Uniform Law On International Sale Of Goods Law International Essay

Published Date: 02 Nov 2017

CHAPTER 2

The increased international trade has led to several problems for the domestic legal minds: both lawyers and judges. they have to be well acquainted with numerous legal systems to resolve the problems created and the issues raised in an international trade transaction. [1] This unnecessarily complicates the trade relations and increases the work burden. This is mostly tricky if the legal system in question has not come across situations dealing with certain concepts earlier. [2] 

In this era of globalization, thanks to the faster modes of communications such as the internet, the world has been reduced to a global village, were every nation is in trade relations with other nations. With the lifting of the legal barriers and with an attempt to move on lines of the developed countries, businessmen of the developing countries are now involved in international sales transactions with traders from a wide group of jurisdiction whose laws are not uniform or familiar. Thus, it has resulted in many encountering legal issues associated with a foreign legal system. [3] In such a scenario, in case of any dispute, it leads to numerous problems for all its stakeholders such as businessmen, traders, lawyers, policy-makers, and legal systems. [4] Such a scenario can be dealt with or done away with if the trading nations have a similar or uniform legal system based on model international mechanism. [5] For a uniform sales law in general and CISG, in particular, is an attempt to lessen such risks in the area of sales of goods.

Traders are saved from being saddled with uncertainty and cross-border trade is facilitated if the differences in various national laws and legal systems are eliminated by harmonization of laws relating to any particular field is achieved. Laws dealing with commercial interests should keep in mind the interests of the commercial community as a whole. The commercial community requires certainty which is possible by a uniform set of rules and regulations which are applicable to international commercial transactions. Also, it is beyond dispute that exchange is facilitated by law. It is as necessary to a cross-border transaction as it is to a local domestic transaction. It is only under a set of clear and certain rules as positive law that the traders will be able to operate their freedom of contract efficiently. [6] 

The need of having a uniform international sales law is furthered by the preamble of CISG which takes in to account the various social, economic and legal systems. This need thus leads to the promotion and development of international trade. [7] A uniform international sales law will remove substantial barriers to cross-border trade by providing a simplified and unified framework of law within which international sales can take place. The activity of international trade can itself provide basis for a friendly relation if it is structured by a common set of rules and regulations, informed by principles of equality and mutual respect. [8] Co-operation among nations in the field of international trade is an important factor not only in promotion of the friendly relations, but also consequently in maintenance of peace and security among countries. [9] There is progressive unification and harmonization of international sales law for removing or reducing legal obstacles in the flow of international trade, especially the obstacles which affect developing nations. This step has contributed significantly to the global economic co-operation among nations on basis of equity, equality, common interest and the elimination of discrimination in the arena of international trade. The ultimate result of this entire process will be the well-being of all people. [10] Thus adoption of a Uniform Sales Law is in the best interests of not only India but the entire world community.

GLOBAL APPROACH

The first attempt to unify international sales law can be dated back to 1920. Since then number efforts have been made in this regard which have been discussed in the previous chapter. This clearly highlights the need for a uniform international sales law which will exert great influence both at international at domestic level. [11] There has been certain attempts post-CISG in this arena. The first set of UNIDROIT Principles of International Commercial Contracts (PICC) was launched in the year 1994, which closely followed the CISG not only with respect to the mechanism of remedies but also in its systematic approach. [12] Same is in the case of Principles of European Contract Law (PECL) which was published in 1999. [13] Moreover, the EC Directive on ‘Certain Aspects of the Sale of Consumer Goods and Associated Guarantees’ must also be mentioned in this regard, [14] as it took its definition of conformity of goods from Article 35 of CISG and thus introduced this concept into domestic sales laws of EU member states. [15] In Africa, sixteen member states of the Organisation for Harmonisation of Business Law in Africa, or in French, l'Organisation pour l'harmonisation en Afrique du Droit des Affaires (OHADA) has adopted the Acte uniforme sur le droit commercial général (AUDCG) as uniform law for than region. [16] Lastly, the Draft Common Frame of Reference published in early 2008 is a continuation of these different harmonization efforts. [17] It includes general concepts relevant to sales contracts, i.e., the obligations of the parties and the remedies available.

Another interesting aspect of uniform international sales law is that it can act a role model not only at an international level but also for the national law makers. Example can be take of Sweden, Norway and Finland which utilised the introduction of CISG as an opportunity and enacted new domestic laws on sale of goods based on it. [18] Moreover, at the end of the cold war and the disintegration of the Soviet Union, the resultant new European nations formulated their civil codes based on the uniform law prevalent then, i.e. the CISG. This is true with regard to the Commonwealth of Independent States (CIS) [19] and for the Baltic states among which the most pertinent example is Estonia. The domestic contract law of the trading giant China (the People's Republic of China) whose dominance in the international trade arena cannot be questioned is also based on harmonised international sales law. Lastly, the renewal of the German Law of Obligations is also influenced from uniform international sales law from the very beginning. [20] 

