Adoption of CISG

Posted on 20 January 2015

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‘Choice of laws’ in an international trade contract, i.e. which (domestic) law should apply in the event of disputes, could be contentious during a contract negotiation.

The parties may bargain their own domestic law is the preferred choice. In a stalemate situation, the parties may have to adopt a third country domestic law as the choice of laws.

Thus ‘CISG’, which is short for ‘United Nations Convention on Contracts for the International Sale of Goods’, could be a better alternative instead of another third country domestic law.

What is CISG?

The CISG was developed by the United Nations Commission on International Trade Law (UNCITRAL), and came into force on 1.1.1988. As at today, 83 countries have ratified CISG as their domestic laws.

(Note: In South East Asia, only Brunei and Singapore have ratified; in Pacific Island Countries, only Australia and New Zealand have ratified.)

CISG could be the preferred choice of law, as it is a suitable neutral ground between the domestics law of both parties.

The model clause for adopting CISG as part of the contract, as suggested by Pace Law School, is as follow:

“This contract shall be governed by and construed in accordance with those provisions of United Nations Convention on Contracts for the International Sale of Goods that do not conflict with the terms set forth in this document.”

Partial exclusion

It is important for the corporate counsel to fully the provisions of CISG, as the parties of the contract have the liberty to exclude part of the provision from the contract. And, some of the provisions of CISG may differ from the domestic contract laws.

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Posted in: Contract Law