Tam Tran

Academic, Foreign Trade University

PhD Candidate, La Trobe Law School

HCMC, October 2020

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Module 1: The issue of applicability

1. CISG - A brief history

2. Structure of the CISG

3. Scope of application

4. Exclusion of the CISG

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1. CISG – A BRIEF HISTORY

• Developed by the United Nations Commission on

International Trade Law (UNCITRAL) in response
to the failure of ULIS & ULF
• Signed in Vienna in 1980 & came into force on 01
Jan 1988
• Recognised as a ‘success story’ due to its
widespread adoption and impact
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1. CISG – A BRIEF HISTORY

• 94 contracting members (updated on 28th Oct
2020)
• ¾ of all international business transactions
• Over 4500 case presentations & abundant number
of scholarly writings dedicated to the CISG
• A model for law reform projects at both national
and regional level.
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2. STRUCTURE OF THE CISG

• Part 1: Sphere of application and general provisions

(Art 1-13)
• Part 2: Formation of the contract (Offer and
acceptance) (Art 14-24)
• Part 3: Rights, obligations and remedies to buyers
and sellers (Art 25-88)
• Part 4: Final provisions (Art 89-101)
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3. SCOPE OF APPLICATION
Art 1:
(1) This Convention applies to contracts of sale of goods between parties whose places of
business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law of a Contracting
State.
(2) The fact that the parties have their places of business in different States is to be disregarded
whenever this fact does not appear either from the contract or from any dealings between, or from
information disclosed by, the parties at any time before or at the conclusion of the contract.
(3) Neither the nationality of the parties nor the civil or commercial character of the parties or of
the contract is to be taken into consideration in determining the application of this Convention.
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3. SCOPE OF APPLICATION

3.1. DIRECT APPLICATION: ART 1(1)(a)

3.2. INDIRECT APPLICATION: ART 1(1)(b)

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3.1. DIRECT APPLICATION: ART 1(1)(a)

• the CISG is “directly” or “autonomously” applicable when the

parties have their places of business in different Contracting
States
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‘PLACE OF BUSINESS’

• The fact that the parties have their places of business in

different States must be apparent before or at the at the
conclusion of the contract within the meaning of Article 1(2)
• Where a party (e.g. a natural person) does not have a place
of business, his or her “habitual residence” is to be applied
(Article 10(b)).
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‘PLACE OF BUSINESS’
• The “place of business” is not defined under the Convention
• It is subject to an autonomous interpretation unaffected by local
definitions (Article 7(1)).
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‘PLACE OF BUSINESS’
• Drafting history:
‘…place of business shall not be considered his place of business unless the party at
that place maintains a permanent organisation [including an office and personnel of
his own]

‘a stable place where the entire or (part of) the contract is performed and which has
autonomous power to conduct the bargaining and to conclude the contract’
(Argentina & Belgium)

an establishment having no competence to conclude the contract is still considered

as a place of business provided that it has power to bargain (Norway)
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‘PLACE OF BUSINESS’
• Scholarly writing:
Certain characteristics attributed to the notion of ‘place of
business: Duration, stability and a certain degree of
independence.
+ a mere place of contracting such as booths at an
exhibitions or rented hotels
+ a liaison office
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‘PLACE OF BUSINESS’
• Case law:
- It is mostly applied without providing any definitions or further
explanations.
- Some cases exhibit a homeward trend by defining a place of
business as either ‘place of incorporation’ or ‘principal place of
business’
- Many cases share the similar approach with CISG scholars that
reference is made to duration, stability and independence
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‘ MULTIPLE PLACE OF BUSINESS’

• Art 10(a): Principal place of business theory vs Closest
relationship theory?
If a party has more than one place of business, the place of business
is that which has the closest relationship to the contract and its
performance, having regard to the circumstances known to or
contemplated by the parties at any time before or at the conclusion
of the contract;
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MULTIPLE PLACE OF BUSINESS

Ex: A buyer in Austria (a CISG State)

purchased goods from the Swiss branch of a
company with headquarters in Liechtenstein
(notably: a non-CISG Contracting State)
(CLOUT case 261)
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A Certain Ri Dev., Co. v. A Certain H.K. Bang Dev., Co.], (2008) Shen Zhong Fa Min Si
Zhong Zi No. 101 Civil Judgment (Shenzhen Intermediate People’s Ct. Mar. 30, 2009).

