Global Sales Law Prof. Dr. Ingeborg Schwenzer University of Basel Switzerland.

Global Sales Law

Prof. Dr. Ingeborg Schwenzer

University of Basel

Switzerland

Introduction

• Development of global trade• 2010: 9,5% increase (WTO)• 2000-2008: average annual growth 5%• Focus: China, Brazil, Russia, Africa• 2007/08: Africa annual growth: exports: 18/28%,

imports: 23/27%• Different laws = obstacle to trade

Introduction

• Different sets of sales law• Domestic: SGA, CC, others• Regional: OHADA Uniform Act on General

Commercial Law (UAGCL), general contract law

• Global: UN Convention on Contracts for the International Sale of Goods (CISG), UNIDROIT Principles of International Commercial Contracts

Introduction

• History of Unification of sales law• 1920s: Ernst Rabel• 1960s: Hague Conventions ULIS/ULF• 1980: Vienna Conference CISG• 1988: Entering into force• 2011: 76 member states covering 80% of world

trade• Africa: 9 member states, only two OHADA states

Introduction

• Structure of the CISG

• Part I: Sphere of application

• Part II: Formation of the contract

• Part III: Substantive rules for the sale of goods, incl. duties of the parties, remedies, risk of loss

• Part IV: Final provisions – international public law

Part I: Sphere of application

• Application and ambit of CISG (Art. 1-6)• CISG itself determines ist applicability• Art. 1(1) CISG: different states (Art. 10 CISG)• Art. 1(1)(a) CISG: both states are member states• Art. 1(1)(b) CISG: rules of private international

law lead to member state• Example China – Cameroon• Application by arbitral tribunals


• Party autonomy Art. 6 CISG

• Opting out in whole or in part

• Choice of domestic law, f.e. Swiss law

• Litigating under the wrong law


• Ambit of the CISG

• Sale of goods contracts

• Barter contracts, back-to-back-sale

• Distribution agreements

• Art. 3 CISG: work and labour, services

• Art. 3(1) CISG: manufacture of goods

• Art. 3(2) CISG: mixed contracts (factory)


• Ambit of the CISG• Goods: factory, machine, food, shoes,

clothes, cars, circus elephant• Documents representing the goods• Art. 2 CISG exceptions• Art. 2(a) CISG: consumer sales• Art. 2(b)(c) CISG: auctions, bancruptcy• Art. 2(d)(e)(f) CISG: certain goods


• Substantive ambit

• Art. 4 CISG: Formation, rights and obligations of parties

• Art. 4(a) CISG: validity questions

• Public policy, mandatory rules, capacity of the parties, fraud, mistake?

• Art. 4(b) CISG: transfer of title, retention of title, bona fide purchase


• Substantive ambit

• Art. 5 CISG: Compensation for personal injury and death

• Compensation for damage to property

• Limits of the CISG (external gaps)

• Agency, assignment, transfer of debts, joint debtors, limitation of actions, set-off?

• Form requirements: Art. 11 CISG


• Art. 7 CISG: Interpretation of the CISG

• Art. 7(1) CISG: international character, promotion of uniformity, good faith

• Art. 7(2) CISG: gap-filling

• General principles of CISG (party autonomy, burden of proof, stamdard of proof, set-off)

• PICC?


• Art. 8 CISG: Interpretation of party statements and conduct

• Art. 8(1) CISG: true intention of parties

• Art. 8(2) CISG: reasonable person

• Art. 8(3) CISG: circumstances to be considered

• Art. 9(1) CISG: usages and practices

• Art. 9(2) CISG: international usages


• Art. 11 CISG: freedom of form

• Formation, Art. 29(1): modification

• Excluded: procedural requirements, pariol evidence rule, consideration, cause, statute of frauds

• Art. 12 CISG: reservation

• Agreed form, Art. 13 CISG: writing

• Art. 29(2) CISG: modification

Part II: Formation of the contract

• General remarks

• Art. 14 et seq. CISG antiquated

• Offer-acceptance mechanism

• e-commerce, UNCITRAL Concention 2004

• Standard terms: incorporation – validity

• Pre-contractual duties

• Breaking off negotiations


• Offer

• Art. 14 CISG: criteria for an offer

• Art. 14(1) CISG: definiteness (pretium certum – Art. 55 CISG), intention to be bound (invitatio ad offerendum)

