http://www.dgslaw.com/articles/565324.pdfDavis Graham & Stubbs LLP

Graduating from Obscurity: The U.N. International Sale ofGoods Convention

By: Tom McNamara

Davis Graham & Stubbs LLP1550 Seventeenth Street

Suite 500Denver, Colorado 80202

Telephone: (303) 892-9400Facsimile: (303) 893-1379

tom.mcnamara@dgslaw.com

Presented at Second Annual Florida BarInternational Litigation Update Conference

International Litigation and Arbitration CommitteeInternational Law SectionFlorida Bar Association

June 24, 2004Boca Raton, Florida

Sixteen years ago, the United Nations Convention on Contracts for the International Saleof Goods (“CISG” or “Convention” )1 entered into force between the United States andten other nations. The CISG, a multilateral treaty that governs the rights and obligationsof parties to international sales contracts, is the international functional equivalent ofArticle 2 of the Florida Uniform Commercial Code (“UCC”).2 The Convention wasdesigned to foster foreign trade by making it easier and more economical to buy and sellraw materials, commodities, and manufactured goods through a unified legal approach.

At its inception, diplomats, scholars, and even some practitioners hailed the Conventionas a monumental achievement and notable example of international legal cooperation.The original expectation was that the CISG would achieve rapid acceptance andessentially supplant domestic sales laws that were not specifically tailored to internationaltransactions.

The actual experience during the CISG’s first decade was quite different as the optimismand promise of the early years eroded. By and large, most American lawyers werecompletely oblivious to the Convention’s very existence. Traders continued to use pre-printed forms with typical domestic American choice-of-law provisions. Those attorneyswho actually knew about the CISG almost uniformly tried to avoid it by “opting-out.”The Convention “suffer[ed] from neglect, as well as ignorance and even fear.”3 Morecharitably, the CISG’s adolescent years were characterized, at least in the United States,by only small, incremental steps toward grudging acceptance.

However, at the sixteen-year mark, the Convention is finally starting to graduate fromobscurity. Growing from an original group of eleven countries in 1988, the Conventionis now the law in more than sixty-three nations. CISG-signatory countries account for astaggering two-thirds of all goods moving in international trade and encompass amajority of the world’s population. In just the last three years, U.S. courts have issuedmore published opinions concerning the CISG than in the previous thirteen yearscombined. The trend is worldwide. From 2001-2003, the United Nations’ database ofConvention case abstracts doubled.4 Scholarly literature on the CISG is now quitecomprehensive. The leading American Internet resource for CISG materials has reportedexplosive growth in the number of Internet “hits” – from 100,000 hits per month duringearly 1999 to 330,000 hits per month by late 2000.5

Now, more than ever, Florida practitioners should become familiar with the CISG. Abetter understanding of the Convention is important for both Florida litigation andtransactional professionals.

The United Nations Convention on Contracts for the International Sale of Goodshas been ratified in sixty-three nations (including the U.S.) and is the internationalfunctional equivalent of Article 2 of the Uniform Commercial Code. This articleprovides an overview of the Convention, contrasts the Convention with domesticsales law, and offers a series of practice pointers.

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Business lawyers need to be aware of the CISG and its nuances to properly counsel theincreasing number of Florida clients engaged in international commerce. Litigatorsshould be aware that transnational commercial disputes may be governed by an entirelyunfamiliar legal regime, which may affect the substantive outcome. Further, at leastrudimentary knowledge is necessary, if for no other reason than to satisfy professionalresponsibility and to avoid the Convention “traps for the unwary.”6

The balance of this article briefly: (1) describes the history and development of theCISG; (2) identifies the principal signatory nations; (3) provides an overview of theConvention; (4) presents a substantive comparison of certain important differencesbetween the CISG and the Florida UCC; (5) explains the application of a companiontreaty governing the limitations period for international sales of goods; and (6) offerssome practical pointers and resources for CISG issues. The article’s purpose is not toprovide comprehensive information on all aspects of the CISG, but rather to highlight (atleast superficially) the emerging importance of the Convention in keeping with thetheme, “Learn the CISG, Whether You Like It or Not.”7

HISTORY AND DEVELOPMENT OF THE CISG

The CISG is an extraordinary example of international legal cooperation that representsthe culmination of more than fifty years of work to construct a codified lex mercatoriafor transnational sales. The Convention’s origins may be traced to the late 1920s whenscholars, lawyers and traders (primarily from Western Europe) began to explore thepossibility of creating a uniform law to govern international trade.8 Draft uniform saleslaws were presented and debated from 1926 through 1939 under the auspices of theHague Conference on Private International Law (“Hague Conference”) and theInternational Institute for the Unification of Private Law (“UNIDROIT”). Interrupted atvarious intervals by world events (including World War II), these efforts continued in the1950s and 1960s.

The Hague Conference eventually adopted three conventions governing internationalsales: Convention on the Law Applicable to International Sales of Goods (June 15, 1955);Convention on the Jurisdiction of the Selected Forum in the Case of International Sales ofGoods (April 15, 1958); and Convention on the Law Governing Transfer of Title inInternational Sales of Goods (April 15, 1958).9 Only one of these treaties (theConvention on the Law Applicable to International Sales of Goods) ever actually enteredinto force (and then only among one African and eight European nations).

Although the Hague Conference efforts had been partially successful, the resultingtreaties were criticized for their primarily Eurocentric approach and failure to address theneeds of the United States, the developing countries, and Eastern Europe.10 In 1965, theUnited Nations General Assembly created the United Nations Commission onInternational Trade Law (“UNCITRAL”) to address important trade law issues on a moreglobal basis. The development of an international sales law was at the forefront. Thedrafting and negotiation process, for what ultimately became the CISG, was quiteinclusive. The United States and more than sixty-one other nations representing quitedifferent legal systems (common law, civil law, and other types of legal systems)

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participated in the working groups and provided their input. Academics, corporation,traders, diplomats, and lawyers all played a role.

UNCITRAL unanimously approved the draft CISG and referred it to the United NationsGeneral Assembly. The Convention was finalized at a diplomatic conference in Viennain 1980, where it was again unanimously approved.11 The CISG is officially plurilingualin six languages; Arabic, Chinese, English, French, Russian and Spanish.

PRINCIPAL SIGNATORY NATIONS

Since the 1980 Vienna conference, the Convention has received ever-wideningacceptance in the international community. Nineteen nations, including the UnitedStates, originally signed the Convention in 1980 and 1981. The United States ratified thetreaty on December 11, 1986. All but two of the original signatory countriessubsequently ratified the CISG.12 Pursuant to Article 99(1) of the CISG (which requiredratification by at least ten nations prior to its effectiveness), the Convention “entered intoforce” and became effective on January 1, 1988, among a diverse group of eleven nationson five continents: Argentina, the People’s Republic of China, Egypt, France, Hungary,Italy, Lesotho, Syrian Arab Republic, United States, Yugoslavia, and Zambia. As ofMay 5, 2004, sixty-three countries (including the United States) had signed and ratifiedthe CISG (“Contracting States”). The CISG is in force with respect to most (but not all)of the United States’ principal trading partners.

Regionally, the CISG has been universally adopted in North America (the United States,Canada, and Mexico). The Convention regime has achieved acceptance in most ofWestern and Eastern Europe (including the Russian Federation). The United Kingdomand Ireland are notable European exceptions and have not ratified the CISG. LatinAmerica and the Caribbean are split. Although Argentina, Chile, Columbia, Cuba,Ecuador, Peru, and Uruguay have ratified the treaty, Latin America’s largest economy,Brazil, has not. In the Middle East, the Convention has been adopted in Egypt, Israel,Iraq, Jordan, Lebanon, and Syria. The CISG is in effect in only eight African nations.Similarly, the Convention has achieved mixed acceptance in Asia. The CISG is in effectin only two (but very influential) Asian countries: the People’s Republic of China(including Hong Kong) and Singapore. Notably, the Republic of Korea ratified theConvention earlier this year and the CISG will enter into force in that nation in March2005.

