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INTERNATIONAL TRADE LAW

INTERNATIONAL TRADE LAW. Dr. Özlem Döğerlioğlu IŞIKSUNGUR Yaşar University Faculty of Economics andAdministrative Science International Trade Law – Lecture Notes. CISG. CISG = United Nations Convention o n C ontracts for the I nternational S ale of G oods (Vienna 1980).

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INTERNATIONAL TRADE LAW

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  1. INTERNATIONAL TRADE LAW Dr. Özlem Döğerlioğlu IŞIKSUNGUR Yaşar University Faculty of Economics andAdministrative Science International Trade Law – Lecture Notes

  2. CISG • CISG = United Nations • Convention on Contracts for • the International Sale of Goods • (Vienna 1980)

  3. AIM OF THE CONVENTION • The Vienna Convention aims toestablish a uniform substantive law on contracts for international sales. • The term of internationalsales covers all the sales relating to an international link.

  4. UNITED NATION’S CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CISG) • In effect since January 1, 1988 • Current state parties: 76 (As of 1 September 2010) • Turkey 07/07/2010 (Approval) 01/08/2011 (Enter into force)

  5. CISG rules and principles? • PART I - Sphere of Application and General Provisions • Chapter I - Sphere of Application • Chapter II - General Provisions • PART II - Formation of the Contract • PART III - Sale of Goods • Chapter I - General Provisions • Chapter II - Obligations of the Seller • Section I - Delivery of the goods and handing over of documents • Section II - Conformity of the goods and third party claims • Section III - Remedies for breach of contract by the seller • Chapter III - Obligations of the Buyer • Section I - Payment of the price • Section II - Taking delivery • Section III - Remedies for breach of contract by the buyer • Chapter IV - Passing of Risk • Chapter V - Provisions Common to the Obligations of the Seller and of the Buyer • Section I - Anticipatory breach and instalment contracts • Section II - Damages • Section III - Interest • Section IV - Exemptions • Section V - Effects of avoidance • Section VI - Preservation of the goods • PART IV - Final Provisions

  6. TO WHOM? • Articles 1-4 that determine the sphere of application • Vienna Convention applies clearly to cases where the application of different legal systems would come into force • The provisions of the Vienna Convention apply if the A-“places of business” of the parties in different states involved states are participants in the Vienna Convention or B-“places of business” of the parties in different states rules of private international lawlead to the application of the law of a contracting state.

  7. SCOPE OF APPLICATION CISG applies to ”international sale of goods” It does notapply to: - consumer sales - sales by auction - sales on execution or otherwise by authority of law - sales of stocks, shares, investment securities, negotiable intstruments or money - sale of ships, vessels, hovercraft or aircraft - sale of electricity Neither does it apply to: manufacturing contracts, where the party ordering the goods supplies a substansial part of the material contracts, where labour or other services is the preponderant part of the obligations It does not govern: - matters of validity, at least not as a rule - matters concerning the right to the property of the goods - product liability

  8. Hierarchy on norms in international sales law 1. The "mandatory norms” that prevail over the rules of the Convention (art. 4[a]) 2. Contract provisions (art. 6) 3. Trade usages, either expressly referred to by the parties (art. 9[l]) or found applicable by a court or arbitrator (art. 9[2]) 4. The rules of the Convention 5. The "general principles" on which the Convention is based (art. 7[l]) 6. If no such principles are identified, the non-mandatory norms of the law applicable under the conflict rules of the forum (art. 7[2])

  9. Hierarchy on norms in international sales law 1- Finding the mandatory rules of the applicable (domestic) law The rules of ViennaConvention applyif the parties : • did notexclude the applicability of the ViennaConvention and • at the same time they did not choose aspecific code to be applied exclusively, • 2- Sales contract of parties • Parties’ will receives priority • 3- Accepted trade usages • The parties may have explicitly or implicitly made applicable to their contract some of the wellknown global trade usages – such as INCOTERMS. When express provision ismade, like questions regarding the place of delivery or the passing of risk, the issue will bedecided by reference to the chosen usages.

