidenced
  by writing may at any time make a declaration in
  accordance with article 12 than any provision of
  article 11, article 29, or Part II of this
  Convention, that allows a contract of sale or its
  modification or termination by agreement or any
  offer, acceptance, or other indication of
  intention to be made in any form other than in
  writing, does not apply where any party has his
  place of business in that State.

24
UN Convention on Contracts for the International
Sale of Goods

• Electronic exchanges not yet addressed Art. 13
• For purposes of this Convention writing
  includes telegram and telex.

25
UN Convention on Contracts for the International
Sale of Goods

• Formation
• Contract created by Offer and Unconditional
  Acceptance

26
UN Convention on Contracts for the International
Sale of Goods

• Offer - Addressed to specific person or group
  Art. 14
• A proposal for concluding a contract addressed to
  one or more specific persons constitutes an offer
  if it is sufficiently definite and indicates the
  intention of the offeror to be bound in case of
  acceptance. A proposal is sufficiently definite
  if it indicates the goods and expressly or
  implicitly fixes or makes provision for
  determining the quantity and the price.

27
UN Convention on Contracts for the International
Sale of Goods

• Offer - Addressed to specific person or group
  Art. 14
• A proposal other than one addressed to one or
  more specific persons is to be considered merely
  as an invitation to make offers, unless the
  contrary is clearly indicated by the person
  making the proposal.

28
UN Convention on Contracts for the International
Sale of Goods

• Offer Withdrawal Art. 15
• An offer becomes effective when it reaches the
  offeree.
• An offer, even if it is irrevocable, may be
  withdrawn if the withdrawal reaches the offeree
  before or at the same time as the offer.

29
UN Convention on Contracts for the International
Sale of Goods

• Offer Withdrawal Art. 16
• Until a contract is concluded an offer may be
  revoked if the revocation reaches the offeree
  before he has dispatched an acceptance.
• However, an offer cannot be revoked
• if it indicates, whether by stating a fixed time
  for acceptance or otherwise, that it is
  irrevocable or
• if it was reasonable for the offeree to rely on
  the offer as being irrevocable and the offeree
  has acted in reliance on the offer.

30
UN Convention on Contracts for the International
Sale of Goods

• Acceptance Must be affirmative not silent
  Art. 11
• A contract of sale need not be concluded in or
  evidence by writing and is not subject to any
  other requirement as to form. It may be proved
  by any means, including witnesses.

31
UN Convention on Contracts for the International
Sale of Goods

• Acceptance Timing Art. 18
• An acceptance of an offer becomes effective at
  the moment the indication of assent reaches the
  offeror. An acceptance is not effective if the
  indication of assent does not reach the offeror
  within the time he has fixed or, if no time is
  fixed, within a reasonable time, due account
  being taken of the circumstances of the
  transaction, including the rapidity of the means
  of communication employed by the offeror. An
  oral offer must be accepted immediately unless
  the circumstances indicate otherwise.

32
UN Convention on Contracts for the International
Sale of Goods

• Acceptance Timing Art. 18
• However, if, by virtue of the offer or as a
  result of practices which the parties have
  established between themselves or of usage, the
  offeree may indicate assent by performing an act,
  such as one relating to the dispatch of the goods
  or payment of the price, without notice to the
  offeror, the acceptance is effective at the
  moment the act is performed, provided that the
  act is performed within the period of time laid
  down in the preceding paragraph.

33
UN Convention on Contracts for the International
Sale of Goods

• Acceptance Conclusion Art. 23
• A contract is concluded at the moment when an
  acceptance of an offer becomes effective in
  accordance with the provisions of this Convention.

34
UN Convention on Contracts for the International
Sale of Goods

• Counter-Offer Must conform to Offer Art. 19
• A reply to an offer which purports to be an
  acceptance but contains additions, limitations or
  other modifications is a rejection of the offer
  and constitutes a counter-offer.
• Additional or different terms relating, amount
  other things, to the price, payment, quality and
  quantity of the goods, place and time of
  delivery, extent of one partys liability to the
  other or the settlement of disputes are
  considered to alter the terms of the offer
  materially.

35
UN Convention on Contracts for the International
Sale of Goods

• Counter-Offer Minor points not Counter-Offer
  but Acceptance Art. 19
• However, a reply to an offer which purports to be
  an acceptance but contains additional or
  different terms which do not materially alter the
  terms of the offer constitutes an acceptance,
  unless the offeror, without undue delay, objects
  orally to the discrepancy or dispatches a notice
  to that effect. If he does not so object, the
  terms of the contract are the terms of the offer
  with the modifications contained in the
  acceptance.