While many countries have ratified the CISG, the Convention permits Contracting Statesto make certain “reservations” at their election. The reservations are deviations from thestandard provisions of the CISG. For example, at least nine nations (mostly in EasternEurope and Latin America) have declared that any provisions that would permit oralcontracts do not apply in those nations. The United States and several other countriesmade a reservation stating that they will not be bound by a technical CISG provision thatmakes the Convention applicable under a choice-of-law analysis, even if one or bothparties to the contract do not have a place of business in a Contracting State.

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The current list of countries that have ratified the CISG (and their respective reservationsand declarations) is published and updated periodically by the International Trade LawBranch of the United Nations Office of Legal Affairs servicing UNCITRAL and isavailable on the Internet.13 Almost every year, a few more nations join the CISG treatyregime. For a private international law treaty, the CISG’s sign-up rate has beenremarkable in a relatively short period of time. With respect to the thirty-six modernHague Conference conventions on private international law, only two have received moreratifications than the CISG. Similarly, no UNCITRAL convention has more membersthan the CISG. The only commercial-oriented private international law treaty moreheavily subscribed than the CISG is the United Nations Convention on the Recognitionand Enforcement of Foreign Arbitral Awards, adopted in New York in 1958 (prior toUNCITRAL’s formation).

Florida’s Substantial Role in International Trade

Florida, of course, is a major international trade center. Annually, more than $70 billionof products (exports and imports combined) flow through the State, making Florida oneof the top trade participants in the United States.14 Given Florida’s geographic position,many trade relationships are focused in the Americas. Approximately 65% of Florida’sforeign trade in merchandise (exports and imports combined) is with North America,South America, Central America and the Caribbean. In South America, Central Americaand the Caribbean, Florida’s share of total United States trade ranges between 27-55%.15

For Florida, the volume of European and Asian trade lags behind.16

About half of Florida’s principal trade partners have ratified the Convention. Thispercentage is fairly low17 because of Florida’s focus on the Americas, an area in whichthe Convention has not achieved universal acceptance. The table below shows Florida’smain trade partners and identifies their positions with respect to the Convention.18

Total Florida Merchandise TradingPrincipal FloridaTrade Partners

Value of FloridaTrade for 2002

(in $US Millions)

CISGRatification?

1. Brazil $9,537 No2. Japan 5,128 No3. Dominican Republic 4,796 No4. Germany 3,723 Yes5. Honduras 3,703 Yes6. Costa Rica 3,652 No7. Columbia 2,905 Yes8. Venezuela 2,720 No9. United Kingdom 2,663 No

10. Guatemala 2,392 No11. Mexico 2,322 Yes12. El Salvador 2,037 No13. China (PRC) 1,656 Yes14. Chile 1,587 Yes

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Total Florida Merchandise TradingPrincipal FloridaTrade Partners

Value of FloridaTrade for 2002

(in $US Millions)

CISGRatification?

15. Italy 1,390 Yes(Total) Trade $70,137

OVERVIEW OF CONVENTION

The Convention is an international commercial legal code. According to a leading CISGscholar, the jobs of the UCC and the CISG are substantially the same:

Both were designed to reduce the misunderstandings and controversies that canarise when one law governs the seller and a different law the buyer. They do thejob in different areas: The UCC is designed to avoid the modest differencesamong the domestic laws of our fifty states, while the CISG is designed toovercome differences among the laws of the countries of the world.19

At the risk of gross over-generalization, the CISG can be characterized as “generallyconsistent” with the UCC. The UCC and American input greatly influenced theConvention’s provisions and text. Most scholars, lawyers, and traders have agreed thatthe CISG is well-drafted, fair, balanced, and generally reflects international businessexpectations and norms.20

While similarities between the CISG and UCC predominate, the differences are quiteimportant. Obviously, as with any multi-lateral negotiation, the Convention ultimatelyrepresents a series of compromises, including between common law and civil lawconcepts. Further, the CISG has a number of “gaps” that, by design or otherwise, simplywere not addressed. As a consequence, the CISG “corresponds to the pre-CISG law ofno country of the world.”21 From the point of view of the Florida practitioner,understanding the differences between the UCC and CISG, as well as the CISG’s gaps, iscritical.

Scope of the Convention

The Convention is generally applicable to: (1) “contracts of sale”; (2) “of goods”;(3) “between parties whose places of business are in different [Contracting] States.”22 Inthese requirements, the CISG is more straightforward than the Florida UCC, whichsomewhat cryptically provides: “Unless the context otherwise requires, this chapterapplies to transactions in goods….”23 Like the UCC, the Convention contains a series ofapplication exclusions. The CISG does not apply to sales: (1) of consumer goods (boughtfor personal use and consumption by the purchaser); (2) by auction; (3) of securities ornegotiable instruments; (4) of ships, vessels, or aircraft; or (5) electricity.24 TheConvention also is not applicable to so-called “assembly contracts” where the party thatorders goods “to be manufactured or produced” undertakes to supply a “substantial partof the materials necessary for such manufacture or production” of the goods.25

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Assuming that a particular transaction is not specifically “excluded” by the CISG, theprincipal issues of applicability of the Convention revolve around the meaning of theterm “goods” and the phrase “between parties whose places of business are in different[Contracting] States.” Unlike the UCC, the CISG does not specifically define the term“goods.”26 However, by using the term “goods,” the CISG (like the UCC) clearly makesa distinction between the sale of “goods” and the sale of “services or labor.” TheConvention does not apply to contracts in which the “preponderant part of theobligations…consists in the supply of labour or other services.”27 Thus, most agreementssolely for distribution,28 development, licensing,29 leasing,30 transportation, carriage(shipping), insurance, and financing are likely not covered by the Convention. Certaintransactions may raise potentially difficult legal issues concerning the applicability of theConvention in the same way that such transactions are subject to some uncertainty underthe UCC.31 These may include the development and sale of computer software32 or boththe sale of goods and services or “gray areas” (such as leases with purchase options).

The CISG’s second primary scope requirement (that the sales contract be “betweenparties whose places of business are in different [Contracting] States”) also merits closescrutiny. Contrary to the gut reaction of many American lawyers, the focus of theConvention is not on the “nationality” of the parties, but on the “places of business of theparties.”33 This difference in approach may drive unexpected results.

Two illustrations make the point. Suppose a Delaware corporation that maintains its onlyplace of business in California contracts to sell computer equipment to a Canadiancorporation that maintains its only place of business in Vancouver. The CISG wouldpresumptively apply to such a transaction.

Modify the example and suppose that a Delaware corporation that maintains its onlyplace of business in California contracts to sell computer equipment to another Delawarecorporation that maintains its headquarters in Vancouver and an office in Oregon. Underthe CISG, even though the transaction is between two “American” companies (bothDelaware companies), the transaction nevertheless may be governed by the CISG if theCanadian headquarters of the Delaware corporation (rather than its Oregon office) hadthe “closest relationship to the contract and its performance.”34

This real-life example35 shows that lawyers and their clients must carefully consider thescope of the CISG, especially in transactions involving multi-national corporations withseveral “places of business.” The focus should be on “place of business” rather than“nationality” of the parties.

Freedom of Contract Under the CISG

Many Convention commentators have argued that the most fundamental provision of theConvention is the “freedom of contract” principle. CISG Article 6 permits the parties to“derogate from or vary the effect of any of its [CISG] provisions.” Thus, the CISG doesnot deprive buyers and sellers from the freedom to mold their contracts to their ownneeds and to modify the presumptive CISG provisions. Instead, the Convention isprimarily designed to provide dependable solutions for things not specifically considered

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by the parties (that is, a “default setting”). The CISG provisions always should yield tospecific contrary contract terms. Accordingly, to the extent that parties desire provisionsdifferent than the CISG, they simply need to agree by contract.