  10. Hierarchy on norms in international sales law 4- The provisions of the Vienna Convention the parties made no specificprovision – either by contract or by the usages 5- The general principles underlying the Convention priority is given to (Article 7/I): international character, uniform interpretation the observance of good faith 6-The law applicable by virtue of the rules of private international law of the forum state

  11. Conformity of Goods and Liability • Takes place in the The Section II of the Vienna Convention • requirements for conformity of thegoods • obligations : seller & buyer

  12. Conformity of Goods and Liability • The seller’s liability for the quality and quantity: • Article 35: 1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: • (a) are fit for the purposes for which goods of the same description would ordinarily be used; • (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement; • (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model; • (d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. • (3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity

  13. Conformity of Goods and Liability • The seller’s liability for the quality and quantity: • priority of parties’ will to determine their obligations. • The goods mustconform withthe quantity, quality and description mentionedin the contractual provisions • Unless otherwise agreed by the parties Vienna Convention's criteria shall be applied. In other words, the criterions of Article 35 are applicable only in theabsence of an express or implied agreement. (Importance of interpretation) • a minimum of contractual indications about the goods must be provided.

  14. Conformity of Goods and Liability • The seller’s liability for the quality and quantity: • The price is, however, an indicativefactor to estimate level of quality • the delivered goods must at least meet the general description of the contract • ICC :in case of unidentified goods the seller is obliged to delivergoods which generally conform to the purpose and description of the contract’s subject

  15. Conformity of Goods and Liability The seller’s liability for the quality and quantity: Four determinative standards (Article 35) • A- Fitness of the goods for the purposes for which goods of the same description would ordinarily be used. • Art. 35 para. (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unlessthey: (a) are fit for the purposes for which goods of the same description would ordinarily be used B- • C- To deliver goods possessing the qualities of goodswhich the seller has held out to the buyer as a sample or model. • D-The seller must deliver goods properly contained or packaged.

  16. Conformity of Goods and Liability • The seller’s liability for the quality and quantity: • Art. 35 para. (3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack ofconformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have beenunaware of such lack of conformity. • The buyer who knows or ought to know whatkind of goods the seller would deliver, cannot ask for goods of better qualities • The seller is liable, for defects not known by the buyer and not reasonably discoverable by examining the goods. • The seller is responsible for hidden defects that need an unusualexamination to be detected.

  17. Obligations of the Seller • Article 30 • “The seller must deliver the goods, hand over any documents relating tothem and transfer the property in the goods, as required by the contract and this Convention.”

  18. Obligations of the Seller • To deliver the goods • Hand over the relevant/necessary documents • Transfer the ownership in the goods to the buyer in accordance with the terms and conditions of the contract and as required by the Convention

  19. Obligations of the Seller • To deliver the goods Article 35/1 “The seller must deliver goods which are of the quantity, qualityand descriptionrequired by the contract and which are contained or packagedin the manner required by the contract.” • Article 41 “The seller must deliver goods which are free from any right or claim ofa third party, unless the buyer agreed to take the goods subject to that rightor claim. However, if such right or claim is based on industrial property orother intellectual property, the seller’s obligation is governed by article 42.” • Article 42 “The seller must deliver goods which are free from any right or • claim of a third party based on industrial property or other intellectual • property, of which at the time of the conclusion of the contract the seller • knew or could not have been unaware, provided that the right or claim is • based on industrial property or other intellectual property:

  20. Obligations of the Seller • To deliver the goods • The seller must deliver goods that are of the quantity, quality and description required by contract • As being contained or packaged in the manner agreed between parties • The goods shall be free from any right or claim by third party

  21. Obligations of the Seller • Delivery conditions&mode: • The parties are free to choose.– Freedom to contract • In case parties made no contractual arragement apply article 31 of Convention • If the contract of sale involves carriage (transportation)of the goods, seller is under obligation to deliver goods to a carrier to be carried to the buyer • If the contract relates to Goods to be manufactured or produced, AND at the time of the conclusion of the contractthe parties knew that - the goods were to be manufacturedor produced at, a particular place in placing the goods at the buyer’s disposal at that place; • If the contract relates to • specific goods, or • unidentified goods • to be drawn from a specific stock AND at the time of the conclusion of the contractthe parties knew that -the goods were ata particular place, in placing the goods at the buyer’s disposal at that place; • in other cases—(in placing the goods at the buyer’s disposal)at theplace where the seller had his place of business at the time of the conclusion of the contract.

  22. Obligations of the Seller • Time of Delivery: (Article 33) • Parties are free to make arrangement concerning time of delivery • if a date is fixed by the contract on that date • if the date is not fixed but determinable from the contract,on that date • In case parties made no contractual arragement apply article 33/b-c • in any other case, within a reasonable time after the conclusion of the contract.

  23. Obligations of the Seller • Delivery of Documents– Article 34 “If the seller is bound to hand over documents relating to the goods, hemust hand them over at the time and place and in the form required by thecontract. If the seller has handed over documents before that time, he may,up to that time, cure any lack of conformity in the documents, if the exerciseof this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damagesas provided for in this Convention.”

