CISG, CIF, risk, Hague Rules, Carriage of Goods by Sea

Extract 1 : Part-A
Extract 2 : Part-B

Part-B

We shall now look at whether or not we UN Convention on the International Sales of Goods provides a more satisfactory solution to the issues that are raised and whether or not the Convention was available to the parties.

The CISG is restricted to parties that have their place of business in different contracting states, under Article 1(1). The Convention applies to contracts of sale of goods between parties whose places of business are in different States :(a) when the States are Contracting States; or (b) When the rules of private international law lead to the application of the law of a Contracting State.

Australia is signatory but both the UK and Ireland are not despite the fact that the major and influential trading nations, such as the US, and most European states are parties to the CISG.

As Schmitoff points out the effect of this. Is that when contract is governed by English Law the states "must contract in."1 Therefore unless the parties have expertly mentioned that the CISG will apply then it will not.

Presuming that they have indeed contracted in, the approach taken by the CISG towards termination as a remedy for a breach of contract, is derived from the rationale that it is the most drastic of the remedies, and should therefore only be exercised as a last resort. Thus, Article 49 only allows a buyer to terminate, if the seller commits a 'fundamental breach'. Article 25 provides that a breach is 'fundamental' if it results 'in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result'.

In defining a 'fundamental breach', the provision refers to a number of vague concepts however, such as 'substantially and what a 'reasonable person…would not have foreseen' Thus, the net result of Article 25 is that buyers should not attempt termination of a contract, where the seller's breach is not clearly 'fundamental'; this is because a judgement on Article 25 requires national courts to creatively interpret several subjective concepts before evaluating the lawfulness of a termination.

In essence this makes it more difficult for the relevant parties to avoid their obligations under international sales contracts.

One suggestion has been the introduction of a presumption that the breaches of certain obligations are 'fundamental'2 , regardless of the harm that has derived from them 3. Whilst the text of the CISG does not make any express reference to the operation of such presumptions, Schlechtriem has suggested that this method of interpretation exists independently within the concept of the 'fundamental breach'. He asserts this on the grounds that the 'fundamental' breach' under the CISG is reflective of the English doctrine of conditions, which stipulates that if a certain expectation is a condition of, or is the essence of the contract, then a breach of it is automatically is fundamental. However, this view is not held unanimously 4

Added to this the remedy of specific performance of specific performance provided by the Convention Article 46 bestows on buyers the right to demand specific performance of the seller's obligations, and Article 62 entitles the seller to require the same of the buyer. The CISG includes Article 28 which provides that neither the buyer nor the seller are entitled to claim specific performance unless the 'court would do so under the law forum in respect of similar contracts of sale not governed by the Convention'.

Therefore, Imports UK may be able to plead that there has been a fundamental breach by the sellers and have the contract terminated accordingly. The same holds true for Fruitfare. It is submitted however, that both parties could not have reasonably foreseen the circumstances that occurred and thus the fundamental breach in both cases will not be held. In the alternative both could bring an action for specific performance, thereby holding the other party to its obligations. This cannot occur in the first case as the Myrus has sunk, yet the courts may give leeway here. As regards the Fruitfare contract, specific performance is more likely to be granted, however due to the commercial reality of the situation, it is still unlikely on the whole, and an award of damages is more likely.

  1. Schmitthoffs Export Trade -The Law and Practice of International Trade D'Arcy. Murray, Cleave pp 687[^ Return]
  2. For example, it has been suggested that such presumptions should be made in respect of breach of time clauses (Schlechtriem, in 'Uniform Sales Law' 1986 p. 60)[^ Return]
  3. Koji Takahashi 'Right to Terminate (Avoid) International Sales of Commodities' 2003 Journal of Business Law 102-130[^ Return]
  4. For example, Honnold, in 'Uniform Law for International Sales under the 1980 United Nations Convention (3rd ed. 1999) argued that it was not appropriate to compare domestic laws with international laws, as this would fail 'to take account of the special circumstances of international trade'.[^ Return]

BIBLIOGRAPHY

Chuan, JCT Law Of International Trade 2nd Edition

D'Arcy, L Murray, C Cleave, B Schmitthoffs Export Trade -The Law and Practice of International Trade

Day, D and Griffin, B The Law of International Trade Butterworths, 3rd ed 2003

Honnold, J 'Uniform Law for International Sales under the 1980 United Nations Convention (3rd ed. 1999) Kluwer

Schlechtriem, P Uniform Sales Law. The UN Convention on Contract for the International Sale of Goods, in Law-Economics-International Trade, vol VI, Vienna, 1986

Takahashi, K 'Right to Terminate (Avoid) International Sales of Commodities' 2003 Journal of Business Law

Todd, P Cases and Materials on International Trade Law Sweet and Maxwell 2003

Extract 1 : Part-A
Extract 2 : Part-B

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