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Contracts for the International Sale of Goods
Recent Developments at the International and European Level
S.A. Kruisinga*
1 Introduction
In the globalizing economy, national borders seem to have disappeared. However, when determining which law will apply to a commercial transaction, the opposite is true. This paper will illustrate the relevance of nation- al borders for ascertaining the applicable legal regime for contracts for the international sale of goods. In 1980, the UN Convention on Contracts for the International Sale of Goods (hereafter the CISG) was specifically drafted to apply to contracts for the international sale of goods. Recently, the European Commission also pub- lished a document containing provisions that can apply to contracts for the international sale of goods. On 11 October 2011, the European Commission published a Proposal for a Regulation on a Common European Sales Law (hereafter referred to as the Regulation on CESL).^1 If the Regulation on CESL enters into force, cross- border contracts for the sale of goods concluded between businesses within Europe can be governed by the CISG, the CESL and/or national contract law. Thus, these different systems of law may become each other’s competitors. Therefore, it is interesting to com- pare the scope of application of these two instruments and also to compare the CESL with the CISG in order to ascertain which provisions are most suitable for com- mercial transactions (section 2). It would, however, be going beyond the scope of this contribution to make a complete comparison of the two instruments. From the perspective of private international law, it is important to ascertain whether a contract contains a valid choice of law clause and/or a forum selection clause or an arbitra- tion clause. Such clauses are very often found in stand- ard terms and conditions. Therefore, it is interesting to compare the regulation of standard terms in the CISG and the CESL. This paper will provide a comparison in this respect (section 3). It should be noted that this paper does not intend to discuss the validity of choice of law and dispute settlement clauses in general.
- Dr. S.A. Kruisinga is Associate Professor at the Molengraaff Institute of Private Law, Utrecht University, the Netherlands.
- Proposal for a Regulation of the European Parliament and of the Coun- cil on a Common European Sales Law, Brussels 11 October 2011, COM(2011) 635 final.
In addition, if it turns out that the contracting parties have not validly incorporated a dispute settlement clause in their contract, the EU Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I)^2 may be of rele- vance to determine which court within the European Union has jurisdiction to hear a dispute in a certain case. The provisions in this Regulation which are of relevance for contracts for the international sale of goods which do not contain a valid dispute settlement clause will be addressed as well as the relevant recent case law by the Court of Justice of the European Union (section 4).
2 The Scope of Application of
the Regulation on a
Common European Sales
Law (Opting in) and the
CISG (Opting out)
The CISG will generally apply to contracts for the international sale of goods if the contracting parties, i.e. the buyer and the seller, have their places of business in different states. Even though the CISG does not pro- vide a definition of a sales contract, a description of a sales contract can be derived from Articles. 30 and 53 CISG. Accordingly, sales contracts can be described as reciprocal contracts directed at the exchange of goods against a price. In general, the Convention only applies to contracts for the sale of movable goods. According to Article 3(1) CISG, a sales contract governed by the CISG can entail both the delivery of goods and the pro- vision of services: contracts for the supply of goods to be manufactured or produced are to be considered as sales, unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. Furthermore, the CISG will also apply to a contract that involves both the sale of goods and the provision of services, unless the preponderant part of the obligations of the purported
- Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdic- tion and the recognition and enforcement of judgments in civil and commercial matters.
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seller consists of the supply of labour or other services (Article 3(2) CISG). The Convention provides that it will apply if both states where the buyer and seller have their respective places of business are Contracting States (Article 1(1)(a) CISG). Almost all EU Member States are Contracting States to the CISG, except for the United Kingdom, Ireland, Portugal and Malta.^3 Thus, to most contracts for the sale of goods within the EU, the Convention will apply. It should be noted, however, that the Convention does not in principle apply to consumer sales (Article 2(a) CISG). The CISG will also apply when the rules of private international law lead to the application of the law of a Contracting State (Article 1(1)(b) CISG). The contracting parties may agree to (completely or partly) exclude the application of the CISG (Article 6 CISG). The question may arise whether a choice of law clause, referring to the law of a Contracting State, implies an exclusion of the CISG. The majority view in both the legal literature and in the case law is that a choice of law clause that refers to the law of a Contract- ing State will lead to the application of the CISG.^4 This may be different if the respective choice of law clause expressly refers to the application of the national law of a Contracting State.^5 In this context, it is relevant to note that the party who claims the exclusion of the CISG will bear the burden of proof for such an inter- pretation. It may be doubted whether, alongside the CISG, an additional instrument of contract law would be necessa- ry. The European Commission gave three reasons as to why the CISG would not suffice.^6 First of all, the CISG regulates certain aspects of contracts for the sale of goods but also leaves matters outside its scope, such as unfair contract terms and prescription. While this is true, it should also be mentioned that the CESL does not regulate all legal aspects of a contract for the sale of goods either; for example, it does not regulate set-off, representation and plurality of debtors.^7 Secondly, not all Member States have ratified the CISG. However, as was stated supra , the majority of the EU Member States have ratified the CISG. Thirdly, there is no mechanism which could ensure a uniform interpretation of the CISG. Even though there is no supranational court which can safeguard its uniform interpretation, this does not mean that there is no uniformity in the application of the convention.^8 There are a number of initiatives which promote the uniform interpretation of the convention. One of the most important initiatives is the establishment of the CISG Advisory Council (here-
- See : <www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_ status.html> (last accessed on 16 July 2014).