Uniform law in Practice: The choice of law

The existence of uniform sales law is generally known to the lawyers and traders involved in international trade. Nevertheless, there seems to be a affinity to suggest the exclusion of uniform sales law, especially in the commodities trade. There are three main reasons which are usually given for this approach. First, even though any uniform law would be commonly known, the degree of acquaintance with its functioning and application in practice is normally very low. Lawyers generally prefer their own national law and tend to prove to the saying "you can't teach an old dog new tricks" true. The second reason arises from the first one: whenever the position of the party to a contract allows that party to retain its own national law in a contract, they prefer to do so. Thirdly, most parties are not fully convinced of the benefits of the uniform international sales law as compared to national sales laws. Lastly, most international conventions have their texts in more than one language, with draft in one language having authority over the others. However, in certain conventions, this is not the case and all official languages are considered equally authoritative which gives rise to criticism. However, these arguments are unconvincing for several reasons. [21] 

Even though it is now generally accepted in the western developed nations that at least the business parties are free to choose the applicable law to a contract, this is not true for all the parts of the world. The apprehension of giving western countries too many advantages leads many transitions and developing countries to refuse the recognition of the choice of law clause. One prominent example is Brazil where validity of choice of law clause is highly controversial and regulated. Thus, an English buyer procuring goods from a Brazilian seller and having contracted on basis of Uniform Commercial Code, will find itself in a very insecure position while trying to sue the seller in a Brazilian court applying domestic Brazilian law to the contract. This will lead to a situation where the party is confronted with a law that is hardly foreseeable and is not understandable or truly accessible.

Even if choice of law clauses are recognized, any party insisting on its own national law will still encounter serious problems when litigating in the courts of a foreign nation. First of all, respective law has to be proven in the court. This not only implies the need to translate statutes and other legal texts, like scholarly writings and court decisions, into the official language of the domestic court but also usually requires the presentation of an expert opinion. In some nations the experts may also be appointed by the court while in other nations each party has to present its own expert, and often several experts are needed. Needless to say that all this proves to be very expensive and time consuming. The consequences are particularly harsh in procedural systems where each party has to bear its own cost regardless of the final result of the litigation, as is the case specifically under the purported "American Rule". To make things worse, even if the party is willing to bear all the above mentioned costs to prove the foreign law in the court, it still faces a high degree of unpredictability regarding the application and interpretation of this law by foreign courts and a very high margin of error. [22] 

It is true that today, a large number of cross-border sales disputes are not litigated before the national courts but are rather amicably resolved by the international commercial arbitration. Still, problem of proving the domestic law remains and the translations are still very necessary where this law is not available in English language. Moreover, it often remains uncertain, how the arbitrators, who more than often come from very different legal backgrounds, will apply the domestic law.

In most cases, the parties seek to resolve these problems by resorting to what is believed to be a "neutral law," although political neutrality is often confused with the suitability of chosen law for the international transactions. This particularly seems to be true for the Swiss law. If parties choose such a neutral (third) law, they may even be worse off than they would have been if they had chosen one of their own home laws. To start with, they will have to investigate the foreign law. Moreover, the costs and trouble in proving it are more burdensome. Last, but not least, laws like the Swiss domestic sales law can be uncertain and not suitable for international contracts in certain core regards.

All the above mentioned shortcomings of the domestic laws are avoidable by applying uniform international sales law.

CHAPTER 3

ADVANTAGES AND DISADVANTAGES OF CISG

ADVANTAGES

There are various advantages which the CISG offers as a convention to trader and the lawyer. The Singapore Academy of Law's Law Reform Committee lists down the following advantages of ratifying CISG:

CISG achieves the unification and simplification if international sale law

One of the essential features of CISG is its clarity, practicality and simplicity. It is easy for businessmen to understand as it does not include any legal shorthand or complicated legal theory. [23] CISG avoids use of any shorthand terms which might be prone to different interpretations. [24] Cases where a shorthand expression has been used [25] , the drafters of CISG have provided a clear definition. Thus, CISG is written in a businessmen’s language [26] with along with practical details for them to understand. [27] 

Over two-thirds of the countries have ratified the CISG.

As on today, 79 countries are signatories of CISG. These counties alone accounted for 61% of the world trade in 2002 and much more presently. [28] Thus, if a country does not ratify CISG it may be left behind from the rest of the major trading countries in the world. [29] 

There is unified application and interpretation of CISG.

Commentaries and literary work by eminent scholars' commentaries help in this process. A phenomenal amount of work, time and scholarship has gone into making of CISG. [30] Moreover, the decisions pronounced on various provisions of CISG are complied in the Case Law on UNCITRAL Texts ('CLOUT'), which in the due course will lead to greater certainly and uniformity.

CISG came in to existence after the Uniform Law on the International Sale of Goods ('ULIS'), which took many years to be formulated. Although, ULIS was not very successful, CISG has removed most of its shortcomings.

