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The international contract: knowing when, why, and how to "opt out" of the United Nations Convention on Contracts for the International Sale of Goods.

Article Excerpt
According to the U.S. International Trade Administration, Florida ranks ninth in the nation for exports. (1) Notably, two of the top countries of export destination from Florida--Mexico and Canada--as well as the United States, are among the 60 countries that have adopted the 1980 United Nations Convention on Contracts for the International Sale of Goods (the "convention" or "CISG"). (2) The convention as adopted by the U.S. is a self-executing treaty. Consequently, all international sale contracts entered into with U.S. companies and companies located in countries that have adopted the CISG are governed by the CISG unless the parties effectively "opt out" of the CISG's application. (3)

This article provides a general overview of the convention as well as a short comparative analysis to the Uniform Commercial Code (UCC). (45) More importantly, however, this article seeks to assist the practitioner when drafting the international contract that is subject to the convention.

Background of the CISG

In 1988, the convention was officially adopted by 10 nations, including the U.S. The objective of the convention is to establish uniform rules governing certain aspects of the formation and performance of international commercial contracts for the sale of goods. As of December 2001, 60 countries had adopted the CISG. (6) These countries are more commonly referred to as "contracting states." However, it should be noted that countries also have the option to declare certain portions of the convention inapplicable upon ratification. (7) This is achieved by declaration. For example, at the time of ratification of the CISG, the U.S. declared that it was not bound by article 1(1)(b), which provides that the convention applies to the sale of goods when the rules of private international law lead to the application of the law of the contracting state. The application of this reservation mandates that courts in the U.S. must apply the CISG when the places of business of both parties to the sale contract are each in different states, and both of those states are contracting states to the CISG. (8)

When Does the CISG Apply?

Part I of the convention sets forth its sphere of application as well as general provisions. In sum, the convention governs contracts for the sale of goods when the transaction is international. Although the term "international" is defined in the convention, the two remaining terms are defined through negation. (9)

* Contracts for Sale

The convention specifically governs the formation of the contract of sale and the rights and obligations of the seller and buyer arising from such a contract. Hence, the convention is not concerned with the validity of the contract or any of its provisions of any usage as well as the effect, which the contract may have on the property in the sale of goods. (10) Moreover, the convention does not apply to the liability of the seller for the death or personal injury caused by the goods to any person. (11) A cautious practitioner should also note that other treaties pre-empt the application of the convention. (12)

* Goods

Article 2 of the convention expressly states that the convention does not apply to the sale of goods for personal family or household uses unless the seller, at anytime before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for such use. (13) Also excluded from the convention is the sale of watercraft, aircraft, natural gas or electricity, letters of credit, auctions, and securities. (14) In the event of a mixed contract, the convention would apply unless the "preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services." (15) The CISG can apply to the sale of goods of a...

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