  24. Obligations of the Buyer • Article 53 • “The buyer must pay the price for the goods and take delivery of themas required by the contract and this Convention.”

  25. Obligations of the Buyer • Primarily obligation is • To pay the the price for the goods and • To take delivery of the goods

  26. Obligations of the Buyer • Payment of Price: (Article 54-59) “The buyer’s obligation to pay the price includes taking such steps andcomplying with such formalities as may be required under the contract orany laws and regulations to enable payment to be made.”

  27. Obligations of the Buyer • Payment of Price: Article 54 • Payment of import duties • Arrangement for exchange approvals • Making provisions for letter of credit or other mode of payment as foreseen in the contract • Payment of bank charges and expenses

  28. Obligations of the Buyer Price: Article 55 “Where a contract has been validly concluded but does not expressly orimplicitly fix or make provision for determining the price, the parties areconsidered, in the absence of any indication to the contrary, to have impliedlymade reference to the price generally charged at the time of the conclusionof the contract for such goods sold under comparable circumstances in the trade concerned.”

  29. Obligations of the Buyer • Price: Article 55 • In case the parties determine • neither the price nor any procedure concerning determination • It is accepted that • The price shall be that generally charged at the formation of the contract for such goods sold under comparable circustances in the trade

  30. Obligations of the Buyer • Place of the payment • Usually mentioned in the contract • If not, apply article 57 • at the seller’s place of business; or • if the payment is to be made against the handing over of the goodsor of documents, at the place where the handing over takes place.

  31. Obligations of the Buyer • Time of the payment • Usually mentioned in the contract • If not, apply article 58 “(1) If the buyer is not bound to pay the price at any other specifictime, he must pay it when the seller places either the goods or documentscontrolling their disposition at the buyer’s disposal in accordance with thecontract and this Convention. The seller may make such payment a conditionfor handing over the goods or documents. (2) If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controllingtheir disposition, will not be handed over to the buyer except against payment of the price. (3) The buyer is not bound to pay the price until he has had anopportunity to examine the goods, unless the procedures for delivery orpayment agreed upon by the parties are inconsistent with his having such an opportunity.”

  32. Passing the Risk • Convention does not deal with the passing of title • It regulates passing of risk • Definition of passing the risk: The buyer shall bear the burden of loss of or damage to goods before acquires title on the goods and still has to pay the purchase price to the seller • Parties free to determine the conditions, if the parties do not regulate in then contract apply 66-70

  33. Article 66 • Loss of or damage to the goods after the risk has passed to the buyer • does not discharge him from his obligation to pay the price, unless the loss • or damage is due to an act or omission of the seller. • Article 67 • (1) If the contract of sale involves carriage of the goods and the seller • is not bound to hand them over at a particular place, the risk passes to the • buyer when the goods are handed over to the first carrier for transmission • to the buyer in accordance with the contract of sale. If the seller is bound • to hand the goods over to a carrier at a particular place, the risk does not • pass to the buyer until the goods are handed over to the carrier at that place. • The fact that the seller is authorized to retain documents controlling the • disposition of the goods does not affect the passage of the risk. • (2) Nevertheless, the risk does not pass to the buyer until the goods • are clearly identified to the contract, whether by markings on the goods, byshipping documents, by notice given to the buyer or otherwise.

  34. Article 68 • The risk in respect of goods sold in transit passes to the buyer from thetime of the conclusion of the contract. However, if the circumstances so indicate,the risk is assumed by the buyer from the time the goods were handed over to • the carrier who issued the documents embodying the contract of carriage. • Nevertheless, • if at the time of the conclusion of the contract of sale the seller • knew or ought to have known that the goods had been lost or damaged and did • not disclose this to the buyer, the loss or damage is at the risk of the seller. • Article 69 • (1) In cases not within articles 67 and 68, the risk passes to the buyer • when he takes over the goods or, if he does not do so in due time, from • the time when the goods are placed at his disposal and he commits a breach • of contract by failing to take delivery. • (2) However, if the buyer is bound to take over the goods at a place • other than a place of business of the seller, the risk passes when delivery is • due and the buyer is aware of the fact that the goods are placed at his • disposal • at that place. • (3) If the contract relates to goods not then identified, the goods are • considered not to be placed at the disposal of the buyer until they are clearly • identified to the contract. • Article 70 • If the seller has committed a fundamental breach of contract, articles 67, • 68 and 69 do not impair the remedies available to the buyer on account of • the breach.

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