• a Hong Kong company performed the sales contract partly

through a factory set up in Shenzhen (the equipment sold under
the contract was apparently delivered to and stationed in the
factory).
• the company’s headquarters in Hong Kong was held to be the
place of business with the “closest relationship to the contract
and its performance” under Article 10(a) given that it was in
Hong Kong that the company performed its main obligation
under the sales contract by making payments through a local
bank
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US case law

• Zodiac Seats US LLC v. Synergy Aero. Corp., 2019 U.S. Dist. LEXIS
68456: In weighing which location has the closest relationship to the contract,
courts consider where the communications about the contract or representations
about the product originated.

• the Court finds that Synergy's employees involved in the initial negotiation of the
contracts at issue were based in Colombia. Moreover, the ongoing renegotiation,
and alleged novation pursuant to the Commitment Letters, occurred during a
July 26, 2016, visit by Zodiac to Synergy's location in Colombia. Accordingly,
both at the time the contracts were formed, and throughout the performance of
the contract, the Court finds that as between Brazil and Columbia, Colombia had
the "closest relationship to the contract and its performance." Therefore, the
Court finds that the CISG governs the parties' dispute
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US case law

• McDowell Valley Vineyards, Inc. v. Sabate USA Inc., 2005 WL 2893848

(N.D. Cal. Nov. 2, 2005): the CISG does not apply where most
communications emanated from the United States, thus under
the CISG, the parties were both American, not from different
member states); 
• Asante Technologies, Inc. v. PMC-Sierra, Inc.
, 164 F. Supp. 2d 1142, 1149 (N.D. Cal. 2001): Finding the
"place of business" to be Canada where "most if not all of the
defendant's representations regarding the technical
specifications of the products emanated from Canada
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‘CONTRACTING STATE’
• A current list of CISG contracting states, including their dates of
ratification, acceptance, approval, or accession, and the relevant
effective dates of the Convention, is available from the
UNCITRAL website:
https://uncitral.un.org/en/texts/salegoods/conventions/sale_of
_goods/cisg/status
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‘CONTRACTING STATE’
• Should Hong Kong (or Macao) acquire an effective Convention
status by reason of being a territorial unit of China?
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‘CONTRACTING STATE’
• On 20 June 1997, the PRC deposited a diplomatic note with the
Secretary General of the United Nations announcing that the
treaties in Annex I to the note ‘will be applied’ to the HKSAR. This
annex did not include any reference to the CISG.
• As a result, courts seated throughout the world have taken
inconsistent positions with respect to the CISG’s applicability to
the HKSAR.
• the Supreme Court of France (Cour de cassation), the Zhejiang High
People’s Court decided that the CISG does not apply to the HKSAR .6

• Some courts in the United States have found that the CISG is applicable to
the HKSAR
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3.2. INDIRECT APPLICATION: ART 1(1)(b)

(1) This Convention applies to contracts of sale of goods between
parties whose places of business are in different States:
(b) when the rules of private international law lead to the
application of the law of a Contracting State.
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3.2. INDIRECT APPLICATION: ART 1(1)(b)

• rules of private international law -> private international law of the

forum.
• These rules may be found in an international set of rules if in force and
applicable (e.g. the 1955 Hague Convention on the Law Applicable to
Contracts for the International Sale of Goods, the 1980 Rome Convention on
the Law Applicable to Contractual Obligations ) or in the domestic body of
rules on private international law of that state, depending on the legal
framework in the forum state.
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RESERVATION UNDER ART 95

• article 95 was introduced to give Contracting States the

opportunity to choose not to be bound by article 1 (1) (b).
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RESERVATIONS UNDER ART 95

