International Sales of Goods 1980 Sample Assignment

Scenario analysis: The United Nations Convention for the International Sales of Goods 1980 (CISG) does not deal directly with the question of who has title to the goods.

Introduction

Ownership and possession are often considered to be synonymous due to ack of appropriate legal definition of the two terms. Due to the misinterpretation of the terms in several countries that are ruled by the local Sales of Goods law, have different provisions regarding the breaches of contract in terms of transfer of title as well as transfer of ownership. On the other hand, in order to understand the legal implications of the Title of Goods it is important to consider different case laws of different countries that are regulated by the Sales of Good act, which is most of the times, are adapted from the English Common Law. The current study, attempts to analyze the implications of the provisions of CISG due to the absence of any proper definition of the title of goods in the doctrine critically. In order to delve deep into the scenario the provisions of CISG has been compared with that of Sales of Goods Act of Sri Lanka.

Implication of title of goods

CISG largely prioritizes the contracts and the implied terms and conditions of the contract. In the contract of sale the transfer of Title to goods helps in identifying the meaning of the term title and thus differentiating it from ownership or the possession (Bridge, 2017).

The United Nations Convention on International Sale of Goods sets out a range of uniform as well as coherent rules in accordance with which the private parties in different countries can sell and buy goods from and to each of the countries. It is imperative to mention that CISG can be considered the functional equivalent of at the international level of the Uniform Commercial Code at the domestic level (Lookofsky, 2016). In order to understand the implication of CISG it is important to note that although United States had ratified CISG in 1986, as a self executing treaty CISG became the part of Federal Law of United States (Mai, 2017). The signatory nations of CISG need to assure that the national law of the country needs to comply with the regulations of CIGS or the CISG is directly enforced in the country. It is important to note that under the provisions of CISG if a transaction occurs, then it is important that the transaction has satisfied the below mentioned criteria in order to be governed by CISG:

  • It is mandatory for the transaction to be a contract for the sale of goods and not include thus any labor or services
  • It is important that two of the parties have their places of business in different states or else the rules of the private international law has been applied the law enforced in the contracting state
  • Lastly, as per the mandate each of the States in that one of the party has its place of business is considered as a Contracting State

As far as the Sale of Good is concerned, CISG has not defined the term sale. On the other hand, CISG has promulgated several obligations that are largely imposed upon the seller as well as on a buyer from which it is possible to infer the definition of Sale. In order to be specific, it can be stated that CISG brings forth the fact that it is mandatory that the seller transfers the ownership as well as the possession of the goods to the buyer (Smythe, 2016). A buyer in exchange in exchange needs to pay the decided purchase price in order to accept the ownership as well as the possession of the goods.

CISG has not defined “goods” but it has indicated that the goods are tangible material items that can be moved (Schwenzer and Beimel, 2017). The implication is a deliberate attempt to exclude the real estate’s from the domain of goods that are governed by Property law.

Critical analysis of the scenario

In order to understand the complications due to the lack of legal definition provided in CISG regarding the term title of the goods, it important to understand the transfer of the title to goods. In Contract of Sale the transfer of the title to the goods has been identified to be passing from the seller to the buyer in any manner or conditions that have been agreed upon by the involved parties to the contract of sale (Mai, 2015). It has been mentioned that by the rule, the title is passed when the involved parties intend to pass the title. It is important to note that in case if the parties have no explicit agreements as to the transfer of the title, then the title is passed to the buyer (Singh, 2015).

Title and ownership

CISG has not clearly categorized the difference of the title and the ownership. The transfer of the title indicates that title can only be transferred on existing, specific or the identified good. CISG has distinguished between the passage of the title and the passage of risk. Passage of title and the passage of risk are no necessary to coincide but it is possible for them to coincide and the coincidence largely depends on the applicable law as well as the desire of the involved parties. The CISG has rules regarding the passage of the risks (Tripodi, 2015). However, it is important to note that at the time of enforcement, under the prosecution of CISG the gap filling law needs to be examined in order to determine the point of the passage of the title. Therefore, it is important to note that CIG does not cover the title passage aspects in the domain of international trade. Article 67 of the CISG says that in the process of transferring the title or the risk the risk does not pass to the buyer if the goods are not clearly identified to the contract (Leandro, 2015). As the title as well as the transfer of the title has not been defined in the CISG, the local legal provisions are often taken into account in order to validate a contract.

Complex legal issues

As per the UN Convention Law of Contract, a contract is considered as an agreement, through which the title of the good is passed with offer and acceptance of the involved parties. The terms that are not covered in CSIG are the validity of the contracts, conditions, warranty, passing of property that brings in light the issue of title of goods. Seeking the example of case law the important cases are

Sunflower oil case (Commercial court of Zurich)

The decision in the case was taken by the Court Zurich, which had awarded the buyer the restitution of the advance payment long with the interest as per the provisions of article 78 of CISG (Lee, 2017).

In The Clough Mill case Clough Mill’s retention of the title, conditions if the ownership of the yarn that it supplied remained to Clough Mill as the court decided that the supplier did not have the legal right to register a charge over its own goods if the customer had never obtained the title of the goods.

