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Many San Diego businesses are familiar with basic California business law and business contracts. Many are familiar with the Uniform Commercial Code. But what is CISG? That is an acronym that stands for Convention/Contracts for the International Sale of Goods (“CISG”). CISG law and forms govern international sales of goods including all transactions completed under NAFTA. CISG is an international treaty created by the United Nations Convention on Contracts for the International Sale of Goods back in the 1970s. The treaty was signed in 1980 in Vienna and came into effect in 1988.
Both Mexico and the US are ratifying member states. By operation of the treaty and the supremacy clause of the US Constitution, CISG law and forms govern commercial sales transactions between businesses in San Diego and businesses in Mexico. Put another way, California law will not apply and neither will the Uniform Commercial Code (“UCC”).
History of CISG
Like the UCC, CISG is a set of uniform rules with respect to international commercial transactions. Like the UCC, CISG applies to the sale and purchase of goods. Unless excluded by the express terms of a contract, CISG law is presumed to be incorporated into the contract and, importantly, to supplant the domestic commercial codes of the two countries involved.
Important Differences Between the UCC and CISG
Here are a few of the more important differences between the UCC and CISG:
UCC — contracts must be in writing; no parol evidence allowed unless there is ambiguity
CISG — oral contracts allowed; parol evidence allowed
UCC — course-of-dealing can modify contract
CISG — contracts cannot be modified by course-of-dealing
UCC — industry standards/usage cannot be used to modify contracts
CISG — contracts can be modified or terms supplied based on industry standards/usage
UCC — courts allowed to supply contract terms like reasonable price
CISG — contract may fail for indefiniteness if price is not specified
UCC — when buyer and seller are using their own different forms, a contract is formed even though there might be differences between the forms; if performance is undertaken, the UCC rules of construction will “knock out” terms that differ between the two forms enforcing only those terms to which both parties agreed
CISG — forms must “mirror” each other for a contract to be formed, otherwise the first form is the offer and the responding form is a “counter-offer,” not an acceptance; if performance is undertaken, the offering party is deemed to have “accepted” the “counter-offer” and the second form controls (so-called “last shot” wins and nothing is knocked-out)
For a representative case showing how California courts apply and interpret CISG, see Chateau des Charmes Wines Ltd. v. Sabate USA Inc., 328 F.3d 528 (9th Cir. 2003) involving a dispute between a Canadian company and a California company wholly owned by a French corporation.
Contact San Diego Corporation Law Today
San Diego businesses dealing with cross-border commercial transactions with Mexican companies should be aware of CISG. You should be cautious of oral statements, keep a good record of what you do say on the phone and, if you want California law to apply, there must be specific reference to CISG in the written contracts.
If you would like more information about excluding CISG in your international sales and purchase contracts or if you need legal services with respect to business contracts, business formation, or other aspects of business law, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email.