Many US contractors are unaware of the body of law that governs the shipment of materials from overseas. The Convention for the International Sale of Goods (“CISG”) operates as the governing law on international transactions involving the sale of goods between participating countries. (for a list of participating countries click here). The CISG is similar to the Uniform Commercial Code (“UCC”), which governs the sale of goods in 49 of the 50 states within the United States.
However, there are critical differences between U.S. law and the CISG. For example, under the CISG, to be enforceable an agreement must identify the goods to be sold and expressly or implicitly fix or make a provision for determining the quantity and the price. By contrast, the UCC is more flexible in contract formation and will find an agreement valid, despite missing terms including performance and price, if the parties intended to be bound by the agreement, and a reasonably certain basis exists for granting a remedy. That being said, the CISG goes out of its way to create contracts in other respects. Under the CISG, an offer becomes irrevocable if it states through a fixed time for acceptance or otherwise that it is irrevocable, or if the offeree reasonably relies on the offer as being irrevocable, and acts in reliance on it. Under the UCC, an irrevocable offer must be in a signed writing that by its terms assures that the offer will be held open. Most significantly, however, a contract under the CISG can be oral. In other words, there is no formal writing requirement, and a thus a combination of emails and discussions can create an enforceable agreement, so long as there is some certainty on quantity and price.
Generally, it is believed that the CISG favors sellers and disfavors buyers. If you are a US company and do not want the CISG to apply to your international transaction, it is not enough to specify another body of law, e.g., “This contract shall be construed under the laws of Maryland exclusive of its conflicts of laws rules.” Rather, the contract must expressly carve out the CISG, e.g., “This contract shall not be governed by the CISG, but instead shall be governed by the Laws of the State of Maryland exclusive of its conflicts of laws rules.”
For further questions, contact Matthew G. Hjortsberg at Hjortsberg@bowie-jensen.com or at 410-583-2400.