•  Armenia: Pursuant to Article 95 of the Convention, the Republic of Armenia declares

that it will not apply the Article 1, subparagraph (1) (b) of the Convention to the
parties that declare not to be bound by the Article 1, subparagraph (1) (b) of the
Convention.
• China:  The People's Republic of China does not consider itself to be bound by
subparagraph (b) of paragraph 1 of article 1.
• Saint Vincent and the Grenadines: “The Government of Saint Vincent and the
Grenadines declares that Saint Vincent and the Grenadines will not be bound by
subparagraph  1  (b) of Article 1 of the Convention.”
• USA:  "Pursuant to article 95 the United States will not be bound by subparagraph (1)
(b) of Article 1".
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RESERVATIONS UNDER ART 95

•  Lao People's Democratic Republic (2019): “In accordance with article 95 of the
United Nations Convention on Contracts for the International Sale of Goods (CISG),
the Government of the Lao People’s Democratic Republic declares that it will not
be bound by subparagraph (1) (b) of article 1 of the Convention and will apply the
Convention to Contracts of Sale of Goods only between those parties whose place
of business are in different States when the States are Contracting States.”
• Singapore:    "In accordance with article 95 of the said Convention, the Government
of the Republic of Singapore will not be bound by sub-paragraph (1) (b) of article 1
of the Convention and will apply the Convention to the Contracts of Sale of Goods
only between those parties whose places of business are in different States when
the States are Contracting States.“
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RESERVATIONS UNDER ART 95

•  Germany: Germany did not make an Article 95 reservation when ratifying to the
Convention, but made an interpretative declaration that relates to certain effects
of Article 95 reservations made by other Contracting States
‘The Government of the Federal Republic of Germany holds the view that Parties to
the Convention that have made a declaration under article 95 of the Convention are
not considered Contracting States within the meaning of subparagraph (a) (b) of
article 1 of the Convention.  Accordingly, there is no obligation to apply - and the
Federal Republic of Germany assumes no obligation to apply - this provision when the
rules of private international law lead to the application of the law of a Party that has
made a declaration to the effect that it will not be bound by subparagraph (1) (b) of
article 1 of the Convention.’
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RESERVATIONS UNDER ART 95

Netherlands:
• Article 2 of the Dutch Implementing CISG Act dated December 18,
1991 request foreign judges in Article 95 reservation states not to
apply the Dutch Civil Code provisions on sales (Book 7, Title 1 of
the Civil Code) but rather CISG, if Dutch law were to be applicable
by virtue of the local conflict rule.
• This suggestion is of course not binding on foreign courts but by
enacting this Dutch solution the legislator has indicated that
under Dutch law it prefers a solution which enhances uniformity
rather than one that relies on local Dutch law
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RESERVATIONS UNDER ART 95

CISG-AC opinion 15:

1. A declaration under Article 95 excludes the declaring Contracting State's obligation

under public international law to apply the Convention in accordance with Article 1(1)(b).
However, it does not prevent the courts of such a State from applying the Convention when
their rules of private international law lead to the application of the law of a Contracting State.

2. A declaration under Article 95 is without any effect for the Convention's applicability in
accordance with Article 1(1)(a). In applying Article 1(1)(a), it is irrelevant whether the forum
State has made an Article 95 declaration or whether one (or both) parties to the sales contract
have their place of business in a State which has made an Article 95 declaration.

3. When the forum is in a Contracting State that has made no declaration under Article 95,
the Convention applies in accordance with Article 1(1)(b) even when the rules of private
international law lead to the application of the law of a Contracting State that has made an
Article 95 declaration.
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Module: The issue of applicability

1. CISG - A brief history

2. Structure of the CISG

3. Scope of application

4. Exclusion of the CISG

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4. EXCLUSION OF THE CISG

• Overview
• Classification
• Implicit exclusion: Variations
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4. EXCLUSION OF THE CISG

Art 6:
The parties may exclude the
application of this Convention or,
subject to article 12, derogate from or
vary the effect of any of its provisions.
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4. EXCLUSION OF THE CISG: OVERVIEW

• the principle of party autonomy expressed
in Art. 6 CISG permits parties to agree to
exclude its application, at the time of or
after the conclusion of the contract.
• An agreement to exclude the CISG is
governed by the rules on contract
formation and modification in Arts 11, 14-
24, 29 CISG.
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4. EXCLUSION OF THE CISG: CLASSIFICATION

