International Trade Law & CISG

International Trade Law Scope

• This covers goods, services, intellectual property's commercial aspects, specific public procurement, and foreign direct investment.

CISG - The Basics

• The CISG (UN Convention on Contracts for the International Sales of Goods) came into force 1 January 1988.
• Parties to CISG are 97 states.
• CISG ensures a uniform set of rules for contracts in international sales.
• It applies only to international business deals, but it also shapes domestic laws.
• Contracts that aren't under CISG or choose another law aren't influenced by it.
• CISG doesn't affect solely domestic sales.

CISG Sources and Structure

• Cases can be found via UN CLOUT, CISG-online, IICL Pace, Unilex CISG, UNCITRAL Digest, and CISG Advisory Council.
• The CISG is structured into sections covering its sphere of application, general provisions, contract formation, sales regulations, obligations for both the seller and buyer, risk transfer, common obligations, and final stipulations.

Contracts of Sale of Goods Under CISG

• CISG does not have a defined contract of sale
• The seller must deliver goods, transfer related documents and property, and the buyer must pay and take delivery per Articles 30/53.
• CISG doesn't cover barters, distribution, or agency agreements.

Direct Application of CISG

• The Vienna Convention (CISG) applies if the businesses are in different countries that are also part of the Convention.
• Both parties must know they're operating in different states at the time of contract.

Place of Business and Indirect Application

• The CISG doesn't define "place of business," but it means a stable place with the ability to conduct business.
• Article 1 (1)(b) extends CISG to situations where only one or neither party's business is in a Convention country, if private international law points to a Convention country's law.
• China, US, Singapore, St.Vincent & Grenadines don't apply Article 1 (1)(b) because of Article 95 exception.

Analyzing CISG Applicability

• Is the CISG directly applicable?
• Do the rules of private international law lead to a Contracting State's law?
• Has the state made Article 95 reservations?

Examples of CISG Application

• A sale between a New York seller and an Ireland buyer is under CISG if not excluded, as both countries have signed the treaty.
• A sale between a Swiss seller and an English buyer falls under Swiss law (including CISG) if chosen by private international law, regardless of England's CISG status.

CISG Scope and Exclusions

• CISG scope covers Articles 1-6, 95, 12 (non-derogation), and 96 (contract declaration in writing).
• CISG excludes consumer transactions, auction sales, sales by authority of law, stocks, ships, and electricity etc
• Also excludes goods where the buyer provides a substantial part of the materials

Issues Outside CISG

• CISG doesn't govern contract validity, property transfer timing, liability for damages/death, or burden of proof, except for force majeure.

Party Autonomy and Contract Formation

• Parties can exclude CISG, choose a CISG-country's law (including CISG), or modify CISG, limited by Article 96.
• CISG follows offer/acceptance framework to determine contracts.

Offers and Acceptance

• Offers must be directed, definite (goods, quality, price), and show intent to be bound.
• Revocation is possible before acceptance is sent; offers can be irrevocable if specified or reasonably relied upon.
• Acceptance is effective upon receipt and can be withdrawn beforehand.
• Changes to offers are counter-offers unless minor and unchallenged.
• Silence does not equal acceptance
• Oral contracts are possible if there are no reservations under Article 96
• Oral acceptances must be immediate

Writing Requirements and Seller Responsibilities

• Contracts don't need to be in writing unless a party is in an Article 96-reserved country
• The seller must deliver goods as contracted, transfer documents, and ensure property transfer.
• Goods must meet quantity, quality, and packaging standards per Article 35.

Buyer Requirements and Risk

• Buyers must enable delivery and examine the goods promptly.
• Non-conformity must be reported quickly.
• Risk transfers to the buyer once they have control, even if loss occurs.
• Risk is tied to the contract's specifics, especially regarding transport

Remedies for Breaches

• Remedies include avoidance for fundamental breaches, time extensions, specific performance, price reduction, interest, or exemptions for force majeure.
• Damages are calculable as lost profits if reasonably foreseeable and proper steps have mitigated any losses.