• Art. 14(2) CISG: public offer (advertisements, websites)


• Offer• Art. 15(1) CISG: effective upon reaching

the offeree• Art. 15(2) CISG: withdrawal of offer• Art. 16 CISG: revocability of offer• Art. 16(1): Common Law starting point• Art. 16(2): restrictions on revocability• Art. 17 CISG: termination of offer


• Acceptance (Art. 18-22 CISG)

• Art. 18(1): acceptance by declaration

• Statement or conduct (delivery, payment)

• Acceptance by silence

• Effectiveness of acceptance: Art. 18(2 s.1): reaching, Art. 18(3): performance of act


• Acceptance (Art. 18-22 CISG)• Deadline for acceptance (Art. 18(2) CISG)• Art. 20 CISG: calculating the period of time• Art. 21 CISG: when late acceptance may

be effective• Divergence between offer and acceptance• Art. 19(1): rejection and counter-offer• Art. 19(2)(3): insignificant modifications


• Battle of forms

• Practical importance

• Possible solutions: last shot doctrine, knock-out doctrine

• Commercial letter of confirmation (acceptance by silence?)


• Effectiveness of statements

• Importance of statement reaching the other party, Art. 23: conclusion of contract

• Art. 24: when does statement reach the other party?

• e-commerce, standard terms (making available, transparency)

• Art. 29: modification of contract

Part III/1: Substantive Rules - General

• Content of Part III: General, obligations of seller, obligations of buyer, passing of risk, common provisions

• Basic remedies• Specific performance (Art. 28 CISG)• Right to withhold performance• Damages• Avoidance of contract, Art. 25:

fundamental breach


• Art. 26 CISG: declaration of avoidance

• Art. 27 CISG: dispatch principle – transmission risk

• Other notices (non-conformity


• Art. 25 CISG: fundamental breach• Fundamentality: effect on creditor• Foreseeability• In case of non-performance: impossibility,

delay – time of the essence, ancillary duties

• Non-conformity of the goods: purpose of the contract, repairable defect, time of the essence


• Art. 25 CISG: fundamental breach

• Breach of buyer‘s obligations

• Payment, repudiation, insolvency

• Taking delivery

• Art. 28 CISG: Specific performance

• Common law – Civil law

Part III/2: Substantive Rules – Seller‘s obligations

• Overview Art. 30-44 CISG

• Cornerstone of any sales law

• Art. 30-35: delivery, conformity

• Art. 37-40: non-conforming goods

• Art. 41-43: third party rights

• Art. 44: buyer‘s excuse for not giving notice


• Seller‘s duty to deliver• Art. 30 CISG: delivery, documents,

transfer of title• Art. 31 CISG: place of delivery• Primarily party agreement• Incoterms 2010: EXW (ex works), FCA

(free carrier)/FOB (free on board), CIF (cost, insurance, freight), DAP (delivered at place)


• Seller‘s duty to deliver• Subsidiary rules• Art. 31(a): carriage of goods• Art. 31(b): goods at specific place• Art. 31(c): seller‘s place of business• Making available• Art. 32: obligations during transport• Jurisdiction at place of delivery


• Seller‘s duty to deliver

• Art. 33: time of delivery: primarily party agreement

• Art. 33(a): fixed date

• Art. 33(b): fixed period of time

• Art. 33(c): reasonable time after conclusion of contract

• Art. 52(1): early delivery by seller


• Art. 34: handing over of documents

• Documents of title

• Other documents

• Place and time of handing over of documents

• Right to cure in case of early delivery


• Art. 35 CISG: conformity of the goods• Most important provisions of CISG• CISG key concept: quality, quantity, aliud

packaging treated alike• Domestic approaches: warranties/

conditions (SGA), express/implied warranties (UCC), vices cachés (CC), peius/aliud (CC, Germanic systems), partial non-delivery, ancillary duties


• Art. 35 CISG: conformity of the goods• Art. 35(1): primarily party agreement• Quantity: trade usages• Quality: features of goods, origin, manufacturing

practices, ethical standards• Dicrepancies in nature: aliud• Packaging• Additional duties: services, non-competition


• Art. 35 CISG: conformity of the goods

• Art. 35(2): objective criteria to determine conformity

• Art. 35(2)(a): fitness for ordinary purpose

• Commercial purposes, resalability, average quality?

