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CISG and its purpose for international trade

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2012/07/27
Location : Ukraine, Kiev

No country in the world is self-supporting. This very fact accounts for the reason why international trade is of vital importance to all nations around the globe. Modern world is so knit politically, economically, socially and commercially that it may safely be said that no one anywhere can remain unaffected by whatever takes place in any other part of the globe. Further, recent developments and improvements in communication and transportation have bought the remotest areas into the closest touch with each other.

United Nations Commission on International Trade Law (UNCITRAL) was launched in 1966. Its main task was fostering world peace through trade. National diversity was seen as a barrier to international trade and indirectly therefore a threat to world peace. United Nations Convention on Contracts for the International Sale of Goods (shorthand «CISG» or sometimes referred to as the Vienna Sales Convention) was signed in Vienna in 1980 and first entered into effect in 1988. First countries ratified where Argentina, China, Egypt, France, Hungary, Italy, Lesotho, Syria, United States of America, Yugoslavia and Zambia. Nowadays adopted in almost 70 countries located in all of the inhabited continents.

The CISG, which applies by default in the international sales context, has become law in both common law system and civil law system. Importance of the CISG in the international arena underlined by more than 2500 reported decisions, where CISG has been held to apply. It’s a great evidence of conduct of international traders who choose for their sales contracts CISG by default or by choice of law. All countries that have ratified CISG now have two distinct sales law rules. First one is for domestic sales laws which apply in local transactions and second – CISG for international sales.

The one of the main rules of CISG is stated in Article 1(1)(a). In accordance with this provision, a sales contract between parties whose main places of business are in different CISG contracting countries, for example Italy and Ukraine, automatically becomes subject to the treaty by default.

Example: Buyer (B) from Ukraine orders 20 designer shoes from Seller (S) in France. S accepts the order by e-mail confirmation for purchase from B, but B refuses to accept goods delivered, whereas S demands to be paid.

In this situation, the parties might end up having their dispute decided by a Ukrainian or Italian court, but since the Ukraine and Italy are both CISG contracting countries, all Ukrainian and Italian courts are bound to apply CISG Part 2 to determine whether or not B and S have entered to a sales contract. If the court in question determines that the parties have made a contract, it must then use CISG Part 3 to determine the party’s obligations, the rights and remedies for breach, the passing of risk etc.

The CISG contains rules governing for writing and interpretation of international contracts for the sale of goods. It also provides rules governing obligations and remedies of the parties to such transactions. CISG does not deprive sellers and buyers of the freedom to mold their contracts to their specifications. Generally, you are free to modify the rules established by the CISG or to agree that the CISG is not to apply at all.

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