ICC Model International Sale Contract

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556 Cover Final

12/09/03 14:52

Page 1

Contrats Internationaux ICC

This latest addition to the ICC series of model international contracts is an authoritative legal standard and a time-saving tool for international exporters and importers. The model contract is divided into two parts – Specific Conditions, which permit the parties to set out the details and conditions of a particular transaction; and General Conditions, providing a platform of standard legal terms for all transactions. The General Conditions can be used together with the Specific Conditions, or independently, and an introductory section explains how the contract should be used, including helpful tips and reminders. This ICC Model Contract provides clear and equitable solutions to the key practical and legal issues arising in international transactions. With ICC Incoterms definitions and Golden Rules and the UNCITRAL Vienna Convention on Contracts for the International Sale of Goods (CISG) annexed for easy reference, this flexible and secure model makes simple work of the drafting of an international sale contract.

The ICC Model International Sale Contract Manufactured goods intended for resale Includes the text of the specific and general conditions on CDrom

ICC Publication N°556 ISBN 92-842-1210-3

9:HSTCSE=WVWVUV:

PUBLISHING SA An affiliate of ICC: the world business organization 38, Cours Albert 1er, 75008 Paris, France Telephone +33 1 49 53 29 23 / 28 89 Fax +33 1 49 53 29 02 www.iccbooks.com E-mail [email protected]

The world business organization

The ICC Model International Sale Contract Manufactured goods intended for resale

International Chamber of Commerce

The world business organization

Published in December 1997 by ICC PUBLISHING S.A. (Paris) Reprinted November 1998, December 1999 and October 2000 Copyright © 1997 ICC (International Chamber of Commerce) All rights reserved. No part of this work may be reproduced or copied in any form or by any means without written permission of ICC Publishing SA, except by the purchaser of this ICC publication N°556, for his own personal use. This publication may not be reproduced in whole or in part for sale, hire or licensing or any other commercial purpose without written permission of ICC Publishing SA. The software being part of the publication is subject to this provision.

ICC publication N°556 (E) ISBN 92-842-1210-3

THE ICC MODEL INTERNATIONAL SALE CONTRACT

ACKNOWLEDGEMENTS The ICC Model International Sale Contract is intended to provide a reliable and equitable standard legal platform for the global export-import sector. The International Chamber of Commerce (ICC), as the world business organization, has sought to respond to the need for a set of clear and concise standard contractual conditions which balance the interests of export sellers and import buyers. This model contract, the third in a successful series produced under the Chairmanship of Fabio Bortolotti (Italy), has benefited from the extensive drafting contributions of the Chairman of the ICC Commission on International Commercial Practice, Roy Goode (U.K.), as well as from the Commission Vice-Chairman, Jan Ramberg (Sweden) and Incoterms Panel Co-rapporteur, Charles Debattista (U.K.). Other ICC members who participated actively in drafting or commenting upon the contract were: Martin Vetter (Austria), Hans Van Houtte (Belgium), Didier Matray (Belgium), Ole Lando (Denmark), Sarno Lindberg (Finland), Lauri Railas (Finland), Didier Ferrier (France), and Klaus Meyer Swantee (Netherlands). As always, the ICC National Committees around the world were instrumental in circulating early drafts of this contract to their trading communities for comment. Administrative support was provided by ICC staff: Anne-Marie Harper, Guillermo Jiménez, Emmanuel Jolivet and Pascale Reins. The ICC would also like to thank Gerold Herrmann, Secretary General of Uncitral, for his kind permission to reprint in its entirety the Vienna Convention on the International Sale of Goods.

Maria Livanos Cattaui Secretary General International Chamber of Commerce

3

INTERNATIONAL CHAMBER OF COMMERCE

TABLE OF CONTENTS page Acknowledgements

3

Introduction

5

The ICC Model International Sale Contract A. Specific Conditions

15

B. General Conditions

19

Annexes Specimen form of Model Contract

24

Incoterms 2000 – Preambles

27

United Nations Convention on Contracts for the International Sale of Goods (CSIG)

34

ICC at a Glance

61

Selected ICC Publications

62

For more information on the ICC Model Contracts and other ICC publications, please contact ICC Publishing at: ICC Publishing 38 Cours Albert 1er 75008 Paris France tel.: (33 1) 49 53 29 23 fax: (33 1) 49 53 29 02 e-mail: [email protected] or consult the ICC Publishing web site at www.iccbooks.com

4


INTRODUCTION

1. General characteristics

The ICC Model International Sale Contract is divided into two parts: A.