• Public law requirements, regional v. global players


• Art. 35 CISG: conformity of the goods• Art. 35(2)(b): fitness for particular purpose• Purpose made known to seller• Buyer reasonably relying on seller‘s skill

and judgement• Art. 35(2)(c): sample or model• Art. 35(2)(d): adequate packaging• Art. 35(3): buyer‘s knowledge


• Art. 36: determinative time for conformity

• Art. 36(1): passing of risk

• Burden of proof

• Art. 36(2): after risk has passed: breach of obligation, guarantee

• Durability in general

• Art. 37: seller‘s right to cure non-conformity


• Art. 38, 39: Examination and notice

• Comparative overview: SGA, CC, UCC, Germanic systems

• Drafting history

• Art. 38: Examination

• Method of examination

• Period for examination: general, carriage of goods, redirection or redispatch


• Art. 39: notice

• Specificity of notice

• Form and transmission risk

• Reasonable time: nature of goods, „noble month“

• Beginning of period

• Art. 39(2): two year cut-off period


• Art. 40: seller‘s knowledge

• Consequences of failure to give notice

• General – Art. 44: reasonable excuse

• Limitation periods

• UN Convention on Limitation period: 4 years

• Domestic rules vary from 6 months to 6 years, compatability with Art. 39(2)


• Art. 41, 42: defects in title and intellectual property rights

• Distinction unknown to most countries

• Art. 41: defects in title

• Third party rights (property, encumbrances)

• Third party claims

• Public law encumbrances


• Art. 42: third party industrial or intellectual property rights

• Third party rights or claims

• Art. 42(1)(a)(b): territorial restriction

• Seller‘s knowledge

• Art. 42(2): exclusion of seller‘s liability

• Art. 43: notice requirement

Part III/3: Substantive Rules – Buyer‘s remedies in case of breach• Art. 45-52 CISG: buyer‘s remedies

• Unified approach: breach of contract

• Some special rules: non-conformity

• Art. 45: overview of buyer‘s remedies

• Concurrent domestic remedies: contract law (mistake), tort law (culpa in contrahendo, negligent misrepresentation)

Part III/3: Substantive Rules – Buyer‘s remedies in case of breach• Art. 48 CISG: seller‘s right to cure• Distinguish Art. 37• Relationship to buyer‘s right to avoid the

contract• Setting time limits• Art. 47: buyer fixing additional time for

performance• Art. 48(2)(3): seller requesting additional

time

Part III/3: Substantive Rules – Buyer‘s remedies in case of breach• Art. 46, 47 CISG: right of performance and

substitute performance• Art. 46(1): right to specific performance

subject to Art. 28 and Art. 79• Art. 46(2): restriction on right to substitute

goods in case of non-conformity (fundamental breach)

• Art. 46(3): restriction on right to repair in case of non-conformity

Part III/3: Substantive Rules – Buyer‘s remedies in case of breach• Art. 49: Avoidance of contract

• Art. 49(1)(a): fundamental breach

• Art. 49(1)(b): „Nachfrist“-principle (additional period in case of non-delivery and breach of additional obligations)

• Art. 49(2): restriction in case of delivery of goods

• Avoidance by declaration

Part III/3: Substantive Rules – Buyer‘s remedies in case of breach• Part performance and delivery of partly

non-conforming goods

• Art. 51 and Art. 73 CISG

• Art. 51(1), 73(1): principle: partial avoidance only

• Art. 51(2), 73(3): avoidance of the whole contract in case of fundamental breach

• Art. 72: Anticipated breach of contract

Part III/3: Substantive Rules – Buyer‘s remedies in case of breach• Art. 50 CISG: reduction of purchase price• Roman law descent• Difference to damages: calculation, Art. 79 not

applicable• Art. 45(1)(b), 74 et seq.: damages• Right to withhold performance, general principle• Art. 71: right to suspend performance• Right to reject the goods (perfect tender rule?)• Art. 52(2): rejection of excessive quantity

Part III/4: Substantive Rules – Buyer‘s obligations

• Art. 53 CISG: payment, taking delivery

• Art. 54-59: payment of purchase price

• Art. 54: encompasses all arrangements, form of payment, letter of credit, compliance with public law regulations etc.

