Lesson 1 - CISG

Monday, 2 October 2023

Introduction / Research / Sphere of Application /

Interpretation / Formation of Contract

Dr. Pascal Hachem

Bär & Karrer AG Zurich

Lesson 1 – CISG – Introduction

CISG Consists of four Parts

▪ Part 1 (Arts 1 – 13 CISG): Sphere of Application and General Provisions
➢ Arts 1 – 6 CISG: Autonomous determination of scope
− States can influence scope only, where allowed by Convention
− Interference by adjusting conflict of laws or procedural rules not possible

➢ Arts 7 – 13 CISG: Interpretation of CISG, interpretation of declarations and contracts,

practices and trade usages, form issues

▪ Part 2 (Arts 14 – 24 CISG): Formation of Contract

➢ In substance rules of general contract law
➢ Previously two conventions: ULF and ULIS
➢ CISG is progress in legal transnationalism

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Lesson 1 – CISG – Introduction

▪ Part 3 (Arts 25 – 88 CISG): Sale of Goods

➢ Includes
− Making and taking of delivery
− Conformity of the goods, examination and notice
− Transfer of Risk
− Remedies for breach of contract, including calculation of damages, exemption and unwinding of
contract

▪ Part 4 (Arts 89 – 101 CISG): Final Provisions

➢ Relationship to other international instruments
➢ Reservations
➢ Accession process
➢ Temporal sphere of application

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Lesson 1 – CISG – Research

Online Resources
▪ http://www.cisg-online.ch/: Database for decisions on the CISG; all free of charge
▪ http://www.cisg.law.pace.edu/: Database for decisions on the CISG; also has
numerous journal articles and in some cases entire books online; all free of charge
Books
▪ Schwenzer, Ingeborg (ed): Schlechtriem & Schwenzer – Commentary on the UN-
Convention for the International Sale of Goods, 5th English edn, Oxford Universty
Press (2022) → Worldwide leading commentary on the CISG
▪ Kröll, Stefan et al (eds): UN Convention on Contracts for the International Sale of
Goods (CISG), 2nd edn, C.H.Beck et al (2018) → Commentary on the CISG
▪ Brunner, Christoph / Gottlieb, Benjamin (eds): Commentary on the UN Sales Law
(CISG), Wolters Kluwer (2019) → Commentary on the CISG
▪ Schwenzer, Ingeborg / Fountoulakis, Christiana / Dimsey, Mariel: International Sales
Law, 2nd edn, Hart Publishing (2013) → Casebook on the CISG with comparative
remarks on domestic legal systems

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Lesson 1 – CISG – Research

▪ Schroeter, Ulrich: Internationales UN-Kaufrecht, 7th edn, Mohr Siebeck (2022) →

Undoubtedly the leading textbook on the CISG
▪ Schlechtriem, Peter (†) / Butler, Petra: UN Law on International Sales, Springer (2009)
→ Adapted English edition of Peter Schlechtriem's seminal German textbook on the
CISG
▪ Ferrari, Franco / Torsello, Marco: International Sales Law – CISG – in a Nutshell, 2nd
edn, West Academic Publishing (2018) → Introductory and student friendly textbook
▪ Huber, Peter / Mullis, Alastair: The CISG: A New Textbook For Students and
Practitioners, 2nd edn., Sellier ELP (2014) → Easy to read English textbook on the
CISG
▪ Schwenzer, Ingeborg / Munoz, Edgardo, Global Sales and Contract Law, 2nd edn.,
Oxford University Press (2022) → Comparative work on sales and general contract
law covering domestic legal systems as well as CISG, no specific CISG textbook
▪ Bridge, Michael: The International Sale of Goods, 4th edn, Oxford University Press
(2017) → Textbook on international sales transactions under English law with
comparisons to the CISG from one of the leading English scholars

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Lesson 1 – CISG – Sphere of Application

Part 1 – Sphere of Application and General Provisions

Chapter 1

General territorial sphere of application and subject matter (Arts 1 – 5 CISG)

Exclusion, modification and supplementation by contract (Art 6 CISG)

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Lesson 1 – CISG – Sphere of Application

Basic Rule: Art 1(1) CISG:

This 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.

