The Seller's Right to Cure Under the Uniform Commercial Code and the United Nations Convention on Contracts for the International Sale of Goods
Eric C. Schneider
University of Baltimore - School of Law
Arizona Journal of International and Comparative Law, Vol. 7, No. 1, pp. 69-103, Spring 1989
University of Baltimore School of Law Legal Studies Research Paper
On January 1, 1988, a United Nations Convention became the first federal sales law in the United States. Disputes arising out of international sales contracts, formed after January 1, 1988 between merchants from signatory nations, may be governed by the United Nations Convention On Contracts For the International Sale Of Goods (CISG or Convention) rather than the Uniform Commercial Code (U.C.C.) or foreign sales law, unless the parties specifically state otherwise.
The structure of an international sale of goods differs from a local sale in ways which will affect traders' decisions about which law to choose as the governing law of their contract. In an international sale of goods between merchants, payment is made through a documentary sale or letter of credit transaction. In simplified form, the buyer takes the sales contract to his bank and receives a line of credit The buyer's bank notifies the seller's bank of the line of credit and the seller, after shipping the goods, presents the bill of lading and other required documents to his bank for payment The seller's bank presents the documents to the buyer's bank for reimbursement and the buyer's bank turns over the documents to the buyer so that the buyer can obtain the goods from the carrier.
In a documentary transaction, the buyer has paid for the goods before receiving them. He nevertheless has a right to inspect the goods and can reject them if they do not conform to the sales contract and sue for a return of the purchase price.
Because the buyer must pay for the goods before he can inspect them, the buyer can demand that a third party in the seller's country inspect the goods and that the seller include a certificate of inspection with the documents of sale. Although the letter of credit transaction and documentary sale are a valuable means of payment in international trade, they do expose the parties to certain risks. In a letter of credit transaction, the buyer has paid for goods without personally inspecting them. If the goods do not conform to the-sales contract, the buyer's' only recourse is a cause of action for damages. In a documentary sale transaction, if the buyer or the buyer's bank does not accept the seller's draft, the seller may incur expenses in reselling the goods in a foreign country.
The seller's right to prevent the buyer from rejecting the goods and the buyer's right to avoid a contract were in the past dependent on domestic law, of either the buyer's or the seller's country, as determined by uncertain conflict of law rules. The CISG is designed to make the outcome of such disputes more certain. One area of the CISG which was vigorously debated and ultimately compromised is the seller's right to cure a late or defective performance. This Article will examine whether international traders will benefit by opting to use the CISG provisions regarding the seller's right to cure rather than the Uniform Commercial Code as the controlling law of their contracts.
Number of Pages in PDF File: 35
Keywords: United Nations, sales law, United States, international sales contracts, CISG, UCC, Uniform Commercial Code, foreign sales law, merchants, documentary sale, letter of credit transaction, line of credit, bill of lading, certificate of inspection, damages,
JEL Classification: K19, K29, K33, K39, F13,Accepted Paper Series
Date posted: September 30, 2011
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