Ex-ante exclusion
e.g. the form of a contract clause purporting
to “opt out” of the CISG
Ex-post exclusion
e.g. agreements made during court
proceedings prior to a court decision on
applicable laws
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4. EXCLUSION OF THE CISG: CLASSIFICATION

• Express exclusion
e.g. ‘Australian law applicable under exclusion
of UNCITRAL law’.
• Implicit exclusion
e.g. ‘ These terms and conditions and the
transactions contemplated hereby shall be
governed by, and construed in accordance with
the laws of England’.
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Implicit exclusion
• It can be an issue of some difficulty in determining whether
the application of the CISG is implicitly excluded.
• The intent of the parties to exclude must be determined in
accordance with Art. 8 CISG.
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ART 8 negotiations

Parties’s intention

reasonable interpretation

usages
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4. EXCLUSION OF THE CISG: VARIATIONS

Implicit exclusion (1)
#1: Where the CISG is applicable by virtue of Article 1(1)
(a), but the parties agree to choose, either in contract or in
subsequent legal proceedings, the law of a contracting
state (such as Vietnam) as the proper law of their contract,
does this choice of law oust the CISG?
• Prevailing view: A mere choice of the law of a contracting
state, without being specifically confined to its domestic law,
does not of itself constitute such an implicit exclusion.
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Implicit exclusion (2)

• #2: Choice of an expressly specified
domestic statute or code where that would
otherwise be displaced by the CISG’s
application.
Drafting History: ‘referring to the title of [a
municipal law]’ was seen as potential evidence
of parties’ intent to exclude.
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Case law:
Germany: German Civil Code BGB, German
Commercial Code HGB
Austria: Austrian Consumer Protection Act
or Austrian Commercial Code
The USA: ‘Uniform Commercial Code’
Hungary: Hungarian Civil Code?
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Implicit exclusion (3)

• #3: Choice of the law of a territorial
unit of a Contracting State? (e.g
choices of the law of ‘California’, the
‘Province of British Columbia’,‘the state
of Pennsylvania’ )
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Implicit exclusion
ThyssenKrupp v. Sinochem: Guiding case of Chinese SPC
• A contract between a German seller and a Chinese buyer
contained a choice of law clause designating the law of
New York as the proper law of the contract. The SPC held
that the parties “had not excluded its application.” The
CISG remained applicable by virtue of Article 1(1)(a). The
chosen law of New York was to supplement the CISG on
matters not covered by the CISG.
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Exclusion of the CISG in Chinese

courts:
‘while a choice of Chinese law in the contract will not per se
exclude the application of the CISG, the same choice made in
court proceedings will be given such an exclusory effect
provided the parties so intend.’
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Implicit exclusion (4)

• #4: A reference to INCOTERMS =
intent to exclude the CISG?
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1. The contract No.170211 VCT-FETA on 17/1/2011 b/w

VIET COTTON YARN INVESTMENT TRADING JSC & FETA
TEKSTIL SAN.TIC.LTD.STI:
“ ALL OTHER CONDITIONS, WHICH NOT STATED IN THIS
CONTRACT, WILL REFER TO INCOTERMS 2000”
2. The contract No. BVQA400 b/w FORMOSA INDUSTRIES
CORPORATION & NANYA PLASTICS CORPORATION:
“ The INCOTERMS 2000 will be used for this contract”
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BP Oil Intl Ltd, et al v. Empresa Estatal, et al

An Ecuadorian company (the Buyer) entered into a contract with

a Texan company (the Seller) for the sale of gasoline. The
requirement of the buyer is to opt out of the CISG and choose
Ecuadorian domestic sales law as the applicable law for the
contract. Which of the following choice of law clause meets the
buyer’s requirements?

OPTION 1: ‘CISG SHALL NOT BE APPLICABLE FOR THIS CONTRACT’

OPTION 2: ‘THE APPLICABLE LAW: THE LAWS OF THE REPUBLIC
ECUADOR’
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Q&A
 Thank you!

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