Automatic Application and Opting Out of CISG

Although not widely known within the international trade and legal communities, as ageneral matter, the Convention presumptively and automatically governs all internationaltrade transactions within the CISG’s scope (an international sales contract).36 Indeed,U.S. courts are unanimous that the CISG preempts domestic sales law for coveredinternational transactions.37

However, after completing a careful analysis of the comparative benefits and detrimentsof domestic law and the CISG with respect to a specific transaction, parties maydetermine that they should “opt-out” of the CISG. The Convention permits the ultimatefreedom of contract deviation: complete exclusion of the Convention. Under CISGArticle 6, “the parties may exclude the application of the Convention….” Parties desiringto exclude application of the CISG must be extremely cautious in fashioning theexclusion provision. For example, simple (but common) domestic choice-of-lawprovisions, such as the following, likely will not effect an exclusion of the Convention asgoverning law:

§ The rights and obligations of the parties under this contract shall be governedby and construed under the laws of the State of Florida.

§ The laws of the State of Florida shall govern in connection with the formation,performance, and legal enforcement of this purchase order.

§ Any dispute arising out of this contract shall be determined in accordance withthe laws of the State of Florida.38

Even though the parties to such contracts specifically identified the “laws of the State ofFlorida,” international treaties such as the CISG are the supreme law of the United Statesand, therefore, would likely be construed as part of the law of the State of Florida.39

If the parties desire to effectively exclude application of the Convention, such exclusionshould be explicit and state the alternative applicable law.40 For example, the followingprovision should effect an exclusion of the CISG:

The rights and obligations of the parties under this contract shall not be governedby the United Nations Convention on Contracts for the International Sale ofGoods. Instead, the rights and obligations of the parties under this contract shallbe governed by the laws of the State of Florida (without regard to principles ofconflict of law), including the Florida Uniform Commercial Code.

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SUBSTANTIVE COMPARISON OF CISG AND UCC DIFFERENCES

This section identifies and analyzes some (but not all) of the most important differencesbetween the CISG and UCC. With respect to any particular international transaction,competent legal advice should be obtained to assist in comparing the relative differencesbetween the CISG and UCC.

Statute of Frauds and Parol Evidence

One significant difference between the Convention and the UCC concerns the “statute offrauds” or oral contracts. With respect to the domestic sale of goods, the UCC “statute offrauds” generally provides that “a contract for the sale of goods for the price of $500 ormore is not enforceable by way of action or defense unless there is some writingsufficient to indicate that a contract for sale has been made between the parties andsigned by the party against whom enforcement is sought….”41 Furthermore, anyamendment or modification to a contract must be in writing if the underlying contract isrequired to be in writing.42

The UCC approach has historical roots going back several centuries to English law.43

The “no oral contracts” law represents a policy decision designed to avoid themisunderstandings and differing recollections, which often are inherent in oraltransactions. Advocates argue that by requiring the parties to reduce their agreement towriting, the terms of the agreement are more accurate and definite and less prone tosubsequent dispute. In actual practice, there are many exceptions to the “statute offrauds.” As a result, while the UCC establishes a presumption against the enforcement oforal contracts, such oral contracts may be enforced in certain circumstances (such asreasonable reliance, promissory estoppel, and performance).

The Convention departs from the UCC formal requirement of a written agreement. CISGArticle 11 states: “A contract of sale need not be concluded in or evidenced by writingand is not subject to any other requirement as to form. It may be proven by any means,including witnesses.” Furthermore, in the absence of a specific clause otherwise, theConvention generally permits oral amendments or modifications to contracts.44

The oral contract issue was quite divisive in the negotiations for the CISG. The UnitedStates, certain other common-law nations, Latin American countries, and EasternEuropean nations all pressed for a written agreement requirement. On the other hand,many civil law countries has no such requirement and advocated the recognition of oralcontracts. In the end, the CISG followed the more liberal civil law approach and allowedenforcement of oral agreements. Notably, however, several nations (mostly in EasternEurope and Latin America, but not the United Sates) have made Article 96 “declarations”concerning oral contracts and continue to insist that international contracts for the sale ofgoods must be in writing.45

The “statute of frauds” differences between the CISG and UCC are related to anotherpotential area of difference: the “parol evidence” rule. In the United States, oraltestimony of witnesses concerning the terms of a contract and intent of the parties that

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contradicts or varies from the terms of a written contract is generally inadmissible inevidence. The CISG does not expressly address this issue. However, given the CISG’swillingness to endorse oral contracts, some courts and most commentators believe thatthe CISG abandons the parol evidence rule in favor of a more liberal approach thatpermits testimony, even if it contradicts or varies from the terms of a written contract.The two United States appellate decisions that have considered the issue reached oppositeresults concerning whether the parol evidence rule is applicable to CISG disputes.46

Florida practitioners should be aware that the Eleventh Circuit specifically addressed theparol evidence issue in MCC-Marble Ceramic Center, Inc. v. Ceramica NuovaDiAgostino S.p.A., 144 F.3d 1384 (11th Cir. 1998). MCC-Marble is one of the mostimportant United States CISG decisions. In that case, the appellate panel reversed adecision from the United States District Court for the Southern District of Florida andapplied CISG principles to hold that evidence of subjective intent of parties could beconsidered and that the typical American parol evidence bar did not apply in CISG cases.The current CISG trend regarding parol evidence follows MCC Marble.47

Battle of the Forms

The Convention and UCC also differ in their approaches to the “battle of the forms.”48

The typical battle of the forms (there are many variants) occurs when a buyer sends aseller a purchase order that includes numerous terms and conditions (usually in smallprint, legalese on the back side of the form) that the buyer desires to include in thecontract. The seller sends back an acknowledgement that adds a different series of termsand conditions to the buyer’s original purchase order. These forms (the purchase orderand acknowledgement) usually conflict because each party (through its lawyer) hasdeveloped form terms that are most favorable for that party. While the front sides of thevarious forms may agree on important terms such as price, transportation, and quantity,the back sides are in confusing disarray.

Before the advent of the UCC, most American (and English common law) jurisdictionsgenerally had followed a “last shot doctrine” or “mirror image rule.” This means that ifthe terms of acknowledgement varied from the terms of the purchase order, the variedacknowledgement became not an acceptance but a counter offer. As long as the partiesdid not actually perform, no contract could be formed and either party could “get out” ofthe arrangement. Normally, however, even in spite of the conflicting forms, the sellerwould deliver and the buyer would receive the goods. When the transaction was thuscompleted by performance, the common law assumed that a contract had been formed.Subject to many exceptions, the terms of the contract generally consisted of the terms ofthe original offer, subject to the modifications contained in the acceptance.

The UCC changed the common-law “mirror-image rule.” F.S.A. § 672.207 creates adefault provision whereby a final form that is not intended specifically as a counter-offerwill act as an acceptance, even though it contains different or additional terms to thosecontained in the prior form. The additional terms are considered as proposals foradditions to the contract and, as between merchants, become part of the contract, unless:(1) the offer expressly limits acceptance to the terms of the offer; (2) the terms materially

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alter the offer; or (3) notification of objection to the terms already has been given or isgiven within a reasonable time after notice has been received. The normal result underthe UCC is to reverse the common-law presumption that the last form governs andreplace it with the result that the second-to-last form usually governs.