Key Questions for CISG Analysis

• Does CISG apply and what is its scope (Arts. 1-6, 12, 95, 96)?
• Is there a choice of law clause?
• Is there a contract with a valid offer (Art. 14) and acceptance (Art. 18)?
• What was the parties' intentions (Art. 8)?
• Was there trade usage (Art. 9)?
• Was the contract breached, and was it fundamental (Art. 25)?
• etc...

UNIDROIT Principles Overview

• The UNIDROIT Principles are general rules for international commercial contracts intended to balance the parties' interests, published in 1994, 2004, 2010, and 2016
• They cover areas beyond the Vienna Convention, like contract validity and limitation periods.

Applying the Principles

• The UNIDROIT Principles apply when chosen by parties as governing law, incorporated contract terms, or used to interpret CISG or domestic law.

Preliminary Agreements

• Preliminary agreements frame transactions, set core terms, and can be binding, non-binding, or partially both.
• Superceded by negotiated detailed agreements
• They include term sheets, letters of intent (LOIs), and memorandums of understanding (MOUs).

Types of Preliminary Agreements

• Term sheets are less formal, vary in form, and can be signed or unsigned.
• LOIs use "intent" to suggest non-binding status, are in letter format signed by both parties, and are typically less formal than MOUs.
• MOUs use "understanding," mirror contract style with sections like preambles, numbered operative clauses, and signature blocks.

Purpose of Preliminary Agreements

• Seeking reassurance by detailing agreed parameters
• Outlining the negotiation timetable
• Including preliminary legally binding agreements like exclusivity or confidentiality while negotiating
• Identifying and framing the transaction, especially in complex deals.

Common Legal Issues

• Main issue: Inadvertently creating a legally binding agreement.
• A moral obligation to preliminary terms can complicate renegotiations.
• A duty to negotiate in good faith can exist in some places

Benefits of Preliminary Agreements

• Identifying threshold issues or 'deal breakers' early to save time/resources
• Focusing definitive agreement drafting by resolving principal elements
• Enhancing long-term deal, which displays commitment early on.

Other Considerations for Preliminary Agreements

• Explaining the deal to third parties like lenders.
• Certain preliminary provisions may exist for early stages of negotiation
• Setting a basic structure assists less sophisticated parties through complex deals

Risks of Preliminary Agreements

• Cost may be too high for benefits
• Impairing deal momentum
• Unintentional creation of commitments
• Unintended consequences
• Duty to negotiate in good faith may be created
• A weaker negotiating position may be created in the future
• Disclosure obligations

Binding and Non Binding Elements

• Preliminary agreements can be partially binding
• Price/quantity are typically non-binding aspects
• Confidentiality/exclusivity is binding

Agreement Characteristics

• Non-binding does not create legal obligations
• it shows a good moral intent
• Biding creates obligations on those terms
• The terms "Shall" and "intends to" imply a binding agreement and non binding agreement, respectively

Intent Considerations

• Language, performance, and negotiations indicate if a term sheet, LOI, or MOU is binding.

Drafting Guidelines

• Focus on the big picture, and state intent
• Clearly define binding and non-binding sections
• Get expert legal advice
• List all closing conditions
• Consider duty to negotiate
• Weigh all the factors

Best Practices

• Explain everything, avoid anything assumed
• Use the right tone (non-binding vs binding)
• Use descriptive headings for each section

Preliminary Agreement Case Law

• JamSports case: LOI was unenforceable as a contract since it contemplated a later agreement for a binding contract.
• Bed Bath & Beyond case: LOI was binding, since there was no right to not be bound

Confidentiality Clauses

• They protect info better than trade laws could
• Duration, matter, and remedies must be thought through

Confidentiality

• Concealing illegalities isn't allowed
• You must obey the law

International Trade and Incoterms

• Trade allows all nations to develop and flourish
• It creates financial independence
• Also binds the economy as a whole

International Trade and Incoterms cont...