Supplementary Rule: Art 10 CISG:

For the purposes of this Convention:
(a) if a party has more than one place of business, the place of business is that
which has the closest relationship to the contract and its performance, having
regard to the circumstances known to or contemplated by the parties at any time
before or at the conclusion of the contract.
(b) […]

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Lesson 1 – CISG – Sphere of Application

Contract for the sale of goods (Art 1(1) CISG)

▪ No definition, obligations of parties are exchange of goods and transfer of title against
price
➢ Delimitation problems in case of "Framework Agreements" / "Distributorship Agreements"
− Reecon North America, LLC v Du-Hope International Group et al., 20 June 2019, US Dist Ct (WD
PA), CISG-online 4425

▪ Supplement: Art 3 CISG

➢ Contracts for goods to be manufactured (Art 3(1) CISG)
− Generally CISG, unless ordering party supplies substantial part of production materials
− Variety of domestic solutions irrelevant, results predictable

➢ Mixed contracts (Art 3(2) CISG)

− Generally CISG, unless service element is preponderant part (assumed in BGH, 7 December 2017,
CISG-online 2961)
− Parallel application of different areas of law excluded, results predictable

➢ No hierarchy of obligations
− Domestic distinctions of main and ancillary duties, irrelevant
− Domestic distinctions of protective ancillary duties and performance related ancillary duties, irrelevant
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Lesson 1 – CISG – Sphere of Application

Goods (Art 1(1) CISG)

▪ No definition in the CISG
➢ Starting point
− Movable (at time of delivery)
− Corporeal
− Generally: broad understanding of "goods"
❖ Livestock, human organs, cultural objects, artificial body parts

➢ Examples: Shoes, clothes, furniture, gas, fur, wood, machines, factories, elephants,
software, cars, live fish, solar panels
➢ Evergreen problem: Software, algorithm
➢ Current (alleged) problem: Data
➢ Note: CISG does not determine, whether sale of such goods is allowed or not → Art 4
sentence 2(a) CISG

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Lesson 1 – CISG – Sphere of Application

Territorial Sphere of Application

▪ Swiss seller (CS), French buyer (CS), Commercial Court Zurich competent; CISG
applicable?
➢ Yes → Art 1(1)(a) CISG
➢ Switzerland is Contracting State, judge must examine applicability of CISG

▪ German seller (CS), English buyer (NCS), Regional Court Freiburg competent; CISG
applicable?
➢ Yes → Art 1(1)(b) CISG
➢ Rome I Regulation leads to law of the place of the seller; seller is located in CS → CISG
applicable

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Lesson 1 – CISG – Sphere of Application

CISG in Arbitration
▪ Turkish seller (CS), French buyer (CS), ICC Paris, Swiss law (CS) chosen; CISG
applicable?
➢ Arbitral tribunals are not organs of the state
− Tribunal is not under a duty to consider treaties of public international law first
− Tribunal first looks to applicable arbitration rules, e.g. Art 21 ICC-Rules
❖ Art 21 sentence 1 ICC-Rules: Choice of the parties relevant
❖ Art 21 sentence 2 ICC-Rules: Appropriate rules of law to be applied

➢ In Example, choice by parties leads to Swiss law, CISG is part of Swiss law
➢ CISG applies because of Art 1(1)(b) CISG
➢ Art 21 ICC Rules is "rule of private international law" within Art 1(1)(b) CISG

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Lesson 1 – CISG – Sphere of Application

