SALES OF GOODS NATIONAL AND INTERNATIONAL LIBALITY

Business in today’s global marketplace is transacted at lightning speed. The products that are
manufactured or designed in India are being sold in other countries across the world and the
products that are manufactured across the world are being sold in India. With the advancement of
the technology, the generation and finalization of sales of goods became easier. Imagine a
contract for sale was finalized between an Indian and English businessman and the deal was
struck due to some reason, if the contract has the law that need to be applied in case of any
dispute then in that case the issue will be resolved according to the law both the parties has
agreed in the contract. What if the parties failed to choose the law that need to be applied? In that
case the two major questions that arise are which court has the jurisdiction to deal with the
matter and which countries laws have to be applied to resolve the issue. In this paper let us
discuss about the various international conventions that are dealing with the sale of goods,
applicability of the conventions, its historical development, and the position under Indian law
and English law.

I. International conventions dealing with sales of goods- BINDU PRIYA(2016026)

II. The CISG in USA- SUSHREE SUNANDA(2016105)
III. The CISG in INDIA and ENGLAND- UJJWAL ASHUTOSH(2016111)

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 International Conventions Dealing With Sales of Goods

Chapterisation:

1. Introduction
2. Historical development of international sales law
 The Hague convention
 The Vienna convention(CISG)
 Common European sales law(CESL)
3. Liability under CISG
 Remedies
 exemptions
4. Conclusion
5. Case laws
 Adonia Holding GmbH v. Adonia Organics LLC
 Chicago Prime Packers v. Northam Food Trading
 Macromex Srl. v. Globex International, Inc
 Roser Techs., Inc. v. Carl Schreiber GmbH

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INTRODUCTION:

Due to globalization national boarders seems to have disappeared and trade between different
countries has increased tremendously. Even though the boarders disappeared for trading, the
Sovereignty of the state comes into play while deciding on the law that governs the transaction.
A consumer, who is reaching a market to select a motor vehicle, or any other equipment or
intermediate product, may find that the product was manufactured overseas and the finished
product may itself consist of a mix of domestic and foreign parts. The product itself or one or
more components of the product is designed or manufactured overseas. However, the
international dimension in a product liability case need not arise solely in the design and
manufacture stages - the product may have been supplied in a different country and the damage
could occur in yet another country but not become apparent until the injured party enters yet
another country. Adding yet another level of complexity, any one of these stages in a product
liability claim – design, manufacture, supply and damage, may itself have been spread over more
than one jurisdiction.1 The transactions of sale of goods are remarkably diverse, ranging from the
sale of precision, manufactured goods, where negotiations and post-delivery trials may be
complex, to the sale of commodities such as grain and oil, which take place in impersonal and
expedited circumstances. International transactions, involve a multitude of legal systems
claiming monopoly power within their respective boundaries. If a dispute is arisen out of such
contract for international sale, each party to the contract will have their own legal system and
applicable laws, which makes it difficult for the judges to decide upon the matter. To solve this
issue there are two potential approaches to give an anticipated law to international sale. The first
is to bring together the principles that govern the conflict of laws (unification of choice of law
rule). On the off chance that this is appropriately done, it won't make any difference in which
ever jurisdiction a case is attempted, as a similar conflict rule would be applied in all
jurisdictions. The outcome would be that in a given certainty circumstance each court would pick
a similar law to oversee the exchange. The subsequent method to give an anticipated law to
international sale of goods is for every jurisdiction to consent to apply a specific uniform
substantive law to international sale (unification or harmonization of substantive rules). On
assessment both the techniques Professor David concludes that,

1
Stuart Dutson, Product Liability and Private International Law: Jurisdiction and Forum Non Conveniens in England,
9 K.C.L.J. 39 (1998-1999).

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 "it seems clear that the two methods should be combined, and that each must have its
particular field of application."2

REVIEW OF LITERATURE:

DEVELOPMENT OF A LAW FOR THE INTERNATIONAL SALE OF GOODS by GERT

REINHART:3

This article discusses about the historical development of international law for sale of goods over
three decades from the Hague Convention on the Conflict of Laws which is applicable to the
international sale of goods to United Nations Convention on Contracts for the International Sale
of Goods. It discuss about the applicability of United Nations Convention on Contracts for the
International Sale of Goods. It compares the Hague convention with the Vienna convention.

CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS by S.A. Kruisinga:4

This article deals with the Common European Sales Law (CESL), which was proposed by
European commission on 11 October 2011. This ascertains the relevance of the national borders
to find the applicable legal system for the contract of international sale of goods. If CSEL comes
into force, cross-border contracts for the sale of goods concluded between businesses within
Europe can be governed by the CISG, the CESL and/or national contract law therefore this
article compares the scope of application of the Vienna Convention and The Common European
Sales Law. It also compares the regulation of standard terms in the CISG and the CESL.

DAMAGES LIABILITY OF THE SELLER UNDER UNITED NATIONS CONVENTION ON

CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS:5

2
The Report of the Secretary-General, Progressive Development of the Law of International Trade, Official Records
of the General Assembly, Twenty-first Session, Annexes, (Agenda Item 88), U.N. Doc. A/6396, reprinted in [1968-
1970] 1 Y.B. UNCITRAL 18, 37-41. See also Matteucci, Unification of Conflicts Rules in Relation to International
Unification of Private Law, in LECTURES ON THE CONFLICT OF LAwS AND INTERNATIONAL CONTRACTS 150, 156
(1951) ("Indeed, it is thought that the unification of the rules of private international law-that is, the conflicts rules-
should proceed side by side with the unification of the rules of substantive law, in order to bridge the gaps that will
inevitably occur in the latter").
3
Gert Reinhart, Development of a Law for the International Sale of Goods, 14 Cumb. L. Rev. 89 (1983),
https://heinonline.org/HOL
4
S. A. Kruisinga, Contracts for the International Sale of Goods, 2014 DQ 58 (2014), https://heinonline.org/HOL
5
Binnur Ataseven & Humeyra Doger, Damages Liability of the Seller under United Nations Convention on Contracts
for the International Sale of Goods, 18 GSI Articletter 21 (2018).

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United Nations Convention on Contracts for the International Sale of Goods ("CISG") dated
April 11, 1980 contains regulations that will be applied to the international sale of goods
contracts. Along with the obligations brought to the buyer and the seller within the context of
CISG, liability that may occur due to failing to fulfill such obligations is also regulated. Liability
to damage which is one of the consequences of such elective rights is also regulated under CISG
and article 79 of CISG regulates how to avoid from this liability (strict liability) enclosed in
article 79 of CISG.

HISTORICAL DEVELOPMENT OF INTERNATIONAL SALES LAWS:

Historically, in countries with a federal system involving different state laws, sales laws were
often among the first areas of law to be unified. Examples are the Swiss Code of Obligations
(1881), the Sale of Goods Act of the Commonwealth of Nations (1893) and the Uniform Sales
Act (1906) in the United States. Although the two, conceivable methods of unifying the
substantive law exist, the less pretentious method is to unify only the law applicable to
international sales. The more comprehensive way is to unify the substantive law governing both
internal and international sales.

In 1856, Germany promulgated General German Commercial Code on the recommendation of

the German Bundestag. A draft presented in 1861 was adopted in virtually all of the forty odd
German states that existed at the time. The Scandinavian countries also followed the similar
fashion. The delegates from Sweden, Norway, and Denmark from 1903 to 1905 drafted a
uniform law to regulate the sale and barter of goods and chattels. It was introduced in the
Scandinavian countries in the early nineteen-hundreds.6

The Hague Convention:

This complexity is exacerbated by competition between several different international

institutions traditionally associated with one technique or the other. The Hague Conference on
Private International Law is, despite its name, a permanent body made up of governmental
members and charged with preparing texts unifying conflict-of-laws rules. Another permanent
institution with governmental membership is the International Institute for the Unification of
6
T. ALME'N, DAS SKANDINAVISCHE KAUFRECHT-EIN KOMMENTAR ZU DEN SKANDINAVISCHEN KAUFGESETZEN
(Scandinavian Sales Law-a commentary to Scandinavian Sales Law) (1922). (Sweden 1905, Denmark 1906, Norway
1907, and Iceland 1911).

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Private Law in Rome, which sponsors studies and prepares legal texts setting out uniform
substantive rules. More recently, the U.N. Commission on International Trade Law has
approached unification work more eclectically. While the U.N. Commission has coordinated its
work with that of The Hague Conference and the Rome Institute, the Commission has the
advantages of more significant funding and broader membership to support its undertakings.” 7 In
1930, on the request of League of Nations, efforts were made towards the establishment of an
international sales law at the Rome International Institute for the Unification of Private Law
(UNIDROIT). A draft was made in the year 1935 by a committee formed by leading European
jurists from many countries and the same was revised in 1939. Due to Second World War the
draft was interrupted.

The government of the Netherlands in 1951 took a step to continuing the draft for unification. In
1956 and 1963 new drafts were presented. A diplomatic conference was held in The Hague, in
1964 and passed the Conventions relating to a Uniform Sales Law with the laws themselves,
namely the Uniform Law on the International Sales of Goods (ULIS) and the Uniform Law on
the Formation of Contracts for the International Sale of Goods (ULFIS) attached as annexes.
The substantive law was split into two parts to enable a state to adopt only one part if it desired
to do so. The conventions obligate the ratifying states to adopt the laws which appear as annexes
to the conventions. The ratifying states may then adopt the substantive law in any way they find
appropriate, for example, as a chapter of the ratifying states civil code or a completely separate
law. They came into force in August 1972. The principle failure of The Hague Convention is that
it failed to gain the approval of the developing countries 8 with the suspicion that these laws are
products of the industrialized countries of Europe. The developing countries place their hopes on
the activities of the United Nations.

The Vienna Convention:

The United Nations Commission on International Trade Law (UNCITRAL) in 1969 made a
working committee to examine whether is it possible to from a worldwide uniform law for
international sales or not. This working group based on the 1964 Hague sales laws prepared a

7
Winship, Peter (1988) "Private International Law and the U.N. Sales Convention, "Cornell International Law
Journal: Vol. 21: Iss. 3, Article 7.
8
The Scandinavian and Eastern European countries, which had participated in the preparation of the Hague
conventions, did not ratify them.

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draft version Geneva draft. “The working committee presented the Vienna Draft in 1977 and
the New York Draft in 1978. United Nations Convention on Contracts for the International
Sale of Goods (CISG) was promulgated in the United Nations 97th Diplomatic Conference in
Vienna on April 11, 1980. This Convention is popularly known as the 1980 United Nations
(UN) Convention or the 1980 Vienna Convention (CISG). The 1980 Vienna Convention is
expected to replace the 1955 and 1964 Hague Laws. To a large extent, it has copied and made
less rigid, the main provisions of the Hague substantive laws. Its goal is to establish general,
simple and easy to understand rules, changing the substance and underlying theory of The Hague
rules when it is necessary. The E.E.C. (Eastern European Countries) states which are members of
the Hague Sales Convention have agreed among themselves to abandon that convention and join
the United Nations Convention.”9

The Vienna Convention doesn’t apply to the sale of goods which are for personal, family or
household items unless the seller neither knew, nor ought to have known, of the purpose of the
sale. The application of the convention is limited to commercial sales and contracts for work,
labor and materials.10 This convention is generally applicable to sale of movable goods. The
Convention only governs rights and obligations arising from a contract. 11 The 1980 Vienna
convention does not deal with questions concerning the validity of contracts, such as those
relating to illegality, competency of the parties, usages, the effects of the contract on the property
in the goods sold, or problems of personal injury.12 The rules of the Convention are not jus
cogens: all of them can be changed by agreement of the parties. 13 The Convention provides that
it will apply if both states where the buyer and seller have their respective places of business are
Contracting States.14 Almost all EU Member States are Contracting States to the CISG, except
for the United Kingdom, Ireland, Portugal and Malta. Thus, to most contracts for the sale of
goods within the EU, the Convention will apply. It should be noted, however, that the
Convention does not in principle apply to consumer sales.15 The CISG will also apply when the
rules of private international law lead to the application of the law of a Contracting State.16
9
Gert Reinhart, Development of a Law for the International Sale of Goods, 14 Cumb. L. Rev. 89 (1983).
10
Art.2 , CISG
11
Pamesa Ceramica v. Yisrael Mendelson Engineering Technical Supply Ltd.
12
Art. 4 and 5, CISG
13
Art. 6, CISG
14
Article-l(1)(a), CISG.
15
Article-2(a), CISG
16
Article-1 (1)(b), CISG.