Consider the following example. A Columbian company sends a purchase order to aFlorida company offering to purchase 100,000 pink flamingo lawn ornaments for$1 million. The back of the purchase order states that the seller must provide a full ten-year warranty and that all disputes shall be resolved in Bogota in the Spanish language.The Florida company responds by sending its acknowledgement sales order to theColumbian company. In many respects (such as price and quantity), theacknowledgement sales order and the purchase order are the same; however, on the backside of the acknowledgement sales order, the Florida company has included a warrantydisclaimer and a provision requiring that all disputes shall be resolved in Miami in theEnglish language. No further forms, communications, or objections are exchanged. Afew weeks later, the Florida company ships the lawn ornaments to Columbia.

Under the common-law “mirror image” approach, no contract would have beenconcluded (prior to performance) because the purchase order and acknowledgement salesorder were materially different with respect to warranties and dispute resolution.However, after the lawn ornaments were sent to Columbia and received, a contract wouldexist. The terms of the contract would likely follow the Florida company’sacknowledgement sales order form (the “last shot”). Dispute resolution would be inMiami in English without any warranties because the Columbian company assented tothe “last shot” by accepting the lawn ornaments.

Under the UCC approach, a contract would have been concluded earlier – when theFlorida company delivered its acknowledgement sales order. The terms of the contractwould likely follow the Columbian company’s purchase order because the Floridacompany’s acknowledgement sales order materially altered the offer. Thus, disputeresolution would be in Bogota in Spanish with full ten-year warranties.

The CISG departs from the UCC approach and, instead, is consistent with the oldcommon-law “mirror image” rule. CISG Article 19(1) states:

A reply to an offer which purports to be an acceptance but contains [material49]additions, limitations or other modifications is a rejection of the offer andconstitutes a counter-offer.

Thus, (at least prior to performance), either party may be able to claim successfully thatno enforceable contract exists under the CISG. After delivery and acceptance, a contractwill undoubtedly be deemed to have existed. Although the terms of the contract may besubject to dispute, the CISG generally favors the last party to submit materially differentterms.50 Put another way, the CISG “retrogresses to a pre-UCC view that typically favorsthe seller”51 in the battle of the forms.

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Warranties and Disclaimers of Warranties

The UCC and the Convention have similar provisions for warranties, but differ withrespect to disclaimers of warranties. Under the Convention, the seller has a four-foldwarranty obligation and “must deliver goods which are of the quantity, quality anddescription required by the contract and which are contained or packaged in the mannerrequired by the contract.”52 Goods do not conform with the contract unless they “are fitfor the purposes for which goods of the same description would ordinarily be used” and“are fit for any particular purpose expressly or impliedly made known to the seller….”53

Although the CISG’s merchantability, fitness, and title warranties are not identical to theUCC provisions,54 they are substantially similar and would likely lead to similar results.

However, the CISG contains no provisions comparable to the disclaimer procedures thatsellers are authorized to use under the UCC. For example, under the UCC, an effectivedisclaimer of the implied warranty of merchantability must mention “merchantability”and must be in conspicuous writing.55 Similarly, an effective disclaimer of an impliedwarranty of fitness must be in writing and conspicuous. The UCC proposes languagesuch as: “There are no warranties which extend beyond the description on the facehereof.”56 The Convention is less formalistic and appears to permit disclaimers ofwarranties as long as the “parties have agreed” in writing or orally.57

Perfect Tender Rule

Under the UCC, a buyer is generally entitled to reject goods (under a one-deliverycontract of sale) that fail in any respect to conform to the contract.58 This is known as the“perfect tender” rule. Under the rule, a buyer (subject to good faith and certain otherrequirements) may reject goods and cancel the contract, even if a defect in tenderedgoods is not serious and the buyer would have received substantially the goods for whichit bargained.

The CISG departs from the perfect tender rule and makes rejection, revocation ofacceptance, or cancellation more difficult. Under the Convention’s provisions, a buyermay “declare the contract avoided” only if the failure by the seller to deliver goodsconstitutes “a fundamental breach” of the contract.59 A breach of contract is“fundamental” only “if it results in such detriment to the other party as substantially todeprive him of what he is entitled to expect under the contract” and even then, only if theseller foresaw, or a reasonable party in the seller’s position would have foreseen, such aresult.60

Notice of Non-Conforming Goods

The CISG provides that “the buyer loses the right to rely on a lack of conformity of thegoods if he does not give notice to the seller specifying the nature of the lack ofconformity within a reasonable time after he has discovered it or should have discoveredit.”61 The buyer bears the burden to establish that notice of non-conformity was givenwithin a “reasonable” time frame. Whether notice was given within a “reasonable” timedepends on the facts and circumstances of the transaction, including the type of goods

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(for example, notices concerning perishable goods should be given more promptly).Disputes over the notice of non-conformity requirement (including timing andspecificity) have been the subject of almost 20 percent of the reported CISG decisionsworldwide.62

Although the analogous UCC provision63 also requires notice within a “reasonable” time,the CISG approach has been construed far more narrowly and restrictively than the UCC.Under the UCC, the buyer is afforded “a reasonable opportunity to inspect the goods.”64

However, under the CISG, the buyer must inspect the goods “within as short a period asis practicable under the circumstances.”65 Based on these differences, the “reasonable”time periods for notices of non-conformity have been construed as quite short under theCISG. Further, the specificity mandated by the CISG appears more restrictive than underthe UCC (especially so in German decisions). As a result, effective notice ofnonconformity under the CISG should be timely and very detailed.

Unilateral Price Reduction

The CISG contains many of the same damages remedies as available under the UCC.Generally, a buyer may claim damages if the seller fails to perform. Such damagesconsist of a sum equal to the loss, including the loss of profit, suffered as a consequenceof the breach.66 These provisions resemble the direct, incidental, and consequentialdamages under the UCC.67

However, the CISG includes a novel (for Americans), unilateral price reductionremedy.68 Under CISG Article 50, “[i]f the goods do not conform with the contract andwhether or not the price has already been paid, the buyer may reduce the price in thesame proportion as the value that the goods actually delivered had at the time of thedelivery bears to the value that the conforming goods would have had at that time.” Thispro-purchaser, self-help remedy stems from civil law and generally has not beenavailable in common-law jurisdictions such as the United States and England. It is notavailable if the seller is able to cure non-conformity without causing unreasonable delayor inconvenience to the buyer.

CISG Gaps

Although the CISG was designed to create a general substantive law of sales governinginternational contracts, the Convention does not cover all issues that may arise in suchtransactions or subsequent dispute resolution. Gaps in the CISG include, the following,among others:

§ trade terms

§ applicable interest rate

§ burden of proof

§ validity of penalty clauses

§ transfer of title

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§ existence of agency relationship

§ forum selection clauses

§ limitations period

§ currency of payment.

For example, with respect to trade terms, the UCC contains some definitions of commontrade terms, such as F.O.B., F.A.S., C.I.S., and C.I.F.69 The CISG contains no expressprovisions concerning specific trade terms. The parties may develop their own tradeterms to specify the obligations of the parties. However, in the international context(given varying meanings and nuances), the parties may best achieve clarity byincorporating trade terms from commonly accepted trade term regimes such as theInternational Chamber of Commerce Official Rules for the Interpretation of Trade Terms(“Incoterms”).70

Although the CISG contains specific provisions for the award of interest,71 theConvention does not specify the rate of interest or which nation’s laws should apply toselecting the applicable rate of interest. The interest issue, while relatively mundane-sounding, has been the subject of up to 30 percent of total CISG cases worldwide.72 Inthe absence of direction, courts have often awarded interest according to the applicablelaw of the forum jurisdiction.73

The CISG does have substantial “gaps.” If the CISG will be the applicable sales law,practitioners should consider supplementing the Convention with the domestic laws ofthe American or foreign jurisdiction to “fill in the gaps.”

