The Trick to Contracting Internationally - Use the Other Set of Rules


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; although, notably, India, Hong Kong, India, South Africa, United Kingdom, and Taiwan have not ratified 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 laymen’s terms, the document 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 to be a fair, typical, and reasonable standards to efficiently conduct business. Some international transactions do not need a formalized contract and others appropriately require a cadre of legal experts but the CISG is an excellent default for most international contracts that have moderate legal or financial consequence.  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 expensive 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the United States ratified the CISG it reserved ratification of the sections that allow the US domestic law to be superseded by the CISG.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 particular reservation is obviously fundamental to the expectations of the involved parties and parties intending US courts or dispute resolution experts to interpret their contact according to the CISG must denote that intent within their contract.  There are other notable, but reasonable, differences between the CISG and US law, just as there are when comparing the treaty to any other single country’s laws.  For example, section II changes the typical “Mailbox Rule” in ways that are generally appropriate 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 a writing to form a contract and business people from places with an English law history must keep in mind 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 do occasionally lead to some language, cultural, and interpretive disagreements. Commentators also critique the treaty because local enforcement of the treaty relies on humans, who use their cultural and educational experiences to assist them 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 obviously 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 contact Natalie Lynch.

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