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Common European Sales Law:

The European Commission gave three reasons as to why the CISG would not suffice, they are

i. The CISG regulates certain aspects of contracts for the sale of goods but also leaves
matters outside its scope, such as unfair contract terms and prescription.
ii. Majority of member states did not ratify the convention.
iii. There is no mechanism which could ensure a uniform interpretation of the CISG.

“For these reasons, the European Commission stated that the CISG does not suffice within the
EU. When the European Commission published its Proposal for a Regulation on a Common
European Sales Law, it stated that the divergences between national contract laws constitute an
obstacle to cross-border transactions and impede the functioning of the internal market.
Therefore, the objective of this proposal is to "improve the conditions for the establishment and
the functioning of the internal market by making available a uniform set of contract law rules".
The proposed Regulation itself provides for the scope of application of the instrument. The
provisions of the proposed instrument of European contract law, the Common European Sales
Law or CESL are to be found in Annex I. In September 2013, the Legal Affairs Committee of
the European Parliament approved the text of this proposal with a number of amendments, the
most important being to limit the scope of application of the Regulation to distance contracts,
notably online contracts.”17 The CESL has the form of an optional instrument and can be chosen
by businesses and consumers to serve as a basis for their transactions ('opting in'). This optional
instrument is supposed to be a second legal regime in each Member State, thus providing parties
with an option between two regimes of domestic contract law.

LIABILITY UNDER CISG:

Till date 93 countries have ratified the convention. To know whether CISG is applicable to a
particular states truncation we need to know under which scenario CISG is applicable to a sale.
CISG is applicable when:
17
S. A. Kruisinga, Contracts for the International Sale of Goods, 2014 DQ 58 (2014).

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 i. Both parties to the sales contract’s places of business are in countries who have adopted
the CISG (the “Contracting States”), the CISG can apply automatically to your
transaction.
ii. One party is from a Contracting State and the contract expressly states that the law of that
Contracting State will govern the agreement, the CISG can apply.
iii. Neither party is from a Contracting State, but the parties agree in their contract to have
the CISG apply.

Hence, even though India did not ratify the convention, but still it can be made applicable if the
other party is contracting state to the convention, unless and until the ratified nation expressly
states that CISG apply only when both the paries have to ratify the convention. 18 If the contract
for sale comes under any one of the scenarios mentioned above then it has to fulfill four main
requirements for the application of the provisions regulating the liability of the seller under the
CISG:

 the defect should be existed at the time of the transmission of the damage to the buyer,
 the buyer should fulfill its burden to inspect or get the goods inspected,
 the buyer should inform the seller about the defect19,
 the buyer should not accept the defected good.

The notice requires no specific form. It can be made in writing or even orally. 20 If the above
conditions are fulfilled then the liability of the seller is governed by Article 79 (1) of the Vienna
convention. It also prescribes that the seller will be release from any of his or her obligations in
the case of circumstances that can be regarded as force majeure.21 The calculation of the
compensation will be governed by article- 74, 75 and 76 of CISG. If the seller proves that the
violation originated from a cause that is not available, the seller will be able to evade from the
responsibility. It should be noted that indemnification will always be a monetary value and may

18
Prime Start Ltd. v. Maher Forest Prod., Ltd., 442 F. Supp. 2d 1113, refusing to apply CISG since neither UK nor BVI
are parties to CISG even though the other party i.e America has ratified the convention.
19
NV A.R Vs NV 1(design of radio phone case), 2001/AR/0180, http://cisgw3.law.pace.edu/cases/020515b1.html
20
CLOUT Case No. 176 [Oberster Gerichtshof, Austria, 6 Feb. 1996], published in RECHT DER WIRTSCHAFT (RIW)
203 (1996) (German).
21
Pursuant to Article 79 (1) of the CISG, a party is not liable for a failure to perform any of his obligations if he
proves that the failure was due to an impediment beyond his control and that he could not reasonably be
expected to have taken the impediment into account at the time of the conclusion of the contract or to have
avoided or overcome it or its consequences.

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be claimed along with other optional rights. The other remedies that are provided under CISG
are specific performance,22 avoidance of the contract,23 and price reduction.24 It follows from art
45(1)(b)25 CISG that the sellers liability for damages is independent of fault or contractual
warranty of performance. The seller is subject to a general guarantee liability with regard to
performance of the contractual obligations. The law remains unclear as to how far CISG
supplants and preempts relevant contrary state law. Few courts have addressed the issue and
those that have seem to indicate that CISG will probably prevail over contrary state law on areas
covered by CISG. More cases are anticipated to occur. One published Northern District court
case in California held that CISG did preempt the pleaded state law claims for breach of contact
and breach of warranty.26 The common question arises as to what is the place of business if a
business has several locations in several nations. The court is required to determine the place of
business that possesses the closest nexus to the transaction. CSIG does not contain a specific
statute of limitations it follows 1974 Convention on the Limitations Period in the
International Sale of Goods Treaty.

Article 5 provides that the CISG "does not apply to the liability of the seller for death or personal
injury caused by the goods to any person." This does not mean that the buyer is left with no
remedy for such losses. “The recovery of damages will be governed by the law applicable by
virtue of the rules of private international law. If, in addition to personal injury, other damage
such as loss of profit or damage to property has also been caused by the same goods, domestic
law is applicable to seller's liability for personal injuries, while the CISG is applicable to seller's
liability for other types of damage. If property damage was caused by seller's breach of contract
and if that result was foreseeable, it would fall within the scope of damage claims under the
CISG. However, whether or not the CISG completely excludes domestic law claims for property
damage, especially tort law claims, has been subject to continuous debate. An obligor will be
exempt from paying damages, but not from other remedies for non-performance, in accordance
with Article 79(1). Article 79(1) requires that because of an unforeseeable impediment beyond
the obligor’s control, the obligor is not able to perform the obligor’s obligation under the

22
Articles-46(1), 62, 28, CISG.
23
Article-49(1), 64(1), CISG.
24
Article-50, CISG.
25
Bundesgerichtshof, Germany, 31 Oct. 2001, CLOUT Case No. 445
26
Asante Technologies Inc v PMC-Sierra Inc, 164 F.Supp.2d 1142 (2001).

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contract. In cases where the obligee undertakes measures to place itself in the same position that
it would have been in had the contract been properly performed, the obligee is entitled to recover
the costs of those measures, provided that they were reasonable. If the non-conformity of the
delivered goods can be remedied, the loss can be calculated according to the necessary and
reasonable expenses for the cure.”27

Remedies:

The buyer can excise his elective rights under CISG article-45, if the conditions for the sellers
liability are meet. These rights are remedies provided under articles between 46 and 52 and the
right to claim compensation under articles 74 to 77. Remedies regulated under mentioned
provisions are;

 Request a free delivery of a similar good or a free repair:

In order for the buyer to be able to use one of the two alternatives, he/she should not apply to
the use of other remedies. In addition, the state party to the Contract should not be subjected
to the same decision in the domestic law system. The right to request an indefectible similar
of the contractual goods from remedies is only possible if, for example, the goods are
relocatable, in other words, not in part. In addition to this requirement, the breach leading to
the remedies of buyer must be essential as it is explained below. It should also be noted that
when a similar dispensation is requested, all costs related to article-48(1)28 of CISG will be
covered by the seller.

 Right to Return From the Contract:

The use of the right to return from the contract is only possible in the event of an essential
breach of the Contract. In order to determine whether there is an essential breach of the
Contract or not, the definition in article -25 29 of the convention needs to be examined. What
27
Delchi Carrier SpA v. Rotorex Corp, U.S. Circuit Court of Appeals (2nd Cir) (6 December 1996)
28
Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to
perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable
inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the
buyer retains any right to claim damages as provided for in this Convention.
29
A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other
party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach
did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen
such a result.

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 should be taken into consideration when determining the essential violation under this
definition is that to which extent the other party is affected by the violation. For example, in
ajudgment of the German Federal Court, goods were not considered to be defamatory since it
could not be proved that it is impossible to sell such goods in Germany or abroad. In the
court's opinion, this illustrates that the buyer is not deprived significantly of what he expects
from his contract.30

 Right to Request Discount of the Price:

There is no obligation for the price to be payed in full in order for the buyer to use the right
to request discount.31 However, it is regulated that the buyer will not be able to use the right
to request a discount at the price if the seller lost his or her deficiencies in the performance or
if the buyer refused the act that the seller had done in accordance with Article 37 or 48 of the
CISG.

Or he can file an action against the seller for damages. Any kind of breach, even the most minor
one, of a contractual duty can trigger the entitlement to damages. Also, a breach of the obligation
to make restitution when unwinding the contract upon avoidance leads to liability under Article
74.32 A tort that is in essence a contract claim and does not involve interests existing
independently of contractual obligations will fall within the scope of the CISG regardless of the
label given to the claim, and therefore not require a determination concerning the preemptive
effect of the CISG on tort remedies.33

Remedies to sellers are like suspension of performance; avoidance of the contract; reclamation of
the goods; an action for the price of the goods; or an action for damages.

Conditions for seller to evade from liability:

The seller must prove that the damage was caused by unavoidable circumstance in order to evade
the liability. Articlr-79 of CISG deals with the conditions that are to be fulfilled to avail the

30
Binnur Ataseven & Humeyra Doger, Damages Liability of the Seller under United Nations Convention on
Contracts for the International Sale of Goods, 18 GSI Articletter 21 (2018).
31
Article-50, CISG
32
Roder Zelt- und Handelskonstruktionen GmbH v. Rosedown Park Pty Ltd and Reginald R Eustace (Fed Ct,
Adelaide, SA (28 April 1995).
33
Electrocraft Arkansas Inc. v. Super Electric Motors Ltd, 320 F.Supp.2d 702, 711-12 (N.D.Ill.2004).

12 | P a g e
exemption for liability. Sellers were held to be conceivably excused on account of their failure to
deliver conforming goods, but such exemption was denied on the specific facts of those cases. 34
An "impediment" must be "an unmanageable risk or a totally exceptional event, such as force
majeure, economic impossibility or excessive onerousness."35 four elements of article-79:

1) an impediment beyond the party's control,

2) unforeseeable by that party,

3) that could not be reasonably avoided or overcome, and

4) an allegation by that party that nonperformance was due to that impediment.36

The conditions are as follows:

 Existence of An Obstacle Out of Control of the Seller:

For the seller to avoid liability to damage, reason for his inability to perform the obligations
in article-35 of CISG should be caused by an obstacle beyond his control. The Convention
did not define the meaning of obstacle. However classical force majors can be counted as an
obstacle: super natural things like earthquake, lighting, flood, thunder; social or political
happenings like war, insurrection, strike, coup: legal barriers like import and exports
prohibition or limitation. Though the limit should not be overextended, only situations that
can obstruct the performance should be understood from the term.37 While assessing the
impediment potential of the Contract conditions like ‘context of the contract', ‘foreseen risks’
should be taken into consideration. The mentioned obstacle has to be out of the seller's
control area and the control area limits shall be determined by the parties’ risk distribution as
it is mentioned.38

 Unpredictability of the Obstacle at the Time of Establishment of the Contract:

34
Powder milk case; http://cisgw3.law.pace.edu/cases/020109g1.html
35
CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June 1996]
36
07-cv-07616-SAS
37
Nuova Fucinati, S.p.A., v. Fondmetall International A.B., Tribunale di Monza, Italy , Clout No. 54, reproduced in
English translation 15 J.L. & Com. 153 (1995)
38
CLOUT case No. 596 [Oberlandesgericht Zweibrücken, Germany, 2 February 2004]

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 Predictability condition has to be assessed objectively. In other words, it is essential to
consider whether the active, sensible, reasonable person in business life will be able to
perceive an obstacle in such away and to establish contracts accordingly. Such obstacle shall
be foreseeable during the establishment of the Contract. In case the existence of such
obstacle; it will not be possible for the parties to evade from the responsibility since it shall
be considered that the parties are considered to have accepted the risks arising from the
Contract. “the obligator is always responsible for impediments when he could have prevented
them but, despite his control over preparation, organization and execution, failed to do so” 39
Even though the burden of proof for the unpredictability condition is on the party that claims
the exception in general, if the seller predicts the outcome, he can secure himself by taking
the precautions that as expected from him and set a non-liability clause. The burden of proof
is on the party failing to perform.40

 Unavoidability of the Obstacles and Their Consequences:

Even if the conditions that have been mentioned in the two prior headlines realized, the seller
still has to avoid the obstacle beyond his control, the unpredictable obstacle and its
consequences at the establishment of the Contract as far as possible, taking all the
commercial and economic precaution. Any contrary behavior will be assumed as he had a
chance to avoid. In this respect it is possible for the seller to evade from the responsibility. 41