36
UN Convention on Contracts for the International
Sale of Goods

• Delivery of Offer or Acceptance Art. 24
• For the purposes of this Part of the Convention,
  an offer, declaration of acceptance or any other
  indication of intention reaches the addressee
  when it is made orally to him or delivered by any
  other means to him personally, to his place of
  business or mailing address or, if he does not
  have a place of business or mailing address, to
  his habitual residence.

37
UN Convention on Contracts for the International
Sale of Goods

• Electronic Acceptance
• Electronic Commerce and Electronic Signature Act
  Electronic Message (Art. 5)
• It is assumed that an electronic message
  originates from a sender if
• it is sent by the sender, or
• it is sent by a person authorised by the sender,
  or
• it is sent by an information system, programmed
  by the sender himself, or programmed by an order
  of the sender to operate automatically, or
• the recipient established the origin of a message
  by application of procedure or technology, which
  was previously agreed upon between the sender and
  the recipient.

38
Electronic Commerce and Electronic Signature Act

• Electronic Acceptance
• Previous paragraph does not apply
• as of the time when the recipient has both
  received notice from the sender that the
  electronic message is not that of the sender, and
  had reasonable time to act accordingly or
• if the recipient knew or should have known, had
  it exercised reasonable care or used any agreed
  technology and procedure, that the electronic
  message was not that of the sender.

39
Electronic Commerce and Electronic Signature Act

• Acknowledgment of Receipt (Art. 7(1))
• Where the sender has previously or at the time of
  sending the electronic message requested or
  agreed with the recipient upon the
  acknowledgement of the receipt of the message and
  stated that the electronic message is treated as
  though it has never been sent, until the sender
  receives the acknowledgement on the receipt

40
Electronic Commerce and Electronic Signature Act

• Dispatch (Art.9)
• Unless otherwise agreed, the dispatch of the
  electronic message occurs when it enters an
  information system outside the control of the
  sender or the person who sent the electronic
  message on behalf of the sender

41
Electronic Commerce and Electronic Signature Act

• Receipt (Art.10)
• Unless otherwise agreed, the time of receipt of
  an electronic message is the time when the
  electronic message enters the recipient's
  information system.

42
Electronic Commerce and Electronic Signature Act

• Receipt (Art.10)
• Unless otherwise agreed and regardless of the
  provisions of the previous paragraph, if the
  recipient has designated an information system
  for the purpose of receiving electronic messages,
  receipt occurs at the time when the electronic
  message enters the designated information system,
  or, if the electronic message is sent to an
  information system other than the designated
  information system, at the time when the
  electronic message is retrieved by the recipient.

43
Electronic Commerce and Electronic Signature Act

• Receipt (Art.10)
• Provisions of the previous paragraph apply
  notwithstanding that the place where the
  information system is located may be different
  from the place where the electronic message is
  deemed to be received after this act.

44
Electronic Commerce Electronic Signature Act

• Place of Dispatch or Receipt (Art. 11)
• Unless otherwise agreed, an electronic message is
  deemed to be dispatched from the place where the
  sender has his place of business or his permanent
  residence at the time of sending of the
  electronic message, and is deemed to be received
  at the place where the recipient has place of
  business or his permanent residence at the time
  of the receipt.

45
Electronic Commerce Electronic Signature Act

• Place of Dispatch or Receipt (Art. 11)
• If the sender or the recipient does not have a
  permanent residence, an electronic message is
  deemed to be dispatched, after the previous
  paragraph, from the place or received at the
  place of his habitual residence at the time of
  sending or receiving of the electronic message.

46
Legal Systems as They Apply to International
Commercial Transactions

• Anti-Corruption Initiatives
• Conventions
• African Union Convention on Preventing and
  Combating Corruption
• Council of Europe Criminal Law Convention on
  Corruption
• Slovenia ratified 9 June 2000
• Organization of American States Inter-American
  Convention Against Corruption

47
Legal Systems as They Apply to International
Commercial Transactions

• Anti-Corruption Initiatives
• Conventions
• OECD Convention Combating Bribery of Foreign
  Public Officials in International Business
  Transactions
• Slovenia ratified 6 September 2001
• United Nations Convention Against Corruption

48
Legal Systems as They Apply to International
Commercial Transactions

• Anti-Corruption Initiatives
• Statements of Policy and Task Forces
• ADB OECD Anti-Corruption Initiative
• Asia-Pacific Economic Cooperation (APEC)
  Anti-Corruption and Transparency Task Force
• Asian Development Bank
• Group of States Against Corruption (GRECO)
• EU and the United States
• Inter-American Development Bank
• International Chamber of Commerce
• Organization for Economic Cooperation
  Development (OECD)

49
Legal Systems as They Apply to International
Commercial Transactions

• Anti-Corruption Initiatives
• Statements of Policy and Task Forces, cont.
• Organization of American States
• UN Global Compact on Transparency
  Anti-Corruption
• UNODC
• World Bank
• World Economic Forum Partnering Against Corruption

50
U.N. Convention Against Corruption

• Purpose
• Article 1
• The purpose of this Convention are
• To promote and strengthen measures to prevent and
  combat corruption more efficiently and
  effectively
• To promote, facilitate and support international
  cooperation and technical assistance in the
  prevention and fight against corruption,
  including in asset recovery
• To promote integrity, accountability and proper
  management of public affairs and public property.

