The Trick to Contracting Internationally - Use the Other Set of Rules
July 19, 2013
The CISG is somewhat akin to the UCC, which many Americans are more familiar with. The UN Commission on Trade Law signed the CISG in 1980, and 79 countries, including the United States, ratified it; However, notably, India, Hong Kong, India, South Africa, the United Kingdom, and Taiwan have not confirmed the CISG. Generally, the CISG avoids turf issues and extreme legal expenses that can be affiliated with choice of law issues in contract drafting. It is an understandable document of only 10,000 words that is comprehensible, workable, and fair. In layperson's terms, the record establishes default rules that can be left as-is or overridden by the parties in a contract.
The CISG is well acclaimed because of the simplicity and comprehensiveness of the text. Further, most business people regard the terms as fair, typical, and reasonable standards to conduct business efficiently. Some international transactions do not need a formalized contract, and others appropriately require a cadre of legal experts. Still, the CISG is an excellent default for most international agreements with moderate legal or financial consequences. The substantially accomplished intent of the CISG is to articulate fair and reasonable expectations so that people from all cultural and legal origins understand the terms that will be used to fill in gaps that could otherwise be inconsistently and expensively debated.
Although the United States ratified the CISG, it reserved ratification of the sections that allow the US domestic law to be superseded by the CISG. This reservation is fundamental to the expectations of the involved parties and parties intending US courts or dispute resolution experts to interpret their contract according to the CISG must denote that intent within their agreement. In addition, there are other notable but reasonable differences between the CISG and US law, just as there are when comparing the treaty to any other country’s laws. For example, section II changes the typical “Mailbox Rule” in generally appropriate ways but should be deliberately contemplated. Terms of acceptance are also different, and “battle of the forms” issues may arise under the CISG unless contrarily articulated within the agreement. Lastly, the CISG does not require writing to form a contract, and business people from places with an English law history must remember that verbal agreements can be binding where the CISG applies.
Although the CISG is as respected and well-regarded as any international treaty, the criticisms of the treaty are legitimate. Although the authors did a phenomenal job authoring a simple document, translations of the treaty occasionally led to some language, cultural, and interpretive disagreements. Commentators also critique the treaty because local enforcement relies on humans, who use their cultural and educational experiences to assist the interpretation of the treaty, and the results are occasionally inconsistent. Lastly, and the most severe criticism of the treaty, is that 24 of the 79 ratifying countries reserved ratification of specific provisions, which serves as a complicated web of enforceability for contracting parties to consider.
For more information about using Texas organizations using the CISG or assistance drafting and interpreting work under the CISG, please get in touch with Natalie Lynch.