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.