212 |
The Vienna Convention on the International Sale of Goods 1980 (CISG) |
|
|
|
Both Articles provide that the parties cannot resort to a remedy which would |
|
be inconsistent with requiring performance; for example, the parties cannot |
|
declare avoidance of the contract nor fix an additional time for performance. |
|
Furthermore, CISG, Article 28 states that a court is not bound to order specific |
|
performance on behalf of a party, if the court would not do so under its domes- |
|
tic law. As specific performance is not a generally accepted remedy in most |
|
common law jurisdictions, this could restrict the availability of this remedy. |
|
(v)â Price reduction |
|
As mentioned earlier, CISG, Article 50 permits the buyer to request a reduc- |
|
tion in price if the goods do not conform to their contractual quantity, qual- |
|
ity and description within the meaning of CISG, Article 35. The buyer may |
|
reduce the price in proportion to the reduced value of the goods, however he is |
|
prevented from doing so if the seller offers to cure the defects. The buyer must |
|
have given notice of the non-conformity within the requirements of CISG, |
|
Article 39. |
|
Q10 What is the nature and purpose of the remedy of price reduction? |
|
(vi)â Damages |
|
CISG, Article 74 deals with a party’s right to claim damages. It provides: |
|
Damages for breach of contract by one party consist of a sum equal to the loss, |
|
including loss of profit, suffered by the other party as a consequence of the |
|
breach. Such damages may not exceed the loss which the party in breach foresaw |
|
or ought to have foreseen at the time of the conclusion of the contract, in the light |
|
of the facts and matters of which he then knew or ought to have known, as a pos- |
|
sible consequence of the breach of contract. |
|
Under this provision, the party can claim all losses suffered as a result of the |
|
breach, including loss of profits. Recoverability is limited by the requirement of |
|
foreseeability at the time the contract was concluded. CISG, Article 78 provides |
|
that, ‘[i]f a party fails to pay the price or any other sum that is in arrears, the |
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other party is entitled to interest on it’. |
3â UNIDROIT Principles of International Commercial Contracts
The International Institute for the Unification of Private Law (UNIDROIT) is an independent intergovernmental organisation, whose purpose is to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law between states and groups of states. The UNIDROIT Principles were drafted and discussed by legal scholars from different nations, whose opinions did not bear the official representation of any one country. This approach precluded the need to adopt diplomatic solutions in the
213 5â Recommended reading
formulation of rules, and the consequent need to obscure important issues with compromise formulae. Thus, the unequal bargaining conditions that may exist in international treaties between parties with different levels of education and technical skills were not present in the drafting of UNIDROIT Principles. The UNIDROIT Principles set out rules for international commercial contracts and will be applicable when parties have agreed that their contract be governed by them. The Principles may also apply when parties have decided their contract should be governed by general principles of law such as the lex mercatoria, or alternatively have not chosen a law to govern the contract.
4â Conclusion
The CISG has proved to be one of the most successful international Conventions of its kind. The Convention offers parties a useful compromise in that it may decrease the time and legal costs otherwise involved in research of foreign laws, and it will have a degree of familiarity to both parties, thus putting each on an equal footing with the other with no unfair advantage to either party. Other ‘soft law’ instruments, such as the UNIDROIT Principles, are often times used as a means of supplementing the provisions of the CISG. It is more advantageous to use the UNIDROIT Principles as a means of ‘gap filling’ instead of domestic law if the international character, uniformity and good faith of the Convention are to be protected. In using the UNIDROIT Principles, the settlement of the dispute is kept within its international legal habitat, and ensures fairness to the parties as they will both have equal access to its provisions.
5â Recommended reading
Babiak, A. ‘Defining fundamental breach under the United Nations Convention on Contracts for the International Sale of Goods’ (1992) 6 Temple Int’l and Comp. LJ 113
Bailey, J. ‘Facing the truth: seeing the Convention on Contracts for the International Sale of Goods as an obstacle to a Uniform Law of International Sales’ (1999) 32 Cornell International Law Journal 273
Bianca, C.M. and Bonell, M.J. (eds.) Commentary on the International Sales Law: the 1980 Vienna Sales Convention (Giuffre, Milan, 1987)
Dimatteo, L. ‘The CISG and the presumption of enforceability: unintended contractual liability in international business dealings’ (1997) 22 Yale Journal of International Law 111
Farnsworth, A. ‘The Eason-Weinmann Colloquim on International and Comparative Law: duties of good faith and fair dealing under the UNIDROIT principles, relevant international Conventions, and national laws’ (1995) 3 Tulane Journal of International and Comparative Law 54
Lee, R. ‘The UN Convention on Contracts for the International Sale of Goods: OK for the UK?’ (1993) 37 Journal of Business Law 131
214 The Vienna Convention on the International Sale of Goods 1980 (CISG)
Murray, J. ‘An essay on the formation of contracts and related matters under the United Nations Convention on Contracts for the International Sale of Goods’ (1988) 8
Journal of Law and Commerce 11
Schlechtriem, P. Commentary on the UN Convention on the International Sale of Goods (CISG) (2nd edn, Clarendon Press, Oxford, 1998)
Van Alstine, M. ‘Dynamic treaty interpretation’ (1998) 146 University of Pennsylvania Law Review 687
Part 3 Chapter 3
Payment in International Sales
Contents
1â |
Introduction and background |
215 |
2â |
Open account |
215 |
3â |
Bills of exchange |
216 |
4â |
Documentary collections |
217 |
5â Introduction to letters of credit |
217 |
|
6â |
Factoring |
226 |
7â |
Forfaiting |
228 |
8â |
Conclusion |
229 |
9â |
Recommended reading |
229 |
1â Introduction and background
The role of payment in international trade is complicated by many factors. International trade, particularly sales of goods transactions, often involve long periods of transit, multiple buyers and sellers who are unfamiliar to each other, different currencies and different laws. For these reasons the method of payment chosen by the parties will be crucial to the contract of sale. As many sellers will require payment to procure the goods from suppliers and arrange for transport of the goods, the buyer’s creditworthiness will be necessary to ensure the seller is paid for his goods and services. This chapter will examine some of the most common methods of payment in international transactions, each having inherent risks as well as benefits to the parties. In particular, we will be examining payment by open account, bills of exchange, documentary collections, letters of credit, factoring and forfaiting.
2â Open account
Open account as a means of payment in international trade is usually seen where the buyer and seller have done business in the past and may continue to do so on a frequent basis. This particular method of payment carries with it