CISG is a neutral law acceptable by both parties.

It is fair and does not favour the buyer at the expense of the seller or vice versa, and thus parties have equal bargaining. Hence, the selection of CISG can be viewed as a neutral, constructive and even-handed approach. [31] 

CISG recognises that parties to an international sales contract may want to exercise broad contractual freedom. Article 6 enables the parties to exclude the application of CISG and to vary or derogate from the effect of any of its articles. [32] 

CISG help avoid the tricky conflict of laws issues.

It takes into consideration modern trade practices and realities. [33] 

CISG is available in all the six official languages of including Arabic, English, Chinese, French, Spanish and Russian.

It provides the legal infrastructure to assist a government's drive to encourage economic expansion by providing companies and businessmen with a uniform international sales law with the countries they are investing in.

CISG helps in the promotion of international trade by removing a substantial barrier of diverse legal frameworks.

It is a complete code which act as gap-fillers

Most sales contracts are incomplete as every sort of contingency can never be covered. Hence gaps are created in them. A uniform sales law embodies default rules [34] which are solutions to these gaps. These default rules intend to ensure a uniform standard of treatment to a particular problem which may arise in international sales contracts. [35] 

CISG is applicable to transactions which constitute a large portion of international business transactions. [36] It is concerned with rights and duties of the buyer and the seller arising from sales contract and also addresses important aspects of contract law in general, such as formation of contract and its interpretation, right to suspend the performance, anticipatory breach and lastly damages and exemption from the liability for the non-performance, leading to an enlarged scope of application.

It does not favour a civil law approach over the common law approach to the problems related to the dealings between parties or vice versa. Rather, it aims is to find a compromise between the two.

CISG is "good law" in the sense that it represents reasonable compromises on complex commercial issues acceptable to almost all of the important participants in the international trade. [37] 

It contains useful provisions on practical problems such as requiring the parties to preserve the goods in their possession belonging to other party.

CISG has narrowed its field of application so that common law countries can adopt it.

DISADVANTAGES

Sieg Eiselen aptly summarises the disadvantages of ratifying the CISG. [38] He states:

Legal uncertainty would be caused by the introduction of a new set of rules regarding international sale

The convention is nothing but a set of broadly formulated rules which contains many new and undefined terms which will have to be developed by arbitral tribunals and courts having no hierarchy and thus no principle of stare decisis. This will lead to legal uncertainty.

CISG introduces foreign solutions to problems whose solutions were well known in the domestic legal systems. Thus, it is a futile instrument.

In most instance parties exclude the application of CISG, thus it is irrelevant.

The convention evades many real issues and blunts the solutions and thus is in a way compromise character.

The legislative measures are not most suitable means to create the legal unification or solve problems created by the diverse laws and conflict issues.

CISG has robbed the international sales law of its flexibility and has fossilized it in a code which will be almost impossible to change.

Due to diverse tradition and interpretational approaches the integrity of the convention is threatened.

CISG is not comprehensive. It does not relate to the validity of a contract. Barry Nicholas remarked that CISG 'would not therefore achieve one of the main objectives of the uniform laws'. [39] 

Also CISG uses imprecise language for common law lawyers. Professor Farnsworth described the language used as giving a 'sense of unease'. [40] Arthur Rossett described it as using 'language which, first of all, is foreign in regard to the law of contract and therefore has no clearly defined meaning and, secondly, is too wide and inexact and therefore leads to uncertainty'. [41] 

Courts of different nations, partly due to inaccurate language, have interpreted provisions of CISG inconsistently, which has further hindered the object of simplification and uniformity. [42] 

CISG is not equally authentic in all six languages, namely, Arabic, Chinese, English, French, Russian and Spanish. [43] Rossett described its effect as: 'Inevitably, the various versions of the Convention are not perfectly faithful to each other since subtle nuances will elude even the most highly skilled translated translators.' [44] 

Another disadvantage is that CISG makes compromises conceptually and linguistically to accommodate the conflicting demands of the civil law and the common law, leading to lack of clarity. [45] 

Domestic courts tend to treat CISG in a cursory manner and thus ultimately make decisions only based on the domestic laws. [46] 

The CISG thus deprives the buyer of his statutory right under the domestic law to reject the goods when they do not conform to the quantity or quality. [47] 

CISG brings in a great risk through its Article 11, which says that any contract of sale need not be in writing. However, in cases not falling within the ambit of CISG, the national laws will be applicable which might mandatorily require written contracts. This leads to uncertainty.

A major problem with the convention is that it is international law applied locally. This unavoidably puts a local tint on interpretation of CISG. The fact that no international court administers CISG is identified by Ronald A Brand and Harry M Flechtner as the most 'serious obstacles to achieving the uniform international sales regime at which CISG aims'. [48] 

REFUTING THE ALLEGATIONS

Although not the overall advantages of CISG are undisputable, the criticism regarding application of the convention to international commercial transactions remains, and it seems to develop a strongly negative view of CISG in certain countries. On a closer look at these criticisms, it is revealed that they are unfounded as they resuot from general misunderstanding. Even in cases where the criticism has some merit, appropriate defences/ remedies can be developed.

