Harmonization of Export Sales Contract Law

Export sales contracts are central to international commercial transactions, and around them revolve a series of connected but distinct relationships, including cargo insurance, transportation, and payment arrangements. The rules and practices governing such con­tracts vary from one export transaction to another, based on the agreement of the parties as well as the legal system. National legal systems on contracts may differ, but the basic principles of contracts, such as good faith and consideration, are generally recognized and accepted in many countries. There is also a movement toward convergence among the world’s different legal systems in the area of international commercial law (DiMatteo, 1997; DiMatteo and Dhooge, 2006; Lubman, 1988). Today, it is not easy to identify any examples of substantial divergence that produce important and predictable differences in the outcome of commercial disputes (Rosett, 1982). Certain differences in theory or ap­proach are often offset by the countervailing force of international usage or custom, which brings about a predictable and harmonious outcome in commercial dispute resolution. It is pertinent to identify the motives behind the move toward harmonization of interna­tional contract law:

• Increase in trade and other economic relations between nations
• The growth of international customary law: Commercial custom and usage have often been used in the drafting and interpretation of commercial law. Today, certain customs and practices, derived from merchants in Europe, regarding documentary drafts, letters of credit, and so forth, are universally accepted and form the basis for domestic and international commercial law.
• The adoption of international conventions and rules: There have been several attempts at unification of international contract law. The most recent attempt at progressive harmonization of the law of international trade is one undertaken by the United Na­tions Commission on International Trade Law (UNCITRAL). UNCITRAL produced a set of uniform rules (Convention on International Sale of Goods or CISG) on in­ternational trade that are a product of different national legal systems. CISG, which entered into force on January 1, 1988, governs the formation of international sales contracts and the rights and obligations of parties under these contracts. Many impor­tant trading nations, such as France, Germany, Italy, the Netherlands, Singapore, and the United States, have signed or ratified the convention (United Nations, 1984). As of September 2004, sixty-three countries accounting for more than two thirds of world trade have adopted the convention. CISG is largely identical to the provisions of the U.S. Uniform Commercial Code. However, there are several important distinctions (see Table 8.1). CISG applies to contracts for the commercial sale of goods between parties whose “places of business” are in different nations that have agreed to abide by the convention. “Place of business” is often interpreted to mean the country that has the closest relationship to the contract and is closest to where it will be performed, for example, the place where the contract is to be signed or the goods delivered. Par­ties to a sales contract are at liberty to specify the application of a law of some third country that recognizes the convention in the event of a dispute. CISG does not apply to certain types of contracts, such as sales of consumer goods, securities, labor ser­vices, electricity, ships, vessel, or aircraft, or to the supply of goods for manufacture if the buyer provides a substantial part of the material needed for such manufacture or production. CISG is intended to supersede the two Hague conventions (UNIDROIT rules) on international sales.

Source: Seyoum Belay (2014), Export-import theory, practices, and procedures, Routledge; 3rd edition.