Practical Exercise 1

Zodiac Seats US LLC v Synergy Aerospace Corp, US Dist Ct (ED TX) 23 April 2019, CISG-
online 4234
Seller is located in the U.S. and manufactures airplane seats. Buyer has places of
business in Colombia and Brazil as well as other places and operates airplanes into
which the seats are built.
The parties did not execute a single contract, rather there is a series of purchase orders
between February and December 2013. Billing and payment went through buyer's
Brazilian place of business, the parties met once in Brazil and the transactions causes
tax consequences for the buyer in Brazil.
Buyer's employees who worked on the purchase orders and communicated with seller
are located in Colombia. The parties met multiple times in Colombia, including a
meeting with a presentation on unresolved issues (delayed deliveries, product
defects).
Seller relies on Texas law, buyer relies on CISG.

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Lesson 1 – CISG – Sphere of Application

Decision
▪ Problem 1: In 2013 U.S. CISG Contracting State (since 1986), Colombia Contracting
State (since 2001), Brazil not CISG Contracting State (only since 2014)
➢ Due to article 100 CISG, if Brazil is relevant, article 1(1)(a) CISG not applicable;
➢ U.S. has made reservation under article 95 CISG to article 1(1)(b) CISG;
➢ If Brazil is relevant, Texas law applies, if Colombia is relevant, CISG applies.

▪ Problem 2: Problem: Several places of business are concerned with the conclusion
and performance of the contract → Issue: What does closest connection mean?
▪ Three approaches:
➢ mv: Place of business relevant for conclusion of the contract
➢ op2: Place of business relevant for performance of the contract
➢ op3: Place of business which has strongest influence on contractual relationship →
typically headquarters

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Lesson 1 – CISG – Sphere of Application

Decision
▪ Court combined looking at the formation of the purchase orders and the performance
➢ Initial negotiations in Colombia;
➢ Ongoing renegotiations and novations in Colombia;
➢ Various visits of seller to buyer's location in Colombia;
➢ Difficulties in the execution of the purchase orders were discussed and addressed in
Colombia.

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Lesson 1 – CISG – Sphere of Application

Initial leading case

▪ Asante Technologies, Inc. v. PMC-Sierra, Inc., US Dist Ct (ND Cal), 27 July 2001,
CISG-online 616
➢ Buyer U.S. Seller Canadian. B orders electric components which S produces and sells. Four
of the five orders placed with an independent distributor in California, the fifth placed directly
in British Columbia. S has most engineers in U.S. S's headquarters, accounting, marketing,
public relations and main warehouse in Canada. The invoices were produced by an
independent distributor in California. B pays the price to U.S. banks.
− CISG applicable, because main influence on the contract in Canada, therefore business place with
closes connection in Canada.

Recent similar questions

▪ BGer, 12 July 2019, 4A_543/2018:
➢ Buyer located in Switzerland, Seller 1 located in Switzerland, Seller 2 located in Slovenia
− CISG applicable, in case of more than two parties it is sufficient that one of them is located in another
country to make the sales contract "international" within the meaning of Art 1(1) CISG, CISG is
applicable

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Lesson 1 – CISG – Sphere of Application

▪ Target Corp v JJS Developments LTD, 9 February 2018, US Dist Ct (Minn), CISG-
online 3046
➢ Seller located in the US, buyer located in Canada but in order to accommodate the expected
volume of goods to be received from seller, buyer opened a facility in the US "and invested in
substantial infrastructure for transport, inspection, repair and repackaging, disassembly
and recycling, rerouting and disposal of TVs and other electronic products"
− Based on Art 10(a) CISG relevant place of business of buyer is in the US, therefore no international
sales contract, CISG is not applicable

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Lesson 1 – CISG – Sphere of Application

Party Autonomy: Art 6 CISG

The parties may exclude the application of this Convention or, subject to article 12,
derogate from or vary the effect of any of its provisions.

