The Hierarchy That Wasn’t There: Elevating ‘Usage’ to Its Rightful Position for Contracts Governed by the CISG

Abstract

The term ‘usage’ generally refers to any practice that is habitual or customary within a given industry, trade or region. Under domestic U.S. sales law, the term ‘usage of trade’ is used, and usage of trade can be used under domestic U.S. sales law to interpret, explain, or supplement a written agreement. But usage of trade may not be used under domestic U.S. sales law to contradict a written agreement. Moreover, under domestic U.S. sales law, the express terms of the parties’ agreement and any course of performance or course of dealing between the parties will prevail over inconsistent usage of trade.

The United Nations Convention on Contracts for the International Sale of Goods, or CISG, also provides for consideration of usage to establish the terms of the agreement between the parties, as well as to determine party intent. But the CISG does not establish a hierarchy that requires usage to defer automatically to party conduct or to the parties’ established practices. Yet, U.S courts have incorrectly assumed that the same hierarchy that they are accustomed to under the UCC must exist under the CISG as well. Because usage can be highly relevant for determining the terms of the agreement between the parties, especially when commercial arrangements are consummated without a written agreement, proper analysis of the role of usage is essential. The failure to understand the role usage plays under the CISG can improperly affect the outcomes of disputes. This Article analyzes this issue and proposes better understanding of the role usage plays for sale of goods contracts governed by the CISG.

Keywords: CISG, usage, party conduct, contract interpretation, extrinsic evidence, international sale law

JEL Classification: K12, K20, K33