National and International Sales of Goods
The company is interested in expanding the business globally and are considering Mexico as the new location for a factory. The company would like to know the benefits and the obstacles they will encounter in this expansion. Do the benefits outweigh the obstacles? Facts and Laws: Aspects of U.S. laws that will affect the company in dealing with Mexico: 1. North American Free Trade Agreement (NAFTA), was signed in 1994, is a trade agreement between Canada, Mexico, and United States. NAFTA eliminated all trade barriers and created investment opportunity for businesses between these countries.
The German buyer claimed that the goods were not suitable for use because of deterioration during the shipment. The goods were subject to “ex factory” delivery. The Regional Court held that the buyer had declared its refusal to pay on contract; therefore, the plaintiff was not entitled to ask for payment. Upon the appeal of the seller, the Higher Regional Court affirmed the decision of Court of First Instance by stating that it was non-performance of the seller in accordance with the Article 35(2) (d) CISG. Indeed, although the risk passed to the buyer, the Court considered that the seller was still responsible for the damage due to lack of preserving under Article 36(2) and 66 CISG. The above case should be interpreted in a way with regard to the seller obligations under the CISG, which are providing the goods, preserving them and properly bringing them to the point of delivery. In this respect, it can be said that Article 66(2) of the CISG brings an exception to obligations of the buyer which is indeed that if the damage or loss occurs as a result of the seller’s mistake, omission or act, he will remain responsible for this loss or damage until successfully handing over the goods. Consequently, the buyer obligation to pay for the goods will be delayed when this exception applies. There are different approaches to explain the phrase of “act or omission of the seller”. According to one of those, it is a breach of seller’s obligations under the CISG or their contract. Proponents of another approach argue that it could be any behaviour of the seller which caused the damage or loss; therefore, it is difficult to say that such acts of the seller should be regarded as a breach of the CISG. Schlechtriem and Honnold, as supporters of this second view, state that any behaviours of the seller which resulted in the loss or damage should not be interpreted as a breach of obligations of the seller, it also might be unlawful behaviours under the tort law. “If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for Transmission to the buyer in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.”
Notwithstanding these differences in style and scope the CISG provisions constitute a comprehensive codification which provides many of the same answers found in the common law and the Uniform Commercial Code. This is illustrated by the answers set out below to questions arising in the following hypothetical case. Seller, a manufacturer of equipment, has his place of business in France. Buyer, an equipment dealer, has his place of business in New York. In the following questions Buyer (the offeror) seeks to enter into a contract with Seller (the offeree) for the purchase of equipment. Assume that the CISG is in force and that both France and the United States have ratified the 1980 convention.
Hence, CISG is a success in an endeavour towards the unification of sales law on an international level.
A.B.A. Section of International Law, Report to the House of Delegates 13-14 (April 1981).
R. Schlesinger, Formation of Contracts, A Study of the Common Core of Legal Systems (1968).
Cigoj, International Sales: Formation of Contracts, 23 Neth. Int'l L. Rev. 257 (1976).