Article-79 exempts only from certain liabilities, and doesn’t address to the other type of
liabilities that are given to buyer under article- 50(right to reduction on price), article-46, 62(right
to compel performance), article-49, 64(right to avoid the contract) or article-78(right to collect
interest).42

CONCLUSION:

Till now 93 countries have ratified the Vienna convention. Even though the Convention will
permit the buyers and sellers to exclude the application of its provisions by agreement (Article

39
Vine wax case, Germany, 24 marche 1999 supreme court, http://cisgw3. Law.pace.edu/cases/990324g1.html.
40
Powdered milk case, http://cisgw3.law.pace.edu/cases/020109g1.html.
41
Binnur Ataseven & Humeyra Doger, Damages Liability of the Seller under United Nations Convention on
Contracts for the International Sale of Goods, 18 GSI Articletter 21 (2018).
42
Vine wax case, VIII ZR 121/98, http://cisgw3.law.pace.edu/cases/990324g1.html

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6), the terms of the Convention are likely to be regarded as fair and neither party will be easily
persuaded to accept terms less favorable to himself. The principles of the United Nations Sales
Law are likely to evolve into rules generally accepted in international trade. This will greatly
improve the law of international sales throughout the world and facilitate international trade. The
CISG is doesn’t deal with many aspects, it is applicable only to the business to business
transaction unlike CESL where it is applicable both to the business to business transactions as
well as to the business to consumer transactions. Damages under the CISG can be claimed in
addition to other available remedies for breach of contract, such as specific performance or
avoidance of the contract. The CISG’s damages regime under Articles 74 provides for the
obligor to put the obligee into the position the obligee would have been in if the contract had
been performed according to its terms. The CISG offers the obligee a choice, if the breach was
so fundamental that the obligee could avoid the contract, to either calculate the obligee’s
damages abstractly under Article 74, or concretely under Article 75 if the requirements of Article
75 are met. The obligee may prefer recovery under Article 75 (or recovery under Article 76 if no
substitute transaction was done) if the obligee cannot prove with a requisite degree of certainty
that it suffered damages as a result of the breach.

Case analysis

Adonia Holding GmbH v. Adonia Organics LLC:43

Facts:

 The dispute was between Defendant Adonia Organics LLC (“Adonia Organics”), an
Arizona limited liability company, and Plaintiff Adonia Holding GmbH (“Adonia
Holding”), a private company incorporated in Austria.

43
No. 14-01223-PHX-GMS, 2014 WL 7178389 (D. Ariz. Dec. 16, 2014).

15 | P a g e
  In its First Amended Complaint (“FAC”), Adonia Holding alleges that Dr. Marc Franco
Tahilian, a representative of Adonia Organics, promised Adonia Holding that it could
become the exclusive dealer of Adonia products in Eastern Europe.
 Based on this oral agreement, Adonia Holding traveled to these countries, created
affiliated companies, registered the products, retained the services of public relations
companies, advertised, held press conferences, and obtained celebrity endorsements.
Adonia Holding also bought Internet domains, began creating platforms for online sale of
Adonia products, and made plans to meet with a pharmacy distributor in Poland.
 Adonia Holding alleges that it and Adonia Organics entered into a written distributorship
agreement entitled the Eastern European Reseller Agreement. The Agreement stated that
Adonia Holding would be given the exclusive right to sell Adonia products in Eastern
Europe upon its initial purchase of ADONIA products.
 In addition, the Agreement required Adonia Holding to order 39,500 units over a 21-day
period after obtaining product registration in three countries. Adonia Holding registered
the products in by the date required.
 Upon learning that another Adonia products reseller was competing with it in Eastern
Europe, Holding contacted Organics and requested assistance with this problem. When
Organics did not provide sufficient help and the competing reseller did not cease its
actions. Holding sued for breach of contract, armiong other claims.

Issues:

 Whether CISG applicable to the transaction?

 whether the subject matter of the contract fell within the scope of the C.IS.G?

Reasoning:

 Adonia Organics first claims that the Agreement is governed by the Convention on the
International Sale of Goods (“CISG”). The CISG provides applicable law for contracts
for the sale of goods between parties whose places of business are in different states
(article-1). It is undisputed that the United States and Austria are signatories to the CISG
and that Adonia Holding and Adonia Organics are, therefore, members of different states.

16 | P a g e
  The agreement was expressly governed by Arizona law. Although Arizona courts have
not yet decided whether the UCC applies to distributorship agreements, the Ninth Circuit
has held that Arizona would follow the majority of states and apply the UCC to such
agreements.44
 Adonia Holding’s FAC has adequately pled the existence of the Agreement, its
repudiation, and the resulting damages. The FAC concedes that Adonia Holding
suspended its purchase of 39,500 units of Adonia product. However, it also alleges that it
did so only after Adonia Organics did not ensure the exclusivity of the Eastern European
Markets. Under Arizona law, to recover damages for anticipatory breach, the injured
party need only show that he had the ability to perform his own obligations under the
agreement.
 To apply CISG there must be a minimum quantity to be specified in the contract. The
court found that the cases at a minimum stand for the proposition that an agreement must
specify the price or types of goods to be sold before the C.I S.G. will apply. Because the
court found no cases45 to the contrary, it accepted the reasoning of the majority of cases.
The fact that the agreement between Holding and Organics required a minimum quantity
to be purchased did not bring this agreement within the CI S.G., because it did not
specify the type or price of the goods to be sold. Therefore, the agreement was not a
contract for the sale of goods, so the C .S.G. did not apply.

Conclusion:

CISG doesn’t apply to CISG. Instead, the court applied the Uniform Commercial Code
(UCC) because the agreement specified that the law of Arizona would apply, and the Ninth
Circuit has held that Arizona would follow the majority of states and apply the UCC to
distributorship agreements.

Chicago Prime Packers v. Northam Food Trading:46

Facts:
44
Paulson, Inc. v. Bromar, Inc., 775 F.Supp. 1329, 1333 (D.Haw.1991)
45
Amco Ukrservice v. Am. Meter Co., 312 F. Sun. 2d 681, 686 (E.D. Pa 2004); Viva Vino Imp. Corp. v. Farnese Vi
SVrl., Cv. A. No. 99-6384, 2000 WL 1224903, at *2 (L.D. Pa. Aug. 29, 2000); Helen Kaminski Pty., Ltd. v. Mktg. AustI.
Prods., Inc.. No. 96B46510. 1997 WL 414137, at *3 (S.D.N.Y. juy 23, 1997).
46
320 F. Supp. 2d 702 (N.D. Ill. 2004)

17 | P a g e
  Chicago Prime Packers, Inc. brought a complaint for breach of contract against Northam
Food Trading Co. and Nationwide Foods, Inc. Brookfield Farms.
 Chicago Prime is a Colorado corporation with its principal place of business in Avon,
Colorado and Northam is a Canadian corporation with its principal place of business in
Montreal, Canada. Both companies are wholesalers of meat products. On March 30,
2001, Chicago Prime contracted to sell 40,500 pounds of government inspected fresh,
blast frozen pork back ribs to Northam. Chicago Prime purchased the ribs from
Brookfield, a meat processor.
 On April 24, 2001, Brown Brother's Trucking Company picked up the delivery and
delivered the ribs on 25th April to the Northam's customer. At the time of receipt, Beacon
signed a second bill of lading acknowledging receipt and stating that the ribs were "in
apparent good order," except for 21 boxes that were gouged and the meat in those boxes
showed signs of freezer burn.
 On May 4, 2001, Beacon began processing the shipment and noticed that the product
appeared to be in an "off-condition." Beacon contacted the United States Department of
Agriculture ("USDA") to inspect the goods. The inspector found that the product was
spoiled and ordered Beacon to stop processing it. That same day, Beacon notified
Northam and Chicago Prime of the potential problem with the delivered goods. On May
23, 2001, Dr. John Maltby, a USDA expert, inspected the goods and concluded that the
product was rotten, that it arrived at Beacon in a rotten condition, and that it appeared to
be assembled from different locations. He also determined that there was no opportunity
for salvage and that the product should be condemned.

Issues:

 whether buyer made timely examination of the goods?

 whether Northam gave notice to Chicago Prime of the alleged lack of conformity within a
reasonable time after it ought to have discovered the alleged lack of conformity?

Reasoning:

 Northam argued that "there were no contractual terms requiring inspection upon
delivery." Furthermore, in the first bill of lading it was specifically stated that the

18 | P a g e
 contents and condition of contents of packages were unknown. When an issue is not
addressed by the contract, the provisions of the CISG govern.
 Under article 35 of the CISG, "the seller must deliver goods which are of the quantity,
quality and description required by the contract," and "the goods do not conform with the
contract unless they are fit for the purposes for which goods of the same description
would ordinarily be used." Under article 36, the seller is liable for any lack of
conformity. Article 38 requires the buyer to "examine the goods, or cause them to be
examined, within as short a period as is practicable in the circumstances."
 Article 38 of the CISG, Section 3, further states that "if the goods are redirected in transit
or redispatched by the buyer without a reasonable opportunity for examination by him
and at the time of the conclusion of the contract the seller knew or ought to have known
of the possibility of such redirection or redispatch, examination may be deferred until
after the goods have arrived at the new destination."
 The buyer bears the burden of proving that the goods were inspected within a reasonable
time.47 To answer the question with in how much time the inspection has to be made, it
has referred to several cases. It first cited a German case 48, where the buyer lost the right
to rely on lack of conformity by failing to promptly inspect ham delivered by the seller or
to give notice of the ham's non-conformity within a reasonable time. The German Court
found that because the alleged defect was easily recognizable, the buyer should have
examined the goods within three days of delivery. In other case, the German Court held
that examination of the quantity of items delivered must be done immediately at the place
of performance of the obligation or at the agreed destination. It further held that
examination of the quantity of the items delivered more than a week after delivery was
unreasonable under the circumstances.49
 In Alessandro Rizzieri, the Italian Court decided that according to the CISG, goods are to
be examined at the time of receipt, which will usually permit the buyer to determine
quickly whether the goods are defective, and thus notify the seller of any lack of
conformity shortly after delivery of the goods. In fact, the Italian Court found that,
although the cheese ordered by the buyer had been delivered frozen, the buyer was not
47
Fallini Stefano & Co. S.n.c. v. Foodic BV, Case No. 900336, Arrondissementsrechtbank Roermond (19 December 1991) UNILEX 1991.
48
No. 2 C 395/93, Amtsgericht Riedlingen (21 October 1944) UNILEX 1994.
49
No. 2 C 395/93, Amtsgericht Riedlingen (21 October 1944) UNILEX 1994.

19 | P a g e
 exempt from the duty to make a timely examination. The buyer could have defrosted a
portion of the cheese and discovered the non-conformity.
 The District Court pointed out that Northam was only a "trading company" and that
Northam owns no brick and mortar facilities or trucks. Furthermore, Northam presented
no testimony or evidence as to why it could not have examined the shipment when
delivered to Beacon on April 25 or within a few days thereafter. Because the goods were
redirected or redispatched after receipt, in accordance with CISG article 38(3),
examination of the ribs could have been deferred until after they arrived at Beacon. The
Court held that Northam's inspection, nearly a month after delivery, did not satisfy its
obligation to inspect the goods within a reasonable time.
 Under article 39 CISG, "a buyer loses the right to rely on a lack of conformity of the
goods if he does not give notice to the seller specifying the nature of the lack of
conformity within a reasonable time after he has discovered it or ought to have
discovered it."
 In Sport D'Hiver di Genevieve Culet v. Ets Louys et Fils,50 it was held that the
reasonableness of the time for a notice of non-conformity provided in article 39 of the
CISG is strictly related to the duty to examine the goods within as short a period as is
practicable in the circumstances set forth in article 38 of the CISG. The Italian Court
further determined that when defects are easy to discover by a prompt examination of the
goods, the time of notice must be reduced. In the case at hand, Dr. Maltby reported that
the ribs were obviously rotten and that even the odor was foul.
 Based on its analysis of foreign decisions, the District Court determined that not only did
Northam fail to examine the shipment of ribs in as short a period of time as practicable,
but that it also failed to give notice within a reasonable time after it should have
discovered the alleged non-conformity. Northam provided notice on May 4, 2001, which
was eleven days after it discovered that the ribs were spoiled. The Court found this period
of time to be unreasonable under the circumstances.

Conclusion:

50
Case No. 45/96, Tribunale Civile di Cuneo, Sez. 1 (31 January 1996), UNILEX 1996.

20 | P a g e
  Northam failed to demonstrate that it examined the ribs, or caused them to be examined
within as short a period as is practicable and it also failed to send the notice wit in
reasonable time.