STATUTE OF LIMITATIONS UNDER CISG

The CISG has no general statute of limitations provision requiring that dispute resolutionbe initiated within a certain time frame. However, a separate treaty governs the issue: theUnited Nations Convention on the Limitation Period in the International Sale of Goods.74

That convention was originally completed in 1974, but was amended in 1980 through aProtocol to make it consistent with the CISG (as amended, the “LimitationsConvention”). Fewer nations have ratified the Limitations Convention than have ratifiedthe CISG. As of May 2004, at least some version of the Limitations Convention (that is,the 1974 version or 1980 Protocol) had been ratified in twenty-five nations, including theUnited States (compared to sixty-three countries that have ratified the CISG).Accordingly, if a CISG governed transaction is conducted with a non-signatory of theLimitations Convention and the contract does not specify a limitations period, theapplicable statute of limitations may be uncertain.

The key limitations period under the Limitations Convention is four years75 after theclaim accrues – usually the date of breach of the contract;76 under certain limitedcircumstances, the period may be extended, but in no case beyond ten years.77 Thestatute of limitations is shorter than the five-year period of limitations generallyapplicable in Florida for actions “on a contract, obligation, or liability founded on awritten instrument . . . .”78 However, the Limitations Convention’s four-year period is

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similar to Florida’s limitations law for contracts “not founded on a written instrument.”79

As a general matter, the Limitations Convention operates in a similar fashion to the UCCin terms of determination of the commencement of the limitations period and otherrelated matters.80 As with the CISG, application of the Limitations Convention isautomatic for covered transactions between signatory nations. Also similar to the CISG,the Limitations Convention provides that the parties may expressly “opt-out” of theLimitations Convention.81 Since the Limitations Convention is broadly similar to theUCC, most American traders have not elected to routinely “opt-out.” From theperspective of a Florida company, an “opt-out” would seem to make sense only if theparties desired to have a limitations period greater than four years.82

PRACTICAL CISG ISSUES FOR FLORIDA PRACTITIONERS

The CISG is a complex code for international trade law that has advantages anddisadvantages for Florida businesses, depending on the unique international transactionbeing considered and the special facts and circumstances of each case. The following aregeneral advantages and disadvantages.

CISG Advantages

§ The CISG reflects international business expectations.

§ The CISG is fair and, overall, does not appear to favor buyers at the expenseof sellers or vice-versa. The Convention is reasonably well drafted. To theextent that parties have equal bargaining strength and are locked in a struggleover the choice of substantive law governing sales, selection of the CISG maybe viewed as a constructive, neutral, and even-handed approach.

§ The CISG is “good law” in that it represents reasonable compromises ondifficult commercial issues acceptable to most of the important participants ininternational trade.

§ The CISG is generally similar to the UCC on most issues.

§ The CISG promotes uniformity. The CISG may make internationaltransactions easier for “heavy volume” traders who trade with numerousdifferent foreign countries because the domestic sales laws of such otherforeign countries are less important if the CISG governs. Further, CISGjudicial decision-making continues to spread. There are now thousands ofreported CISG decisions worldwide and more every year.

CISG Disadvantages

§ After sixteen years, the CISG is only now graduating from obscurity. U.S.lawyers and traders are somewhat unfamiliar with the CISG.

§ U.S. courts are generally unfamiliar with the CISG. As yet, no reporteddecisions have been announced concerning the CISG in Florida state court.

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Only a handful of Florida federal court decisions on the CISG have beenentered. Nationwide, CISG reported cases are still quite few compared to theUCC. Accordingly, the CISG is largely untested on most issues (throughlegal proceedings) in the United States.

§ The UCC is more familiar to U.S. traders, lawyers, and courts than the CISGand may better reflect the expectations of the United States businesscommunity. The unfamiliarity of traders, lawyers, and courts with the CISGmay raise transactional costs and the costs of dispute adjudication.

Practical Transaction Issues

Each international transaction is different. The parties should carefully analyze whetherthe CISG applies or should be excluded, based on the unique factors, facts andcircumstances of the trade. However, U.S. parties may wish to consider the followingpractical issues.83

§ Consider opting out of the automatic application of the CISG and, instead,specifying the law of Florida, including the UCC, as the applicable law for thetransaction. As noted above, most purchasers and lawyers are unfamiliar withthe CISG, and it has not been thoroughly tested in the United States. To theextent that the Florida party has superior bargaining power, it appears therewould be little “downside” in initially requesting that the transaction excludethe CISG. Such an opt-out provision must be carefully drafted, specify thatthe CISG is excluded, and identify the chosen applicable law. Many majorU.S. companies have defaulted to such a position. Opting out avoids thediscomfort of the unknown.

§ If the CISG will govern, consider negotiating and executing a detailedcontract that will cover foreseeable issues and contingencies. The CISGpermits freedom of contract so that the specific terms of the contract willgenerally “trump” the CISG. The CISG primarily is a “default-setting.”

§ If the CISG will apply, recognize the absence of the “statute of frauds.”Consider formalizing in writing all matters with the foreign party andincluding contractual “statute of frauds” provisions, merger and integrationclauses, and other means of ensuring that oral contracts or modifications willnot be enforced. In the early stages, consider announcing that oral statementsare not binding and only the final written agreement will govern. Try toobtain acknowledgment from the foreign party.

§ If the CISG will apply, recognize “battle of the forms” issues. Considerrequiring a single written agreement signed by both parties rather than anexchange of different and contradictory forms. If the parties sign a clearagreement addressing all of the “boilerplate,” a “battle of the forms” shouldnot materialize. If that is not possible, carefully review the various forms

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exchanged and timely object to unacceptable provisions in the foreign party’sforms. Try to make the “last shot” before delivery of the goods.

§ If the CISG will apply, recognize that the seller may disclaim warrantieswithout following the formal requirements of the UCC. Consider and try toreach agreement with the foreign party on the specific warranties anddisclaimers rather than through an exchange of different and contradictoryforms.

§ If the CISG will apply, recognize that the “perfect tender” rule will not.Consider incorporating the perfect tender rule into the contract andspecifically address the issues raised by non-conforming goods.

§ If the CISG will govern, recognize the potential remedy of a “unilateral pricereduction.” Because this clause is pro-buyer, consider objecting ifrepresenting a seller.

§ If the CISG will govern, recognize that there will be some uncertainty withrespect to the applicable statute of limitations, especially with nations thathave not signed the Limitations Convention. Consider incorporating alimitations period in the contract consistent with Florida law.

§ If the CISG will govern, recognize that there will be some uncertainty withrespect to notice timing (including notice for non-conforming goods).Consider specifying specific periods of time for certain types of notices.

§ If the CISG will govern, recognize that the Convention does not specify aspecific rate or formula for the calculation of interest on damages claims.Consider incorporating a clause specifying a particular interest rate or methodof calculation, such as an index.

§ If the CISG will govern, recognize that there are important issues ofinternational commerce that are not addressed in the Convention, including,for example: choice of forum; submission to jurisdiction; alternative disputeresolution (mediation, conciliation, or arbitration); language of contract;language of dispute adjudication; attorney fees for disputes (for example, loserpays);84 and choice of law for any gaps in the CISG.85

§ Carefully consider the various unique international issues and tailor thecontract accordingly.

Practical CISG Litigation Issues

The need for familiarity with the CISG is just as important for Florida litigators86 as fortransactional attorneys. While business counsel may put the international deal together(and should be careful on the front end to assess the advantages and disadvantages of theCISG for the particular transaction), trial counsel will need to work on the back endprosecuting and defending the CISG-based claims.

