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Final Word
FACULTY OF LAW
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MID-TERM ASSIGNMENT
TOPIC 5:
CISG: STATUS AND OVERVIEW
Group 11
Class: PLUE324(HK2-2324)2.1
Course: 60
1. GENERAL INTRODUCTION.......................................................................2
2. OVERVIEW OF CISG....................................................................................5
REFERENCES......................................................................................................19
1. GENERAL INTRODUCTION
1.1. Historical background
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An UN-authorized diplomatic conference for the purpose of voting on
the New York Draft was convened in Vienna from March 10 to April 11,
1980, with sixty-two states and eight international organizations in
attendance. In this third phase of the CISG’s development, two committees
were formed to work on different sections of the New York Draft: The First
Committee focused on the substantive provisions (Parts I-III, Articles 1–88),
while the Second Committee worked on the final provisions governing
CISG entry into force and related matters (Part IV, Articles 89–101). The
Second Committee also prepared a protocol to the 1974 Convention on the
Limitation Period in the International Sale of Goods, modifying its
provisions on sphere of applicability, to make the 1974 Limitation
Convention conform to the New York Draft. The texts prepared by the First
and Second Committees were then voted on, article by article, in plenary
session.
The CISG was adopted on April 11, 1980. 11 states, representing
“every geographical region and every major legal, social, and economic
system” signed the CISG immediately. By September 30, 1981, a total of 18
states signed the CISG. By December 11, 1986, 11 states deposited
instruments of adherence with the Secretary General, satisfying the
requirements of Article 99, which provides that the CISG will come into
force “on the first day of the month following the expiration of twelve
months after the date of deposit of the tenth instrument of ratification,
acceptance, approval or accession, including an instrument which contains
a declaration made under Article 92.” The CISG entered into force on
January 1, 1988.
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2. OVERVIEW OF CISG
2.1. Key provisions
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actions, and conduct of the parties, and the principle of freedom of contract
form. The Convention also emphasizes the value of customs in international
sales transactions.
Part 2: Formation of the Contract (Procedure for Contract
Conclusion) (Articles 14-24)
In this part, with 11 articles, the Convention provides detailed and
comprehensive legal provisions on issues arising in the process of forming
international sales contracts. Article 14 defines an offer, specifying its
characteristics and distinguishing it from "invitations to offer." The
effectiveness of offers, revocation, and withdrawal of offers are covered in
Articles 15, 16, and 17. Particularly, Articles 18, 19, 20, and 21 contain very
detailed provisions on the content of acceptance of offers, when and under
what conditions an acceptance is effective and, together with the offer,
constitutes a contract; the time frame for acceptance, late acceptance; and
extension of the acceptance period. Additionally, the Convention addresses
the withdrawal of acceptance and the moment the contract becomes
effective.
Regarding the formation of sales contracts, the CISG recognizes the
Offer-Acceptance rule. The Convention stipulates that an offer must be
addressed to one or several specific persons, clearly describing the goods,
quantity, and price. An offer can be withdrawn if the withdrawal reaches the
offeree before or at the same time as the offer, or before the offeree sends an
acceptance. Any modifications to the original offer are considered a
rejection unless the modifications do not materially alter the essential terms
of the offer.
Part 3: Sale of Goods (Articles 25-88)
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Named "Sale of Goods," the content of Part 3 deals with the legal
issues arising during the performance of the contract. This part is divided
into 5 chapters with the following basic contents:
Chapter I: General Provisions
Chapter II: Obligations of the Seller
Chapter III: Obligations of the Buyer
Chapter IV: Passing of Risk
Chapter V: Provisions Common to the Obligations of the Seller and
the Buyer
This chapter contains the largest number of articles and features
modern regulations, creating the advantages of the CISG. The obligations of
the seller and buyer are detailed in two separate chapters, facilitating ease of
reading and reference for traders. Regarding the seller's obligations, the
Convention clearly stipulates the obligation to deliver goods and transfer
documents, particularly the obligation to ensure the conformity of the
delivered goods (both factually and legally). The Convention emphasizes the
inspection of delivered goods (inspection period, notification period for
defects). These provisions are very practical and have effectively resolved
related disputes. The buyer's obligations, including payment and receipt of
goods, are outlined in Articles 53 to 60.
The 1980 Vienna Convention does not have a separate chapter on
breach of contract and remedies for breach of contract. These topics are
integrated into Chapters II, III, and V. In Chapters II and III, after stating the
obligations of the seller and buyer, the 1980 Vienna Convention addresses
the measures applicable in cases where the seller/buyer breaches the
contract. Such arrangement of articles makes reference convenient and
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reflects the drafters' intention to create legal equality for both sellers and
buyers in sales contracts.
