International Goods Transactions & The CISG
BY FRED MENDELSOHN, PARTNER AT BURKE, WARREN, MACKAY & SERRITELLA, P.C. IN CHICAGO
Many distributors buy and sell goods across oceans and international boundaries and often buy goods for resale in their territory (e.g., North
America). Distributors should thus be aware of the laws
applicable to their goods transactions, including the Convention on Contracts for the International Sale of Goods
The United Nations recognized the importance of
minimizing challenges arising out of international goods
transactions – such as language barriers and the customs,
law and practice of different countries – in the 1980s, when
it promulgated the CISG. A total of 83 countries including
the world’s largest economies have now ratified the CISG.
Because of its extensive adoption, the CISG is proving to
be one of the most successful economic treaties to date.
It is also not widely known, but important for distributors
conducting goods transactions internationally to understand how the CISG could affect them (just as much as they
should know similar goods laws, such as the Uniform Commercial Code or “UCC”).
Broadly, the CISG governs contracts for the sale of goods
between entities located in separate signatory countries.
Article 6 of the treaty provides flexibility where parties
may exclude the CISG in its entirety or “derogate from or
vary the effect of any of its provisions.” This is key for distributors; they are free to customize the fine-print of their
forms or contracts for international goods transactions. The
CISG, however, does not apply to all goods sold by distributors, such as the exclusive distribution of goods between
a foreign manufacturer and a distribution entity existing
under U.S. law (so called “framework agreements”).
Even then, however, the CISG may well apply (there
is some hair-splitting in the international body of law
on CISG application) to specific purchase orders under a
framework distribution agreement. Further, the purchase
of goods by distributors for resale may not be pursuant
to a framework agreement and once the goods enter the
United States, application of the CISG would depend on
whether the sale is a transaction governed by the CISG.
The CISG does not uproot the laws of signatory countries, but instead (1) fills in gaps in goods contracts to help
resolve disputes and to facilitate resolution dialogue, and
( 2) provides a set of default terms and remedies for covered transactions much like the UCC. By way of example,
the CISG covers:
• The key elements of offers and the manner of their acceptance;
• What happens when parties seek to add or change terms
or other modifications to international sales contracts;
• The role of local and international practice, custom and
• Obligations as to the quality of the goods, issues as to
examination of goods, delivery, payment and notice of
any claimed lack of conformity;
• Remedies for breach of contract – for both the seller and
buyer – ranging from delivery and price issues, repair,
replacement or price adjustment for non-conforming
goods to contract avoidance, warranty issues, or damages incurred by performing sellers; and
• The passing of risk of loss in the goods sold and defenses
due to acts of God (i.e., force majeure).
Courts in signatory countries will, by default, apply the
CISG in the event of a dispute relative to a “CISG covered”
international goods transaction.
Not only should the distributors know how the CISG
works, but also that unless they alter the terms of their
international goods contracts or forms, the rules to which
they are accustomed to (or think apply) may not have effect. As such, distributors should ensure that they address
these issues in their sales forms and contracts in order to
avoid after-the-fact disputes. Review by counsel can be particularly helpful; especially with respect to choice of law and
dispute resolution provisions (e.g., forum selection clauses,
jurisdictional waivers and concession provisions, etc.).
Language barriers and cultural differences can exacerbate disputes between businesses involved in international
goods transactions – even those between companies with
deeply engrained relationships. As such, distributors should
generally consider exactly how their goods transactions
could “go south,” before they do, and that their contractual protections are not lost in translation. The CISG is not a
substitute for a well-drafted sales contract or set of goods
transactions forms, but it should be considered along with
other applicable law in transactions negotiations and
For distributors interested in this topic or who might
have further questions, Fred can be contacted at 312-840-