51
U.N. Convention Against Corruption

• Not Affect Sovereignty
• Article 4
• States Parties shall carry out their obligations
  under this Convention in a manner consistent with
  the principles of sovereign equality and
  territorial integrity of States and that of
  non-intervention in the domestic affairs of other
  States.
• Nothing in this Convention shall entitle a State
  Party to undertake in the territory of another
  State the exercise of jurisdiction and
  performance of functions that are reserved
  exclusively for the authorities of that State by
  its domestic law.

52
U.N. Convention Against Corruption

• Prevention Corruption
• Article 5(1)
• Each State Party Shall, in accordance with the
  fundamental principles of its legal system,
  develop and implement or maintain effective,
  coordinated anti-corruption policies that promote
  the participation of society and reflect the
  principles of the rule of law, proper management
  of public affairs and public property, integrity,
  transparency and accountability.

53
U.N. Convention Against Corruption

• Prevention Corruption
• Article 5(4)
• State Parties shall, as appropriate and in
  accordance with the fundamental principles of
  their legal system , collaborate with each other
  and with relevant international principles of
  their legal system, collaborate with each other
  and with relevant international and regional
  organizations in promoting and developing the
  measures referred to in this article. That
  collaboration may include participation in
  international programmes and project aimed at the
  prevention of corruption.

54
U.N. Convention Against Corruption

• Criminalization
• Article 15
• Each State Party shall adopt such legislative and
  other measures as may be necessary to establish
  as criminal offences, when committed
  intentionally
• The promise, offering or giving, to a public
  official, directly or indirectly, of an undue
  advantage, for the official himself or another
  person or entity, in order that the official act
  or refrain from acting in the exercise of his or
  her official duties
• The solicitation or acceptance by a public
  official, directly or indirectly, of an undue
  advantage, for the official himself or herself or
  another person or entity, in order that the
  official duties.

55
U.N. Convention Against Corruption

• Criminalization
• Article 21
• Each State Party shall consider adopting such
  legislative and other measures as may be
  necessary to establish as criminal offences, when
  committed intentionally in the course of
  economic, financial or commercial relations
• The promise, offering or giving, directly or
  indirectly, of an undue advantage to any person
  who directs or works, in any capacity, for a
  private sector entity, for the person himself or
  herself or for another person, in order that he
  or she in breach of his or her duties, act or
  refrain from acting

56
U.N. Convention Against Corruption

• Criminalization
• Article 21
• The solicitation or acceptance, directly or
  indirectly, of an undue advantage by any person
  who directs or works, in any capacity, for a
  private sector entity, for the person himself or
  herself or for another person, in order that he
  or she, in breach of his or her duties, act or
  refrain from acting.

57
U.N. Convention Against Corruption

• Protect Witnesses
• Article 32(1)
• Each State Party shall take appropriate measures
  in accordance with its domestic legal system and
  within its means to provide effective protection
  from potential retaliation or intimidation for
  witnesses and experts who give testimony
  concerning offences established in accordance
  with this Convention and, as appropriate, for
  their relatives and other persons close to them

58
U.N. Convention Against Corruption

• Compensation for Damage
• Article 35
• Each State Party shall take such measures as may
  be necessary, in accordance with principles of
  its domestic law, to ensure that entities or
  persons who have suffered damage as a result of
  an act of corruption have the right to initiate
  legal proceedings against those responsible for
  that damage in order to obtain compensation

59
U.N. Convention Against Corruption

• International Cooperation
• Article 43
• State Parties shall cooperate in criminal matters
  in accordance with articles 44 to 50 of this
  Convention. Where appropriate and consistent
  with their domestic legal system, State Parties
  shall consider assisting each other in
  investigations of and proceedings in civil and
  administrative matters relating to corruption.

60
U.N. Convention Against Corruption

• International Cooperation
• Article 43
• In matters of international cooperation, whenever
  dual criminality is considered a requirement, it
  shall be deemed fulfilled irrespective of whether
  the laws of the requested State Party place the
  offence within the same category of offence or
  denominate the offence by the same terminology as
  the requesting State party, if the conduct
  underlying the offence for which assistance is
  sought is a criminal offence under the laws of
  both State Parties.