Alphabet Soup: How the UCC, CISG, UNIDROIT Principles, Incoterms, UETA, ESIGN, and the U.N. Electron

1
Alphabet Soup How the UCC, CISG, UNIDROIT
Principles, Incoterms, UETA, E-SIGN, and the U.N.
Electronic Commerce Convention Interact in
International Sales of Goods

• ABA Section on Business Law
• Uniform Commercial Code Committee
• August 12, 2007

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The Law Governing International Sales of Goods

• Keith A. Rowley
• Professor of Law, William S. Boyd School of Law,
  University of Nevada Las Vegas
• and
• Charles E. Tweedy, Jr. Visiting Chairholder in
  Law, The University of Alabama School of Law
• krowley_at_law.ua.edu or keith.rowley_at_unlv.edu

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Scope of UCC Article 2

• 2-102 Article 2 governs transactions (other
  than those intended solely for security) in
  goods.
• 2-106(1) Article 2 governs present or future
  sales (passing title from the seller to the buyer
  for a price) of goods.

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UCC 2-105(1)

• Goods means all things (including specially
  manufactured goods) which are movable at the time
  of identification to the contract for sale other
  than the money in which the price is to be paid,
  investment securities (Article 8) and things in
  action. Goods also includes the unborn young
  of animals and growing crops and other identified
  things attached to realty as described in
  2-107.

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Mixed Contracts

• Courts determine whether UCC Article 2 governs a
  transaction or dispute involving a contract for
  goods and either non-goods personal property or
  services using one of two tests
• Predominant purpose
• Gravamen of the action

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CISG art. 1

• (1) This Convention applies to contracts of sale
  of goods between parties whose places of business
  are in different States
• (a) when the States are Contracting States .
• (2) 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.

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CISG art. 10

• (a) if a party has more than one place of
  business, the place of business is that which has
  the closest relationship to the contract and its
  performance, having regard to the circumstances
  known to or contemplated by the parties at any
  time before or at the conclusion of the contract
• (b) if a party does not have a place of business,
  reference is to be made to his habitual residence.

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CISG art. 2(a)

• 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 .

9
CISG 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.

10
CISG art. 18(2)-(3)

• An acceptance of an offer becomes effective at
  the moment the indication of assent (by return
  promise or performance) reaches the offeror.
  within the time the offeror has fixed or, if no
  time is fixed, within a reasonable time .

11
CISG art. 2(b)-(f)

• The CISG does not apply to sales
• by auction
• by authority of law
• of stocks, shares, investment securities,
  negotiable instruments, or money
• of ships, vessels, hovercraft, or aircraft
• of electricity.

12
CISG Art. 3(2)

• The CISG 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 labor or other services.

13
CISG Art. 3(1)

• The CISG does apply to contracts for the supply
  of goods to be manufactured or produced unless
  the party who orders the goods undertakes to
  supply a substantial part of the materials
  necessary for such manufacture or production.

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Contracting State Reservations

• A country that is a party to the CISG may
  declare that it is not bound by one or more
  provisions of the CISG -- most commonly
• the formation rules (Arts. 13-24)
• Article (1)(1)(b) and
• Articles 11 and 29 and those formation rules that
  recognize the validity of oral offers,
  acceptances, agreements, and modifications.

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Scope of the CISG Recap

• Subject to a valid reservation, the CISG applies
  to sales of goods between parties whose places of
  business or habitual residences are in two
  Contracting States, unless
• (a) either party doesnt know or have reason to
  know that the other partys place of business is
  in another country
• (b) the buyer is purchasing the goods for
  personal, family, or household use and the seller
  knows or has reason to know the buyers intended
  use of the goods or the sale is excluded by
  Article 2(b)-(f) or
• (c) the seller is primarily supplying labor or
  other services, to which the goods provided are
  incidental.

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Contracting Out of the CISG

• Article 6 permits the parties to exclude the
  application of the CISG or, subject to article
  12, derogate from or vary the effect of any of
  its provisions.
• With one exception, U.S. courts have consistently
  required the parties to expressly disavow the
  CISG simply choosing the domestic law of a
  jurisdiction will not suffice.

17
CISG vs. UCC

• American Mint LLC v. GOSoftware, Inc., 2006 WL
  42090 (M.D. Pa. Jan. 6, 2006)
• TeeVee Toons, Inc. v. Gerhard Schubert GmbH, 2006
  WL 2463537 (S.D.N.Y. Aug. 23, 2006)
• American Biophysics Corp. v. Dubois Marine
  Specialties, 411 F. Supp. 2d 61 (D.R.I. 2006)

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Scope of the UNIDROIT Principles

• The Principles shall be applied if the parties
  have expressly agreed the Principles will govern
  their contract and may be applied
• if the parties have agreed that general
  principles of law, including lex mercatoria, will
  govern their contract
• if the parties have not chosen governing law
• to interpret or supplement uniform law
  instruments, such as the CISG.

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UNIDROIT Principles art. 1.4

• Nothing in the Principles shall restrict the
  application of mandatory rules, whether national
  e.g., UCC, international e.g., CISG or
  supranational origin, which are applicable in
  accordance with the relevant rules of private
  international law.

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Incoterms 2000

• The CISG is silent on transportation terms (e.g.,
  F.O.B.). The International Chamber of Commerce
  periodically publishes Incoterms, which define
  the commercial delivery terms most commonly used
  by parties to international sales contracts.
• Several U.S. courts have treated Incoterms as a
  trade usage of which the parties to a contract
  otherwise governed by the CISG were or should
  have been aware when they made a contract
  including one or more terms defined by Incoterms.

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Harmonic Convergence

• CISG art. 9(b) (The parties are considered,
  unless otherwise agreed, to have impliedly made
  applicable to their contract 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 .)
• UNIDROIT Principles art. 1.9(2) (The parties are
  bound by a usage that is widely known to and
  regularly observed in international trade by
  parties in the particular trade concerned .)