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What Laws Govern the International Sales of Goods Between Companies?

Nowadays, clients often ask what laws govern contracts for the the purchase and sale of “goods” between private companies during international transactions?  Such questions do not apply with respect to the consumer sales of “goods” through a third-party provider such as Amazon. Rather such questions only arise with respect to the purchase and sale of “goods” between companies from different countries. To be clear, the commercial sale of “goods” are governed by one set of laws and the purchase of “goods” by consumers or by governments by other laws!  [SeeDoes the UCC or Common Law Govern Your Contract?”, posted 12/13/23]. Here we address the international sales of “goods” between different companies from different countries.

The international sale of “goods” underwent a huge expansion following the close of World War I, or WWI. In 1920,  the victorious allied powers developed the “League of Nations” to promote cooperation between countries. The “League of Nations”  established a related body - “International Institute for the Unification of Private Law” or UNIDROIT – to develop rules to promote and harmonize international sales transactions. UNIDROIT sponsored and recommended that members to the “League of Nations” adopt a pair of conventions to promote trade: 1.) Uniform Law on the Formation of International Sales Contracts, and 2.) Uniform Law for the International Sale of Goods. Although UNIDROIT conventions applicable to the international sale of goods  remained in place from 1930 through 1980, it never gained wide acceptance outside of the victorious allied powers.

Following the close of World War II, or WWII, in 1945, the “United Nations” or UN was established to replace the League of Nations which had proven to be ineffective. The objectives of the UN were to promote and maintain international peace and security, protect human rights, deliver humanitarian aid, promote development, and support international law. Meanwhile the UNIDROIT conventions applicable to the international sales of “goods” remained in place, although continued to remain highly ineffective. In an attempt to fill the void, the UN Commission on International Trade or UNCITRAL adopted a single convention replacing the 2 conventions drafted by UNIDROIT back in 1930. This new convention was named the UN Convention on Contracts for the International Sale of Goods or CISG.

CISG applies to most sales transactions between companies from different countries unless: 1) the contracting parties exclude or restrict its application, or 2) the member country of the UN where the contract was made excludes or restricts its application. When applicable, CISG does not establish rules applicable to every aspect of the international sales contracts. However, it does establish rules that apply to most of the significant issues relating to the sale, including:

  1. Contract formation and  interpretation
  2. Application of trade practices and international usages
  3. The features, duration and revocability of offers.
  4. Manner, timing and effectiveness of acceptance of offers.
  5. Adding, changing, or modifying the acceptance.
  6. Modifications or change orders to contracts.
  7. Quality requirements for the goods.
  8. Time and place for delivery of goods by the seller
  9. Time and place for payment by the buyer.
  10. Buyer’s obligation to take delivery and notify seller of defects.
  11. Buyer’s remedies for breach of the sales contract.
  12. Sellers remedies for breach of contract. 
  13. Risks of loss during transfer of the goods.
  14. Anticipatory Recovery of interest.
  15. Breach of contract.
  16. Force Majeure
  17. Obligation to preserve rejected.
  18. Ratification, approval, and accession.
  19. Interplay with overlapping international agreements, and
  20. Availability of declarations and reservations to member countries.

Over the years, UNCITRAL has adopted several other conventions that apply in conjunction with CISG, including: “UN Convention on the Limitations Period in the International Sales of Goods”, and “UN Convention on the Use of Electronic Communications in International Contracts” (“Supplemental Conventions”). 

CISG does not dictate a tribunal for the resolution of disputes, but rather allows its interpretation and application to be decided by those courts and arbitration panels having jurisdiction over the parties. However, UNCITRAL does maintain and make available databases that record decisions under CISG as well as commentaries by scholars, for the purpose of maintaining the international character and uniformity of its interpretation. Obviously, any company purchasing goods directly from a company in a different country should familiarize itself with both CISG as well as its Supplemental Conventions.


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