Basic Content of the Rule

▪ CISG follows "opting out approach"
➢ CISG is objectively applicable
➢ CISG applies ex officio
➢ No choice by parties necessary for application of CISG
➢ If CISG not desired, exclusion is not only possible but necessary

▪ Exclusion may be implicit or explicit

➢ US-courts apply high threshold for exclusion of the CISG
− Cases show that in essence explicit exclusion is required

➢ German and Swiss courts similarly require very strong evidence that parties wanted to
exclude the CISG
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Lesson 1 – CISG – Sphere of Application

Application of the Rule

▪ German seller (CS), French buyer (CS), German law chosen under the exclusion of
ULF and ULIS (predecessors of CISG); District Court Munich competent; CISG
applicable?
➢ OLG München, 19 October 2006, CISG-online 1394
− No exclusion of the CISG → CISG applicable

▪ German seller (CS), Australian buyer (CS), Australian law chosen under the exclusion
of "UNCITRAL Law"; Court in Australia competent; CISG applicable?
➢ Federal Court Australia, 20 May 2009, CISG-online 1902
− Exclusion of the CISG → CISG not applicable

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Lesson 1 – CISG – Sphere of Application

▪ German seller (CS), Turkish buyer (CS), Swiss law (CS) chosen, Regional Court
Freiburg (Germany) (CS) is competent
➢ Problem: CISG is already applicable → Art 1(1)(a) CISG
➢ Question: What is the effect of clause choosing the law of a Contracting State, if the CISG is
already applicable
− Clause must be interpreted (Art. 8 CISG)
− op 1: CISG excluded
− Vast majority in court / arbitral practice, doctrine: CISG not excluded, clause makes sense because it
clarifies which law to apply to questions not addressed by the CISG

➢ Result: Choice of law of a Contracting State without further specifications always leads to
application of the CISG

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Lesson 1 – CISG – Sphere of Application

▪ US-seller (CS), Italian buyer (CS), New York Law chosen, Federal District Court,
Southern District of New York (CS) competent; CISG applicable?
➢ Yes, CISG applicable → Art 1(1)(a) CISG
➢ State of New York is part of USA, CISG is part of the law of the state of New York, same
situation as in case of choice of the law of a Contracting State
➢ Different in American Biophysics v. Dubois Marine Specialties, a/k/a Dubois Motor
Sports, 30 January 2006, US Dist Ct (DRI), CISG-online 1176

▪ Swiss seller (CS), Indian buyer (NCS), English law (NCS) chosen, Commercial Court
Zurich (CS) competent; CISG applicable?
➢ CISG objectively applicable → Art 1(1)(b) CISG
➢ But: England not Contracting State → CISG excluded
− Disputed, whether explicit or implicit exclusion
− Probably explicit exclusion (dispute has no practical relevance)

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Lesson 1 – CISG – Sphere of Application

Practical Exercise 2

Industrias Magromer Cueros y Pieles S.A. v. Sociedad Agrícola Sacor Ltda., Corte Suprema
Chile, 22 September 2008, CISG-online 1787

Seller S is located in Chile (CS). Buyer B is located in Argentina (CS). The contract is for
the delivery of leathermade goods. B brings claims based on defectiveness of the
goods and claims damages for breach of contract.

B bases its claim on the Chilean Civil Code. S defends itself also on the basis of the
Chilean Civil Code. During the oral proceedings, B bases its claim on the CISG.

Is the CISG applicable?

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Lesson 1 – CISG – Sphere of Application

Decision
▪ Problem: CISG objectively applicable; implicit exclusion is possible → is basing
arguments on another law sufficient to exclude the CISG?
➢ In casu: Court affirms exclusion of the CISG
➢ Cour de Cassation France initially used same approach

▪ Opposing view: Ignorance is not a choice of law → No intention to be bound → No

exclusion of the CISG
➢ French Cour de Cassation meanwhile has reversed its view
− Cour de Cassation's change of position explicitly recognized in BGer, 12 July 2019, 4A_543/2018

➢ German BGH, 7 December 2017, CISG-online 2961: No exclusion of CISG by choosing

