Stussi Neves | Newsletter May 2023 - Whether or not to include CISG in International Contracts

The United Nations Convention on Contracts for the International Sale of Goods (CISG), also known as the Vienna Convention and introduced by UNCITRAL in 1980, is a treaty that establishes a uniform set of rules for agreements for the international sale of goods, seeking to facilitate cross-border trade and expand the interrelationship between the economies of nations on a global scale.

In 2022, the CISG achieved the number of 95 signatory countries, including the United States, Russia, Germany, Canada, China, Singapore, and Brazil, which adopted it as part of its legal system through Decree no. 8.327/2014. It is therefore considered a legal instrument widely divulged in the international trade environment.

The question therefore arises: should the contracting parties choose to include or exclude the CISG in the regulation of their contract?

The reasons for choosing the application of this Convention to govern a contract range from unfavourable local legislation of the contracting States to undeveloped local legislation, which would thus allow benefits from the application of the Convention’s uniform rule. In addition, another favourable point is the facilitated interpretation of the contract signed between the parties, most often from different member States, since the provisions of the CISG were drafted with the intention of avoiding the use of specific common law or civil law terms, in view of the fact that such terms may not exist or may have different interpretations in different languages and in different jurisdictions.

On the other hand, reasons for excluding the application of the Convention to the contract include the possibility that it may be unfamiliar to legal practitioners or lawyers, who may have less experience with the CISG around the world. Moreover, depending on the subject-matter of the particular contract, it may be more beneficial for the parties to apply the law of a specific jurisdiction, whether that of the State of one of the contracting parties, or even a third jurisdiction of the parties’ choice.

In any case, care should be taken as regards the following points:

  • The CISG may be applied without the existence of a contract in writing;
  • With the global market and the cross-border exchanges of e-mails, the parties must ensure that such exchanges are not treated as a contract because, in accordance with the CISG, a formal contract is not necessary in order for the CISG to be applied.
  • There are lacunae in the text of the CISG which will need to be covered by the applicable domestic law governing the contract. This will lead to a “double operation” of laws, with the CISG applying to certain aspects of the contract and another body of law applying to the rest. This does not necessarily lead to difficulties, but it may cause some uncertainty for the contracting parties, which is why an alternative would be to include express clauses to remedy the foreseeable omissions in the CISG’s application.

It is important to remember that the CISG upholds the principle of contractual freedom, and the parties are completely free, both to draw up the terms of their contract, and also to choose whether or not to apply the CISG. However, it should be noted that the choice to exclude the CISG must be made expressly, because silence leads to the presumption of its application. In this respect, if the parties choose to exclude the CISG, it is common for them to include such decision in the section in their agreement dealing with the applicable law, with the addition, for example, of the following wording: “The provisions of the United Nations Convention on the International Sale of Goods shall not apply to this Agreement.”

Finally, the question of whether the application of the CISG should be included in or excluded from a contract depends on each specific case. The parties should not necessarily avoid the CISG, but rather should weigh up the benefits and drawbacks of its potential application, considering the possibility of a better commercial outcome between the contracting parties and the prevention of legal disputes in transactions involving the international sale of goods.

We continue to follow up closely the evolution of this matter and remain at the disposal of our clients and friends for any additional information.

 

Mariana de Magalhães e Souza

Lawyer in the Civil Area – Stüssi Neves Advogados – São Paulo

mariana.souza@stussinevessp.com.br