INCOTERMS and risk of loss [49] 

In the nations which have not yet adopted CISG, such as India and the United Kingdom, often it is suggested that the convention does not suit the needs of international trade. This particular criticism focuses on two points, one of them being the relationship between the CISG provisions on risk of loss and the INCOTERMS. (the other point regarding the specific needs of commodity trading is discussed in next point).

These arguments are diluted if one looks at the drafting process of CISG. The drafters not only took into account the contributions of academicians, legal practitioners and governments, but also, most notably those of the International Chamber of Commerce (ICC). In return, ICC demonstrated its full appreciation and support to the convention by adopting the provisions of the convention as ICC model terms.

Concerning the convention provisions relating to the risk of loss, it has been stated "that they do not accommodate well understood delivery terms such as FOB and CIF and do not mesh well with Incoterms so that they fail to capture the central ground of sales practice." This criticism is based on the fundamental misunderstanding of relationship between contract terms, including INCOTERMS on one hand, and the default system of the convention on the other. As the name suggests, the default system will come into play only if parties do not make provisions for a specific issue in their contract. It is virtue of the default system to give enough leeway to parties to tailor their contract according to their individual needs. To necessitate the default system to mirror vast majority of contracts would make it unsuitable for a wide range of markets. As CISG stands today, it yields just and fair results for all kinds of sales contracts in different markets. As Jan Ramberg has pointed out, CISG provisions on the risk of loss as the default system are perfectly compatible with INCOTERMS 2000 as contractual terms. The convention serves as general background; INCOTERMS that are being revised every ten years are responsible for the fine tuning.

Not suitable for commodity trade

Authors continuously allege that although CISG may be suitable for sale of manufactured goods it does not satisfy needs of commodity trade. Apart from objection concerning the risk of loss, the criticism targets rules on fundamental breach and on cure. Nevertheless, as has been shown in another place, the provisions of CISG can easily be adapted to peculiarities of commodity trade. In the parts of commodity market where string transactions continue to prevail or prices are susceptible to considerable fluctuation, some special standards have to be applied for determining whether there is fundamental breach. In such circumstances, the timely delivery by handing over of clean documents, which can be resold in normal course of business, is essential to the contract. If parties do not stipulate its importance by a respective clauses, it can be derived from circumstances by an interpretation of the contract pursuant to Article 8(2), (3) CISG. As a result, seller's general option to remedy a defect in the documents that is normally provided by CISG does not exist in commodities trade. Thus, in this specific trade branch, the solution under CISG is quite similar to that under perfect tender rule of Common Law.

Lack of Neutrality between the Parties

Representatives of developing nations have argued that the convention is too seller friendly. This allegation focuses mainly on obligation of buyer to examine goods and give a notice of any non-conformity. At Vienna Conference, this position was supported by delegates from certain countries whose legal systems did not provide for a notice requirement. The well known compromise is now found in Article 44 CISG.

On other hand, especially legal practitioners with a German background fear that CISG is too buyer friendly. They point specifically to Anglo-American concept of "strict liability" and somewhat ironically to attenuation of the notice requirement. Nevertheless, in practice, differences between liability systems are negligible. The opposition reveals mainly a general and irrational fear of hitherto the unknown legal concepts and the outside influences.

All in all it can be concluded that if one side is criticizing the seller friendliness while other side fears the buyer friendliness, these arguments neutralize each other. This, finally, strongly suggests that CISG actually achieves reasonable and fair results for both the parties.

Hardship

Quite a few writers have complained about another perceived defect of the convention, i.e., absence of the rules relating to a severe change of circumstances and lack of an express provision on hardship. They thus advocate applicability of remedies laid down in these rules to CISG cases by pointing out other domestic laws or uniform projects which have introduced such provisions. Duty to renegotiate and possibility that the court may adjust contractual obligations to changed circumstances are particularly emphasized.

As has been discussed in another place, CISG itself is better suited for the practical solution of problem of the change of circumstances. Even though taken at face value, Article 79 of CISG primarily deals with exemption in cases of force majeure, a change of circumstances can also amount to an impediment in sense of this provision.

In regard to remedies available in the case of hardship, CISG mechanism is flexible enough to reach equitable and just results. On one hand, CISG provisions guarantee certainty, while on other hand, they contribute to implementing fair dealing and good faith in international sales law.

Uncertainty in interpretation

A major problem with implementation of a convention is the possibility of having opposing views on cases of similar nature by judges from different countries. Drafters of CISG were aware of this problem and therefore, tried to give a solution by incorporating some rules of interpretation would aid in achieving uniformity.

