The United Nations Convention on Contracts for the International Sale of Goods (CISG) came into force for the Principality of Liechtenstein on May 1st 2020.
The CISG of April 11th 1980, also known as Vienna Sales Convention, is an international treaty concerning the international sale of goods. It applies to cross-border contracts for the sale of goods if both parties to the contract have their place of business in a state party to the CISG or if the legal jurisdiction applicable to the contract is that of a contracting state. To this day, 93 states have already ratified the Convention. Among them are most European countries and important trading partners of Liechtenstein.
What does CISG regulate in detail?
The treaty does not include any conflict of laws rules, but contains material law for contracts of sale. In case the CISG applies, it replaces national sales law regulations within its scope of application. The CISG represents uniform law. In material terms, the CISG regulates exclusively the conclusion of contracts for the sale of goods and the resulting rights and obligations of buyer and seller. It must be noted that the CISG is not mandatory and may therefore be contractually excluded.
Scope of application
In principle the UN Convention on Contracts for the International Sale of Goods shall apply to contracts for the sale of goods if
- the parties have their places of business in different States and
- these States are Contracting States or
- rules of private international law lead to the application of the law of a Contracting State
The nationality of the contracting parties is not relevant, since the UN Convention on Contracts for the International Sale of Goods only refers to the place of establishment of the contracting parties with regard to its applicability. Moreover, it does not matter whether the parties are merchants or non-merchants or whether the contract is of a commercial or civil law nature.
Exceptions to the scope
The CISG does not apply to sales
- of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use;
- by auction;
- on execution or otherwise by authority of law;
- of stock, shares, investment securities, negotiable instruments or money;
- of ships, vessels, hovercraft or aircraft;
- of electricity.
Furthermore, the treaty does not regulate the following:
- legal capacity;
- deficiencies in representation;
- consequences of the conclusion of the contract and delivery regarding substantive law;
- claiming of defects of will;
- contractual penalties;
- statute of limitations;
- liability for personal injury.
These unregulated matters are subject to national law designated by the international private law.
Conclusion of sales contracts according to CISG
According to the UN Convention on Contracts for the International Sale of Goods, a contract is concluded by the intentional agreement of offer and acceptance, which must be determined and become effective upon receipt. The principle of freedom of form applies. Silence is not to be regarded as approval without special indications. If a separate declaration of acceptance is not expected, a contract can be concluded by silent acceptance. The fact, that an offer under CISG may be revoked until the recipient's declaration of acceptance has been sent, has to be considered in this context. According to the provisions of the Liechtenstein General Civil Code (ABGB), a submitted offer can only be revoked until the recipient receives it. In addition, a contract under UN Sales Convention is also concluded if the acceptance contains insignificant changes to the offer, such as slightly different delivery periods, unless the offeror objects to this immediately.
The basic obligations of the seller include
- to deliver the goods;
- to hand over any documents relating to the goods;
- to transfer property in the goods.
The basic obligations of the buyer include
- to pay the price;
- to take delivery.
Breach of contract
In contrast to Liechtenstein law, the CISG only provides remedies for one fact, the breach of contract. The seller realizes the breach of contract equally in case of delay, non-performance and defective performance. However, a differentiation is made in terms of intensity. Only fundamental breaches of contract entitle the customer to immediate termination of the contract. Impossibility and the serious and final refusal of delivery or payment as well as non-performance in the case of transactions for delivery by a fixed date. Otherwise default does not lead to fundamental breach of contract.
The following remedies are available to the buyer in the case of breach of contract by the seller:
- granting a period of grace and termination of the contract after expiry of the period of grace in case of delay;
- immediate termination of the contract in case of fundamental breach of contract;
- granting a period of grace and requiring performance;
- granting a period of grace and termination of the contract after expiry of the period in case of default of acceptance.
In any case, the impaired contractual partner is also entitled to claim for damages for physical damage, financial losses and lost profits. Excluded are breaches of contract which are based on an unforeseeable and unavoidable reasons beyond the control of the company. This includes strikes and natural disasters.
Originally published 2020-04-30
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.