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Global Sales Law

Global Sales Law. Prof. Dr. Ingeborg Schwenzer University of Basel Switzerland. Introduction. Development of global trade 2010: 9,5% increase (WTO) 2000-2008: average annual growth 5% Focus: China, Brazil, Russia, Africa 2007/08: Africa annual growth: exports: 18/28%, imports: 23/27%

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Global Sales Law

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  1. Global Sales Law Prof. Dr. Ingeborg Schwenzer University of Basel Switzerland

  2. Introduction • Development of global trade • 2010: 9,5% increase (WTO) • 2000-2008: average annual growth 5% • Focus: China, Brazil, Russia, Africa • 2007/08: Africa annual growth: exports: 18/28%, imports: 23/27% • Different laws = obstacle to trade

  3. Introduction • Different sets of sales law • Domestic: SGA, CC, others • Regional: OHADA Uniform Act on General Commercial Law (UAGCL), general contract law • Global: UN Convention on Contracts for the International Sale of Goods (CISG), UNIDROIT Principles of International Commercial Contracts

  4. Introduction • History of Unification of sales law • 1920s: Ernst Rabel • 1960s: Hague Conventions ULIS/ULF • 1980: Vienna Conference CISG • 1988: Entering into force • 2011: 76 member states covering 80% of world trade • Africa: 9 member states, only two OHADA states

  5. Introduction • Structure of the CISG • Part I: Sphere of application • Part II: Formation of the contract • Part III: Substantive rules for the sale of goods, incl. duties of the parties, remedies, risk of loss • Part IV: Final provisions – international public law

  6. Part I: Sphere of application • Application and ambit of CISG (Art. 1-6) • CISG itself determines ist applicability • Art. 1(1) CISG: different states (Art. 10 CISG) • Art. 1(1)(a) CISG: both states are member states • Art. 1(1)(b) CISG: rules of private international law lead to member state • Example China – Cameroon • Application by arbitral tribunals

  7. Part I: Sphere of application • Party autonomy Art. 6 CISG • Opting out in whole or in part • Choice of domestic law, f.e. Swiss law • Litigating under the wrong law

  8. Part I: Sphere of application • Ambit of the CISG • Sale of goods contracts • Barter contracts, back-to-back-sale • Distribution agreements • Art. 3 CISG: work and labour, services • Art. 3(1) CISG: manufacture of goods • Art. 3(2) CISG: mixed contracts (factory)

  9. Part I: Sphere of application • Ambit of the CISG • Goods: factory, machine, food, shoes, clothes, cars, circus elephant • Documents representing the goods • Art. 2 CISG exceptions • Art. 2(a) CISG: consumer sales • Art. 2(b)(c) CISG: auctions, bancruptcy • Art. 2(d)(e)(f) CISG: certain goods

  10. Part I: Sphere of application • Substantive ambit • Art. 4 CISG: Formation, rights and obligations of parties • Art. 4(a) CISG: validity questions • Public policy, mandatory rules, capacity of the parties, fraud, mistake? • Art. 4(b) CISG: transfer of title, retention of title, bona fide purchase

  11. Part I: Sphere of application • Substantive ambit • Art. 5 CISG: Compensation for personal injury and death • Compensation for damage to property • Limits of the CISG (external gaps) • Agency, assignment, transfer of debts, joint debtors, limitation of actions, set-off? • Form requirements: Art. 11 CISG

  12. Part I: Sphere of application • Art. 7 CISG: Interpretation of the CISG • Art. 7(1) CISG: international character, promotion of uniformity, good faith • Art. 7(2) CISG: gap-filling • General principles of CISG (party autonomy, burden of proof, stamdard of proof, set-off) • PICC?