CISG takes the first step in this direction by observance of good faith and application of general principles underlying it. [50] By emphasising on its international nature and the need to encourage uniformity in its application, this provision does not encourage any remedy to legal domestic concepts and frees judges, particularly in the countries of common law tradition, from iron chains of the precedents, thus permitting them to examine the foreign cases as well in order to attain uniformity in application of CISG. [51] 

While drafting a legislation or convention, sometimes a provision is drafted in an abstract manner so as to cover all possible situations that might arise in future. This was the approach of Hague Conventions. However, CISG is humble in this respect. It admits that some issues are not addressed to and are left to be resolved by the applicable law under traditional rules of private international law, [52] like the issue of passing of property, on which the gulf between two traditions is too wide to be bridged at present. [53] Answers to the interpretation questions are to be found within CISG and its underlying principles. There should not be too impulsive reference to a national system of law. It should be the last resort. [54] 

CISG also gives directions on interpretation of statements and conduct of parties to a contract in hand. Its emphasis on fairness between parties is clear in its provisions which are designed in such a manner so as to ensure that effect is given to intentions of parties as far as they can be determined. If actual intentions cannot be determined then "reasonable person" test is to be applied with reference to all circumstances of the case. [55] Parties are bound by any practice or usage to which they might have agreed or which they might have established themselves. [56] They are also subject to regularly observed and widely known relevant usages in international trade, unless it is otherwise agreed. These usages are of vast practical significance in numerous areas of international trade. [57] 

The interpretation and the appropriate application of CISG largely benefits from the extrinsic input provided by the courts, the scholars, the lawyers, the travaux préparatoires and the commentaries. A practically important consideration for successful interpretation of CISG is promoting the knowledge of the national court judgments on law stated in CISG. Currently, UNCITRAL is looking in to this matter. Promotion of knowledge will help achieve consistent interpretation and reduce or remove uncertainties in operation of uniform rules. UNCITRAL has compiled CLOUT (Case Law on UNCITRAL Texts) which contains significant court decisions from around all over the world, to promote international uniformity in interpretation of CISG. [58] The increasing number of cases on the convention has helped in shaping the CISG's interpretation in a steady manner. [59] Evidently, there are conflicting decisions as they are in case of all laws; still these decisions are only an exception and not a rule. [60] There are thousands of major commentaries on various provisions of the convention which also help in this direction. [61] It is a reciprocal system of knowledge transfer operating on a worldwide basis which enhances uniform application of CISG and which, lastly, will make CISG shine. Therefore it is required that there is international co-operation among the courts, the scholars and the lawyers for successful implementation of CISG. It is worth mentioning that courts, including those in the common law countries, have shown a significant willingness to apply the convention and to arrive at a reasonable and just solution under its regime. [62] 

Denying the reservation opposition

It has been declared by the opponents of the convention, that wherever the convention is applicable, parties more than often exclude its application. As to the frequency at which the parties actually exclude application of the convention, it is correct that in some trade sectors (e.g. commodities) exclusion is indeed the rule and not an exception. However, in most other areas, surveys show that after an initial rejection of the convention, business people have become more and more willing to accept and adopt the new regime. [63] 

Concurrent Remedies

One more critical dilemma jeopardizing uniformity may arise in field of concurrent remedies. The convention is exclusively concerned only with the contractual relationship between the buyer and the seller. Nevertheless, under almost all legal systems only the existence of contractual remedies does not prevent a party from relying on certain other remedies, particularly the ones based on tort law. The critical question arises as to whether a party under a CISG contract can claim concurrent remedies under the domestic law, even if they result in an outcome contrary to the ones reached under the convention.

This is a difficulty particularly in case of remedies regarding non-conformity of goods. Can a buyer in a CISG contract rely on domestic legal concepts like mistake or negligent misrepresentation? Can he recover a purely economical loss caused by defective products or damage of property, especially in those legal systems which recognize an action under tort law for damage to the chattel? Can a buyer in a CISG contract rely on the above mentioned claims in the cases where it is prohibited from relying on non-conformity of goods under the convention; if the damages/ remedies were not within the consideration of the parties; or if avoidance is not possible under the convention because the it is not a fundamental breach?

Answers to the above mentioned questions are very controversial with lawyers from civil law nations who favour a pro-CISG approach whereas scholars from the Anglo-American region seem to adopt a different view. If we seek to achieve the highest level of uniformity, it should not be left to individual nations to apply their local laws, whether based on contract law or based on tort law. Therefore, wherever concurrent domestic remedies are concerned only with the non-conformity of goods, such as delivery of non-conforming goods, misrepresentation of its qualities, or mistake as to its substance, then such remedies must be pre-empted by the convention. However, CISG does not deal with safety requirements or fraud under the product liability approach, thereby leaving room for domestic concepts such as product liability or fraudulent misrepresentation in cases of damage to property other than the goods that were sold.