Macromex Srl. v. Globex International, Inc:51

Facts:

 Globex is an American company that sells food products to countries around the world.
Globex contracted to sell Macromex, a Romanian company, 112 containers of chicken
parts to be delivered in Romania. That contract was governed by the United Nations
Convention on Contracts for the International Sale of Goods ("CISG").
 The contract required that Globex make the final shipment by May 29, 2006. However,
by June 2, 2006, it had failed to ship sixty-two of the containers. The Romanian
Government declared, without notice, that as of June 7, 2006, no chicken could be
imported into Romania unless it was certified. The remaining forty-two containers could
not be shipped to Romania due to that regulation. Macromex then brought arbitration
proceedings against Globex for breach of contract, demanding $608,323.00. Globex
submitted to arbitration and lost.
 Globex's principal argument was a force majeure defense. Globex argued that its delays
in shipment were within the industry's informal standard of flexibility. The ban came
within that period of flexibility without warning, completely blocking Globex from
shipping the remaining chicken to Macromex.
 The arbitrator found that the delay in shipment itself was not a fundamental breach.
Because the ban on importing chicken into Romania made that non-delivery effectively
indefinite, the arbitrator then examined whether Globex was exempted from performance
by CISG Article 79, which covers excuses due to force majeure. That Article, as
interpreted by the arbitrator, contains four elements:
1) an impediment beyond the party's control,
2) unforeseeable by that party,
3) that could not be commercially reasonably avoided or overcome, and
4) an allegation by that party that nonperformance was due to that impediment.
51
No. 08 Civ. 114(SAS); 07-cv-07616-SAS

21 | P a g e
  The arbitrator found that Globex satisfied the first two elements, may have satisfied the
fourth, but failed to satisfy the third. The arbitrator determined that the third element
refers to the concept of substituted performance. The arbitrator found the language of the
contract precluded an interpretation as to the third element based solely on a reading of
the contract. On examining CISG and UCC the arbitrator found that section 2-614 of the
U.C.C. was dispositive of the issue.
 The arbitrator held that section 2-614 requires commercially reasonable alternatives to
performance. Macromex proposed that Globex ship to a port in Georgia, a nearby
country. The arbitrator noted that another of Macromex's American suppliers had
accepted this offer, in the face of the same import ban. Globex, however, had refused, and
instead took advantage of a contemporaneous jump in the market price of chicken.
 Having decided for Macromex, the arbitrator set damages at the Romanian market price
for the undelivered chicken-namely, the $606,323.00 sought by Macromex. The arbitrator
also shifted all costs for the proceedings and attorneys' fees to Globex. The final award
came to $876,310.58.
 Macromex then petitioned for confirmation of the award in this Court, and Globex cross-
petitioned to vacate that award.

Issues:

 Whether resort to private law, and specifically the UCC to define what is commercially
reasonable in the circumstances, is appropriate under article-7(2)52 of CISG?
 Whether arbitrator miscalculated the damages as with regards to article-74 of CISG?

Reasons:

 If the parties so agree, a contract may be governed by the CISG. Because the CISG is a
self-executing treaty and the United States is a member, it is binding on this Court as
federal law. However, because there is virtually no case law under the Convention, we
look to its language and to the general principles upon which it is based. Further, case
law interpreting analogous provisions of Article 2 of the U.C.C., may also inform a court
52
Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled
in conformity with the general principles on which it is based or, in the absence of such principles, in conformity
with the law applicable by virtue of the rules of private international law.

22 | P a g e
 where the language of the relevant CISG provisions tracks that of the U.C.C. This rule of
interpretation also applies to arbitrators examining a contract providing for the
application of the CISG as governing law.
 Section 2-614 is unambiguous. It covers unloading places that have "become
unavailable”, “without fault of either party”. While this may often be read to refer to
specific facilities within a country, it is more than "barely colorable" to read this to
include a country's facilities, blocked by regulation, when a nearby country's facilities
are available. Indeed, as Macromex argues, there is no reason to overburden the
significance of national ownership of a port.
 Globex instead argues that section 2-614 refers only to the technical details of contract
performance. The official comment that Globex quotes, however, can easily be read to
confirm the arbitrator's application. The comment's distinction between incidental
matters and those going to the heart of the contract is better read as "surmountable
impediments" and "insurmountable impediments." Nonperformance without substitution
is only justified if the impediment is totally insurmountable, not just that it affects an
important element of the contract. The comment cites to two cases as illustrative. In
International Paper v. Rockefeller53, the specific stand of trees Buyer wanted was
accidentally destroyed. Because the requested product no long existed, the impediment
to performance was insurmountable. In Meyer v. Sullivan54, however, Seller was to
deliver certain goods to Buyer, but war regulations prohibited Seller from leaving port.
Buyer was able to demand that Seller hold the goods at its warehouse so that Buyer
could retrieve them at that location.
 Globex argues that if it is liable for the breach, the arbitrator miscalculated the damages.
According to Globex, the damages, calculated in accordance with CISG Article 74,
should reflect the market prices in Georgia, not Romania. Globex reasons that if it
breached, it did so by failing to complete the substituted performance, not by failing to
ship to Romania, which was impossible. Because shipment to Romania was impossible,
Macromex could not have lost profits based on Romanian market prices.

53
146 N.Y.S. 371 (3d Dep't 1914)
54
181 P. 847 (Cal.App.1919)

23 | P a g e
  The CISG defines damages in Section II, Articles 74 to 77. Article 74 discusses breached
contracts; Articles 75 and 76 discuss avoided contracts. Finally, Article 77 discusses
mitigation, an issue not raised in this case. Because the arbitrator rejected the force
majeure defense, this contract was breached, rather than avoided. As a result, only
Article 74 applies. An unexcused breach fits squarely within Article 74. The arbitrator
correctly read Article 74 to determine loss of profit as the amount foreseeable at the
signing of the contract.

 The arbitrator correctly applied Article 74, finding that "Buyer is entitled to lost profits
caused by Seller that were foreseeable at the time of entry into the Contracts." The term
"foreseeablity" here is not the same as that used in the second element of force majeure,
where it serves to protect the breaching party from unexpected impediments. The loss of
profit foreseeable at the signing of the contract refers to circumstances similar to those
raised here-preventing each side from using unforeseeable circumstances to modify the
contract. Just as a Seller cannot require the buyer to pay an unexpected jump in market
price for the contracted good, the seller is not required to accept less than the contract
price even if the market crashes or a government regulation causes the price to drop.
Because lost profits are determined under the CISG as the amount foreseeable at the time
the contract was executed, the arbitrator's calculation of damages was correct. The lost
profits were based on the market value of the chickens in Romania, their intended place
of sale.

Conclusion:

 The award passed by the arbitrator is valid. The condition under article-79 of CISG was
not fulfilled.

Roser Techs., Inc. v. Carl Schreiber GmbH55

Facts:

55
No. 11cv302 ERIE, 2013 U.S. Dist. LEXIS 129242 (W.D. Pa. Sep. 10, 2013)

24 | P a g e
  On August 11, 2011, defendant Carl Schreiber GmbH d/b/a CSN Metals ("CSN")
provided two price quotes for copper-molding plates.
 The quotations referred to CSN’s standard quotations of sale to be found under CSN’s
website. Furthermore, the quotations stated that plaintiff Roser Technologies, Inc.
(“RTI”) should provide advanced payment or equivalent guarantees if CSN could not
obtain sufficient coverage by its credit insurance company for RTI’s orders.
Consequently, RTI sent CSN purchase orders.
 Thereafter, on October 4, 2011, CSN informed RTI that its credit insurance company cut
the credit line complete, and hence, RTI should make an advanced payment or secure a
letter of credit, or alternatively, for CSN to change the delivery to partial shipments.
 RTI sent CSN a letter advising the latter that it would procure the requested copper from
an alternate supplier because of CSN’s refusal to perform. CSN then sent a letter
informing RTI that the cancellation of the order was not accepted by CSN.
 Subsequently, RTI filed a complaint alleging that CSN breached its supply contract when
the latter insisted that RTI expedite payment or secure a letter of credit. CSN filed a
Second Amended Counterclaim alleging that RTI breached the contract by repudiation,
and therefore was in material breach.

Rule:

 United Nations Convention on Contracts for the International Sale of Goods article- 71-
provides that a party may suspend the performance of his obligations if, after the
conclusion of the contract, it becomes apparent that the other party will not perform a
substantial part of his obligations as a result of his conduct in preparing to perform or in
performing the contract.

Issue:

 Did RTI breach the contract by repudiation?

 Whether CISG is applicable?

Judgment:

25 | P a g e
The court first noted that the applicable law was the United Nations Convention for the
International Sale of Goods (“CISG”). According to Article 71 of the CISG, a party may suspend
the performance of his obligations if, after the conclusion of the contract, it became apparent that
the other party will not perform a substantial part of his obligations as a result of his conduct in
preparing to perform or in performing the contract. The court noted that CSN included a term
relating to payment if CSN’s insurer refused to cover the transaction, and it properly invoked that
term under the circumstances. The court found that RTI breached its contractual obligations by
repudiating the contract when it sent a letter to CSN, stating that it would procure the requested
copper from an alternate supplier. Furthermore, RTI breached its contractual obligation when it
sent a letter stating that it would not follow through with its obligations relating to advance
payment or other forms of guarantee.

THE CISG IN THE U.S.A

The CISG has come into force with a view to boot and enhance international trade by
creating a uniform legal system for the sale of goods. The CISG has been introduced to increase
efficiencies in the market. The Convention has been ratified by various nations and the US was
the pioneer in getting it ratified and enforced. Though the US was instrumental in getting the
CISG enforced, the nation itself is very slow in adoption of the rules of the CISG and most of the
sale contracts executed by parties belonging to US exclude the application of CISG, knowingly.

In the course of this research paper, the researcher will identify the history and evolution
of CISG, the extent of its applicability in the US and the possible reasons for its slow adoption.
The relevance of the CISG with respect to USA has also been discussed. Further, the author has

26 | P a g e
highlighted the application of the CISG through the interpretations of various case-laws. The
preparation of this research work is purely doctrinal in nature, based on the various articles
reviewed by the researcher.

INTRODUCTION
The Convention on Contracts for the International Sale of Goods (CISG) 56 endeavors to
increase international trade through the creation of a uniform law of international sales 57. By all
counts, the CISG represents the international community’s most ambitious effort to promote
efficiency and sustained growth of international trade. The CISG entered into force for the
United States on January 1, 1988. It currently governs the sale of goods between the United
States and six of its top ten trading partners, including Canada, Mexico, China and the European
Union. Despite the CISG’s political and economic significance to the United States, for the past
decade, U.S. courts and attorneys have overlooked, misconstrued, and misapplied the terms of
the Convention. Most commentators, however, have dismissed the U.S. legal system’s
recalcitrance and agree that the CISG brings general uniformity to the law of international
sales58.
LITERATURE REVIEW

1. Coyle, John F. (2016) “THE ROLE OF THE CISG IN U.S. CONTRACT PRACTICE: AN
EMPIRICAL STUDY.”59
The author of this article has conducted an empirical study based on the data collected and
has tried to draw conclusions on the debate between two ideologies, i.e. one praising the
achievements of the CISG, while the other opposing the previous view on the ground that CISG
is yet to achieve its goal and nothing significant has been achieved. The Article shows that, many
U.S. companies reflexively exclude the CISG without inquiring as to whether it would apply of
its own force; the U.S. companies virtually never select the CISG as the law to govern their
agreements; there is no industry or geographic location within the United States where the CISG

56
U.N. Doc. A/Conf./97/18 Annex I (Apr. 10, 1980), GAOR, 33d Sess., Supp. 35 (A/35/35) at 217; 52 Fed. Reg. 40
6262-6280 (Mar. 2, 1987).
57
Preamble of CISG.
58
Volker Behr, The Sales Convention in Europe: From Problems in Drafting to Problems in Practice, 17J.L. & CoM.
263, 264 (1998).
59
U. Pa. J. Int’l L.: Vol. 38:1. Published by Penn Law: Legal Scholarship Repository, 2016. Available
at:https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1932&context=jil.

27 | P a g e
has been affirmatively embraced; some U.S. companies that had selected the CISG in the past
now have a policy of excluding it from their contracts; and U.S. companies are frequently
unaware that selecting the law of a U.S. state can result in the application of the CISG.
The researcher has adopted the findings of the author and has tried to analyze the application
of the CISG into the contracts for sale of goods, in which US companies are a party.

2. Budow, Leonard N. (2015) “The Law That Dare Not Speak Its Name In The USA: The
CISG”.60
In this article, the author has talked about the need of CISG and its slow adoption in the
USA. He highlights five important factors for the slow adoption of CISG in the US to be
ignorance, parol evidence, intent concerns, statute of frauds and perfect tender.
The researcher has analyzed the factors stated by the author for the slow adoption of CISG
principles into international sale of goods contracts by the US and the implications therein.