  13. Part I: Sphere of application • Art. 8 CISG: Interpretation of party statements and conduct • Art. 8(1) CISG: true intention of parties • Art. 8(2) CISG: reasonable person • Art. 8(3) CISG: circumstances to be considered • Art. 9(1) CISG: usages and practices • Art. 9(2) CISG: international usages

  14. Part I: Sphere of application • Art. 11 CISG: freedom of form • Formation, Art. 29(1): modification • Excluded: procedural requirements, pariol evidence rule, consideration, cause, statute of frauds • Art. 12 CISG: reservation • Agreed form, Art. 13 CISG: writing • Art. 29(2) CISG: modification

  15. Part II: Formation of the contract • General remarks • Art. 14 et seq. CISG antiquated • Offer-acceptance mechanism • e-commerce, UNCITRAL Concention 2004 • Standard terms: incorporation – validity • Pre-contractual duties • Breaking off negotiations

  16. Part II: Formation of the contract • Offer • Art. 14 CISG: criteria for an offer • Art. 14(1) CISG: definiteness (pretium certum – Art. 55 CISG), intention to be bound (invitatio ad offerendum) • Art. 14(2) CISG: public offer (advertisements, websites)

  17. Part II: Formation of the contract • Offer • Art. 15(1) CISG: effective upon reaching the offeree • Art. 15(2) CISG: withdrawal of offer • Art. 16 CISG: revocability of offer • Art. 16(1): Common Law starting point • Art. 16(2): restrictions on revocability • Art. 17 CISG: termination of offer

  18. Part II: Formation of the contract • Acceptance (Art. 18-22 CISG) • Art. 18(1): acceptance by declaration • Statement or conduct (delivery, payment) • Acceptance by silence • Effectiveness of acceptance: Art. 18(2 s.1): reaching, Art. 18(3): performance of act

  19. Part II: Formation of the contract • Acceptance (Art. 18-22 CISG) • Deadline for acceptance (Art. 18(2) CISG) • Art. 20 CISG: calculating the period of time • Art. 21 CISG: when late acceptance may be effective • Divergence between offer and acceptance • Art. 19(1): rejection and counter-offer • Art. 19(2)(3): insignificant modifications

  20. Part II: Formation of the contract • Battle of forms • Practical importance • Possible solutions: last shot doctrine, knock-out doctrine • Commercial letter of confirmation (acceptance by silence?)

  21. Part II: Formation of the contract • Effectiveness of statements • Importance of statement reaching the other party, Art. 23: conclusion of contract • Art. 24: when does statement reach the other party? • e-commerce, standard terms (making available, transparency) • Art. 29: modification of contract

  22. Part III/1: Substantive Rules - General • Content of Part III: General, obligations of seller, obligations of buyer, passing of risk, common provisions • Basic remedies • Specific performance (Art. 28 CISG) • Right to withhold performance • Damages • Avoidance of contract, Art. 25: fundamental breach

  23. Part III/1: Substantive Rules - General • Art. 26 CISG: declaration of avoidance • Art. 27 CISG: dispatch principle – transmission risk • Other notices (non-conformity

  24. Part III/1: Substantive Rules - General • Art. 25 CISG: fundamental breach • Fundamentality: effect on creditor • Foreseeability • In case of non-performance: impossibility, delay – time of the essence, ancillary duties • Non-conformity of the goods: purpose of the contract, repairable defect, time of the essence

  25. Part III/1: Substantive Rules - General • Art. 25 CISG: fundamental breach • Breach of buyer‘s obligations • Payment, repudiation, insolvency • Taking delivery • Art. 28 CISG: Specific performance • Common law – Civil law

  26. Part III/2: Substantive Rules – Seller‘s obligations • Overview Art. 30-44 CISG • Cornerstone of any sales law • Art. 30-35: delivery, conformity • Art. 37-40: non-conforming goods • Art. 41-43: third party rights • Art. 44: buyer‘s excuse for not giving notice