German law and arguing on the basis of German domestic law; additional indicia are needed
to assume an intention of the parties to exclude the CISG
− Same approach in Rienzi & Sons, Inc v N. Puglisi & F Industria Paste Alimentari SpA and Francesco
Pulejo, 10 February 2016, US Ct App (2nd Cir), CISG-online 2815, but application of CISG excluded
on the facts of the case

➢ CISG Advisory Council, Opinion No 16 (Spagnolo)

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Lesson 1 – CISG – Sphere of Application

▪ Parties may exclude CISG subsequent to contract formation and implicitly by

reference to domestic provisions, if they do so being aware of the CISG's applicability
➢ OLG München, 12 December 2022, CISG-online 6210: German seller, Dutch buyer, both
parties argued on the basis of domestic German law
− Court notified parties that CISG applies but that they could exclude it and set both parties a deadline
to comment given that they had argued on the basis of German law so far, stating that in case the
parties did not object, the court would assume exclusion of the CISG

▪ Reference to domestic law in legal proceedings has been used to clarify parties'
intention enshrined in choice of law clause:
➢ OGH, 2 April 2009, CISG-online 1889: German seller, Austrian buyer, contract is subject
"exclusively to Austrian law, with the exception of the rules on the conflicts of law, and CISG"
− Since parties only argued on basis of Austrian law, intention confirmed to exclude CISG and comma
was a simple typo → Here basing of arguments on domestic law was not itself seen as exclusion of
CISG but considered as fact relevant to the interpretation of the initial choice of law clause

➢ Rienzi & Sons, Inc v N. Puglisi & F Industria Paste Alimentari SpA and Francesco Pulejo, 10
February 2016, US Ct App (2nd Cir), CISG-online 2815: "Laws of New York" chosen
− Court states that such choice itself does not indicate exclusion of CISG, but in three years of litigation
plaintiff had not once mentioned CISG, raised defence (statute of fraud) which is incompatible with
CISG, and counsel declared feeling comfortable with application of New York law → Basing of
arguments on domestic law therefore itself exclusion of CISG but factor in interpretation
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Lesson 1 – CISG – Interpretation

Part 1 – Sphere of Application and General Provisions

Chapter 2
Interpretation of the CISG (Art 7 CISG)
Interpretation of statements and contracts (Art 8 CISG)
Practices and usages (Art 9 CISG)
Definition place of business (Art 10 CISG)
Freedom of form (Art 11 CISG)
Reservation towards freedom of form (Art 12 CISG)
Electronic communication (Art 13 CISG)

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Lesson 1 – CISG – Interpretation

Principles of Interpretation
▪ Intentions of the parties: Art 8(1) CISG
➢ Subjective element: Statement made is to be understood in the way it was meant by the
party that made the declaration
➢ Objective element: Recipient knew or could not have been unaware of the intention of the
declaring party
− Where intermediaries are used: Intended addressee of the statement is relevant
− Standard: Where no actual knowledge, recipient must have been in a position where it was easy to
recognize the intention of the declaring party or where it is obvious that an inquiry should be made

➢ In practice Art 8(1) CISG is rarely the decisive provision; but see for an example BGH, 27
November 2007, CISG-online 1617

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Lesson 1 – CISG – Interpretation

▪ Objective standard: Art 8(2) CISG

➢ Hypothetical criterion: No actual third person is consulted
➢ Purpose: Protection of reasonable reliance of recipient
➢ Standard: Understanding of a reasonable third person in the shoes of the recipient of the
statement
− Third person is of the same kind as the recipient and in the same external circumstances
❖ Example 1: If recipient is a sales manager, hypothetical third person is also a sales manager
❖ Example 2: If recipient is in the commodity business, hypothetical third person is also in the commodity
business

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Lesson 1 – CISG – Interpretation