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CISG-governed transactions may raise interesting litigation questions concerning stateand federal jurisdiction. Florida state trial courts technically may have generaljurisdiction to entertain disputes under the Convention.87 However, almost all of thereported U.S. jurisprudence is at the federal level. Since the Convention is a “treaty ofthe United States,” federal courts likely have “federal question” jurisdiction over allCISG-governed international sales disputes.88 While many CISG-oriented casesundoubtedly would have been amendable to “federal diversity” jurisdiction anywaybecause such disputes typically involve “citizens of the United States and citizens orsubjects of a foreign state,”89 the CISG has expanded and “federalized” jurisdiction in thearea of international transactions.90

After assessing the jurisdiction issues (and other threshold matters such as personaljurisdiction, forum, and comity), litigation counsel will need to be (or become) familiarwith the substantive CISG sales law issues. Unfortunately, for a variety of reasons, theapplication of CISG is often ignored. For example, a review of court records of severaldisputes in state and federal courts concerning the international sale of goods betweenCISG signatories reveals that, almost invariably, neither party has raised the CISG asapplicable law. Instead, counsel appear oblivious to the CISG and generally debatewhether domestic U.S. or foreign law should apply. Failure to identify the CISG as theapplicable law in appropriate circumstances (especially if differences between the CISGand UCC may affect the ultimate result) could harm client interests and raise issues ofprofessional responsibility, ethics, and even legal malpractice. Generally, if the partiesdo not raise the CISG as the applicable law in litigation, domestic courts will likely revertto the law in their own jurisdiction.91

Assuming that the CISG is applicable to a dispute, Florida practitioners may be facedwith the issue of establishing or proving CISG law to the court through precedent orotherwise. In the absence of any binding precedent in Florida state and federal courts,lawyers will likely need to rely on other reported decisions in the United States and ontreatises, articles, and other commentary. Another interesting avenue of addressing CISGissues that are novel in the United States is that of precedent from other CISG countries.American courts have started to rely on such foreign decisions.92 This trend may lead toa more unified approach to CISG legal issues. As with other international litigation,CISG-governed cases will pose many other interesting challenges.

CISG Resources

Florida practitioners faced with CISG-related issues will be surprised at the breadth ofavailable resources. In addition to the numerous texts already cited in this article, thereare several English-language treatises and comprehensive practice-oriented materials.93

The Internet has revolutionized the spread of information about the CISG. The bestsingle source for information concerning the CISG is undoubtedly the website of theInstitute of International Commercial Law at Pace University School of Law (“PaceWebsite”): http://www.cisg.law.pace.edu. The Pace Website contains a truly impressivearray of materials including: annotated texts of the CISG (in multiple languages); texts ofearlier international sales law conventions; a listing of current signatories; guides to each

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CISG article; drafting histories; legislative histories, scholarly articles; practice-orientedarticles and guides; and comprehensive bibliographies listing hundreds of additionalarticles.

The real gold mine is the jurisprudence portion of the Pace Website. The Pace Websitecurrently includes in excess of 1,250 cases and 5,000 case annotations from more thanthirty CISG signatory nations or international dispute resolution bodies (such as theInternational Chamber of Commerce Court of Arbitration, the Arbitration Institute of theStockholm Chamber of Commerce and the European Court of Justice). The cases arefully integrated with the UNCITRAL “Case Law on UNCITRAL Texts” database(“CLOUT”). The Pace Website also contains a large collection of full-text CISGdecisions from English-language jurisdictions (United States, Australia, and Canada), aswell as original full-text decisions from other jurisdictions in their respective nativelanguages. A large (and ever-increasing) number of the decisions originally rendered inforeign languages has been translated into English. The case presentations and fullEnglish-language texts are searchable by country, topic, and CISG article.

In addition to the Pace Website, another excellent source for CISG materials isUNCITRAL. The UNCITRAL Internet website, http://www.uncitral.org/, is aplurilingual site (six languages) that includes official texts of the CISG andcomprehensive bibliographies. Further, UNCITRAL developed the CLOUT database,which contains abstracts of almost 500 judicial decisions on the CISG. English-languagecase abstracts are prepared by the UNCITRAL Secretariat and published through thedatabase. The Pace Website system links with CLOUT.

Various legal scholars from around the globe have coordinated in creating the“Autonomous Network of CISG Websites.” This system is a worldwide collection ofInternet websites dedicated to the CISG and organized on a national basis. Each of therespective participating jurisdictions is charged with collecting all CISG case law in thejurisdiction and publishing the decisions through the network. To date, the AutonomousNetwork contains websites with original materials from nineteen nations and threegeographic regions.94 Internet links to the Autonomous Network are available on thePace Website.

Finally, various stakeholders (mostly academics) have recently formed a private initiativeto promote uniform interpretation of the CISG through a CISG-Advisory Council. TheAdvisory Council proposes to address various controversial and unresolved issues underthe CISG through the issuance of advisory opinions. The first CISG-Advisory CouncilOpinion was issued last year and more are likely to be forthcoming.95

CONCLUSION

The Convention is finally graduating from obscurity. The CISG is now the internationalsales law in sixty-three nations and presumptively governs almost two-thirds of theworld’s trade. An ever-increasing number of courts are applying CISG law. Now, morethan ever before, Florida lawyers, both transaction- and litigation-oriented, need to

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become aware of the CISG and its nuances to properly advise their Florida and foreignclients engaged in international transactions and dispute resolution.

NOTES

1 S. Treaty Doc. No. 9, 98th Cong. 1st Sess. 22 (1983), reprinted at 15 U.S.C. App. 52 (2002). The textof the CISG also is readily available from electronic sources: http://www.uncitral.org (official text inEnglish, Arabic, Chinese, French, Russian, and Spanish); http://www.cisg.law.pace.edu. CISGArticles, cited throughout this article, can be found by accessing these electronic sources.

2 F.S.A. §§ 672.101 et seq.3 Murray, The Neglect of the CISG: A Workable Solution, 17 J.L. & COMM. 365 (1998).4 United Nations Commission on International Trade Law CLOUT database, available at

http://www.uncitral.org.5 Guide to the Pace Database on the CISG and International Commercial Law, available at

http://www.cisg.law.pace.edu.6 See Newman and Burrows, U.N. Sales Convention: Traps for Unwary? THE PRACTICE OF

INTERNATIONAL LITIGATION (New York, NY: Transnational Juris. Pub. 1992).7 Del Duca and Del Duca, Practice Under the Convention on International Sale of Goods (CISG): A

Primer for Attorneys and International Traders (Part II), 29 U.C.C.L.J. 99, 157 (1996) (hereafter,“Del Duca Part II”).

8 Many authors have documented the history of the Convention. See, e.g. Farnsworth, Formation ofInternational Sales Contracts: Three Attempts at Unification, 110 U. PA. L. REV. 305 (1962).

9 Copies of the texts of the treaties are available at http://www.hcch.net.10 Hancock, ed., Guide to the International Sale of Goods Convention 101.002 (Chesterland, OH: Bus.

Laws, Inc., Supp. 2002) (hereafter, “CISG Guide”).11 Thus, the CISG is sometimes referred to as the “Vienna Sales Convention,” especially by European

and Eastern European Parties.12 Ghana and Venezuela signed but never formally ratified the CISG.13 See http://www.uncitral.org.14 Based upon 2000-2002 data from Enterprise Florida, Inc. www.eflorida.com. Enterprise Florida, Inc.

is a non-profit corporation created by Florida law. F.S.A. § 288.901. Enterprise Florida, Inc. hasestablished a comprehensive trade database known as the International Trade Data Resource andResearch Center. F.S.A. § 288.8155.