  27. Part III/2: Substantive Rules – Seller‘s obligations • Seller‘s duty to deliver • Art. 30 CISG: delivery, documents, transfer of title • Art. 31 CISG: place of delivery • Primarily party agreement • Incoterms 2010: EXW (ex works), FCA (free carrier)/FOB (free on board), CIF (cost, insurance, freight), DAP (delivered at place)

  28. Part III/2: Substantive Rules – Seller‘s obligations • Seller‘s duty to deliver • Subsidiary rules • Art. 31(a): carriage of goods • Art. 31(b): goods at specific place • Art. 31(c): seller‘s place of business • Making available • Art. 32: obligations during transport • Jurisdiction at place of delivery

  29. Part III/2: Substantive Rules – Seller‘s obligations • Seller‘s duty to deliver • Art. 33: time of delivery: primarily party agreement • Art. 33(a): fixed date • Art. 33(b): fixed period of time • Art. 33(c): reasonable time after conclusion of contract • Art. 52(1): early delivery by seller

  30. Part III/2: Substantive Rules – Seller‘s obligations • Art. 34: handing over of documents • Documents of title • Other documents • Place and time of handing over of documents • Right to cure in case of early delivery

  31. Part III/2: Substantive Rules – Seller‘s obligations • Art. 35 CISG: conformity of the goods • Most important provisions of CISG • CISG key concept: quality, quantity, aliud packaging treated alike • Domestic approaches: warranties/ conditions (SGA), express/implied warranties (UCC), vices cachés (CC), peius/aliud (CC, Germanic systems), partial non-delivery, ancillary duties

  32. Part III/2: Substantive Rules – Seller‘s obligations • Art. 35 CISG: conformity of the goods • Art. 35(1): primarily party agreement • Quantity: trade usages • Quality: features of goods, origin, manufacturing practices, ethical standards • Dicrepancies in nature: aliud • Packaging • Additional duties: services, non-competition

  33. Part III/2: Substantive Rules – Seller‘s obligations • Art. 35 CISG: conformity of the goods • Art. 35(2): objective criteria to determine conformity • Art. 35(2)(a): fitness for ordinary purpose • Commercial purposes, resalability, average quality? • Public law requirements, regional v. global players

  34. Part III/2: Substantive Rules – Seller‘s obligations • Art. 35 CISG: conformity of the goods • Art. 35(2)(b): fitness for particular purpose • Purpose made known to seller • Buyer reasonably relying on seller‘s skill and judgement • Art. 35(2)(c): sample or model • Art. 35(2)(d): adequate packaging • Art. 35(3): buyer‘s knowledge

  35. Part III/2: Substantive Rules – Seller‘s obligations • Art. 36: determinative time for conformity • Art. 36(1): passing of risk • Burden of proof • Art. 36(2): after risk has passed: breach of obligation, guarantee • Durability in general • Art. 37: seller‘s right to cure non-conformity

  36. Part III/2: Substantive Rules – Seller‘s obligations • Art. 38, 39: Examination and notice • Comparative overview: SGA, CC, UCC, Germanic systems • Drafting history • Art. 38: Examination • Method of examination • Period for examination: general, carriage of goods, redirection or redispatch

  37. Part III/2: Substantive Rules – Seller‘s obligations • Art. 39: notice • Specificity of notice • Form and transmission risk • Reasonable time: nature of goods, „noble month“ • Beginning of period • Art. 39(2): two year cut-off period

  38. Part III/2: Substantive Rules – Seller‘s obligations • Art. 40: seller‘s knowledge • Consequences of failure to give notice • General – Art. 44: reasonable excuse • Limitation periods • UN Convention on Limitation period: 4 years • Domestic rules vary from 6 months to 6 years, compatability with Art. 39(2)

  39. Part III/2: Substantive Rules – Seller‘s obligations • Art. 41, 42: defects in title and intellectual property rights • Distinction unknown to most countries • Art. 41: defects in title • Third party rights (property, encumbrances) • Third party claims • Public law encumbrances