▪ Materials for interpretation: Art 8(3) CISG

➢ Basic principle: Unrestricted availability of all circumstances of the case
− Negotiation process
❖ Example: Exchange of documents, e-mails, other correspondence
− Practices
❖ Example: Prior dealings between the same parties to determine whether US-Dollar or Canadian Dollar
intended
− Usages
❖ Example: Industry standards to determine whether time is of the essence
− Subsequent conduct
❖ Example: Payment in US-Dollar, and acceptance thereof, clarifies currency, if contract only referred to
Dollar

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Lesson 1 – CISG – Interpretation

▪ In case of doubt
➢ Individual agreement over standard term: Where general terms and conditions are in
conflict with a negotiated term, the latter prevails
➢ Contra proferentem: Statement to be interpreted against party who made the statement
➢ Favor negotii: Choice of interpretation should lead to the term being in existence and
operational
➢ Interpretation of contract as a whole: Provision must not be read on its own but in context
of surrounding clauses and the entire contract

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Lesson 1 – CISG – Contract Formation

Part 2 – Formation of the Contract

The offer (Art 14 CISG)

Withdrawal of offer (Art 15 CISG)
Revocation of offer (Art 16 CISG)
Termination of offer (Art 17 CISG)
Acceptance and time for acceptance (Art 18 CISG)
Deviation of offer and acceptance (Art 19 CISG)
Starting point of period of time for acceptance (Art 20 CISG)
Late acceptance (Art 21 CISG)
Time of conclusion of Contract (Art 23 CISG)
Definition of "reach" (Art 24 CISG)

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Lesson 1 – CISG – Contract Formation

Part 3 – Sale of Goods

Chapter 1 – General Provisions

[...]
Modification of Contract (Art 29 CISG)

Chapter 3 – Obligations of the Buyer

[...]
Open Price Contracts (Art 55 CISG)

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Lesson 1 – CISG – Contract Formation

Part 4 – Final Provisions

[...]
Reservation towards Part II or Part III (Art 92 CISG)

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Lesson 1 – CISG – Contract Formation

Offer Under the CISG

▪ Basic Content of Art 14 CISG
➢ Minimum requirements for declaration to be an offer:
− Goods, quantity and price sufficiently defined
❖ Quantity and price must be determined or declaration must contain mechanism for determining quantity
and price; French principle of pretium certum (fixed price)
− Intention to be bound in case of acceptance

➢ Declarations to public:
− Generally no offer → invitatio ad offerendum (invitation to make offers)
− Exception: If declaring party clearly indicates the opposite

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Lesson 1 – CISG – Contract Formation

▪ Basic Content of Art 55 CISG

➢ Open price contracts
− Price is neither determined in or determinable from the offer

➢ Scenarios
− Implicit price agreements
❖ Buyer orders urgently needed spare parts
❖ Art 55 CISG provides interpretative guidelines to determine price → supplements Art 14 CISG
− Parties intend to leave price entirely open
❖ Derogation from Art 14 CISG → Art 6 CISG
❖ Price is determined by Art 55 CISG

➢ Parties do not intend to be bound unless price is agreed at later stage

− No contract
− Art 55 CISG does not create contracts in this situation

➢ Parties intend to agree on price subsequently but fail to do so

− CISG does not explicitly refer to market price in these cases
− Agreement to agree on price interpreted as granting the seller the right to claim the market price, if no
agreement is reached
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Lesson 1 – CISG – Contract Formation

Practical Exercise 3

OGH (Supreme Court of Austria), 10 November 1994, CISG-online 117

Seller S is located in Germany. Buyer B is located in Austria. The contract is for the
delivery of 249 Chinchilla furs of superior and average quality. The purchase price was
fixed to be between 35 and 65 DM. At the time of the conclusion of the contract
Chinchilla furs of average quality were usually traded at 60 DM. Out of the 249
delivered furs, 236 were of average quality and 13 of lower quality.

Subsequent to delivery of the furs, B resold the furs to its Italian customer C. The latter
complained to B about the quality of the furs. B then refused to pay the purchase price
to S. S demands payment of the purchase price.