3. Bailey, James E. (1999) “Facing the Truth: Seeing the Convention on Contracts for the
International Sale of Goods as an Obstacle to a Uniform Law of International Sales.”61

In this article, the author has discussed about the adoption and the application of the CISG
into the U.S. legal system and the consequent results. The author believes that the Convention
has failed in achieving its goal of bringing about uniformity; it rather stands as a barrier to
uniformity in the aspect of international sales law. The author has enumerated five major factors
for the failure of CISG and has elaborated on the same in the article. The factors are; first, as a
self-executing treaty under U.S. law, the CISG is virtually unknown to U.S. courts and
practitioners. The result is that the CISG is frequently ignored by both U.S. attorneys and courts.
Second, the CISG’s rules on interpretation are so obscure that the treaty’s own guidelines for
producing consistent interpretations fail to promote uniformity. Third, the treaty’s provisions
regarding contractual freedom lead to bewildering and potentially contradictory results which
prevent uniformity in application of the treaty. Fourth, the Convention’s failure to define its

60
Published by ‘Fox Rothschild LLP.’Available at: https://www.mondaq.com/unitedstates/International-
Law/425500/The-Law-That-Dare-Not-Speak-Its-Name-In-The-USA-The-CISG.
61
Cornell International Law Journal: Vol. 32: Issue. 2, Article 1. Available at:
http://scholarship.law.cornell.edu/cilj/vol32/iss2/1

28 | P a g e
subject matter prevents uniform application. Finally, the CISG’s allowance for certain
reservations by nations ratifying the treaty insidiously undermines the treaty’s goal of
uniformity.

From this article, the researcher has adopted the reasons for the failure of CISG and
specifically its applications and effects on the US contractual relationships relating to sale of
goods; into the project.

THE AMERICAN CISG CASE

Even in the age of statutes, common lawyers see law primarily in cases 62. So, it is
appropriate to begin with the Asante case-law 63. Between 1998 and 2000, Asante Technologies, a
Delaware corporation with its principal place of business in California, posted several orders for
electronic component parts with PMC Sierra Inc., a Delaware corporation headquartered in
British Columbia, Canada. The situation was complicated because PMC, the seller, also had an
office in Portland, Oregon, as well as an American distributor located, like the buyer, in
California. After some of the merchandise had been delivered, Asante sued PMC for breach of
warranty in California state court in 2001. In response, PMC removed the case to the Federal
District Court. According to PMC, the Federal Court had jurisdiction because the dispute was
governed by federal law, namely by CISG. The federal judge agreed that CIS G was applicable
and therefore that the Federal Court could properly hear the case 64. It is unclear what happened
after that ruling; the parties presumably settled the dispute out of the court.
Examining the Asante case and, more generally, the role of CISG in the United States, on
the occasion of the twenty-first anniversary of the Convention, is worthwhile not only because
the United States was one of the driving forces behind the project, not only because it wields
more economic power than any other member state, and not only because it has the most active
legal system65. It is interesting also because the US.-American attitude towards CISG is, at least
in some respects, fairly typical of the common law world generally. In legal practice, CISG has

62
The CISG in the United States: Why It Has Been Neglected and Why Europeans Should Care By Mathias
Reimann, Ann Arbor, Mich. Available at https://www.jstor.org/stable/pdf/27878642.pdf
63
Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F. Supp.2d 114.
64
Ibid.
65
Supra note 3.

29 | P a g e
been received in the United States and other common law countries with far less enthusiasm than
in most civil law jurisdiction66.

THE MARGINAL RELEVANCE OF THE CISG IN THE UNITED STATES

The United States was an early and eager participant in the CISG. It was among the
earliest jurisdictions to ratify the Convention (in 1986) and among the very first group of nations
for which it entered into force (on 1 January 1988), sooner than for most European countries.
There is also no doubt about the legal force of the CISG in the United States. Under the
Supremacy Clause of the U.S. Constitution, the CISG, as a duly ratified treaty, is part of the
“supreme law of the land”67. It has the rank and effect of a federal statute and directly applies to
all cases covered by it, in both state and federal courts68.
But, most contracts entered into by the US based companies with foreign nations don’t
incorporate the CISG into their contracts. The attorneys suggest their clients not to have a clause
as to the CISG in their contracts. Further, the courts don’t find it relevant to interpret the CISG
and its need in the US judicial system. Statistics reveal that the number of cases reported based
on the CISG is negligible in the US69.

REASONS FOR SLOW-ADOPTION OF CISG IN THE USA

a. Fundamental Ignorance
One possible explanation for the low number of CISG cases is that the contractual parties
simply overlook the fact that the CISG applies. In other words, perhaps American lawyers, both
attorneys and judges are just ignorant of the Convention70.
While it is possible that many American businesspeople, and sometimes perhaps even their
lawyers, still overlook the CISG when drafting contracts, it is highly unlikely that litigators do so
in court. Attorneys hand ling international commercial cases, especially in the federal courts
where almost all CISG cases are brought, are by and large specialized and experienced litigators
who very thoroughly check all the sources that may work to their client s advantage. They will
rarely miss a piece of federal law as important and widely discussed as the CISG, especially

66
Ibid.
67
Article VI of the Constitution of the United States of America.
68
Foster and Flam v. Nelson, 27 U.S. 253 [1829].
69
www.cisg.law.pace.edu.
70
C. Thiele, Das UN-Kaufrechtvor US-amerikanischen Gerichten: Internationales Handelsrecht (IHR) 2 (2002).

30 | P a g e
given that it has been in force for more than a decade. To be sure, such oversight may
occasionally happen, but in order to explain the dearth of reported cases, it would have to occur
in a vast majority of disputes; and any oversight is highly impossible.

b. Parol evidence
US Courts applying the UCC will bar evidence that contradicts the specific terms of contract.
The parol evidence rule4 presumes that a written contract encapsulates the parties’ complete
agreement. Therefore, under the UCC, oral evidence cannot be used to contradict the terms of a
written contract.
However, such customary parol evidence rules do not apply when interpreting contracts
governed by CISG5 and this causes some practitioners concern. Under the standard American
parol evidence rule, in general, a writing intended by the parties to be the apotheosis of their
concurrence as to the terms of their transactions cannot be varied by evidence of earlier
agreements or negotiations.  So a contracting party cannot introduce evidence of negotiations
that preceded the signing of the agreement. By contrast, under the CISG, when determining a
party’s intent, the CISG requires a courts and arbitrators to consider all relevant facts and
circumstances which would include the negotiations preceding the contract execution, the course
of conduct or on-going practices of the parties, and any post contract actions of the parties.  This
ability to traverse the four corners of a contract likely gives many American practitioners agita,
that the unambiguous words of the contract might be varied by the parties’ pre-signing or post-
signing conduct.  However, such a rule could be useful if the course of negotiations were
illuminative of the parties’ intent, perhaps more so than a form contact, and when a client wishes
to modify the terms of the agreement based on pre-signing negotiations. This is a judgment call
dependent on the nature of one’s client and the types of goods in question.

 Parties intent
Related to the parol evidence rule is the treatment of parties’ subjective intent 71 by the
CISG which also gives leeway to modify the apparent terms of a contract.   If evidence exists
which may be admissible due to the obviation of the parol evidence rule discussed above, if the
parties intent is inconsistent with the written terms of the contract, such evidence of intent would

MCC Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostina, S.p.A., 144 F. 3rd 1384 (United States, 11th
71

Cir. 1998) .

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be admissible to in effect re-write the contract 72. If one is concerned about a transaction
accurately reflecting the intents of the parties, this rule makes sense and is desirable; if one views
a contract as a battle of forms73 with the last draft prevailing, evidence of intent is anathema.

c. Illicit Avoidance
Another possible explanation is that American lawyers, especially attorneys representing
clients in court, simply avoid invoking the provisions of the CISG in cases in which they apply,
perhaps out of mindless parochialism or for lack of familiarity Again while one can observe this
occasionally it is surely not the norm. Litigants, conscious of the Convention will normally not
ignore it for a simple reason: where the CISG applies, it is likely to be to the advantage of at least
one side and therefore that side has every reason to raise it in court. Attorneys failing to do so
would not only betray their clients’ interests and violate their professional obligations; they
would also be risking their reputation and exposing themselves to liability for malpractice.
A further possibility is that litigants duly invoke the CISG, whereupon courts tend not to
address it, be it out of neglect, incomprehension or even hostility. This, too, will happen only in
the exceptional case. Judges are duty bound to deal with the arguments and legal sources put
before them, and they normally do so. There are few signs that American judges shun the CISG
when it is invoked; by contrast, there are indications that they take it quite seriously and often
strive to apply it as intended, i.e., with a view to its international nature. Moreover, if judges fail
to apply a binding rule of law, they make an egregious mistake and their judgment is subject to
reversal on appeal. Of course, judges may duly consider and then, perhaps wrongly, refuse to
apply the CISG; that, however, cannot explain the low number of reported decisions either; as
such cases of open rejection are included in the count.

d. Statute of Frauds 
Following these gaping holes in the finality of a contract is the lack of a statute of frauds. 
Recall under the UCC, a contract for the sale for goods over $500 must be in writing to be
enforceable in the US court.  The CISG does not.  This fits in with the CISG approach which
fundamentally is a search for the truth, not the formalities of a lawyerly drafted document which
might be too smart by half.

72
TeeVee Tunes, Inc. et al v. Gerhard Schubert GmbH. 
73
UCC 2-207.

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e.   Perfect Tender Rule. 
The next issue of distress to some practitioners is the upending of the perfect tender
rule74. Simply put a buyer has the right to insist upon perfect and fully compliant performance
under the UCC. However the CISG75 states that the buyer may declare the contract avoided if the
failure by the seller to perform any of his obligations under the contract or this Convention
amounts to a fundamental breach of contract.

f. Conscious exclusion
The most important reason for the low number of reported CISG decisions in the United
States appears to be a third factor: the CISG does not apply to the majority of international sales
transactions, involving the United States simply because parties exclude its operation under
Article 6. Obviously, if the parties have effectively opted out, the Convention will not be raised
in litigation thus, no case law will be generated.

 Why American Parties choose to opt-out of the CISG?

One reason for opting out can be that the CISG is considered substantively deficient and thus
inferior to domestic law. The Convention’s weaknesses have not gone unnoticed in the United
States: it does not govern the validity of contracts; its contract formation rules are antiquated in
the electronic age; it regulates some important matters inadequately (e.g., interest for non-
payment, Art. 78); it lacks a mechanism for updating, etc.76. Still, on the whole, such substantive
considerations probably play a minor role in the American reluctance to apply the CISG. The
Convention does not have a ubiquitous reputation as ‘bad’ law; in contrast, it has frequently been
praised for its balanced approach77. Most American practitioners who know anything about its
substance at all realize that compared to the Uniform Commercial Code (UCC), it has its
advantages and disadvantages. They also understand that it is very difficult to predict, at the
contracting stage, whether its provisions will ultimately help or harm their client's interests in
case of a dispute- simply because it is almost impossible to predict the subject matter of future
litigation78. A much more important reason to opt out are the legal uncertainties, whether

74
UCC 2-601.
75
CISG Art.49 (1).
76
J. Ziegel, The Future of the International Sales Convention from a Common Law Perspective: New Zealand Bus.
L.Q. 6 (2000) 336, 339.
77
V Cook, CISG: From the Perspective of the Practitioner: J.L.Com. 17 (1998) 343.
78
Ibid.

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perceived or real, inherent in the CISG. To the extent that American lawyers decide to exclude it
after carefully weighing the pros and cons, they do so mainly because the Convention seems too
risky a bet. The reason is not that there is no common tribunal to decide issues of interpretation
in an authoritative fashion; that is also true for the Uniform Commercial Code, which is happily
embraced by the vast majority of business lawyers in the United States. But American lawyers
are reluctant to submit their clients’ interests to a text that is not uniform in all member states,
because it allows all sorts of reservations, declarations, and renunciations 79. It also comes in six
official languages, including Arabic, Chinese, and Russian, which raises the spectre of
conflicting interpretations. Of course, German, French, or Swiss lawyers face the same problem.
Still, their American colleagues take it far more seriously as the enormous burden and expense of
U.S.-style litigation pushes them to strive for maximum certainty in contractual agreements 80. In
addition, many American lawyers find it quite unsettling that unlike the UCC and the various
Restatements of Law, the CISG lacks official comments 81 and thus provides no authoritative
guidance as to what its often broadly drafted provisions really mean. Last, but certainly not least,
the paucity of American case law is unnerving to common lawyers who tend not to trust a
statutory rule before they have seen what courts actually do with it. Case laws from other
countries are not an answer because it is difficult to evaluate and has no precedential effect. To
be sure, in this regard American lawyers face a catch-22: their routine exclusion of the CISG
prevents the emergence of substantial case law, and in the absence of such case law, they prefer
to exclude its operation. Nonetheless, it remains a serious concern that the “CISG is still an
unproven commodity, where the outcome is difficult to predict” 82. In short, the UCC may not be
substantively better, but at least to an American lawyer, its meaning is much clearer.