15 Id.16 Id. European trade (exports and imports combined) accounts for only 19% for Florida’s total trade.

Asian trade represents only 14% of Florida’s total trade.17 Generally, two-thirds of trade is between Convention signatories.18 Based upon Enterprise Florida, Inc. data for total merchandise flows (both exports and imports) in

2002. www.eflorida.com.19 Honnold, The Sales Convention: From Idea to Practice, 17 J.L. & COMM. 181 (1998).20 See Cook, CISG: From the Perspective of the Practitioner, 17 J.L. & COMM. 343, 349 (1998) (CISG is

“good law that promotes fair and honorable solutions without affording any obvious or hiddenadvantages to either side.”).

21 Del Duca and Del Duca, Practice Under the Convention on International Sale of Goods (CISG): APrimer for Attorneys and International Traders (Part I), 27 U.C.C.L.J. 331, 337 (1994) (hereafter,“Del Duca Part I”).

22 CISG Article 1(1), supra, note 1.23 F.S.A. § 672.102.24 CISG Article 2, supra, note 1.25 Id. at Article 3. Further, the CISG does not purport to govern personal injuries caused by goods. See

CISG Article 5, supra, note 1.

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26 See F.S.A. § 672.105(1) (Florida UCC definition of “goods”). For that matter, the CISG generallydoes not include specific definitions of terms.

27 CISG Article 3(2), supra, note 1. The “predominant part” requirement under the CISG is quite similarto the “predominant purpose” test used by most U.S. courts under the UCC. See CISG Guide at 103.1,supra, note 10.

28 See Helen Kaminsky Pty. Ltd. v. Marketing Australian Products, Inc., 1997 WL 414137 (S.D.N.Y.1997) (unpublished opinion) (CISG did not apply to distributorship agreement because lackedexpression of definite terms for sale of specified goods); AMCO Ukrservice v. American Meter Co.,2004 WL 692233, __ F. Supp. 2d ___ (E.D. Penn. 2004) (same); Viva Vino Import Corp. v. FarneseVivi S.R.L., 2000 WL 1224903 (E.D. Penn. 2000) (unpublished opinion) (same).

29 See Lockhart and McKenna, Software License Agreements in Light of the UCC and the Convention onthe International Sale of Goods, 70 MICH. BAR J. 646 (July 1991).

30 The CISG does not purport to cover leases, and no other international treaty in force in the UnitedStates exists with respect to leases. This gap is in contrast to UCC Article 2.5, a recent UCC additionon the topic. See F.S.A. §§ 680.1011 et seq.

31 CISG Guide at 103.1, supra, note 10.32 See Primak, Compute Software: Should the U.N. Convention on Contracts for the International Sale of

Goods Apply? 11 COMPUTER L.J. 197 (1991).33 CISG Article 1(3), supra, note 1 (“Neither 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 theapplication of this Convention.”).

34 CISG Article 10(a), supra, note 1 (“[I]f a party has more than one place of business, the place ofbusiness is that which has the closest relationship to the contract and its performance, having regard tothe circumstances known or contemplated by the parties at any time before or at the conclusion of thecontract.”).

35 The modified example is based on Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d1142 (N.D.Cal. 2001). In Asante Technologies, the court determined that the CISG governed the salestransaction between two Delaware companies because one of the Delaware companies maintained itsheadquarters in Canada and the Canadian headquarters had the “closest relationship” to the contract.See also Note, Contracts for the International Sale of Goods: Applicability of the United NationsConvention, 69 IOWA L. REV. 209, 224 (1983) (“[A] contract between two American firms that is to benegotiated and performed within the United States possibly could be subject to the Convention’s termsif one of the parties has a place of business in another country and the contract is to be performed inthat country.”).

36 CISG Guide at 100.005, supra, note 10.37 Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc., 201 F.Supp.2d 236, 285-86

(S.D.N.Y. 2002); Usinor Industeel v. Leeco Steel Products, Inc., 209 F. Supp. 2d 880 (N.D. Ill. 2002);Asante Technologies, supra, note 35 at 1151.

38 A review of form purchase orders routinely used by many American companies in their domestic andinternational transactions shows that almost all of the purchase orders contained similar provisionswithout specific reference to opting-out of the CISG.

39 U.S. Const. Art. VI(2) (“This Constitution, and the laws of the United States which shall be made inpursuance thereof; and all treaties made, or which shall be made, under the authority of the UnitedStates, shall be the supreme law of the land.”); see also Asante Technologies, supra, note 35 at 1150.Asante Technologies involved two purchase orders. The American purchase order stated: “Thevalidity and performance of this order shall be governed by the laws of the state shown on Buyer’saddress on this order [California].” The Canadian purchase order stated: “The contract… is made,governed by, and shall be construed in accordance with the laws of … British Columbia and the lawsof Canada….” The Asante Technologies court determined that “the choice of law clauses here do notevidence a clear intent to opt out of the CISG.” Id. Accordingly, the substantive law of the CISG wasapplied to the transaction. More recently, in Ajax Tool Works, Inc. v. Can-Eng Manufacturing Ltd.,2003 WL 223187 (N.D. Ill. 2003) (unpublished) the court found that CISG law controlled even thoughthe contract provided that the “agreement shall be governed by the laws of . . . Ontario, Canada.” The

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Asante Technologies and Ajax Tool rationale was followed in BP Oil Int’l, Ltd. v. Empresa EstatalPetroleos de Ecuador, 332 F.3d 333, 337 (5th Cir. 2003) (applying CISG law to contract governed bylaws of Ecuador).

40 Possibly, a clause such as the following might work to effect an opt-out because the reference to theUCC shows some intent for a specific applicable law of sales: “The rights and obligations of theparties under this contract shall be governed by and construed under the laws of the State of Floridaincluding the Florida Uniform Commercial Code.” Nevertheless, the prudent course is to make the“opt-out” more explicit by referring specifically to the CISG.

41 F.S.A. § 672.201(1).42 F.S.A. § 672.209(3).43 The United States’ adherence to the statute of frauds is a distinct minority position in the present

international legal community. Even Great Britain has rejected the doctrine.44 CISG Article 29, supra, note 1.45 CISG Article 96, supra, note 1, permits such declarations. The countries that have made CISG Article

96 declarations include Argentina, Belarus, Chile, Estonia, Hungary, Latvia, Lithuania, RussianFederation, and Ukraine.

46 See MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino, S.p.A., 144 F.3d 1384, 1389(11th Cir. 1998) (parol evidence rule does not apply in CISG action); Beijing Metals & MineralsImport/Export Corp. v. American Business Center, Inc., 993 F.2d 1178, 1183, n.9 (5th Cir. 1993)(opposite).

47 See Calzaturificio Claudia S.n.C. v. Oliveri Footwear Ltd., 1998 WL 164824 (S.D.N.Y. 1998)(unpublished opinion) (“contracts governed by the CISG are freed from the limits of the parol evidencerule, and there is a wider spectrum of admissible evidence to consider in construing terms of theparties’ agreement.”).

48 The “battle of the forms” issue is treated far more comprehensively than this article in Gabriel, TheBattle of the Forms: A Comparison of the United Nations Convention for the International Sale ofGoods and the Uniform Commercial Code, 49 BUS. LAW. 1053 (May 1994).

49 “Material” terms under the CISG include price, payment, quality and quantity of goods, place and timeof delivery, extent of liability, and dispute resolution. CISG Article 19(3), supra, note 1.

50 This conclusion makes broad-brush strokes and risks over-generalization. Specific results will dependon the nuances of factual development. See Gabriel, supra, note 48 at 1062 (“The CISG and thecommon-law rules obviously favor the last party to submit terms.”).

51 Murray, supra, note 3 at 372.52 CISG Article 35(1), supra, note 1.53 Id. at Article 35(2)(a) and (b).54 F.S.A. § 672.312 to 316.55 F.S.A. § 672.316(2).56 Id.57 CISG Article 35(2), supra, note 1. But see Supermicro Computer, Inc. v. Digitechnic, S.A.,

145 F. Supp. 2d 1147, 1151 (N.D.Cal. 2001) (court found issue of warranty disclaimer under CISGArticle 35 was “unsettled,” especially since one party claimed it was not aware of disclaimer).