Has a contract been concluded between the parties?

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Lesson 1 – CISG – Contract Formation

Decision
▪ Problem: Is the agreement made by the parties sufficiently definite?
➢ Both parties located in Contracting States → Art 1(1)(a) CISG → CISG applicable
➢ Neither Austria nor Germany has made a declaration under Art 92 CISG → CISG applicable
also to formation of the contract
➢ Price range from 35DM to 65DM
− Court: Price sufficiently defined → Price range allows for determining the price for different levels of
quality
− Court: Application of Art 55 CISG not necessary

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Lesson 1 – CISG – Contract Formation

Acceptance Under the CISG

▪ Definition of acceptance: Art 18(1), 3 CISG
➢ Statement or conduct necessary → silence or inactivity in itself not sufficient
➢ If in accordance with practices or usages, acceptance can be made by an act indicating
acceptance; acceptance takes place when performing the act; communication not necessary
→ Art 18(3) CISG

▪ Time of acceptance: Arts 18(2), 21 CISG

➢ Acceptance takes effect when reaching offeror → Art 18(2) sentence 1 CISG
➢ Acceptance must reach offeror within stipulated time or, if no stipulation, within reasonable
period of time → Art 18(2) sentence 2 CISG
➢ Oral offers must be accepted immediately → Art 18(2) sentence 3 CISG
➢ Late acceptance takes effect, if offeror so informs offeree → Art 21(1) CISG
➢ If apparent, that late acceptance was sent in a manner in which under normal circumstances
acceptance would have been on time, acceptance is effective, unless offeror informs offeree
that it considers the offer to have lapsed → Art 21(2) CISG

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Lesson 1 – CISG – Contract Formation

Deviation of Offer and Acceptance

▪ Starting point: Mirror-Image-Rule (Art 19(1) CISG)
➢ Declaration meant to be an acceptance but deviating from the offer does not lead to a
contract, but is a counteroffer
➢ Mirror-Image-Rule found in all domestic legal systems

▪ Exception: Immaterial discrepancies (Art 19(2) CISG)

➢ Contract is formed despite deviation, unless offeror objects

▪ Definition of material discrepancies (Art 19(3) CISG)

➢ Price, payment, quality, quantity, delivery, liability, dispute resolution
➢ Result: In practice every deviation is material → Art 19(2) CISG meaningless

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Lesson 1 – CISG – Contract Formation

Treatment of Standard Terms Under the CISG

▪ Standard terms not expressly addressed by CISG
➢ Undisputed: Convention governs incorporation and interpretation of standard terms
− Includes problems arising from use of different languages or language the recipient cannot
understand
− Includes question as to treatment of conflicting standard terms

➢ Disputed: Substantive control of standard terms

− Presentation of standard terms (format, layout)
− Unreasonable, unfair etc terms

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Lesson 1 – CISG – Contract Formation

▪ Requirements for incorporation

➢ Starting point: Standard terms must be part of the offer
− Subsequent introduction of standard terms is modification of contract under Art 29 CISG

➢ Undisputed:
− Offeree must have had reasonable opportunity to take notice of the standard terms introduced by the
offeror
− Statement by offeror to make standard terms available upon request by offeree not sufficient
− Depositing standard terms at a court or chamber of commerce for review not sufficient
− If standard terms printed on back of offer, front side needs a reference

➢ Disputed: Obligation to send standard terms?