• Currency: agreement, place of seller

• Art. 57(1): place of payment

• Jurisdiction?


• Art. 58: time of payment• Agreement • Art. 58(1)(2): subsidiarily: step by step-

performance• Art. 58(3): reasonable opportunity to inspect the

goods• Art. 60 CISG: duty to take delivery• Necessary preparatory steps, taking over• Offer of non-conforming goods


• Art. 66-70 CISG: passing of risk

• Art. 66: payment obligation if seller performed all of its obligations, even if goods destroyed or damaged

• Which events are covered? Acts of states?

• Exception: loss or damage due to seller

• Primarily: agreement of parties (practice)

• Incoterms – who must insure the goods?


• Art. 66-70 CISG: passing of risk• Art. 67(1): handing over to first carrier, retention

of documents irrelevant• Art. 67(2): generic goods must be identified to

contract• Goods sold in transit: unclear when goods were

destroyed• Art. 68: conclusion of contract. Dating back to

handing over in case of insurance (contract valid)


• Art. 69: catch all provision

• Art. 69(1): goods at seller‘s place of business: taking over of goods or failing to take delivery

• Art. 69(2): other places of delivery (incl. buyer‘s place of business): when delivery is due, notification of buyer, identification to contract

Part III/5: Substantive Rules – Seller‘s remedies in case of breach• Art. 61 CISG: overview of seller‘s

remedies• Art. 61(3): no period of grace as CC• Art. 62: payment of purchase price, Art. 28

applicable• Can Art. 77 be applied to specific

performance of purchase price? Disputed.• Art. 62: taking delivery and other duties• Art. 63: fixing additional period of time

Part III/5: Substantive Rules – Seller‘s remedies in case of breach• Art. 64: avoidance of contract

• Art. 64(1)(a): fundamental breach

• Art. 64(1)(b): lapse of „Nachfrist“

• Fundamentalility of breach very rare: discuss non-payment, taking delivery, other duties

• Art. 64(2): restriction where price has been paid in the meantime (price main interest)

Part III/5: Substantive Rules – Seller‘s remedies in case of breach• Art. 61(1)(b), 74: damages

• Rights of retention: Art. 58(1): step-by-step-principle, Art. 71(1): if seller must perform first, Art. 71(2): right of stoppage in transitu (does not apply against carrier)

• Specification by the seller, Art. 65

• Notice to buyer necessary

• Art. 65 applicable to other duties?

Part III/6: Substantive Rules – Common provisions

• Art. 71: right to suspend performance and stoppage

• Art. 71(1)(a): deficiency in ability to perform (f.e. political situation, natural disaster), creditworthiness (buyer or seller)

• Art. 71(1)(b): debtor‘s conduct• Relevant time: after AND before

conclusion of the contract (becomes apparent), domestic remedies for mistake



• Evidential threshold: reasonable person• Weight of anticipated breach: „substantial part“

less than fundamental breach• „suspension“ of performance as well as

preparatory steps• Art. 71(2): right of stoppage• Art. 71(3): duty to give notice, adequate

assurance of performance



• End of in-between-state: Art. 72: no adequate assurance of performance, fundamental breach threatening

• Art. 72: anticipatory breach

• Art. 72(1): prior to date of performance, fundamental breach, „clear“


• Art. 72: anticipatory breach

• Repudiation by one party, demanding price adjustment, factual circumstances

• Art. 72(2)(3): possibility to give adequate assurance of performance, reasonable notice

• Duty to avoid contract before date of performance, Art. 77?