Specific Conditions, setting out terms which are special to a particular contract of sale; and

B.

General Conditions, setting out standard terms common to all contracts incorporating the ICC General Conditions of sale.

The model has been designed on the assumption that parties would normally use both Parts A and B, with each part being drafted with the other part in mind. On the other hand, it is open to the parties to incorporate into their contract only part B, the General Conditions. Where the parties wish to use only part B of this model contract, they should include terms such as the following in their special contract: “This contract shall be governed by the ICC General Conditions of Sale (Manufactured Goods Intended for Resale).” Of course, in this case part A would not be used and any reference in part B to the clauses in part A would be deemed to refer instead to any relevant specific term, if any, agreed by the parties in their special contract: see article 1.1 of part B.

2. Scope of application

This model contract is primarily directed at contracts for the sale of manufactured goods intended for resale, where the purchaser is not a consumer and where the contract is an independent transaction rather than part of a long-term supply arrangement. Each of these features of the contracts for which this model is intended will now be dealt with. •

“Manufactured goods”: the model contract does not cater for the special terms required in contracts for the sale of commodities, in particular raw material, agricultural produce or food and perishable goods.

•

“Intended for resale”: the model is primarily intended for goods sold and bought in general commerce and which can easily be substituted, rather than for custom-built goods or equipment purchased by the end user. For these specially produced goods and more generally for machinery and equipment, other standard terms may be more appropriate, e.g. the ECE 188 General Conditions or the Orgalime General Conditions for the supply of mechanical, electrical and associated electronic products.

•

The model contract does not cover sales to consumers, but only to purchasers who are in the business of re-selling goods, e.g. distributors, importers, wholesalers, etc.

•

The model is principally designed for one-off sales rather than continuing supply arrangements1. This is the reason why the model does not contain terms more likely to appear within long-term supply agreements, such as price adjustment clauses.

1

However, if the parties enter into an agreement setting up the framework for a number of individual sale contracts (like a distribution agreement) the sale contracts made under such framework agreement may be governed individually by these conditions.

5


It should be emphasized that the above guidance is intended only to advise potential users of the model contract of the intentions of the Working Party responsible for drafting the model contract; it is not intended to prevent the use of the model contract (and in particular of the General Conditions contained in part B) in transactions other than those particularly targeted by the Working Party. However, if the model contract is used in the context of goods which are substantially different from those primarily considered by the Working Party, the parties should take care to satisfy themselves that all the terms of the model contract are appropriate for their purpose.

3. Applicable law

Failing contrary agreement between the parties, the model contract subjects the transaction to the United Nations Convention for the International Sale of Goods (hereafter referred to as CISG), also known as the Vienna Convention of 1980 and which, for ease of reference, is appended to the model contract as an annex. By means of this incorporation of the Vienna Convention into the model contract in article 1.2(A) of Part B, the Convention will apply, whether or not the countries of the seller and buyer have ratified the Vienna Convention. The working party chose to apply the Convention in default of contrary agreement because it was felt appropriate to adopt a uniform law, such as CISG, expressly made for international transactions. The model contract has been drafted on the assumption that the parties’ rights will be governed by the Vienna Convention and, as to questions not covered by the Convention, by the law of the country where the seller has his place of business (article 1.2). Accordingly parties are encouraged not to choose a domestic law of sale to govern the contract. Although CISG does not cover all aspects of the sale contract, it promotes uniformity and consistency. If, however, parties wish to choose a domestic law in place of CISG (by filling in box A-14(a) of part A), they should carefully check to ensure that the domestic law they have chosen to apply does not conflict with the terms of the model contract. If they wish to choose a law other than that of the seller to govern questions not covered by CISG, they should fill in box A-14(b).

4. Modifications to be evidenced in writing

With a view to ensuring maximum certainty regarding the terms agreed between the parties, article 1.5 of Part B provides that modifications to the contract must be made in writing. However, this requirement is not absolute. In keeping with article 29(2) of CISG, article 1.5 of the model contract goes on to say that a party may be precluded from invoking the requirement of writing if he has agreed to a modification of written terms orally or by conduct and the other party has relied on such oral agreement or conduct.

