The "United Nations Convention on Contracts for the International Sale of Goods" or the "CISG" is an international treaty governing the sale of goods in international transactions. It was concluded on April 11, 1980, in Vienna. Switzerland (effective March 1, 1991) and most Western trading nations have ratified the CISG and thus declared that the CISG forms part of their national law. The CISG aims to harmonize international laws regarding cross-border sales of goods.
Unlike Swiss Federal law on private international law, the convention does not determine which national law applies to a specific legal relationship. Instead, it provides provisions that directly govern the rights and obligations of the contracting parties and directly replace, in whole or in part, the provisions of national law, such as those in the Swiss Code of Obligations (CO).
In Switzerland, the Federal Court, in its judgment 4A_543/2018 of May 28, 2019, clarified that the CISG not only constitutes an integral part of Swiss domestic law but also takes precedence over the rules of Swiss domestic law concerning sales law, particularly the rules of the Swiss CO.
Scope of Application
The CISG applies to international sales contracts if the seller and the buyer have their places of business or habitual residence in different contracting states. Similarly, the CISG applies to international sales contracts if the rules of private international law of the state in which one of the parties is located require the application of the laws of another state that has ratified the CISG. Thus, the convention may apply even if neither party, only one party, or both parties are located in a contracting state.
For example, if private international law or a choice of law agreed upon by the parties means that Swiss law governs the legal relationship in question, the CISG automatically applies as a special law for international sales contracts. Therefore, choosing national law, such as "German law" or "Swiss law," does not exclude the CISG but includes it.
Furthermore, the CISG covers sales and supply contracts in an international context only to the extent that the contract concerns movable goods. According to Art. 2 CISG, the convention does not apply to:
a) Goods purchased for personal, family, or household use, unless the seller knew or ought to have known at any time before or at the conclusion of the contract that the goods were being purchased for such use;
b) Auctions;
c) Goods sold under judicial process or other means by authority of law;
d) Securities, negotiable instruments, and money;
e) Ships, boats, hovercraft, and aircraft;
f) Electricity.
The CISG does not exhaustively govern cross-border sales contracts. It does not cover legal issues such as limitations, contract validity, transfer of ownership of goods, and product liability for personal injury. Unless the parties have addressed these issues contractually, gaps in the rules will be filled by the national law applicable to the contract in a supplementary manner.
It should be noted that the CISG is of a discretionary nature. The parties may restructure its provisions or exclude them, wholly or partly. To do so, an unequivocal expression of the parties' true intention is required. The burden of proof regarding the exclusion of the CISG lies with the party invoking the exclusion.
Seller’s Obligations
Under the contract, the seller is required to deliver to the buyer goods that conform to the quantity, quality, and description required by the contract and that are contained or packaged as required by the contract. Additionally, according to Art. 30, the seller must provide all documents related to the goods and transfer ownership of the goods.
According to Art. 42, the goods must be free from any rights or claims by third parties.
The conformity of the delivered goods is primarily determined based on the contract. If the parties have not specified the characteristics of the goods contractually, Art. 35(2) CISG sets out certain minimum objective standards regarding the quality of the goods.
According to this provision, the goods and their packaging are conforming to the contract only if:
a) They are fit for the purposes for which goods of the same type would ordinarily be used;
b) They are fit for any particular purpose that was expressly or implicitly made known to the seller at the time of the conclusion of the contract, unless it is apparent from the circumstances that the buyer did not rely on the seller’s skill or judgment or that it was unreasonable for the buyer to do so;
c) They possess the qualities of goods that the seller has presented to the buyer as a sample or model;
d) They are packaged or contained in a manner usual for goods of the same type or, in the absence of such a manner, in a way appropriate to preserve and protect them.
Buyer’s Obligations
The buyer's obligations are governed by Articles 53 to 60 of the CISG. The buyer is primarily required, as per the contract and, subsidiarily, the CISG, to pay the purchase price and take delivery of the goods and, consequently, to perform all necessary acts of cooperation.
Buyer’s Rights in Case of Breach by the Seller
Unlike the Swiss CO, the CISG does not distinguish between non-performance, defects, and breach of contract. Instead, it operates under the assumption of a uniform breach of contract with objective liability (without fault). Art. 25 of the CISG distinguishes between a fundamental and non-fundamental breach of contract.
A breach of contract is fundamental if it results in such a detriment to the other party that it substantially deprives that party of what it was entitled to expect under the contract. While a "simple breach of contract" grants the party invoking the breach, in particular, the right to damages and/or a reduction in the purchase price, a "fundamental breach of contract" can lead to an action for contract avoidance or the delivery of substitute goods.
In case of a breach of contract, the buyer has the following remedies (Arts. 45 et seq. CISG):
Subsequent Performance
Unlike the Swiss CO, Art. 46(3) of the CISG provides for a right to subsequent performance by both the buyer and the seller, unless this is unreasonable given all the circumstances. Furthermore, if the conditions for an effective delivery of substitute goods are met, the seller is required to replace defective goods with goods conforming to the contract.
Price Reduction
According to Art. 50 CISG, if the goods are not in conformity with the contract, the buyer may reduce the purchase price, whether the purchase price has been paid or not. The reduction is a unilateral right of the buyer exercised through a declaration and is not subject to any formality.
Termination
In the event of a fundamental breach of the contract, the buyer may, within a reasonable time, unilaterally declare the contract terminated. In the case of an authorized cancellation of the contract, the contractual relationship is transformed into a termination relationship. Within this termination relationship, the seller is required to refund the purchase price. The buyer has the obligation to return the purchased item.
Damages
Under Art. 74 CISG, the buyer can claim damages, either alone or in combination with other remedies (such as, for example, contract avoidance or a price reduction).
Seller’s Rights in Case of Breach by the Buyer
A breach of the buyer's obligation consists either of failing to pay the purchase price or refusing to accept the goods.
In Articles 62 to 65, the CISG provides the seller with a range of remedies. In the case of simultaneous performance, the seller may, for instance, in case of non-payment by the buyer, make delivery of the goods conditional upon payment of the purchase price and, consequently, withhold the goods until payment. In addition to contract avoidance in the case of a fundamental breach of contract, the seller also has the right, on a cumulative basis, to claim damages.
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