• Art. 73: installment contracts• Faulty performance of one installment (non-

delivery, late delivery, non-conformity)• Art. 73(1): partial avoidance only if fundamental• Art. 73(2): future installments, anticipatory

breach, lower threashold than Art. 72• Art. 73(3): retrospective avoidance• Other remedies? Damages, price reduction

Part III/7: Substantive Rules – Damages

• Responsibility and discharge• Any breach of obligation• No fault requirement – strict liability• Exemption under Art. 79, 80• Art. 79(1): impediment beyond control, not

foreseeable, not avoidable• Covers all contractual duties• Subsequent and initial impediments


• Typically: force majeure situations• Hardship? Threshold, consequences (duty

to renegotiate?)• Non-conformity of goods. Exemption rare• Liability for own employees: Art. 79(1)• Liability for third persons: Art. 79(2)• Passing impediment: Art. 79(3)• Art. 79(4): duty to give notice


• Art. 79(5): other remedies: withholding performance, avoidance, reduction of price, specific performance?

• Art. 80: creditor causing failure to perform

• All remedies excluded

• Causation by both parties (…to the extent)

• Apportionment of damages, avoidance?


• Extent of damages claim, Art. 74• Principle of full compensation• All losses, causation required• Non-performance loss, incl. Loss of use, costs of

repair• Incidental loss, additional costs etc. Legal costs?• Consequential loss, f.e. penalty, liability, damage

to property• Loss of profit


• Pecuniary (loss of reputation, loss of a chance) v. non-pecuniary loss (pain and suffering, loss of amenities)

• Calculation of loss• Concrete and abstract calculation• Art. 75: concrete: cover purchase• Art. 76: abstract: market-price-rule• Abstract calculation of other losses, esp.

loss of use?


• Betterment

• Disgorgement of profits (performance principle)

• Art. 74: foreseeability rule (contemplation rule)

• Standard: „possible consequence“

• Examples: non-performance loss, incidental loss, consequential loss


• Contractual stipulations on liability• Freedom of contract, Art. 6• Agreed sums (liquidated damages, penalties)• Limitations of liability – validity Art. 4(a)• Art. 77: duty to mitigate• Scope: damagess, other remedies?• Examples, substitute transactions• Consequences of breach

Part III/8: Substantive Rules – Interest

• Art. 78: price or any sum in arrears

• Highly controversial, Islamic countries

• Preconditions: sum due

• Interest rate: CISG itself? PICC? Domestic law?

• Full compensation -> interest rate at creditor‘s place, currency of payment

• Compound interest?

Part III/9: Substantive Rules – Effects of Avoidance

• Art. 81(1): release from primary obligations, arbitration clauses not affected

• Art. 81(2): restitution of what has been performed, concurrently

• Art. 82(1): impossibility of restitution = bar to avoidance or substitute delivery (antiquated rule, better: damages)

• Art. 82(2): cases excluded: other than buyer‘s conduct, examination, normal use

Part III/9: Substantive Rules – Effects of Avoidance

• Restitution: nature of claim? Effect of avoidance on property. CISG: contract remains intact (Art. 81(1) CISG)

• If goods are damaged after avoidance -> damages (Art. 74)

• Art. 84(1): interest on purchase price• Art. 84(2): benefits from goods,

surrogates, fruits, use (no abstract calculation)

Part III/10: Substantive Rules – Preservation of goods

• Breach of contract: problem: fate of the goods? Examples

• Art. 85: seller‘s duty if buyer does not take delivery

• Art. 86: buyer‘s duty if it rejects the goods• Art. 86(2): duty to take possession• Reasonable preservation measures,

depend on nature of goods• Art. 87: storage in a warehouse

Part III/10: Substantive Rules – Preservation of goods

• Art. 88: self-help sale

• Art. 88(1): normal self-help sale („may), notice required

• Art. 88(2): emergency sale, perishable goods („must“), possible notice

• Art. 88(3): proceeds: set-off against costs, account for balance

Global Sales Law Prof. Dr. Ingeborg Schwenzer University of Basel Switzerland.

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