5. Shipment and delivery conditions

The parties are invited to choose the appropriate trade term2 under Incoterms3. Although Part A of the model contract lists all current Incoterms in A-3, the Working Party recommends that the parties should seriously consider avoiding the use of terms requiring transferable transport documents, like bills of lading, such as the CFR and CIF Incoterms: manufactured goods are rarely sold or pledged in transit and consequently rarely require the use of a transferable transport document. Likewise, parties ought to think carefully before using, in conjunction with this model contract, Incoterms providing for delivery to, or discharge from, a vessel, such as FAS, FOB, DES and DEQ. Manufactured goods are normally handed over for carriage at terminals, whether within the port precincts or at an inland depot, and the use of such terms might consequently be inappropriate to the type of goods for which the model contract is intended.

2 3 6

In the absence of such choice EXW shall apply: see art. 8. The current version is Incoterms 2000 (ICC Publication no. 560).


Consequently, the Working Party recommends that the Incoterms most appropriate for use with the model contract would normally be EXW, FCA, CPT, CIP, DAF, DDU or DDP. It is for this reason that these terms are listed first rather than in the order set out in Incoterms. Contracting parties are also reminded that while Incoterms spell out the main duties of, and the allocation of, risk and costs as between sellers and buyers, they do not provide comprehensive answers to all the possible issues which may arise between the parties. Thus, for example, in some Incoterms, e.g. FOB, neither of the parties is under an obligation to insure, and consequently it is up to the parties to agree among themselves who is to effect any insurance cover. Again, the CIP, CPT and FCA terms do not allocate the incidence of terminal handling charges: the allocation of such charges between sellers and buyers is therefore a matter for special agreement between the parties.

6. Time of delivery

It is important to bear in mind that the time of delivery, to be inserted by the parties at A-4 of Part A of the model contract, refers to the date on which, or period within which, the seller undertakes to perform his delivery obligations under the contract of sale, and in particular under the relevant Incoterm selected by the parties. This “time of delivery” is linked to the contractual place of delivery, which is not necessarily the place where the goods reach the buyer. Thus under CPT (Carriage Paid To) the seller fulfils his obligation to deliver the goods (according to clause A4 of this Incoterm) when he delivers the goods into the custody of the carrier and not when the goods arrive at the named place of destination. The Working Party therefore recommends that, before agreeing on the time of delivery by completing A-4 of Part A of the model contract, parties should check carefully the stage at which delivery occurs according to the Incoterm chosen in A-3 of the model contract: i.e. the operation described as delivery under the relevant Incoterm which the seller must perform at, or by the time agreed in A-4 of the model contract. The parties can agree a time of delivery by agreeing a precise date (e.g. “10 February 1998” or “by 10 February 1998”) or a period (e.g. “third week of February 1998”, “March 1998”). The parties can also agree a period of time running from a certain date (e.g. “60 days from signature of the sale contract”, “90 days after receipt of the agreed advance payment”). If a period of time is agreed, the seller may, according to article 33 CISG, deliver the goods at any time within that period, unless circumstances indicate that the buyer is to choose a date.

7. Payment conditions

It is important to designate the mode and time of payment as set out in A-7. Where payment is to be made by transfer to the seller’s bank, the name and address of the bank and branch should be stated, together with details sufficient to identify the account, and, if desired, the mode of the payment message (e.g. wire transfer, electronic funds transfer).

8. Documents to be provided by the seller

It is common practice in international sales that the seller provides the buyer with certain documents: invoice, transport document, certificates, etc. A-8 of Part A of the model contract provides the parties with an opportunity expressly to indicate their intentions as to documents. Two matters are well worth bearing in mind: (a) Parties should check which documents, if any, are to be provided under the particular Incoterm chosen under A-3 of Part A. Should the parties wish to add to or vary the documentary position under the Incoterm chosen, they should do so clearly in completing A-8 in Part A. (b) Where the parties agree on payment through a letter of credit, care should be taken to ensure that the parties are clear as to the documents to be required under the letter of credit. This

7


For the guidance of users of this model contract, the following box contains a list of some transport documents in common use, with an indication of the type of transport for which they are appropriate. Some of the documents listed hereunder are documents of title, which give to their holder the right to dispose of the goods, while others are simply documents which evidence the delivery of the products to a carrier or warehouseman.