Like problems arise in the arena of procedural and substantive law. Questions relating to procedural law are not addressed by the convention. Thus, it may be asked whether issues such as standard and burden of proof, which often determines the final outcome of a case, have to be decided autonomously. In the same context, compensation for legal costs has also recently enjoyed great attention.

Today it is accepted that domestic conceptions of differentiating between substantive and procedural law cannot be decisive. Relying upon this kind of a categorical distinction is unproductive and outdated. Rather, the analysis should focus on general principles of CISG, such as principles of full compensation and equality between parties. Thus, the standard and burden of proof are to be derived from CISG itself while questions regarding compensation for legal costs will be decided by the respective national procedural law.

All this clearly shows that even today the existence of swamp of concurrent domestic remedies can be safely forded.

Incompleteness f CISG

One of the fundamental criticisms relate to the incompleteness of the convention as it is not concerned with the validity of contract. Some scholars primarily criticize that meaning of the term "validity" is not clear, which leads to an inconsistent application of CISG, which finally results in legal uncertainty. This argument can be easily rejected. The term "validity" can be determined autonomously; which means that any question dealt by CISG or the general principles underlying it, cannot be defined as being an issue related to validity. Likewise, certain errors that are recognized as relevant only in a few legal systems don’t qualify as an issue of validity which can be resolved by national law.

Different Languages Lead To Confusion [64] 

Another allegation against CISG is that it has been adopted in six official languages of the UN which according to the witness clause are of equal authority, and thus it leads to confusion. However, the catena of the court decisions from the German speaking nations, which are developed using a German non-authoritative translation of CISG, so far have not led to any serious issues in court practice. Wherever certain inconsistencies were found, they were easily solved by proper interpretation of relevant provisions in light of the object and purpose of the provision, its drafting history and the authoritative versions of the provision.

Moreover, it as to be noted that the legal position of both the parties to a contract is not weakened by the versions of CISG in different languages. All language versions are treated equally and are directly applicable in court. For example, American lawyers will always rely on the English version. Moreover, it seems today to be accepted universally that in cases of any doubt the English version of the convention is to be given prevalence as English had been the language of the preparatory works of the convention and at the 1980 Vienna Conference.

CHAPTER IV

INDIA’S CALLING ON CISG

India has not ratified the CISG like China, Singapore, Australia and several other nations. Even though diverse nations have ratified the convention, quite a few trading giants, such as Brazil, South Africa and United Kingdom have also not ratified it. Numerous authors have appraised this; some expressing appreciation and some hesitation. [65] For example, on one hand the Singapore Law Reform Committee's Report on CISG recommends its ratification, [66] scholars like Professor GH Trietel [67] and Arthur Rossett [68] express reservations about its ratification.

India's adoption of the convention would mean that CISG and not the well-known provisions of the Indian Sale of Goods Act 1930 would apply and govern the rights and liabilities of Indian buyers and sellers in international trade. [69] The Indian act of 1930 is based on the English Sale of Goods Act of 1893. [70] The trading community of India and its legal minds, complemented by the well-developed case laws, can predict with great precision the most probable outcome of a court action in the trading of goods internationally. For India, ratifying the convention is recommended only if the advantages of doing so overshadow the disadvantages.

The convention is one of the most successful instruments in private international law. [71] The level of adoption by a large number of countries clearly shows that there is a high chance of it becoming a norm in international trade in the near future, hence emphasising the need for India to become a party to it. Further, due to the wave of liberalization, globalization and privatization, which started in 1991, India has witnessed a vigorous growth in its international trade statistics. [72] 

WHY INDIA IS HESITATING FROM CISG?

The major reason as to why India is hesitating from signing the CISG is because it believes that the convention is not a complete code or a comprehensive treaty. It does not relate to the issues related to the validity of a contract like fraud, illegality, misrepresentation related to the contract. [73] Hence, it has been correctly remarked by Barry Nicholas that the convention would not achieve one of the main goals of uniform sales laws.

Another reason which is pulling India back from signing the convention is the amigious language used in it. India being a common law county, its lawyers is used to detailed and descriptive laws with clear meaning. [74] However, CISG uses wide and inexact language which leads to legal uncertainty. Thus, the Indian trader and their legal advisors have found errors in CISG worrying because of the vague language of the convention.

Moreover, taking into account a further state of affairs as to why India has not adopted the convention. For example "A" a contracting nation makes a contract with a buyer in India. It is a circumstance where any particular decision with respect to the delivery of goods is not taken. The liability of the foreign seller distinguishes as soon as the goods are delivered to the first carrier. In a situation where the delivery of goods between the buyer and the seller is by any middle supply, India will lose the right to move to an Indian court of law for an interim relief. A range of unknown circumstances are created by 'The closest point' test applied by the convention. In cases of disputes in the above mentioned instance the jurisdiction lies on the courts of the place of the first carrier.

WHY INDIA SHOULD RATIFY IT?

On reviewing our trade relations, we find that most of our major trade partners have ratified the CISG. For this reason having a familiar sales law with the host nation will certainly help in promotion of international trade between India and other countries.

