Understanding Exclusion of the CISG: A New Paradigm of Determining Party Intent

Abstract

The United Nations Convention on Contracts for the International Sale of Goods, or CISG, generally governs contracts of sale of goods when the parties to the contract are located in different countries and the countries are parties to the CISG. The United States is a party to the CISG, as are most of the United States’ top trading partners. Although the CISG automatically applies to contracts that are within its sphere of application, the parties are free to exclude its application. How it can be excluded has befuddled U.S. courts for its entire history.

One source of confusion has been how to understand the effect of a choice-of-law clause when such a clause is included in the underlying contract. In fact, there is a widespread and growing body of U.S. jurisprudence created by courts engaging in imprecise and incorrect analysis of the role of a choice-of-law clause in the analysis of effective exclusion of the CISG.

Even more difficult, virtually no U.S. court has been able to suspend its legal traditions of contract enforcement and interpretation to engage in the specific kind of analysis that is required by the CISG when determining whether parties to a contract that would be governed by the CISG intended to exclude its application. Specifically, even when there is a written contract whose contents suggest that the parties did not intend to exclude application of the CISG, the CISG requires courts to consider evidence outside the four corners of the written contract that could show that the parties nevertheless did intend to exclude application of the CISG, an exercise that is squarely outside the American legal imagination and is likely to be culturally difficult for courts to embrace.

The failure of U.S. courts to recognize their obligation to engage in the kind of analysis required by the CISG when determining whether or not the parties intended to exclude the CISG has led to misapplication of the supreme law of the land, eroding the rule of law established by the U.S. Constitution. It has also seriously undermined the ability of businesspersons to engage in international business transactions by making impossible their already difficult task of identifying performance obligations implied by law, remedies made available at law, and allocations of risk and responsibility established as defaults under the law – impossible, because misunderstanding and inconsistent application of the law makes it impossible to determine which body of law the court will choose to provide answers to relevant questions.

This Article seeks to bring understanding where there is misunderstanding regarding effective exclusion of the CISG, including with respect to (i) the role in the analysis that a choice-of-law clause ought to play and (ii) the obligation under the CISG to consider extrinsic evidence to determine the parties’ intent.

Keywords: CISG, International Sales Law, Choice of Law

JEL Classification: K12, K20, K33