- Schwenzer & Hachem 2010, pp. 108-111; Mistelis 2011, pp. 104-106.
- Compare Schlechtriem & Butler 2009, p. 19.
- Proposal for a Regulation of the European Parliament and of the Coun- cil on a Common European Sales Law, Brussels 11 October 2011, COM(2011) 635 final, p. 5. See also on this issue: Kornet 2012, pp. 171-175; Kruisinga 2013, pp. 344 et seq.
- See Art. 11a subsection 2 of the Proposal for a Regulation on a Com- mon European Sales Law.
- Kieninger 2012, p. 227.
after the CISG-AC).^9 This is a private initiative by scholars to promote a uniform interpretation of the CISG; it does so by issuing opinions relating to the interpretation and application of the CISG. Quite recently, the CISG-AC published an Opinion on the incorporation of standard terms, which will be discussed hereafter (section 3). For these reasons, the European Commission stated that the CISG does not suffice within the EU. When the European Commission published its Proposal for a Reg- ulation on a Common European Sales Law, it stated that the divergences between national contract laws con- stitute an obstacle to cross-border transactions and impede the functioning of the internal market. There- fore, the objective of this proposal is to “improve the conditions for the establishment and the functioning of the internal market by making available a uniform set of contract law rules” (Article 1 of the Regulation on CESL). The proposed Regulation itself provides for the scope of application of the instrument. The provisions of the proposed instrument of European contract law (here- after referred to as the Common European Sales Law or CESL) are to be found in Annex I. In September 2013, the Legal Affairs Committee of the European Parliament approved the text of this proposal with a number of amendments, the most important being to limit the scope of application of the Regulation to dis- tance contracts, notably online contracts. On 26 Febru- ary 2014, the European Parliament backed this proposal with the suggested amendments.^10 The next step in the legislative procedure (co-decision) is that the proposed Regulation will have to be adopted by the Council of Ministers. At this moment (July 2014), it is not certain whether the Council will adopt the proposed Regula- tion. In general, one can say that the publication of the pro- posed Regulation has led to different responses; some authors discuss the CESL with scepticism.^11 Other authors promote a revision of the text of the Proposal.^12 The German Federal Bar^13 recommends for B2B con- tracts to include the CISG in the CESL without any change and to include additional provisions on questions which are not regulated by the CISG. Both the UK Law Commission and the European Law Institute (hereafter ELI) have reviewed the text of the Proposal in a critical
- See <www.cisgac.com> and Schwenzer & Hachem 2010, pp. 124-127.
- See <www.europa.eu/rapid/press-release_MEMO-14-137_en.htm> (last accessed on 16 July 2014).
- See , for example, Mankowski 2012, p. 45.
- See , for example, Piltz 2012, p. 133.
- See “Stellungnahme der Bundesrechtsanwaltskammer”, 3 Internatio- nales Handelsrecht 2012, p. 53. A similar comment was made by Lando 2011, p. 722.
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The CISG-AC notes that this approach should be fa- voured. It states that “it is desirable that a party should make the standard terms available at the time of con- tracting” if the parties have not had prior dealings. In what manner should standard terms be made available in order to be validly incorporated in the contract? The so-called black letter rule No. 3 in the CISG Advisory Council’s Opinion states that, amongst other things, a party is deemed to have had a reasonable opportunity to take notice of the standard terms:
(w)here the terms are attached to a document used in connection with the formation of the contract or printed on the reverse side of that document; (…) (w)here the terms are available to the parties in the presence of each other at the time of negotiating the contract; (…) (w)here, in electronic communications, the terms are made available to and retrievable elec- tronically by that party and are accessible to that par- ty at the time of negotiating the contract; (…) (w)here the parties have had prior agreements subject to the same standard terms.