CONCLUSION

Based on the history, evolution, relevance and applicability of the CISG in the US and the
reasons for its slow adoption in the US; it can be concluded that there is no sound basis on which
USA can rely to justify the slow adoption of the CISG into their legal system. It is for US to
realize that the CISG is not a new law rather it is a mere extrapolation of their national law. And

79
Arts. 96-98, 101.
80
J. Langbein, Comparative Civil Procedure and the Style of Complex Contracts: AmJ.Comp.L. 35 (1987) 381.
81
J. Murray, The Neglect of the CISG: A Workable Solution: J.L.Com. 17 (1997-98) 365, 374.
82
Supra 14.

34 | P a g e
US being a pioneer for international adoption of the CISG must enforce it through its legal
system, and not exclude it knowingly.

CASES
1. MCC-Marble Ceramic Center v. Ceramica Nuova D’Agostino (United States 29 June 1998
Federal Appellate Court [11th Circuit])
FACTS: A U.S. retailer, the buyer, agreed orally with the seller, an Italian manufacturer of
ceramic tiles, on the basic terms for the purchase of tiles. The parties then recorded these terms
in the seller’s standard, pre-printed order form and the president of the buyer’s company signed
the form on behalf of the company. The form was printed in the Italian language and contained
terms on both the front and back. Immediately below the signature line on the front of the form
was language, in Italian, stating that the buyer was aware of the terms on the back of the form
and agreed to them. Four months later the parties entered into a requirements contract and
pursuant to that contract the buyer ordered tiles on numerous occasions using the seller’s order
form.
The buyer brought a breach of contract action in the U.S. District Court for the Southern
District of Florida against the seller for failure to deliver the tiles ordered. In defense, the seller
relied on a standard term on its order form which authorized it to suspend deliveries if the buyer
failed to pay and the seller brought a counterclaim for nonpayment. To buyer's response that the
tiles were nonconforming, the seller stated that the buyer had not given written notice of defects
within ten days of receipt as required by a term on the order form. The buyer presented affidavits
from its president and two employees of the seller stating that the parties did not intend to be
bound by the standard terms on the order form. The court excluded this evidence on the basis of
the domestic parol evidence rule, gave effect to the standard terms and granted summary
judgment to the seller.
ISSUE: Whether the parol evidence rule of domestic law applies to the interpretation of a
contract governed by CISG. The rule excludes evidence of an oral agreement which contradicts
or varies the terms of a subsequent or contemporaneous written contract.
JUDGEMENT: The court stated: “We begin by observing that the parol evidence rule,
contrary to its title, is a substantive rule of law, not a rule of evidence. . . . The rule does not
purport to exclude a particular type of evidence as an ‘untrustworthy or undesirable’ way of

35 | P a g e
proving a fact, but prevents a litigant from attempting to show 'the fact itself -- the fact that the
terms of the agreement are other than those in the writing.’. . As such, a federal district court
cannot simply apply the parol evidence rule as a procedural matter -- as it might if excluding a
particular type of evidence under the Federal Rules of Evidence, which apply in federal court
regardless of the source of the substantive rule of decision.
“An example demonstrates the different approach to be applied to procedural matters. The
CISG provides that a contract for the sale of goods need not be in writing and that the parties
may prove the contract ‘by any means, including witnesses.’ CISG, Art. 11. Nevertheless, a party
seeking to prove a contract in such a manner in federal court could not do so in a way that
violated in the rule against hearsay. A federal district court applies the Federal Rules of Evidence
because these rules are considered procedural, regardless of the source of the law that governs
the substantive decision. . . .”
Balancing the U.S. parol evidence rule against CISG Article 8, the court stated:
“Article 8(3) of the CISG expressly directs courts to give ‘due consideration . . . to all relevant
circumstances of the case including the negotations . . .” to determine the intent of the parties.
Given article 8(1)’s directive to use the intent of the parties to interpret their statements and
conduct, article 8(3) is a clear instruction to admit and consider parol evidence regarding the
negotiations to the extent they reveal the parties’ subjective intent. . . .”
The court endorsed the position that “the parol evidence rule is not viable in CISG cases in
light of article 8 of the Convention”.
The court further stated: One of the primary factors motivating the negotiation and adoption
of the CISG was to provide parties to international contracts for the sale of goods with some
degree of certainty as to the principles of law that would govern potential disputes and remove
the previous doubt regarding which party’s legal system might otherwise apply. . . . Courts
applying the CISG cannot, therefore, upset the parties’ reliance on the Convention by
substituting familiar principles of domestic law when the Convention requires a different result.
We may only achieve the directives of good faith and uniformity in contracts under the CISG by
interpreting and applying the plain language of article 8(3) as written and obeying its directive to
consider the type of parol evidence.

36 | P a g e
2. Magellan International v. Salzgitter Hande (United States 7 December 1999 Federal District
Court [Illinois])
FACTS: An Illinois distributor of steel products, plaintiff, negotiated with a steel trader with
headquarters in Germany and a sales office in Illinois, defendant, to purchase steel to be
manufactured in the Ukraine to the plaintiff’s specifications. When purportedly accepting
plaintiff’s offer, the defendant appended general conditions to its order confirmations that
differed from plaintiff’s conditions with respect to vessel loading conditions, dispute resolution
and choice of law. The parties continued to negotiate until plaintiff, under pressure from the
defendant, agreed to the contract and arranged to have a letter of credit issued naming the
defendant as beneficiary. Each party subsequently sought amendments but they were unable to
agree on any change. Defendant therefore stated that unless the letter of credit was amended it
would ‘no longer feel obligated’ to perform and would ‘sell the material elsewhere’. Plaintiff
thereupon canceled the letter of credit and defendant sought to sell the steel to other buyers.
The plaintiff brought this legal action
(1) To recover damages for the defendant’s alleged anticipatory repudiation of the contract,
(2) To obtain a court order directing the defendant to deliver the steel to the plaintiff. The
defendant moved to dismiss the complaint for failure to state legally sufficient claims.
ISSUE: Whether the buyer’s pleadings stated legally sufficient claims so that the case should
proceed to trial.
CHOICE OF LAW: As stated earlier, Magellan first claims entitlement to relief for breach of
contract. Because the transaction involves the sale and purchase of steel – ‘goods’ -- the parties
acknowledge that the governing law is either the Convention or the UCC. Under the facts alleged
by Magellan, the parties agreed that Convention law would apply to the transaction, and
Salzgitter does not now dispute that contention. That being the case, this opinion looks to
Convention law.
JUDGEMENT: The Court found that the complaint sufficiently stated facts from which it
could be found at trial that there was a contract, that plaintiff was prepared to perform, that there
had been anticipatory repudiation by the defendant, and that the plaintiff had been damaged by
the repudiation. The Court also found that the complaint stated sufficient facts to justify an order
of specific performance under article 46(1) CISG and domestic law, which the Court found to be

37 | P a g e
relevant by virtue of article 28 CISG. The Court therefore refused to dismiss the action but it
noted that plaintiff would still have to prove the facts at trial.

3. Geneva Pharmaceuticals Tech. Corp. v. Barr Labs. Inc.(United States 10 May 2002 Federal
District Court [New York] )
FACTS: The plaintiff, a New Jersey corporation with its place of business in the United
States, sought to develop, manufacture and distribute a generic anti-coagulant drug to treat blood
clots. To develop the drug, the plaintiff obtained sample amounts of clathrate from defendant, a
company with its place of business in Ontario, Canada. The defendant also supplied a reference
letter in support of the plaintiff’s application to the Federal Drug Administration for approval to
manufacture and distribute the anti-coagulant drug. Prior to FDA approval, the defendant
concluded an exclusive purchase agreement with a third party. Following FDA approval,
plaintiff sent a purchase order to defendant for 750 kg. of clathrate. The defendant did not accept
the plaintiff’s order and denied that it was obligated to sell calthrate to the plaintiff. The plaintiff
sued the defendant, alleging, among other claims, that the defendant had breached a contract,
was estopped from rejecting the order, had been negligent and had made negligent
misrepresentations. The defendant moved for summary judgment on these claims.
ISSUE: Whether the plaintiff’s claims of breach of contract, promissory estoppel, negligence
and negligent misrepresentation should be dismissed on the ground that there was no genuine
issue as to material fact and the alleged seller was entitled to judgment as a matter of law.
JUDGEMENT: The court concluded that the Convention governed the breach of contract
claim. The court found that the plaintiff had alleged facts, including an industry usage that
buyers could rely on implied supply commitments, that would support a finding that the
plaintiff’s initial proposal was an offer (art. 14(1) of CISG). Noting that the plaintiff alleged an
industry usage that the provision of a reference letter is an acceptance, the court also found that
there were sufficient facts to support a finding that the defendant had accepted the offer based on
art. 18(3) of CISG. The court also found that there was consideration to support the alleged
contract and that the contract was therefore not invalid under applicable domestic law pursuant to
art. 4(a) of CISG. Under the alleged “implied-in-fact” contract, defendant was obligated to
supply calthrate if the plaintiff gave it commercially reasonable notice of an order. The court
declined to render summary judgment on this claim because there were material facts in dispute.

38 | P a g e
With respect to the plaintiff’s claim under domestic law that it had relied on defendant’s promise
so that the promise was binding as if it were a contract, the court concluded that this claim was
not preempted by the Convention. The court distinguished plaintiff’s claim from claims
specifically addressed by the Convention (art. 16(2)(b) of CISG). The court declined to render
summary judgment on this claim because there were material facts in dispute.
With respect to the claims of negligence and negligent misrepresentation, the court
concluded that the claims were outside the scope of the Convention. Applying domestic law, the
court rendered summary judgment for the defendant on these claims.

4. Shuttle Packaging Systems v. Tsonakis et al. (United States 17 December 2001 Federal
District Court [Michigan])
FACTS: A company with its place of business in the United States concluded a contract with
two companies, one of which had its place of business in Greece, for the purchase of equipment
to be used to manufacture plastic gardening pots. The contract provided that the parties would
conclude a non-competition agreement and they subsequently did so. The sellers delivered the
equipment. The buyer later ceased to make the agreed progress payments, alleging that the
equipment was nonconforming and that the sellers had breached the non-competition agreement.
The buyer brought suit claiming breach of the non-competition agreement, breach of contract,
and breach of warranty. It asked the court to issue a preliminary injunction with respect to the
breach of the non-competition agreement.
ISSUE: Whether it should issue a preliminary injunction forbidding the seller from making
sales in breach of a non-competition agreement.
JUDGEMENT: The court declined to issue a preliminary injunction. It concluded, among
other matters, that the buyer was unlikely to succeed at a trial on the merits.
In a preliminary assessment, the court found that the Convention was the governing law with
respect to all issues other than the non-competition agreement. The court concluded that the
buyer had committed a fundamental breach by failing to make agreed progress payments. On the
basis of art. 25 of CISG. This entitled the sellers to avoid the contract of sale and non-
competition agreement or to suspend their obligations under these agreements pursuant to arts.
64, 71-73 of CISG. The court also concluded that the alleged nonconformities in the equipment
did not constitute a fundamental breach by the sellers.

39 | P a g e
 The court applied the Convention when rejecting several arguments made by the sellers.
In response to the defense that there was no consideration for the non-competition agreement, the
court ruled that the agreement was supported by consideration for the contract of sale and that
the Convention (art. 29 CISG) provided that contract modifications are enforceable without
regard to consideration. In response to the argument that the territory covered by the non-
competition agreement was not sufficiently defined, the court applied the Convention’s rules on
the meaning of the parties’ statements (art. 8 CISG) and course of dealing (art. 9 CISG) to
interpret the agreement as sufficiently definite. In response to the sellers’ argument that they
were not bound by the non-competition agreement because the buyer had breached the sales
transaction first by failing to duly notify the sellers of the alleged nonconformities (arts. 38, 39
CISG), the court found that notice was timely because the equipment was unique, complicated,
delivered in installments and subject to training and on-going repairs.

