Academic journal article Law and Policy in International Business

The Convention on Contracts for the International Sale of Goods: Temporarily out of 'Service'?

Academic journal article Law and Policy in International Business

The Convention on Contracts for the International Sale of Goods: Temporarily out of 'Service'?

Article excerpt


Many business people and law practitioners consider the Convention on Contracts for the International Sale of Goods(1) (the CISG or the Convention) a success for promulgating a set of legal standards used by many to structure international commercial transactions.(2) The CISG provides a common point of reference among the various legal regimes of the world and enhances predictability in the resolution of international disputes, as well as in negotiations among private parties.(3) This predictability and commonality in commercial transactions contributes to the CISG's warm reception by the international legal and business communities.(4)

One reason many consider the CISG a hallmark in international law is its wide acceptance and ratification by countries around the world.(5) The CISG applies to "contracts of sale of goods between parties whose places of business are in different States"(6) and governs issues involving the formation of a contract for the sale of goods and the rights and obligations arising therefrom.(7) Its provisions address a multitude of issues often raised in international commercial contracts--everything from how an offer or acceptance may be made to how to resolve problems of non-conformity of goods, remedies, and damages for breaches of contracts. It is a self-executing treaty(8) and is therefore part of the domestic law of each Contracting State. Yet, parties may choose to avoid application of the Convention or to vary from any of its provisions in their private contracts.(9)

The Convention's wide range approach to transactions in goods also makes the CISG a success in international commercial law. In order to succeed, international commercial law must provide a level of predictability and certainty to contractual legal issues, allowing parties to structure their business transactions. Parties may successfully navigate international commercial waters when they are certain that their agreements will be legally binding and they understand how those agreements will be interpreted, if ever challenged. To apply laws in the international business community successfully, laws and rules must be consistently reliable. The CISG provides this needed reliability for contracts involving the sale of goods.

Although the Convention effectively tears down international legal borders and addresses many international commercial transactional issues, the CISG is nonetheless limited in scope with respect to the types of commercial transactions that it governs. It is surprising that in the present global economy, this monumental international convention applies only to "contracts for the sale of goods" and, by its own terms, fails to account for the ever-increasing role of service industries and service-related contracts. As a result, the CISG is an inadequate medium for the constantly changing international legal environment and therefore only has limited utility with respect to international transactions.

International transactions are no longer limited to those involving the sale of goods. Rapid advances in technology, communication services, and information systems allow multi-national companies to extend their businesses throughout the world, globalizing regional economies and changing the manner in which business is conducted. In the international context, simple contracts for the sale of goods are now mired with service-oriented provisions as issues concerning the licensing of technology and know-how, various distribution, agency and franchise requirements and restrictions, sales performances, and the transfer of trademarks and trade secrets create a more complex and intricate relationship between what has been traditionally known as the "buyer" and the "seller." Services are becoming an increasingly important part of international transactions, and contracts are no longer clearly categorized into separate groups either as "contracts for the sale of goods" or "contracts for the performance of services. …

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