• Standard trade terms define the responsibilities of buyers and sellers in international transactions, specifying cost allocation, risk transfer, and logistics.
• EXW, FCA, CPT, CIP, DAP, DPU, DDP are terms for any transport
• FAS, FOB, CFR, CIF are terms for sea inland waterways

Some Definitions from this section

• Contracts are mutual obligations
• All parties bear potential damages/economic burdens

Trade Law Definitions

• Risk passage = Risk allocation
• Carriers ship goods
• Bills of landing are proof and must be acknowledged

Understanding Consent and the Law

• All agreements mean agreement or consent
• No laws are automatic
• Some laws must be entered

Advantages of Incoterms

• They thought out and objectively measured

Domestic Business Law

• Has 2+ agreements
• Enforces regulations and transactions
• Ensures stability and fairness

Commercial Law

• Incoterms are used
• Has disputes on trade,
• Is separate from law

What is required by CISG

• Binding
• Governs
• Gives remedies
• Risk is for delivery/transfer

What is required by Incoterms

• They are trade terms by definition
• Transfer costs
• Specify sales

Commercial Law - Legal Rules

• Governs business
• Governs commerce/deals
• Governs business states
• It applies UNLESS previously excluded

Choice of Law

• Contracts specify this to ensure disputes
• It involves interpretations

Arbitration

• All parties must consent to resolve disputes

What is in the EU

• Contract law is to EU
• The agreement is made in court

How to conduct trade

• Define seller/buyer
• Designate where responsibility begins
• All must be specified

FOB and CIF

• Customs are not automatic
• All of it must have agreements
• Rights cannot be referred too
• No trade terms are "better"

For EXW

• Sellers must give the option to pick up
• Must all be adequately transported

Free on Board

• You can nominate your carrier
• Owndership is transferred to the buyer
• Risk goes to higher prices

What is transferred under FOB

• It happens upon shipment If ship goes down then the policy will give payments, fault by carrier is also possible
• Risk is borne
• Under FOB the seller has nothing transferred

Sellers Obligations

• Timely delivery
• Charges
• Notify

Buyers OBligations

• Payments made
• Must secure all shipments

Buyers Responsibilities

• All remedies
• Delayed payment
• Can reject goods

Sellers Redress

• All buyers need this
• Its for price
• There must be a lien for money that can be recovered

The goods must be delivered properly

• Must sue
• For a full price
• If not met the seller wins the market

Damages

• Must claim full financial losses
• Agreed prices
• Can claim with the court

Right of Lien

• Money must be provided in the proper time
• Refusals will result in payment
• They retain all possessions

Remedies

• Refusal gets legal
• No legal contract
• Can claim compensation

Non Shipping

• Non deliveries lead to lawsuits

Relevant Cases

• Carlos case shows goods need to be shipped

CIF

• It gives price and freight
• Loss is given when vessel boats
• It offers the right for more prices

Seller has responsibilities

• Contract matches
• Offers the right price
• Follows with the vessel

For Buyers it is important to perform

• Payment happens with terms
• Customs formalities must start
• Shipment needs contracts

For Rejection of Goods

• Right things must arrive
• Legal to get help
• No rights
• No correct damages
• Not covered

If Contracts exist

• Terms must be considered
• Sellers have risks
• Market fluctuation can occur

If Buyers Buy

• All features are given under FOB
• No additional cost

interesting point

They only govern contracts

• Must have a good contract

Case Details

The Electrocase

• It's from Germany
• Must have regulations
• Actual transfers take place

Takeaway

They clarify terms and obligations

Maritime

The practices for companies to implement are

• Bills of Lading on line
• Vessels will trade by sea

For proper Maritime

• The laws must cover and accommodate all regulations

How to handle liability

• Vessels are important
• There are documents which the crew must respect

Under what to control with

• Time in service
• Vessels
• The proper authorities

How to control charter types

_ Vessel for a single time

• voyages are given
• A certain amount of time

What duties the charters have

• Proper ports/ships
• How vessel has to be

What happens after accidents

• They receive proper charter
• All is known then the charter is protected

How to know the framework of a vessel

• Carriage is only known

When regulating all this what applies???