THE CISG IN ENGLAND AND INDIA

INTRODUCTION
In this research work, the researcher has analyzed the principles of the CISG and has checked the
applicability of the Convention into the English and Indian judicial system. In the first part, the
researcher has analyzed the CISG and the English law, by pointing the similarities, differences
etc. In the second part, the researcher has described about the national liability in international
sale of goods contracts, by referring to the Indian Contracts Act and the Sale of Goods Act.
LITERATURE REVIEW
1. The Vienna CISG on International Sales Law by B Nicholas83.

83
The Law Quarterly Review, Vol. 105, 1989.

40 | P a g e
 In this article, the author has described about the adoption of the CSIG, the previous
conventions which regulated international contracts, the structure of the CSIG, its application
and relevance to sale of goods in international commercial transactions. This article has been
instrumental in the understanding of CSIG and its importance with respect to international sale of
goods, such that the principles laid down could be differentiated from the ones under the English
law.
2. The Uniform Law on the International Sale of Goods: A Conflict of Laws
Imbroglio by Kurt H. Nadelmann84.
In this article, the author has described about the evolution of a uniform law for the
regulation of international contracts, the practical difficulties in implementation and the effect of
the Convention on the USA and its legal system. This article enabled the researcher to
understand the difficulties flowing from unification of laws in the international scenario. Thus,
harmonization of the national laws in consonance with the Convention seems to be a workable
idea, as suggested in the research work.
3. INTERNATIONAL SALE OF GOODS by D. JACOBSON.85
In this article, the author has discussed about the principles of contracts in general and those
in the English law in specific; by distinguishing them from those under the Draft Convention,
which was proposed back then. The author talks about the importance of various principles under
the English legal system, while distinguishing them from those in the Draft Convention, e.g. the
concept of identification of proper law. The author acknowledges the problems relating to
conflict of laws in international transactions and urges legal professionals to find solutions to
these problems by adoption of an international system to govern the transactions. This article has
helped the researcher understand the minute differences between the English law and the
international law and the need to have an international legal system, which in turn would help
international economy as any conflicting situation could be easily resolved.
4. Contracts for the International Sale of Goods: Recent Developments at the International and
European Level by S.A. Kruisinga.
In this article, the author has described about the international conventions governing sale of
goods, i.e. CISG and the CEIL. The article has laid down the differences between the two

84
The Yale Law Journal Vol. 74, No. 3 (Jan., 1965), pp. 449-464.
85
The International and Comparative Law Quarterly Vol. 3, No. 4 (Oct., 1954), pp. 659-673. 

41 | P a g e
conventions and the remedies available under each one of them. The researcher has learnt about
the need for unification of international norms with respect to international sale of goods and the
governing principles therein.

5. The Indian Law of Sale of Goods by S. N. SINGH.

The author in this article has discussed about the evolution of the law of contracts and the law on
sale of goods and its implementation beginning from the British era to its codification in India
and the principles so adopted. The author has also described about the conflict of law rules in
India and the methods adopted for resolution of international conflicts with respect to contracts
and the remedies available in case of a breach of contract. The researcher has adopted the
principles governing Indian contract law and the sale of goods and the rules as to conflict of laws
from this article.

6. CONFLICT OF LAWS AS TO CONTRACTS BY V. G. Ramachandran86.

The author, in this article has described about the concepts of lex loci, lex situs and lex
solutionis, and has made an analysis of the conflict of law rules in India by drawing a difference
between the Indian rules and the international rules in general. The researcher has adopted the
difference in the principles under Indian law and international law to justify the principles
underlying contracts and sale of goods in India.

PART-I
COMPARATIVE ANALYSIS OF THE RULES AS TO INTERNATIONAL SALE OF
GOODS UNDER THE CISG AND THE ENGLISH LAW

I. INTRODUCTION
This research work is a comparative analysis between the rules adopted by the United
Nations Convention on Contracts for the International Sale of Goods (hereinafter ‘the CISG’)
and the English Sale of Goods Act 1979 (hereinafter ‘the 1979 Act’), concerning the obligations
of the seller and the remedies of the buyer, with respect to the delivery of conforming goods on
time. The comparison shall lead to a conclusion as to which system of rules is better to be
86
Journal of the Indian Law Institute Vol. 12, No. 2 (APRIL-JUNE 1970), pp. 269-286.

42 | P a g e
adopted in the international scenario, w.r.t. trans-national contracts; by analyzing the similarities
and differences between the two regimes.
II. SIMILARITIES
The similarities between the regimes are transpired u/A. 32 of the CISG which lays down the
obligations of the seller to deliver the goods using suitable carriage and logistics 87. A. 32(1)
obliges the seller to ensure that the goods are properly identified or to notify the buyer about the
specific consignment in question88. It has been observed that the contracts as to sale of goods
have more stringent notice requirements than what is stipulated under this provision, in reality 89.
A. 32(2) of CISG mandates the seller to arrange for the carriage of goods and to enter into the
necessary contracts with carriers to ensure that the goods are delivered to the buyer 90. Following
this, A. 32(3) provides that the seller must give the buyer all of the information required to
secure insurance over the goods, unless it is the duty of the seller to arrange such insurance91.
These provisions intersect with those provided u/s. 32(1) of the 1979 Act, which assumes that
delivery has been made once the seller has handed the goods over to the carrier 92, except in cases
where the buyer is a consumer. Similarly, s. 32(3) of the Act is identical in provision to A. 32(3)
of the CISG, in stipulating that the seller must give the buyer all information necessary for him to
arrange insurance93, wherever necessary. In addition to this, s. 29(6) of the 1979 Act provides
that it is the responsibility of the seller to arrange and pay for the goods to be carried if delivery
is part of the contract 94, which coincides with A. 32(2) of the CISG, though it goes further to
provide that the seller must also enter into the necessary contracts with the carrier. Practically,
this difference is minute and doesn’t amount to differences in legal applications.

III. DIFFERENCES
The difference between the two systems has been observed with respect to the following
aspects:
 Place and time of Delivery

87
Atiyah, Adams & MacQueen, Sale of Goods, 11th ed 2005.
88
U.N. Convention on Contracts for the International Sale of Goods, 2010, Art. 32.
89
MG Bridge, ‘The International Sale of Goods, Law and Practice’, (2nd ed., Oxford University Press 2007).
90
B Nicholas, ‘The Vienna CISG on International Sales Law’, The Law Quarterly Review, Vol. 105, 1989.
91
Ibid.
92
Supra note 2.
93
MG Bridge, ‘The International Sale of Goods, Law and Practice’, (2nd ed., Oxford University Press 2007).
94
Ibid.

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 A. 31 of CISG stipulates that the goods are said to have been delivered once the seller hands
them over to the carrier or to the buyer or when the goods have been placed at the buyer’s
disposal at the seller’s regular place of business 95. On the other hand, s. 29 of the 1979 Act
considers that the place of delivery shall be the place of business of the seller, if no other place
has been specified and the delivery should be in a reasonable hour 96. No requirement as to
timings of delivery has been stipulated under the CISG regime.
 Nature of provisions
The CISG rules and the 1979 Act provisions can be demarcated into ‘proactive’ and
‘reactive’ groups. For example, A. 33 of the CISG concerns about delivery times and stipulates
that the seller must deliver the goods on the date stipulated in (or determinable from) the contract
of sale, if any, or within the period of time stipulated in (or determinable from) the contract of
sale, if any, or, in all other cases, within a reasonable period of time 97. In this regard, the 1979
Act is much less detailed merely providing that whether or not the seller is under a contractual
duty to deliver on time, which depends upon the nature and provisions of the applicable contract
of sale.
The reactive nature of the 1979 Act regime permits the buyer to claim damages for non-
delivery to be calculated as “the difference between the contract price and the market or current
price of the goods at the time or times when they ought to have been delivered.” As to whether
the buyer is entitled to treat the contract as avoided and to refuse to accept delivery of the goods;
this will depend upon whether or not the seller’s infringement is classed as a condition or a
warranty. In turn, this depends upon a variety of factors, including whether or not the buyer was
dealing as consumer for the purposes of the contract. The CISG rules are more proactive in such
a way that they facilitate the market to perform by providing basic guidance in a commercial
framework, whilst the 1979 Act is more reactive towards the failure of the party to perform its
contractual obligations98.
 Extra-judicial measures
It must be noted that the CISG contains numerous extra judicial measures which permit the
parties to settle the disputes quickly. This is reflected in the form of the rights available to the

95
U.N. Convention on Contracts for the International Sale of Goods, 2010, Art. 31.
96
The English Sale of Goods Act 1979, Sec. 29.
97
Supra note 3.
98
Ibid.

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buyer in accordance with A. 45(1)(a) of the CISG. First, the buyer may compel the sepcific
performance of the contract, if appropriate 99; second, he may demand delivery of conforming
goods100; third, he may demand that the non-conforming goods are repaired 101. While the seller is
under a duty to conform to these demands within a reasonable period of time, the buyer may
decide to give the seller an extension to that time, in which case the buyer must refrain from
taking any further action until that time period has expired. Unlike the CISG, the English sales
law retains discretion to decide whether or not to allow the buyer to enjoy specific
performance102.
IV. REMEDIES IN CASE OF BREACH
The CISG advances the need of the international sales to be working in accordance with
commercial ethics and goods customer service, unlike the 1979 Act which is more technical and
legal. A. 50 of the CISG provides that the buyer may reduce the price to be paid to the seller in
proportion to the reduction on value caused by the lack of conformity 103. However, the buyer the
provision can’t be applied if the seller has agreed to rectify the breach in accordance with A. 37
or A. 38. If the breach is considered to be a breach of warranty, then the buyer may not avoid the
contract but rather may claim damages from the seller to be calculated as “the estimated loss
directly and naturally resulting, in the ordinary course of events, from the breach of warranty.”
This is not dissimilar to the remedy provided by A. 50 of the CISG, which states that the buyer
may choose to recover from the seller the difference in value of the goods received and the goods
expected. However, a fundamental difference is that under English law the buyer cannot decide
whether or not the breach amounts to a breach of warranty or a breach of condition. If the breach
is considered to be a breach of condition, then the buyer may treat the contract as avoided and
demand a refund of the full purchase price of the order, if payment has already been made, and
reject delivery of the goods, if delivery has not already been made. In this context, Bridge has
commented that the English law is more complicated and technical, through the application of
caveat emptor, where the buyer can only terminate the contract if he is substantially deprived

99
Supra note 4.
100
Supra note 3.
101
Ibid.
102
Supra note 1.
103
Supra note 4.

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from imbibing the benefit of the contract 104. This is resembled in the case of Harlingdon and
Leinster Enterprise v Hull (Christopher) Fine Art105 where it purports transaction ethic.

The divergence is further seen under A. 51 of the CISG 106: if the seller delivers only a part of
the goods or if only a part of the goods delivered is in conformity with the contract, A. 46 to A.
50 applies in respect of the part which is missing or which does not conform 107. It also prevents
the buyer from treating the contract as avoided, except in the case where he can show that failure
to deliver conforming goods amounted to a fundamental breach; for instance, where the reduced
quantity means that he cannot sell any of the conforming goods. The rule provided by A. 51 of
the CISG is highly restrictive on buyers; however, the rule provided by s. 31(1) of the 1979 Act,
provides that, “Unless otherwise agreed, the buyer of goods is not bound to accept delivery of
them by installments.”108 This latter rule effectively allows a buyer to reject goods, if not all of
the goods have been delivered.

The CISG has several provisions about various aspects which are not present in the English
law109, including the provisions relating to handing over of documents relating to the contract by
the seller to the buyer, within the stipulated time; fixing of deficiencies in goods already
delivered; protection to parties even after the delivery of goods; seller’s liability for lack of
conformity etc.

V. INFERENCE
Having compared the framework provided by the CISG and the 1979 Act, in terms of their
similarities, differences and additional provisions in each regime it can be concluded that the
CISG is more appropriate in light of the international character of the rules and the specific
provisions pertaining to manufactured goods110. On the other hand, the disputes concerning the
international sale of commodities, the Sale of Goods Act 1979 is likely to prove more
appropriate111 because though the Act has not been designed to operate primarily in an
104
MG Bridge, ‘A Law for International Sale of Goods’, Hong Kong Law Journal, Vol. 37, No. 1 (2007) 17.
105
[1991] 1 QB 564.
106
J Felemegas, ‘An International Approach to the Interpretation of the United Nations Convention on Contracts for
the International Sale of Goods (1980) as Uniform Sales Law’ (Cambridge University Press: Cambridge, 2007).
107
Ibid.
108
Supra note 1.
109
Supra note 18.
110
Supra note 19.
111
Supra note 7.

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international context, there is a vast body of settled case laws on the sale of commodities and this
means that the law here is relatively certain in its nature and scope. While both systems have
their inherent pros and cons, the best method would be to harmonize the principles and apply
them to solve practical problems.