58 F.S.A. § 672.601.59 CISG Articles 49(1) and 64, supra, note 1.60 Id. at Article 25.61 Id. at Article 39(1).62 Del Duca Part II, supra, note 7 at 134 (notice issues were raised in twenty-seven of 142 CISG cases).63 F.S.A. § 672.607(3)(a).64 F.S.A. § 672.606(1)(a).65 CISG Article 38(1), supra, note 1.66 Id. at Articles 74-77.67 F.S.A. §§ 672.714 to 715.68 CISG Article 50, supra, note 1.69 F.S.A. §§ 672.319 to 322.

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70 The Incoterms recently have been revised, and the most current version became effective on January 1,2000. Information about the Incoterms is available at http://www.iccwbo.org. In a recent decision, St.Paul Guardian Ins. Col. v. Neuromed Medical Systems & Support, GmbH, 2002 WL 465312 or 2002U.S. Dist. LEXIS 5096 (S.D.N.Y. 2002) (unpublished opinion), the court determined that reference toCIF in a CISG-governed transaction demonstrated the parties’ intent to incorporate Incoterms, eventhough the contract itself did not refer to Incoterms. This rationale was subsequently followed by theFifth Circuit in BP Oil Int’l, supra, note 39.

71 CISG Articles 78 and 84(1).72 Del Duca Part II, supra, note 7 at 134 (interest issues were subject of forty-two of 142 reported CISG

decisions).73 Id.; see Delchi Carrier, S.p.A. v. Rotorex Corp., 1994 WL 495787 or 1994 U.S. Dist. LEXIS 12820

(N.D.N.Y. 1994) (unpublished opinion), aff’d in part, rev’d in part, 71 F.3d 1024 (2d Cir. 1995)(“Because [CISG] Article 78 does not specify the rate of interest to be applied, the court in itsdiscretion awards … prejudgement interest at the United States Treasury Bill rate.”).

74 See http://www.uncitral.org.75 Limitations Convention Article 8, supra, note 74.76 Id. at Articles 1(3)(d) and 10(1) (“breach of contract” means “the failure of a party to perform the

contract or any performance not in conformity with the contract”; the claim “…shall accrue on the dateon which such breach occurs”).

77 Limitations Convention Articles 13-23, supra, note 74.78 F.S.A. § 95.11(2)(b). Florida departed from the four-year limitations period suggested in the model

UCC. Thus, the Limitations Convention four-year period is different than Florida law but consistentwith UCC law in most other states in the United States.

79 F.S.A. § 95.11(3)(k).80 See Hill, A Comparative Study of the United Nations Convention on the Limitation Period in the

International Sale of Goods and § 2-725 of the Uniform Commercial Code, 25 TEX. INT’L L.J. 1, 3(1990).

81 Limitations Convention Article 3(3), supra, note 74.82 Should the parties agree to “opt-out” of the Limitations Convention, they should specify either a

specific limitations period applicable to the transaction or an alternative law of limitations, such asFlorida contract law. Florida practitioners should be aware of certain statutory provisions regardinglimitations periods for contract cases. See F.S.A. § 95.03 (shortening statute of limitations in contractmay be void); and F.S.A. § 95.10 (cause of action arising out of state).

83 Among the more useful sources of practical information concerning drafting contracts under the CISGis Winship, Changing Contract Practices in Light of the U.N. Sales Convention: A Guide forPractitioners, 29 INT’L LAW. 525 (1995). Practitioners delving into international trade for the firsttime also may benefit by considering model forms. See The ICC Model International Sale Contract(Paris, France: ICC Publishing S.A., 1997).

84 See Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., Inc., 313 F.3d 385, 388-89 (7th Cir.2002) (CISG does not provide for award of attorneys’ fees).

85 See Schmitz-Werke GmbH + Co. v. Rockland Indus., Inc., 37 Fed. Appx. 687 (4th Cir. 2002) (applyingMaryland law to issues not addressed by CISG).

86 Florida is a center of international arbitration and the State has enacted legislation promotinginternational arbitration. F.S.A. § 648.01 et seq. (the “Florida International Arbitration Act”). Thepractical issues described in this section also apply in the context of arbitration proceedings.

87 F.S.A. Const. Art. 5 §§ 1 to 6; F.S.A. §§ 25 to 26.88 28 U.S.C. § 1331. This argument was made in Florida in Impuls I.D. Internacional, S.L. v. Psion-

Teklogix Inc., 234 F. Supp. 2d 1267, 1270-1272 (S.D. Fla. 2002). However, in that case, the courtfound that the transaction was not governed by the CISG.

89 28 U.S.C. § 1332(a)(2).90 E.g., an illustration in the “Scope of Convention” section of this article involved a transaction between

a Delaware corporation with its principal place of business in California and a Delaware corporationwith its principal place of business in Canada. Almost certainly, “federal diversity” jurisdiction would

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be lacking because the parties are both Delaware corporations. See 28 U.S.C. § 1332(a)(1) and (c).However, because the transaction is CISG-governed, the case may be subject to “federal question”jurisdiction. Thus, the CISG may expand the role of the federal courts into international transactions.See Asante Technologies, supra, note 35 at 1150-51 (applying federal question jurisdiction to CISGdispute).

91 See China Nat’l Metal Products Import/Export Co. v. Apex Digital, Inc., 141 F.Supp.2d 1013, 1022 n.6(C.D.Cal. 2001) (court applied California law to U.S.-China transaction, in part, because parties neverpresented to court how CISG would apply).

92 See AMCO Ukrservice, supra, note 28 (citing German precedent); Medical Marketing Int’l, Inc. v.Internazionale Medico Scientifica, S.R.L., 1999 WL 311945 or 1999 U.S. Dist. LEXIS 7380 (E.D.La.1999) (unpublished opinion) (citing German precedent); St. Paul Guardian, supra, note 70 (citingGerman precedent); Usinor Industeel, supra, note 37 (citing Australian precedent). Foreign courtshave often cited decisions from other nations in construing the CISG. See Mazzota, The InternationalCharacter of the UN Convention on Contracts for the International Sale of Goods: An Italian CaseExample, 15 PACE INT’L LAW REV. 437 (2003).

93 The following materials on the CISG are useful resources: Lookofsky, Understanding the CISG in theUSA: A Compact Guide to the 1980 United Nations Convention on Contracts for the InternationalSale of Goods (Kluwer Law Pub., 1995); Kritzer, Guide to Practical Applications of the UnitedNations Convention on Contracts for the International Sale of Goods (Kluwer Law Pub., Supp. 1994);Kathrein and Magraw, The Convention for the International Sale of Goods: A Handbook of BasicMaterials (Chicago, IL: American Bar Association, 1990).

94 Because Florida’s export and import trade centers in the Americas, Florida practitioners may findAutonomous Network coverage for Latin America especially useful.

95 See CISG-AC Publishes First Opinion, 15 PACE INT’L LAW REV. 453 (2003).

Tom McNamara is a partner with Davis Graham & Stubbs LLP – (303) 892-9400 –and immediate past president of the Colorado Bar Association International LawSection. His practice focuses on international litigation and dispute resolution.

LEGAL DISCLAIMER: This article is designed to provide general information concerning theUnited Nations Convention on Contracts for the International Sale of Goods. It is provided with theunderstanding that the author is not giving legal advice. This article should not be used as asubstitute for professional legal advice in specific situations. If legal advice is required, a legalprofessional should be engaged to render such advice. Although this article is designed to provideaccurate information as of May 2004, the rules and laws described herein may change. Attorneysdealing with specific legal problems should conduct independent legal research.