8

Type of Document Mode of Transport Comments

Bill of Lading Sea. Also frequently used for multimodal transport. Transferable Document of Title allowing buyer to sell or pledge goods while in transit by transferring the documents at any rate where made out “to order”.


Multimodal Transport Document Transit involving carriage by at least two different modes of transport. Known by many names: Combined Transport Document, Container Bill of Lading, Fiata Multimodal Transport Bill of Lading and other variations.


Seawaybill Sea. Known by many names: Cargo Quay Receipt, Non-negotiable Bill of Lading, Liner Waybill. Non Transferable. Seller may alter delivery directions until discharge, unless the SWB contains a NO DISP clause preventing such change.


Mate’s Receipt Sea. Document providing proof of delivery to a carrier. Sometimes given to shipper when selling FOB or FCA, to be tendered to buyer instead of Bill of Lading.


Air Waybill Air. Sometimes also known as air consignment note.


Consignment Note Land. Also sometimes known as CIM (rail) or CMR (road) consignment note or waybill.


Warehouse Warrant Land & Sea. Transferable document used when the goods are warehoused for collection by buyer at seller’s end or at buyer’s end.


Freight-forwarder’s Documents Sea, Air, Land or multimodal. Important to identify whether the forwarder is undertaking responsibility for the carriage of the goods as carrier or as agent of the carrier.


Packing List Sea, Land or multimodal. A document recording what has been packed into a lorry, package or container. May represent proof of delivery as between seller and buyer, but important to identify who has issued the list and at what stage.


9. Retention of title

The parties may agree, by completing A-6 of Part A of the model contract or otherwise, that the goods will remain the property of the seller until complete payment of the price, as indicated in article 7 of Part B of the model contract. It should however be remembered that under many national laws retention of title of goods intended for resale is not always effective. The seller should therefore carefully check under the relevant law (which normally will be the law of the country where the goods are situated) if and to what extent he may rely on article 7 of Part B4.

10. Warranty to consumers

Manufacturers of the type of goods for which this model contract is primarily intended typically grant a warranty (for repair and/or replacement as the case may be) to the ultimate purchaser (consumer). In such a case, the manufacturer’s warranty to the final user may overlap with the obligations of the seller under the sale contract. In fact, where the goods are defective, the final purchaser may, in principle, make a claim against his seller under the sale contract or directly against the manufacturer under the warranty given by him. In these cases, it may be appropriate for the parties to the international sale contract specifically to agree that the buyer will co-operate with the seller – who might himself be the manufacturer – in managing the warranty, for example by confirming the date of the on-sale to the ultimate consumer, normally the commencement date of the manufacturer’s warranty. The parties may also agree that the buyer will perform on the manufacturer’s behalf certain obligations under the warranty, for example the duties of repair or replacement of non-conforming goods. Elements of desirable co-operation between the parties are provided for in article 12 of Part B of the model contract. Parties may wish to stipulate for other aspects of co-operation by appropriate stipulation in A-16 of Part A of the model contract.

11. Limitations of liability

In line with general practice in international trade, Part B of the model contract provides for a limitation of the amount of damages that may be claimed against a defaulting party, in order to reach a reasonable compromise between the buyer’s interest to claim the full loss caused by the seller’s breach and the seller’s interest to maintain his liability for damages within clearly foreseeable limits. Since it is impossible to strike such a balance in standard terms for all types of products, the Working Party chose to state basic formulae in Part B (at articles 10.1, 10.4, 11.3, 11.5 and 11.6) but expressly giving the parties an opportunity (at A-10, A-11 and A-12 of Part A) to agree on a modification of such formulae. (a)

Delay in delivery or non-delivery

The buyer may claim for delay in delivery: (i)

the liquidated damages provided under article 10.1, i.e. 0.5% per week with a maximum amount of 5% of the price of the delayed goods5, and

(ii) where the contract is terminated by the buyer for late delivery under articles 10.2 or 10.3, the buyer may recover, in addition to the above liquidated damages, an amount for proven loss not exceeding 10% of the price of the non-delivered goods: see article 10.4.

4

For more information on this topic see the Guide on Retention of Title, 2nd ed., (ICC Publication no. 501 out of print ) and Transfer of Ownership in International Trade (ICC Publication no. 546).

5

This amount is reached after 10 weeks, which is also the time limit after which the buyer may terminate the contract. The buyer must notify the seller of the delay and if he does not do so within 15 days from the agreed delivery date damages will run only from the date of notice.