− BGH (German Supreme Court), 31 October 2001, CISG-online 617
❖ In case of first dealings, standard terms must be sent to other party; unclear, whether sending
PDF by e-mail is sufficient
❖ Courts in other countries have followed
− ov: No sending necessary
❖ Sending a link by e-mail is sufficient
o Link must lead directly to standard terms, not simply to website of offeror
o Standard terms must be downloadable, storable and printable
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Lesson 1 – CISG – Contract Formation

▪ Language issues:
➢ Problem: Did offeree have a reasonable opportunity to take notice of standard terms, if it
does not understand the language?
➢ Language used in contract negotiations
− Sufficient, as negotiations are particularly relevant under Art 8(2), (3) CISG
− Problem, if parties negotiated through intermediaries
❖ Agency not governed by CISG → Question whether language skills of agents or parties is
relevant to be decided by domestic law
❖ However: Courts have held language skills of agent relevant under CISG → no further
explanation offered

➢ Language of contract
− Some courts: Language of contract is sufficient
− ov: No good reference point; determining language of the contract needs determination of the contract
and its content

➢ Language known to offeree

− Under Art 8(1), (2) CISG offeree must be taken to have been aware of the standard terms

➢ World language
− Austrian Supreme Court: If world language – in casu German (!!!) – used, this is sufficient
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− Not convincing: Contract between a Russian and Arab party?
Lesson 1 – CISG – Contract Formation

Practical Exercise 5

BGH (German Supreme Court), 9 January 2002, CISG-online 651

Seller S is located in Germany. Buyer B is located in the Netherlands. The contract is for
the delivery of milk powder. The contract was concluded orally on the phone and
confirmed in writing subsequently. The written confirmation sent by B contained a
clause according to which the liability of the seller is limited to price on the invoice
produced by the seller. The written confirmation sent by S contained a clause
according to which S would only accept its own standard terms. Under these standard
terms, the buyer must bring any claims for breach of contract within the period of time
stipulated in the contract, but S' liability is not limited to the invoice.

After delivery of the milk powder B resells it to its Algerian customer C. C discovers that
the milk powder is unusable for human consumption and claims damages from B. B
seeks compensation from S.

Which rules apply to the liability for the delivery of defective goods?

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Lesson 1 – CISG – Contract Formation

Decision
▪ Problem: Both parties have tried to introduce their own standard terms into the
contract. Both standard terms contain provisions on liability for breach of contract
▪ Special situation: The terms introduced by B (liability of seller limited to price on
invoice) are more advantageous to S than its own terms (no limitation, merely time
restriction for claims) and are even to the disadvantage of B
▪ Standard terms not expressly mentioned within the CISG but undisputedly governed
by the CISG
▪ In particular: Incorporation of standard terms governed by CISG
▪ Starting point re standard terms: Mirror-Image-Rule → Art 19(1) CISG
➢ Confirmations do not match → last declaration sent is counteroffer
➢ Discrepancies immaterial (Art 19(2) CISG)? → No, discrepancy relates to liability of the
parties, therefore relevant → Art 19(3) CISG
➢ Preliminary result: Last accepted writing relevant or no contract, if no acceptance

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Lesson 1 – CISG – Contract Formation

▪ Battle of forms
➢ No rule in the CISG → Belgian proposal for inclusion rejected
➢ Strict application of Art 19 CISG leads to Last-Shot-Rule → traditional (outdated) view
➢ Modern approach: Knock-Out-Rule
− Inconsistent clauses knock each other out of the contract → default rule of the applicable law applies
− Rule found also in modernised domestic laws around the world or at least in case law as well as in
PICC and PECL
− Justification: Parties place primary importance on conclusion of contract rather than incorporating
their own standard terms

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Lesson 1 – CISG – Contract Formation

▪ Approach taken by the Court

➢ Conflict of standard terms does not prevent conclusion of the contract
➢ Conflict is not only between individual clauses, standard terms have to be compared as a
whole
➢ Conflict also possible between standard terms of a party and default rule of the applicable
law
− Example: Standard terms of party 1 contain rule on recoverable loss, standard terms of party 2 does
not contain such rule; standard terms of party 2 are read to include default rule of applicable law

➢ Result: Where both parties use standard terms, only terms are included which are
absolutely identical

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Lesson 1 – CISG

Thank you and best of luck

for the Vis Moot

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