The remedies available under the Convention for sellers and buyers in
case of contract breaches include specific performance, damages, and
contract termination. Additionally, there are measures not of a punitive
nature or aimed at penalizing the breaching party, such as price reduction
(Article 50), extension of the performance period by the non-breaching party
to allow the breaching party to continue performing the contract (Article
47(1) and Article 63(1)), and measures that the breaching party can take to
remedy the damages caused by its breach (Article 48(1)). The Convention
also specifies the circumstances for applying specific measures (e.g.,
contract termination or demand for substitute goods is only applicable in
cases of fundamental breach - the concept of fundamental breach is provided
in Article 25).
Chapter V of Part 3 deals with the suspension of contract
performance, anticipatory breach, the application of legal measures in the
case of installment deliveries, and contract termination before the
performance due date. Articles 74, 75, 76, and 77 of the CISG are frequently
cited in case law applying the CISG, as these articles provide detailed rules
for the most common remedy in international sales contract disputes: the
calculation of damages. Other articles in this chapter address exemption
from liability, the consequences of contract termination, and the preservation
of goods in case of disputes.
Part 4: Final Provisions (Articles 89-101)
This part stipulates the procedures for countries to sign, ratify, and
accede to the Convention, the reservations that can be made, the effective
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date of the Convention, and various procedural issues related to participation
or withdrawal from the Convention.
Since its signing in 1980, the Vienna Convention has seen significant
milestones over 40 years in expanding its member countries. The waves of
countries joining the CISG can be divided into four phases:
Phase 1 (1980-1988): This phase saw the first 10 countries ratify the
Convention, enabling it to come into effect. These countries are: Egypt,
Argentina, Syrian Arab Republic, United States, Hungary, Italy, Lesotho,
France, China, and Zambia. Among these first members, the United States
and China are particularly notable, as the US is the world's largest economy
and China was the first Asian country to join the CISG. However, both
countries declared a reservation under Article 1.1(b), significantly reducing
the extent and impact of the CISG in these countries.
Phase 2 (1989-1993): This second wave of accession saw 29
countries join the Convention, most of which were European Union
members completing their ratification procedures. This period also marked
the collapse of the socialist system in Russia and Eastern Europe, and these
countries quickly integrated into the broader trend of Western European
countries joining the Vienna Convention. Noteworthy additions during this
time include Australia and Canada, two economically developed countries
with common law systems. Their participation increased the representation
of common law systems within the CISG, attracting the interest of other
nations.
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Phase 3 (1994-2000): During this period, many developing countries
in Africa and America, as well as the remaining EU countries (except the
UK) such as Belgium, Poland, Luxembourg, and Greece, completed their
ratification and joined the Convention. Singapore became the first ASEAN
country to join the CISG in 1995. Singapore's law, based on the English
common law system, is known for being comprehensive and well-regulated,
making it a preferred choice for international commercial contracts.
Although Singapore made a reservation under Article 1.1(b) to limit the
application of the Convention, its accession marked a significant effort in
harmonizing international commercial law for its trade-dependent economy.
Phase 4 (2001-now): This phase was marked by explosive economic
growth and the rising influence of emerging economies, particularly China,
Brazil, and India, enhancing the role of developing countries within the
CISG framework. South Korea, Japan and Singapore’s participation also
encouraged other Asian and ASEAN countries to join the CISG (including
Vietnam in 2015), facilitating more consistent application of international
commercial law among major trading partners.
As of November 2023, UNCITRAL and UN reports that 97 States
have adopted the CISG, representing two-thirds of world trade. Most
European countries have accepted the CISG, and the European Commission
has put forth a proposal to establish a Common European Sales Law.
Despite the presence and involvement of African countries in the
development of the CISG, it has been adopted by less than one-fifth of
African countries. However, the Organization for the Harmonisation of
Business Law in Africa (OHADA) published a Draft Uniform Act on
Contract Law that is modeled on the UNIDROIT Principles of International
Commercial Contracts.
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In Asia, with the relatively adoption of the CISG by Japan or
Vietnam, along with previous adoptions by China and South Korea, a major
regional trading block within Asia is under the auspices of the CISG.
However, some southeastern and western states within Asia have not
adopted the CISG. The limited adoption of the CISG in parts of Asia is
partly due to the lack of influence from Asian cultures and Islamic law
during the development of the CISG. Given this consideration, there is an
academic initiative underway to harmonize contract law rules across Asia by
drafting the Principles of Asian Contract Law.