3.3 Incorporation of Standard Terms According to the CESL The CESL does not explicitly answer the question whether in B2B relations a mere reference to standard terms is sufficient to incorporate such terms in a con- tract.^22 Article 70 CESL in the manner proposed by the European Commission contained a duty to raise aware- ness concerning standard contract terms. The second subsection of Article 70 CESL provided that contract terms were not sufficiently brought to the other party’s attention by a mere reference thereto in a contract docu- ment. This part of the provision would only apply in relations between a trader and a consumer. If one uses an a contrario reasoning, it would follow from the CESL that in a commercial sales contract, the party using standard terms does not have to make the text of the conditions available to the other party.^23 It may, howev- er, confine itself to a mere reference to its standard terms in a contract document. Thus, it seems that Arti- cle 70 CESL in B2B transactions does not require that such terms be handed over to the other party.^24 It could still be unclear what precisely was required; when has a trader taken reasonable steps to draw the other party’s attention to the standard terms? This was a very impor- tant point as the provision in Article 70 CESL had a mandatory nature. The provision in Article 70 CESL has been criticized, for example, by the European Law Institute in its afore- mentioned ELI Statement. The European Law Institute states that it is not ‘apposite’ to apply Article 70 CESL to both B2B and B2C transactions as this is an issue of consumer protection, which should not be extended to
- See also Kruisinga 2013, pp. 352 et seq. ; Spanjaard & Van Wechem 2012, p. 229.
- See also Loos 2012, pp. 776-796.
- See also Advocate General Wissink in Van Vliet/Dealkent , HR 11 May 2012, NJ 2012, 318.
traders. In response to this criticism, the European Par- liament amended this part of the Regulation, based upon the suggestion by the Legal Affairs Committee. It appeared sufficient to only provide for an obligation to raise awareness of standard contract terms in B2C con- tracts. Thus, Article 70 CESL was deleted. Instead, the European Parliament inserted Article 76a, which applies only in B2C transactions. Article 76a provides that con- tract terms supplied by a trader may only be invoked against a consumer if the consumer was aware of them or if the trader took reasonable steps to draw the con- sumer’s attention thereto, either before or when the contract was concluded. Thus, contract terms have to be presented in a way which is suitable to attract the atten- tion of a consumer to their existence and made available in a manner which provides the consumer with an opportunity to comprehend them before the contract is concluded. Contract terms shall not be considered as having been sufficiently brought to the consumer’s attention by a mere reference thereto in a contract docu- ment. The new version of the provision also indicates that it only has a mandatory nature in B2C contracts, as the fourth subsection of the new provision states that the parties may not, to the detriment of the consumer, exclude the application of this provision or derogate from, or vary, its effects.
3.4 Battle of the Forms Solved According to the CISG and the CESL In case of a so-called battle of the forms, which is the situation in which both contracting parties use their own standard terms, the question may arise as to whether any of the standard terms used by both contracting par- ties can become a part of the contract.^25 As the CISG does not contain any particular provisions concerning standard terms at all, a solution for such questions needs to be found in the provisions in the CISG on formation of contracts. A distinction needs to be made between the conclusion of the contract and determining the content of the contract. It is possible that a contract is concluded even though both contracting parties have used their own contradictory standard terms.^26 It has been stated in the legal literature that questions which arise in case of a battle of the forms need to be answered by applying Article 19 CISG. A strict applica- tion of this provision would mean that the so-called last shot rule will apply.^27 Article 19 CISG provides that a reply to an offer which intends to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer. If, however, such a reply does not materially alter the terms of the offer, it is not a rejection of the offer but constitutes an acceptance unless the offeror immediately objects to the differences. Which terms may be said to materially alter the terms of the offer? Article 19(3) CISG provides some examples of such terms; it refers to terms which relate to the price, payment, quality and
- See Kruisinga 2013, pp. 356 et seq.
- See also Schroeter 2010, pp. 350-351.
- Schroeter 2010, pp. 348-349.
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quantity of the goods, the place and time of delivery, the extent of one party’s liability towards the other or the settlement of disputes. This presumption can be rebut- ted in an individual situation. General conditions usually contain provisions on either of these subjects; a seller will, for example, generally insert a forum selection clause in its standard terms. If the buyer’s standard terms contain a different dispute settlement clause, the sets of general conditions will dif- fer from each other. This means that an offer will be answered by a counter-offer, and this will finally imply that the contract is concluded at the time of performance (Article 18 CISG). From this, most schol- ars conclude that the last shot rule is applicable; the counter-offer that is sent last is decisive. In other words, the general conditions that were sent last become part of the contract.^28 This interpretation of the CISG that leads to the appli- cation of the last shot rule has often been criticized in the legal literature.^29 The choice for the application of the terms that were sent last seems to be coincidental, and one may question whether the offeree has indeed agreed to the standard terms of the offeror merely by perform- ing the contract. Therefore, the CISG Advisory Council has opted for a different approach, the so-called knock- out rule. To this end, black letter rule number ten of Opinion No. 13 states that
(w)here both parties seek to incorporate standard terms and reach agreement except on those terms, a contract is concluded on the basis of the negotiated terms and of any standard terms which are common in substance, unless one party clearly indicates in advance, or later on but without undue delay objects to the conclusion of the contract on that basis.