It has to be kept in mind that the Indian law dealing with international sales of goods i.e. The Sale of Goods Act, 1930 was written by the British and was heavily based on the English Sales of Goods Act, 1893, which in turn is very old and is outdated now. [75] However, after the introduction of modern means of transport, communication and techniques, which have drastically changed the modes of entering into a contract, the 1930 Act is not suitable for the contemporary and modern commercial contracts. Here the importance of the convention is highlighted due to its universal nature and availability in several languages which makes it more comprehendible and accessible to international trading parties across the world.

Another reason why India should ratify the convention is due to its gap-filling nature in case where trans-border contract is made by phone or even by fax or telex only in a few words, which is not covered by the 1930 Act. [76] Most of the times contracts are incomplete or are not in the condition to cover each and every type of contingencies that may arise in the future. AS a result, gaps are created in t in the contract. CISG confers significant benefits on parties like resolving the issue of choice of law clause. CISG’s primary aim is to prevent the obstruction of the party’s freedom and ability to enter into contract and thus fill in the gaps left by the drafters of the contract for international sales. [77] 

Adoption of CISG will not affect the anti CISG lobby as it guarantees large contractual freedom. Under article 6 the convention enables the parties to derogate or vary from any of its provisions or exclude the application of the Convention.

Moreover, CISG will provide a boost to the Indian economy. Law and economy go hand in hand. The legal system of any nation is the important factor which facilitates its economic growth. Although it will be not be completely true to claim that a strong legal system will guarantee a robust economy, but it will be difficult to find a robust economy without a very strong legal system. CISG will strengthen the legal system and assist the Government’s move to boost economic expansion internationally by facilitating Indian traders and Indian businessmen with sales law in harmony with the laws of the countries in which they are trading.

Another reason why India should ratify the CISG is that it overcomes the problem of choice of law. The sales transactions that the cross international boundaries are subject to many legal uncertainty and doubts as to which of the legal system will apply and the difficulty in coping up with an unfamiliar foreign law. Complexity in international sale of goods arises mainly due to the choice of law clause in a contract. Every nation has its own national law, rules, regulations and trade customs which are best suited to the sales environment within the nation. But since there are two or more different nations involved in contracts related to cross-border sales of goods it leads to the problem of legal diversity. No two nations can have the exact same national sales law. It is not certain as to which set of legal rules will apply to a transaction, and more than one set can also apply, depending on how rules of the private international law allocate jurisdiction. Contracts of international sales are made complicated by a diversity of factors raised by unique facts of a case, including place of performance, place where contract is made, parties' domicile, nationality, or place of business and location of subject-matter. [78] 

Additionally, there is diversity of informal norms also that are applicable to the international sales transaction. Thus, the parties have to bargain over the legal system, and this will in turn lead to choosing of a legal system which is not familiar to one of the parties. Hence, one party will be in a stronger position than the other, thereby obviously leading the weaker party to bear higher costs. What the convention attempts to do is to remove or reduce the uncertainty involved with the choice of law clause given in a contract. It tries to make a legal system with which trader in different jurisdictions will be familiar and will accept without additional negotiation. The fact that the convention provides an option that is neutral, for both the parties, in cases when neither entity is willing to give away reliance on their own domestic law, is an excellence of CISG and Indian traders will be hugely benefitted by it.

Moreover, if India adopts CISG, considerable amount of money and time which could have been used in finding, translating and interpreting a foreign law and decisions will not be wasted. [79] When an Indian trade who is a party to the contract accepts the domestic laws of the other party, it is difficult for the courts in India to interpret and analyze such foreign laws. Additionally, foreign laws are sometimes written in languages which are not understood properly. For example, it would be difficult for the Indian courts to interpret Spanish laws when such agreement had been reached by both parties.

Consider another circumstance in which a French trader enters into a sales contract with an Indian trader under the possibility of having the 1930 Sale of Goods Act as the choice of law and the convention as the other. In case of the former it will be very difficult for the French trader to understand the intricacies of the Indian law in the case of a dispute, whereas it will be comfortable for him to understand the provisions in French. Thus, the convention will not only benefit Indian traders on entering into contracts with foreign parties; foreign parties involved in the case of a dispute which has to be settled in Indian courts will also benefit.

Furthermore, the choice of law clauses is not placed in a contract with a view to promote efficiency. It is placed because every party to a contract is looking to maximise his/her individual profit in the said contract. Generally, the dominant party in the bargain is able to exercise his will over the other party and thus, attain substantial benefits resulting in significant loss of money and time for the weaker party. For example if an Indian buyer who enters into a contract with an American seller for the sale of certain machinery which is only available in United States. In such a situation, the seller, on realising that he is clearly in a dominant position, can persuade for making the American law as the proper law of the contract. Hence, in case of a dispute arising out of this contract, the Indian trader will be clearly at a disadvantage. Additionally, seller in this case can also choose to refer the dispute to an inefficient court or arbitration tribunal, which would be bound by its own rules [80] to decide upon the dispute regardless of the inconvenience which will be caused to the Indian trader in terms of wastage of time and money. Thus, adoption of CISG by India will greatly benefit the Indian trading community

How CISG is applicable despite its lack of ratification

Even though India has not adopted the convention there are certain situations in which the convention can be applicable in sales contracts of Indian traders with global businessmen. These situations are "express incorporation" and "implied inclusion".