In its totality, CISG is a remarkable achievement in having been
adopted across many distinct and varying legal cultures. But it is also clear
that there are gaps in representation that need to be closed.
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Vietnam to conduct dissemination and prepare for the implementation of the
CISG in Vietnam.
Depending on the level of development and the need for international
integration based on the reality of each country's situation, countries come to
sign and apply the CISG, but mainly based on criteria such as:
Firstly, in terms of economics. Depending on the volume of
international trade transactions and the number of international partners that
have signed the CISG, the signing of the Convention will have a large or
small impact on international trade of domestic enterprises.
Secondly, in terms of legality. Before deciding to accede to the
Convention, States must consider whether there are more or less similarities
between their laws and the provisions of the Convention, whether the laws
provided for in the Convention affect or cause too different changes in the
country in a negative or positive way.
Thirdly, in terms of politics and diplomacy. The impact on the
political and diplomatic position of the country when acceding to the Vienna
Convention.
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At least 3,000 disputes regarding international sales contracts have
seen courts and arbitrators apply the CISG for resolution. These cases have
not only arisen in member countries but also in non-member countries,
where the CISG was either chosen by the parties in the contract as the
governing law or referenced by courts and arbitrators to resolve disputes.
Many businesspeople in non-member countries have voluntarily applied the
CISG to their international trade transactions because they recognize its
advantages over national laws. With the widespread application of the CISG,
resolving disputes arising from international sales contracts has become
more straightforward and efficient, eliminating the need for businesses,
arbitrators, and judges to consider and study any foreign legal sources other
than the CISG. The recorded number of cases is only a fraction, as in reality,
many non-CISG member countries still have judges referring to the CISG
for rulings.
(2) Promoting International Trade development
Alongside being ratified by many countries and widely applied in
numerous nations, the number of contracts in which the parties choose the
CISG as the governing law has increased. Compared to the two 1964 Hague
Conventions on international sales of tangible personal property, the CISG is
a much larger international convention in terms of the number of
participating countries and its level of application. With 97 member
countries, it is estimated that the Convention governs transactions
accounting for up to three-quarters of the world's merchandise trade. The
CISG is "the most successful international document to date" concerning the
law of international sales of goods, partly due to its flexibility, allowing
contracting states to make exceptions for certain provisions. This flexibility
has strengthened international trade relations and provided businesses with
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greater initiative when trading with foreign partners, thereby expanding the
scale and diversity of goods.
(3) A source for improving national legal systems
The CISG has been described as a legislative achievement. As a
unified law document, the 1980 Vienna Convention has harmonized many
conflicts between different legal systems worldwide. When a country joins
the CISG, its provisions become part of the national law governing
international sales transactions. This is an efficient and cost-effective way to
improve legal institutions in this field. Furthermore, in the member countries
of the 1980 Vienna Convention, the process of applying the CISG has
positively impacted the improvement of national sales laws. This has been
noted in several developed countries, such as the United States, Germany,
France, Canada, and the Nordic countries. When revising and improving
national laws on sales, contracts, or obligations, these countries have
referenced and incorporated many provisions of the CISG.
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Secondly, the drafting process of the CISG demonstrates genuine
efforts to create unified substantive rules for international sales of goods.
Representatives from various legal systems, continents, and economic-
political systems were invited to participate in drafting the provisions of the
Convention. Each provision in the final document is the result of detailed
discussions, considering the reasonable demands and commercial practices
of all parties involved. Moreover, the drafters emphasized the international
nature of the CISG, using neutral and straightforward language to avoid
specific legal concepts unique to any national system. This approach
promotes uniformity and adherence to the principle of "good faith" in
international trade.
Thirdly, the content of the Convention is evaluated as modern,
flexible, and suitable for the realities of international sales of goods. Experts
consider the CISG to contain modern provisions that ensure equality
between buyers and sellers in international sales contracts. These provisions
are practical as they are based on international commercial practices,
including the Incoterms by ICC. The flexibility of the provisions,
particularly highlighted in Article 6 of the CISG, allows parties to negotiate
and choose applicable law based on their specific needs and circumstances,
promoting the widespread adoption of the CISG in business practices.
Finally, the CISG receives significant support from international
arbitrators and the ICC. Many CISG-related case laws involve international
arbitration decisions, where arbitrators often prefer the CISG to resolve
disputes when parties have not specified applicable law. This preference
demonstrates the CISG's suitability for fair dispute resolution in
international trade. Additionally, the ICC incorporates the CISG into its
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model law clauses for international sale of goods contracts, further
promoting its adoption and use in business transactions.
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(PICC) and the Principles of European Contract Law (PECL) to supplement
issues not addressed by CISG.