PART-II

NATIONAL LIABILITY IN CONTRACTS RELATING TO SALE OF GOODS

I. HISTORY

Prior to the enactment of the Contract Act in 1872, the law relating to sale of goods in India
was the English common law on the subject. The Contract Act incorporated in a codified form
these common law principles. With the rapid growth in trade and commerce some of the
concepts and notions of this enactment became archaic. The realization that law has to keep pace
with the changing patterns and character of trade led in England to a new statute, the English
Sale of Goods Act, enacted in 1893 which discarded very many old common law principles and

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adopted some of the basic common law principles in order to meet the needs of a growing
society.

II. UNDERLYING PRINCIPLES

a. Autonomy of parties’ will

One of the basic questions relating to the law of sale of goods contained in the Indian Sale of
Goods Act 1930 (hereinafter referred to as the Indian Act) is whether the provisions of the Act
lay down fixed rules of law which cannot be abrogated by a contrary intention or will of the
parties. Or, does the Indian Act exclude the common law doctrine, viz., that statutory remedies
do not oust old remedies unless inconsistent?112 Or, does the Indian Act, like its English
counterpart113, merely facilitate the ascertainment of the will of the parties? It may be pointed out
that in certain matters the provisions of the Indian Act specifically lay down fixed rules which
cannot be rebutted by evidence of contrary intention of the parties, e.g., provisions relating to the
subject-matter of contract114, implied conditions as to quality or fitness, sale by sample and
description, transfer of title, rules as to delivery, rights of unpaid seller against the goods, suits
for breach of contract etc. There is a set of other provisions in which the provisions of the Indian
Act are to be applicable subject to the intention of the parties appearing from the terms of the
contract. There is yet another set of provisions which are meant only to assist in ascertaining the
intention of the parties and the matter has to be decided only on the basis of the intention of the
parties. These provisions relate to the passing of property from seller to the buyer. It may thus be
observed that the Indian Act restricts freedom of contract in many matters, and in others the will
of the parties is given due consideration as evident from the terms of contract. On this premise
one can proceed to a different plane, namely, the Indian law relating to international sales.

b. Conflict of laws

How does Indian law resolve issues relating to international sales? It is not uncommon these
days to come across a contract for the sale of goods between two parties belonging to, or residing
in, two different countries, or a situation in which the contracting parties may be resident in one
country but the goods may be in a different country. In such cases the question arises as to the

112
Stevens v. Chown (1901) 1 Ch. 894 at 903.
113
The English Sale of Goods Act 1893, ss. 17 and 18.
114
The Indian Sale of Goods Act 1930, ss. 6-8.

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law to be applied115. No doubt, there is a measure of agreement on some principles of law among
most of the civilized countries, e.g., that a valid contract can be entered into by parties capable to
contract; that there should be some consideration for a valid contract; that a contract should not
be unlawful in its nature, etc. But the law differs in detail in many countries. In cases of conflict
the Indian law provides that the question should be the proper law applicable to the situation.
But, when the proper law is not the Indian law, there is a great difficulty in finding out the proper
law of the contract. If the proper law of the contract is some foreign law the task of the courts
and the parties is further complicated in as much as the burden of proof of the fact that the
foreign law is different from the Indian law is on the person who asserts this. If the burden of
proof is not discharged, it would be presumed that both the Indian and the foreign law are
identical116. Despite the above complexities, the Indian law is fairly clear on some aspects of
international sales. In cases of disposal of personal property, the law of the country where
property is situated is applied according to the rule of locus regit actum117. As to the validity of
interpretation of the contract, the law to be applied is the law of the country where it is entered
into. If contract is entered into in one country, and is to be performed in another country, it is the
law of the latter country that has to be applied. If there appears any different intention of the
parties, the above rules would not apply and the intention of the parties would be the decisive
factor.

III. BREACH OF CONTRACT

a. Specific performance

As a general rule, specific performance of a contract of sale of goods is not granted.

However, the courts enjoy discretion to grant specific performance of a contract 118 for the
delivery of specific or ascertained goods 119. But since the remedy of specific performance can be
granted only for the delivery of goods, it benefits only the buyer. On the other hand, the remedies
available to the seller are only a right to sue for damages and the rights of lien 120 and stoppage in
transit121. It is provided under the Specific Relief Act, which overrides the provisions of the
115
Story’s Conflict of Laws, s. 232.
116
Raghunathjee v. Varjewandas (1906) 2 Bom. L.R. 525.
117
Parwatawwa v. Channawwa, A.l.R. 1966 Mys. 100 at 105.
118
The Indian Sale of Goods Act, s. 2(2).
119
Id.
120
Id., ss. 47-49.
121
Id., ss. 20-52.

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Indian Sale of Goods Act in respect of specific performance, that the remedy of specific
performance may be granted when compensation in money would not give the buyer adequate
relief for the loss of the goods, or when it would be extremely difficult to ascertain the actual
damage caused by their loss122. In other words, in the case of sale of goods, specific performance
would be granted only in case of goods of a peculiar character having a pretium affectionis, e.g.,
statue, picture, etc. It may be worthwhile to point out that the rule is based on the simple reason
that in ordinary commercial contracts the matters enumerated in the Specific Relief Act
mentioned above hardly exist, and further, it is statutorily presumed that the breach of a contract
to transfer moveable property can be adequately relieved by pecuniary compensation.

b. Damages

Whereas the right of specific performance operates in favour of the buyer, the right of
damages for breach of contract is available both to the buyer as well as the seller. The seller can
claim damages in case of non-acceptance of delivery. Where the buyer wrongfully neglects or
refuses to accept and pay for goods, the seller may sue him for damages for non-acceptance 123.
Likewise, the buyer can sue the seller for damages for non-delivery of goods if the latter does so
wrongfully. Damages may also be awarded to the plaintiff in case of breach of any warranty or
breach of any condition treated as warranty124. Another situation in which damages could be
awarded is the repudiation of contract by either party before the due date of delivery in which
case the other party can either wait till the date of delivery or may treat the contract as repudiated
and sue for damages for the breach125.

The Indian law not only allows damages in the above mentioned cases but also provides for
special damages for breach of contract under any other law. Thus, the Indian law accepts the
ruling of Hadley v. Baxendale126, in which it was held that damages could be awarded “such as
may reasonably be supposed to have been in contemplation of both parties, at the time they made
the contract, as the probable result of the breach of it”. In such type of cases, damages are
awarded to an extent anticipated by the parties. An example of special damage is found in

122
The Specific Relief Act 1963, s. 10.
123
The Indian Sale of Goods Act, s. 55.
124
S. 13 read with ss. 12(3) and 59(l)(b).
125
Id., s. 60.
126
(1854) 9 Ex. 341.

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section 73 of the Contract Act. This section may be concluded by the observation that the award
of damages under the Indian law of sale of goods is the general rule and grant of a decree for
specific performance is an exception having a very little and rare application.

CASE-LAWS
1. Arcos v EA Ronaasen & Son127
Facts
English purchasers concluded a contract for the sale of staves of timber wood from the
English agents of a Russian company for the purposes of making cement barrels, specifying
staves of Russian redwood and whitewood to be of half-an-inch in thickness. A large proportion
of the staves delivered were over half-an-inch and the buyer rejected them on the grounds that
they did not conform to the contract’s requirement. An arbitration found that the staves were still
commercially within and merchantable under the contract as they remained fit for the purposes
of making cement barrels, thus the buyer could not reject them.
Issue
127
[1933] AC 470

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 The question arose as to whether the buyer had the right to reject goods that do not
conform to specifications within the contract for sale, yet are commercially within and
merchantable under the contract’s description.
Held
The Court held that a buyer in a contract for sale has the right to demand goods of certain
specifications and is not, accordingly, bound to accept goods that do not conform to contractual
specifications merely due to them being merchantable or commercially equivalent to that
specification. Rather, the goods must conform to the specifications to which the parties have
agreed and the contract cannot be constructed as to add a qualification of commercial
equivalence that is not otherwise stipulated. On the facts, the contract for timber wood provided
no elasticity in its terms and expressly specified the thickness of the wood. As the staves of wood
did not conform to the contractual requirements, despite the possibility of their commercial
equivalence and merchantability under the contract, the buyer had the right to reject the goods.

2. Leaf v International Galleries128

Facts
The plaintiff purchased a picture from the defendants who represented that it was painted
by the artist, J. Constable. Five years later, the plaintiff tried to sell the painting at an auction
house and was told it had not been painted by the artist he had been told previously. He
subsequently returned the painting to the defendant who retained it for inspection. The plaintiff
brought an action to rescind the contract as the defendant had responded maintaining that the
artist of the painting was J. Constable, despite the information that the plaintiff had been given
by the auction house. The trial judge found in favour of the defendants, despite explaining that
they had made an innocent misrepresentation regarding the artist of the painting, on the basis that
the contract had been executed.
Issue

128
[1950] 2 KB 86

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 There were two important issues for the court to provide a decision on. The first was
whether the plaintiff had the right to rescind the contract, five years after agreeing on the terms
with the defendant. The second issue was whether the mistake as to the painter of the art was
fundamental enough to void the contract between the parties.
Held
The plaintiff’s claim had failed as a significant amount of time had lapsed between
agreeing the contract and the window to rescind. The court found that the mistake that was made
regarding the painter of the art was fundamental but it was not severe enough to make the
contract void. On this basis the plaintiff’s claim failed.

3. Bunge Corporation v Tradax Export SA Panama129

Facts
A party contracted to purchase 15,000 tons of US soya bean meal, to be shipped in three
shipments. Under the standard form of contract, Clause 7 stipulated that, in respect of the first
shipment, “[b]uyers shall give at least [15] days’ notice of probable readiness of vessel(s) …”
The last day for the buyers to give notice pursuant to Clause 7 was June 12. This notice was
given on 17 June. Following the late notice, the sellers held the buyers to be in default,
terminated the contract and claimed damages.
Issue
The question arose as to whether the notification clause constitutes a contractual
‘condition’, the breach of which by the buyer gave the seller a right to terminate.
Judgment
The Court held that, in a written contract, where a stipulated term has to be performed by
one party as a prerequisite to the other party’s ability to perform their obligations, the term ought
to be constructed as a condition. In the case of mercantile contracts, time is essential and clauses
related to time require precise compliance by the Parties. On the facts, Clause 7 prescribed
requisite notice by the buyers, absent which the sellers would not be able to ascertain the loading
port to nominate to fulfill the delivery of the contract goods within the shipment period. The
ability of the seller to fulfill his contractual obligation is entirely dependent on the buyer’s

129
[1981] UKHL 11

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punctual performance of this contractual clause. Thus, and particularly in consideration of the
essential role of time within mercantile contracts, the notification clause is constructed as a
contractual condition that requires strict compliance. Accordingly, the buyers have breached the
condition and the sellers had the right to terminate and claim for damages.
Lord Wilberforce said:
‘As to such a clause there is only one kind of breach possible, namely to be late, and the
questions to be asked are: first what importance have the parties expressly ascribed to this
consequence? And, second, in the absence of expressed agreement, what consequence
ought to be attached to it having regard to the contract as a whole?’ and ‘In conclusion,
the statement of the law in Halsbury’s Laws of England, 4th ed., vol. 9 (1974), paras.
481-482, including the footnotes to paragraph 482 (generally approved in the House in
the United Scientific Holdings case), appears to me to be correct, in particular in asserting
(1) That the court will require precise compliance with stipulations as to time wherever the
circumstances of the case indicate that this would fulfill the intention of the parties, and
(2) That broadly speaking time will be considered of the essence in ‘mercantile’ contracts – with
footnote reference to authorities which I have mentioned.’

Lord Lowry said:

‘It is by construing a contract (which can be done as soon as the contract is made) that
one decides whether a term is, either expressly or by necessary implication, a condition,
and not by considering the gravity of the breach of that term (which cannot be done until
the breach is imminent or has occurred).’

4. Couturier v Hastie130
Facts

Couturier agreed with Hastie to deliver some corn. They thought it was in transit
between Salonica (now Thessaloniki) and the UK. But the corn had already decayed. The

130
 [1856] UKHL J3 

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shipmaster had sold it. Couturier argued that Hastie was liable for the corn because Hastie had
already bought an ‘interest in the adventure’, or rights under the shipping documents.
Judgment

The House of Lords held that because the corn effectively did not exist at the time of the
contract, there was a total failure of consideration and the buyers were not liable to pay the price.
Lord Cranworth L.C. said: “The whole question turns upon the construction of the contract...
Looking to the contract... alone it appears to me clearly that what the parties contemplated... was
that there was an existing something to be sold and bought.”

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