The courts in India can decide to apply the convention as the contracting choice of parties, in cases where one of the foreign parties expressly incorporates this into the contract. This is also permissible under the Indian choice of law rules, which in turn direct application of the contract law of another country which is a party to the convention. [81] Moreover, the choice of law clause incorporated into a contract can lead to applicability of the convention when a foreign party is itself a contracting state and its law is the law by the parties as the applicable law, or it can apply as part of the domestic law of a third country selected under the foreign court's choice of law rules.

An example of the first situation can be when an Indian buyer contracts with a Chinese seller (China is a CISG contracting state) and decides to apply the Chinese choice of law rules. In this case the Indian traders should be aware that CISG will apply directly since China is a contracting state and therefore CISG applies automatically. The second situation can be explained by an example of Indian businessmen wanting to sell goods to a major English trading company. Neither he nor his English trade partner wants to subject the contract to the other's domestic law. So they agree on the neutral law of France as an applicable law. [82] Similar to the first situation, CISG will be applicable according to Article 1(a).

It must also be noted that instead of specifically incorporating the convention provisions in the contract, there can also be an implied application of CISG as it is provided in CISG itself. Article 1(1)(b) read with Article 6, states that where the normal conflicts rules point to the application of the law of a contracting state, then the convention will be applicable unless it has been specifically excluded by both parties. [83] Thus, if an Indian buyer concludes a contract with an Australian seller, and the proper law of the contract is Australian, then the convention will be applicable. As a result, Indian traders are already aware of the convention in their negotiations and standard contracts.

Increased use of arbitration and the new lex mercatoria

Since beginning of this century, businessmen have avoided the regular courts and have referred their disputes to arbitral tribunals. [84] Demand for the predictability and the legal certainty in the international commerce has been the driving force for emergence of the arbitration tribunals as chief institution for prevention and the settlement of commercial disputes. [85] Among other reasons, the never ending need to save money and time which is exhausted in litigation has made arbitration the best forum for settlement of commercial international disputes. In India, the use of arbitration to settle the international disputes is on a rise due to the Arbitration and Conciliation Act 1996, which has efficiently consolidated and amended laws relating to domestic and international commercial arbitration.

A unified law of international sales is seen as a method of providing these tribunals with a set of "universally accepted" rules that would be more difficult to ignore than the confusing national legal systems. [86] Courts or arbitral tribunals would simply be applying their own law, the unified law of sale. Parties would therefore only have to acquaint themselves with one additional law of sale and not amultitude of laws of sale and thereby saving on legal costs and simplifying international trade. [87] 

Even after a deliberation on how the CISG might be applicable in the contracts of Indian businessmen despite its ratification by India (as discussed above), there is one more area which can make CISG the applicable law. Where the parties have not agreed and cannot agree on the applicable law, an arbitral tribunal may decide to make use of CISG provisions even though the Convention, by its terms, would not be applicable to the transaction. The Convention may be applicable by arbitral tribunals which by virtue of art.17(1) and (2) of the ICC Rules of Arbitration 1998 (ICC Rules) [88] hold that there is no better source for determining the appropriate law than the CISG and applies the Convention as the expression of general principles and customary rules of international trade (a new lex mercatoria ). [89] 

Developing an indigenous legal capacity

It is a known fact that there can be situations where national law is not appropriate for international commercial transactions. The national law of a state is designed to serve the needs of its society and thus cannot be applied in international transactions. [90] It is also true sometimes that the national law gradually keeps on becoming obsolete so as not to cater to needs of the society also.

The Indian sales law was enacted in 1930 and since then no significant amendment has been brought in so as to tune it with the ever changing nature of international sales contract in modern times. Now more than 80 years have passed and the nature of international sales transactions has changed drastically. Model laws, international conventions and restatements provide "off the rack" rules for the developing nations to adapt their own laws and to develop the indigenous legal capacity, which will ultimately have spill over effects to other parts of the legal regime. [91] After its adoption, the convention was taken as a role model by individual countries, or groups of countries, for the purposes of reforming their national sales laws. [92] A case in point is China whose domestic sales law is modelled on the CISG. Further examples are Germany, France and Russia. [93] This clearly shows that the adoption of the convention by India will put pressure on the legislatures to revamp certain characteristics of domestic sales law. [94] Not only will it help align domestic sales law according to the modern standards, it will also provide the impetus for the amendment of other commercial laws like Negotiable Instruments Act 1881, Carriers Act 1865