Thus, in case of a battle of the forms, the contract was concluded and contained all standard terms which were ‘common in substance’. All other general conditions did not form part of the contract. The issues that were pro- vided for in these other terms (which were ‘knocked out’) will be governed by the provisions in the national law or in the CISG, whichever is found to be applicable. The knock-out rule will not apply if a party clearly indi- cates that it does not intend to be bound by other stand- ard terms than its own. According to the CISG-AC, it will not be sufficient in this context if the other party uses its own standard terms which provide that the conditions of the first party will not apply. An explicit declaration by the other party is required in its purpor- ted acceptance. The more difficult question will be how to apply this knock-out rule if the standard terms of one party have no counterpart in the standard terms of the other party.^30 Unfortunately, the CISG-AC does not spend many
- See for example Meeusen 1997, pp. 93-94; Ferrari 2011, pp. 289- and Schroeter 2010, pp. 348-349.
- Compare, for example, Ventsch & Kluth 2003, pp. 63-64 and Meeusen 1997, p. 94.
- See Kruisinga 2013, pp. 360 et seq.
words on this issue in its Opinion. It merely states that in determining which parts are ‘common in substance’ and which parts conflict, a court should consider the standard terms as a whole and should not consider clau- ses in isolation. To me, the term ‘common in substance’ would mean that both parties must have a similar provi- sion in their standard terms concerning the particular issue. It is only in these cases that the parties in fact reached agreement on this subject. This position was also taken, albeit using a different name, by Schroeter, before the Opinion by the CISG-AC was published. Schroeter^31 stated that in the application of the CISG, the rest validity theory should apply. He concludes that “the terms that the parties agreed upon (…) in the stand- ard forms which do not contradict each other become part of the contract”. In reply to the question of when such a contradiction arises, Schroeter^32 states that such a contradiction even exists where the terms of one party deal with matters on which the other party’s terms are silent. He states that there will be a contradiction in such cases since the other party’s declaration must then be supplemented by the – typically different – rules of the CISG. The knock-out rule can also be found in Article 39 of the CESL which provides that where the parties have reached agreement except that the offer and acceptance refer to conflicting standard contract terms, a contract is nonetheless concluded.^33 The standard contract terms are part of the contract to the extent that they are ‘com- mon in substance’. Thus, according to the CESL, the same question arises so as to determine whether terms are ‘common in substance’ and how to deal with additio- nal terms. With regard to this latter question, DiMatteo^34 distinguishes two possible solutions: (1) this is not a case of conflict and the term becomes part of the contract as long as it does not materially alter the terms of the offer within the meaning of Article 38 CESL, or (2) this is a conflicting term and thus the additional terms will not become part of the contract. Loos^35 has advocated the first approach; it is his position that if the standard terms of one party regulate a particular issue and the other party’s terms remain silent on this topic, the relevant terms have become part of the contract. One may wonder, however, if the relevant terms will in such a case indeed be ‘common in substance’.
- Schroeter 2010, pp. 354-355.
- Schroeter 2010.
- Article 39 CESL reads: ‘1. Where the parties have reached agreement except that the offer and acceptance refer to conflicting standard con- tract terms, a contract is nonetheless concluded. The standard contract terms are part of the contract to the extent that they are common in substance. 2. Notwithstanding paragraph 1, no contract is concluded if one party: (a) has indicated in advance, explicitly, and not by way of standard contract terms, an intention not to be bound by a contract on the basis of paragraph 1; or (b) without undue delay, informs the other party of such an intention.’
- DiMatteo 2012, p. 48.
- Loos 2012, Section III.1.
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Thus, for a contracting party to rely on its standard terms, it has to be ascertained whether those standard terms were validly incorporated in the contract. As far as the CISG is concerned, numerous questions have been answered by the CISG Advisory Council in its Opinion No. 13 on the incorporation of standard terms. However, not all issues have been solved. Will the CESL offer any benefit for contracts for the international sale of goods? As the CISG Advisory Council has stated in its recent Declaration on the CISG and regional harmonization, while also explicitly refer- ring to the CISG and CESL, “the existence of a global and regional sales law, in addition to the two national laws of the contracting parties, would certainly have a complicating impact on the pre-contractual process”.^40 Thus, there is never a dull moment in the field of con- tracts for the international sale of goods.
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- CISG-AC Declaration No. 1, The CISG and Regional Harmonization, Rapporteur: Professor Michael Bridge, London School of Economics, London, United Kingdom. Adopted by the CISG-AC following its 16th meeting, in Wellington, New Zealand, on Friday, 3 August 2012.
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