• Hague rule
• Disparity

What all the rules try to achieve

• They make laws

What the rules have to have

• Sea state
• The proper legislation

Requirements the owner has

• There is a ship present
• Safe transportation
• NO deviations

How the duties are performed

• Correct name
• NO shipping of danger

WHAT ARE THE proper charter parties

• Contract rules only apply here

LIABILITY

• This is the risk for cargo

Important to carriers

• Proper care
• Good exercise of the sea

The loss must come for

• Forseen danger/loss

More info about those rules

All must be transferred by water Hamburg has doors It offers legal processes

In the article on vessels, it implies to the reader

• That cargo can claim by law
• They will need to bear themselves to show
• The liability is shown
• It will make all proper choices

The Hague

• Everything is paid for to provide
• This all costs money
• There are fees and numbers for the price

What is key in all this information???

That all parties must have a liability There are set rules on ports and claims

A breakdown of all this rules/info

1 Everything should be fair 2 Vessels must only be delivered by way of transport

• For transport and carriage
• Make sure payments
• You should use contracts and ships to do it correctly

What is the transport

• Air contracts exist

Air Transport

• By waybill
• Montreal Convention rules

Road Transport

• Through road waybills
• Governs by road conduct
• Applies by EUR nations

Rail Transport

• The lading is served
• All the railways follow contracts to make things right

Developing what to use

• Transport with safety
• If trends don't exist then make something new

Incoterms

• To have great transfer
• Follows exportations

For all things to occur, look for the following

• Transporting on the land
• Then follow safety's

Selling to Experts

• Follow instructions

Payments Method

• No one can take the contract

What is important

• Contract of payments
• It does effect property

How is everything laid out/specified in transport???

• By charter

So what do we have and what is necessary???

• Boat hire
• Bills to give away

What is need and provided??? Agreements to give and carry Bills for insurance

How do all the ports function???

• They follow everything/guidelines
• What all is safe to do???

Bills have to be paid to banks and the rules for the money must be adhered to

• What if the guidelines were bad/caused something ???
• All the payments would be messed up since everything is based on contracts

The goal is make sure that the bank insures properly

• To have safety the bank does

With LoC it is important to follow contracts

• Banks help the process

Important to follow

• Financial aid
• Contracts
• Everything is known
• Every safety law must be there

All said these terms are needed

• Proper bills in hands
• To show these terms

What is Important to Know

It gives credit and help If this is not done legal actions will take effect Fraud will show in the paper to be handled

It means make sure everything is safe and legal during transaction

What if no has money???

• If someone hasn't given their money, the bills should be rejected at the border

Payments Must have what is agreed

• Pay if terms and agreements are made
• Pay if a third party has an agreement
• Always think of terms when you pay

Here is a recap!!!

• All consignments must be secured to allow great payment
• If you have bad deals there will be no money
• This is the main point of getting paid for services

If You Do Not Like It

What occurs???

• A tort is placed
• It's from a lawful party that gives lawful justification

If All The Requirements Are Met Follow the protocol that the exporters give

Important To All That Is Transferred

• This always happens in payment cases
• Its through bills that lenders get their money

Always ask legal counsel and make sure everything is correct

You can create your business with

• Payment and transfer from legalities
• Get your documentation made ASAP
• This is key
• Get the money right

There is now an international way to handle and pay

• If you do it safe you are okay To have support you will need the legal help given by this document And this all means that you must have legal ways of being paid and doing business