Failure to clarify this could lead to misconceptions among both
businesses and legal practitioners, resulting in negligence in understanding
and applying other necessary legal texts, potentially causing passivity in
resolving disputes related to international sales contracts even when CISG is
in place.
Moreover, in today's international trade practices, each sector has its
own specific standard contract terms for the sale of certain types of goods
such as oil, rice, fresh fruits, coffee, etc. Typically, parties do not wish to
abandon these widely used and familiar terms.
(ii) CISG does not address newly arising legal issues in International
Trade
Drafted and adopted over 40 years ago, CISG did not foresee and thus
did not incorporate into its provisions new legal issues arising later, such as
legal provisions related to E-commerce.
Amending the Convention to include these legal contents will
probably take much longer (the Vienna Convention 1980 does not have a
mechanism for frequent amendments to adapt to changing interests of its
members, and therefore each amendment to the Convention requires the
unanimous consent and approval of all members). Therefore, businesses
must accept the current content of CISG and still need other legal systems to
deal with new issues despite choosing CISG for their contracts.
(iii) Although successful in most member countries, CISG has not
achieved expected success in some countries
The most prominent example is the United States, where CISG has
not gained significant traction and is not used as frequently as expected (as
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analyzed above). The case of the United States is, of course, an exception
among many countries that have successfully applied CISG but is worth
noting. Vietnam is unlikely to face a similar situation as the current legal
provisions for commercial contracts have been carefully drafted with
reference to CISG. However, the case of the United States is particularly
relevant for businesses entering into international sales contracts with U.S.
counterparts. Joining this Convention may not bring as many benefits as
anticipated for contracts with these partners, especially when disputes are
adjudicated in the United States.
(iv) Despite having many major trading partners worldwide as
members, some countries have not yet joined this convention
As mentioned, despite having a large number of members, including
major trading partners worldwide, some significant counterparts have not
joined this Convention (most notably the United Kingdom and some
ASEAN countries).
It is relatively clear that countries that have not joined the Vienna
Convention 1980 probably have their own reasons, which are mainly not due
to the Convention offering disadvantages in terms of content but rather due
to other reasons such as "conservative" legal traditions that are resistant to
change, even if beneficial, or domestic laws having domesticated CISG to
the extent that they do not need to join this Convention. Therefore, CISG
may not be effective in cases where sales contracts are concluded between
Vietnamese businesses and counterparts from non-member countries.
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REFERENCES
1. TS. Nguyễn Minh Hằng; TS. Đinh Thị Mỹ Loan (2013), “Đề xuất Việt Nam gia
nhập Công ước Viên về hợp đồng mua bán hàng hóa quốc tế”, Trung Tâm WTO
Và Hội Nhập Liên Đoàn Thương Mại Và Công Nghiệp Việt Nam, link:
https://trungtamwto.vn/chuyen-de/912-de-xuat-viet-nam-gia-nhap-cong-uoc-vien-
ve-hop-dong-mua-ban-hang-hoa-quoc-te (accessed in 14/05/2024)
2. Nguyễn Trung Nam (LLM, MBA); Nguyễn Mai Phương (LLM, MBA); Trần Hà
Giang; Trần Quốc Huy (2013), “Việt Nam tham gia Công ước Viên 1980 về Hợp
đồng mua bán hàng hóa quốc tế (CISG) – Lợi ích và Hạn chế”, Trung Tâm WTO
Và Hội Nhập Liên Đoàn Thương Mại Và Công Nghiệp Việt Nam, link:
https://trungtamwto.vn/chuyen-de/913-viet-nam-tham-gia-cong-uoc-vien-1980-ve-
hop-dong-mua-ban-hang-hoa-quoc-te-cisg--loi-ich-va-han-che (accessed in
14/05/2024)
3. “Sơ lược lịch sử Công ước Viên 1980 (CISG)”, Trung Tâm WTO Và Hội Nhập
Liên Đoàn Thương Mại Và Công Nghiệp Việt Nam, link:
https://trungtamwto.vn/chuyen-de/1147-so-luoc-lich-su-cong-uoc-vien-1980-cisg
(accessed in 14/05/2024)
4. Pham Thi Hong Dao (2016), “Advantages and disadvantages of accession to the
1980 Vienna Convention”, Vietnam Law & Legal Forum, link:
https://vietnamlawmagazine.vn/advantages-and-disadvantages-of-accession-to-
the-1980-vienna-convention-5290.html (accessed in 14/05/2024)
5. UNCITRAL, Status: United Nations Convention on Contracts for the International
Sale of Goods (Vienna, 1980) (CISG), link:
https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg/status
(accessed in 13/05/2024)
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