In this case Italian company D & G Group, SRI brings this breach of contract action against American company HA. Import USA, Inc. and individually named defendant Pasquale Morello. The claims arise under state law and the United Nations Convention on Contracts, which the United States has ratified. Defendant Morello, proceeding pro se, moves on to dismiss the complaint, arguing that plaintiff inflated the amount in controversy to satisfy the requirements for diversity jurisdiction. However, the defendant’s dismissal of the action is denied as the plaintiff had successfully asserted a valid claim under the State Contract Law.

Provisions of CISG with local sale of goods act in Sri Lanka

The important features of Sales of Goods Act Sri Lanka indicates that the goods that are subjected to sale or delivered needs to be conform to contract and needs to be described in order to align with the factors like fit for the purpose and of the satisfactory quality (Hawkins and Maffett-Nickelman, 2017). This is similar to the provisions of CISG. Several similarities can also be identified with the similar provision regarding the conformity to contract that is provided by the CIGS. It is important to note that Sales of Good Act provides further provisions for the damages. The purchasers can demand damages for the defective goods up to six years of the purchase. It is important to note that in Sri Lanka the Sales of Goods act similarly does not define title (Lee, 2017). The meaning of title of goods needs to be understood from the transfer of the title. One of the chief benefits of CISG is that its unified code of rules and the regulations helps in the simplification of the importing and exporting facets of international trade. Thus, adaptation of CISG into Sri Lankan legislation can significantly facilitate the process of international trade with other counties. In Sri Lanka Sellers can interpret the domestic laws in different ways but the interpretation of CISG remains static. Using the CISG can significantly decrease the time as well as the legal issues and it can decrease the problems of proof of foreign law in both the foreign as well as the domestic courts.

The major difficulty in adopting the CISG in Sri Lanka is that a CISG was formulated by taking into consideration the western legal traditions, it has not paid much consideration to the alternative legal systems like Islamic law or Hindu law. Therefore, the aspect of contract can seem to be contradictory.

It is important to note that the CISG governs the international sales contracts based on the following factors

  • If both of the involved parties are located in the states that are contracting
  • The states are administered by the private international law

Then, the application of the law of a contracting state as per the permission of CGIS article 95, CGIS would govern the international sales contract. It is important to note that several contracting states are of the opinion that they are not bound by the latter ground. As per the convention the parties can by agreement derogate from any of the CISG rule. It is also possible the parties to exclude the applicability of the CIG in favour of any state or federal law. The problem with the ownership or the title of the good is that when the convention applies, issues related to the validity of the contract and the title of the goods sold are provided in the CISG that is beyond the provision of the convention. As per article 4, these are left to the law that has been applicable by virtue of the rules of private international law. The exclusion of the convention remains an issue of debate as well as for the Sri Lankan audience or any other country. Furthermore, it has developed Sales of Good Act of UK in their conventions, needs to note that, it is important for a lawyer in the process of advising the client, to consider the business of the buyer and the seller in another convention state. The nature of goods and the identity of the other party is very much important in the subject of this caveat.

Conclusion

In the light of the above study, it can be stated that absence of the legal definition to the term title and clear provisions to the passage of title to goods has largely complicated the provision of Sale of goods in different countries and states. Due to the lack of coherent and universal regulation, CISG has indicated the aid of the local sale of good provisions of the involved states. However, the moot problem lies in the fact that, in terms of international trade, often, different countries are involved in a trade and their local Sale of Goods act can have different definitions and provisions that can be problematic in resolving the cases.

Reference list

Bridge, M.G., 2017. The international sale of goods. Oxford University Press.

Hawkins, J.S. and Maffett-Nickelman, J.L., 2017. The Rise of International Standards in the Sale of Goods. American Bankruptcy Institute Journal, 36(4), p.44.

Leandro, T., 2015. Towards a New CISG.

Lee, B.M., 2017. Formation of contracts for the international sale of goods under Korean law and the CISG. Journal of Korea Trade, 21(3), pp.208-223.

Lookofsky, J., 2016. The 1980 United Nations Convention on contracts for the International sale of Goods. In International Encyclopaedia of Laws (pp. 1-250). Kluwer Law International.

Mai, N.K., 2015. Non-Conformity of Goods and Limitation Clause under CISG, UCC and UK Law.

Mai, N.K., 2017. Exclusion and Limitation of Liability for Non-conformity of Goods: A Comparative Study on CISG, UCC and UK Law (Doctoral dissertation, Niigata University).

Schwenzer, I. and Beimel, I., 2017. Replacement and Repair of Non-Conforming Goods under the CISG. Internationales Handelsrecht, 17(5), p.185.

Singh, L., 2015. The United Nation Convention on Contracts for the International Sales of Goods 1980 (CISG) An examination of the buyer’s remedy of avoidance under the CISG: How is the remedy interpreted, exercised and what are the consequences of avoidance? (Doctoral dissertation, University of the West of England).

Smythe, D.J., 2016. Clearing the Clouds on the CISG's Warranty of Title. Nw. J. Int'l L. & Bus., 36, p.509.

Tripodi, L., 2015. Towards a New CISG: The Prospective Convention on the International Sale of Goods and Services. Brill.