  40. Part III/2: Substantive Rules – Seller‘s obligations • Art. 42: third party industrial or intellectual property rights • Third party rights or claims • Art. 42(1)(a)(b): territorial restriction • Seller‘s knowledge • Art. 42(2): exclusion of seller‘s liability • Art. 43: notice requirement

  41. Part III/3: Substantive Rules – Buyer‘s remedies in case of breach • Art. 45-52 CISG: buyer‘s remedies • Unified approach: breach of contract • Some special rules: non-conformity • Art. 45: overview of buyer‘s remedies • Concurrent domestic remedies: contract law (mistake), tort law (culpa in contrahendo, negligent misrepresentation)

  42. Part III/3: Substantive Rules – Buyer‘s remedies in case of breach • Art. 48 CISG: seller‘s right to cure • Distinguish Art. 37 • Relationship to buyer‘s right to avoid the contract • Setting time limits • Art. 47: buyer fixing additional time for performance • Art. 48(2)(3): seller requesting additional time

  43. Part III/3: Substantive Rules – Buyer‘s remedies in case of breach • Art. 46, 47 CISG: right of performance and substitute performance • Art. 46(1): right to specific performance subject to Art. 28 and Art. 79 • Art. 46(2): restriction on right to substitute goods in case of non-conformity (fundamental breach) • Art. 46(3): restriction on right to repair in case of non-conformity

  44. Part III/3: Substantive Rules – Buyer‘s remedies in case of breach • Art. 49: Avoidance of contract • Art. 49(1)(a): fundamental breach • Art. 49(1)(b): „Nachfrist“-principle (additional period in case of non-delivery and breach of additional obligations) • Art. 49(2): restriction in case of delivery of goods • Avoidance by declaration

  45. Part III/3: Substantive Rules – Buyer‘s remedies in case of breach • Part performance and delivery of partly non-conforming goods • Art. 51 and Art. 73 CISG • Art. 51(1), 73(1): principle: partial avoidance only • Art. 51(2), 73(3): avoidance of the whole contract in case of fundamental breach • Art. 72: Anticipated breach of contract

  46. Part III/3: Substantive Rules – Buyer‘s remedies in case of breach • Art. 50 CISG: reduction of purchase price • Roman law descent • Difference to damages: calculation, Art. 79 not applicable • Art. 45(1)(b), 74 et seq.: damages • Right to withhold performance, general principle • Art. 71: right to suspend performance • Right to reject the goods (perfect tender rule?) • Art. 52(2): rejection of excessive quantity

  47. Part III/4: Substantive Rules – Buyer‘s obligations • Art. 53 CISG: payment, taking delivery • Art. 54-59: payment of purchase price • Art. 54: encompasses all arrangements, form of payment, letter of credit, compliance with public law regulations etc. • Currency: agreement, place of seller • Art. 57(1): place of payment • Jurisdiction?

  48. Part III/4: Substantive Rules – Buyer‘s obligations • Art. 58: time of payment • Agreement • Art. 58(1)(2): subsidiarily: step by step-performance • Art. 58(3): reasonable opportunity to inspect the goods • Art. 60 CISG: duty to take delivery • Necessary preparatory steps, taking over • Offer of non-conforming goods

  49. Part III/4: Substantive Rules – Buyer‘s obligations • Art. 66-70 CISG: passing of risk • Art. 66: payment obligation if seller performed all of its obligations, even if goods destroyed or damaged • Which events are covered? Acts of states? • Exception: loss or damage due to seller • Primarily: agreement of parties (practice) • Incoterms – who must insure the goods?

  50. Part III/4: Substantive Rules – Buyer‘s obligations • Art. 66-70 CISG: passing of risk • Art. 67(1): handing over to first carrier, retention of documents irrelevant • Art. 67(2): generic goods must be identified to contract • Goods sold in transit: unclear when goods were destroyed • Art. 68: conclusion of contract. Dating back to handing over in case of insurance (contract valid)

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