9


The damages referred to in (i) relate to delay in delivery of goods which are ultimately delivered and accepted. In this case, the buyer is entitled to the liquidated damages on mere proof of delay, and without showing actual loss, up to a maximum of 5% of the price of the delayed goods. The damages referred to in (ii) deal with the case where the buyer exercises a right to terminate the contract for delay. In this case he is still entitled to liquidated damages as above but can claim further damages (not exceeding 10% of the price) only if, and to the extent that, he proves additional loss after taking account of the liquidated damages to which he is entitled. Finally, the parties may modify the formulae in article 10.1 and 10.4 by completing A-10 of Part A of the model contract. (b)

Lack of conformity

The structure of remedies for delivery of non-conforming goods follows that applicable to delay in delivery. The breach does not by itself give the buyer the right to terminate the contract and, if the seller cures the breach, the buyer’s damages are limited to liquidated damages for the delay involved up to an amount which, when aggregated with the damages for the first period of delay (if any) under article 10.1, does not exceed 5% of the price of the non-conforming goods. Only where the non-conformity is not cured (and the contract is terminated) is the buyer entitled to further damages for any additional loss he is able to prove over and above reimbursement of the price and liquidated damages for delay. If the buyer notifies the seller of the non-conformity of the goods, the seller has three options: to replace the goods, to repair them, or to reimburse the price. Should the seller delay in replacing the goods or repairing them, the buyer is entitled to liquidated damages for delay in the same formula set out above under heading (a)(i). On the other hand, should the buyer choose to accept non-conforming goods, he is entitled to recover from the seller the difference in value compared with conforming goods, subject to a limit of 15% of the price of such goods. Finally, if the contract is terminated, the buyer can claim, as well as reimbursement of the price and damages for delay, additional damages for any loss he can establish up to a maximum of 10% of the price of the non-conforming goods. The Working Party felt that these formulae represent a fair balance between the conflicting interests of the parties, who can nonetheless agree otherwise. By completing A-11 of Part A, the parties can modify the above balance by deciding: (a) to fix a maximum amount of liability which is higher (or lower) than the 10% limit of article 11.5, or (b) to provide otherwise.

12. Termination of contract by the buyer in case of breach

The model contract envisages three circumstances in which the buyer is entitled to terminate the contract on account of the seller’s breach: (a) where the seller fails to deliver goods by the cancellation date agreed in Box A-9 in part A of the model contract: see article 10.2; or (b) in the absence of such an agreed date, where the seller, duly notified of delay in delivery according to article 10.1, fails to deliver goods when the maximum amount of liquidated damages for delay is due, i.e. after 10 weeks from the date on which the seller should have delivered the goods and after five days from receipt by the seller of a notice to terminate: see article 10.3; or (c)

10

where the seller fails to repair or replace non-conforming goods when the maximum aggregate of 5 % of the price of the delayed and/or non-conforming goods has been reached (that is, in the case of non-conformity, after 10 weeks from the date of notification) and after five days from receipt by the seller of a notice to terminate: see


article 11.4.

13. Force majeure

The force majeure clause, contained in article 13 of part B of the model contract, is based on the force majeure clause of the ICC, with some modifications intended more efficiently to allocate losses in the case of commonly recognized instances of force majeure.

14. Resolution of disputes

Through the completion of Box A-15 in Part A of the model contract, the parties may choose between arbitration and litigation for the resolution of disputes arising under the contract. Whether they choose arbitration or litigation, the parties are also invited to specify the place of arbitration or litigation. Where the parties fail to choose between arbitration and litigation, the model contract assumes that ICC arbitration is the preferred method intended by the parties for the resolution of disputes. If the parties choose litigation, without indicating the forum, ordinary courts will have jurisdiction according to the applicable rules of law.

11


The ICC Model International Sale Contract A. Specific Conditions B. General Conditions

Copyright © 1997 ICC (International Chamber of Commerce) All rights reserved. No part of this work may be reproduced or copied in any form or by any means without written permission of ICC Publishing SA, except by the purchaser of this ICC publication N°556, for his own personal use. This publication may not be reproduced in whole or in part for sale, hire or licensing or any other commercial purpose without written permission of ICC Publishing SA. The software being part of the publication is subject to this provision. 13

ICC International Sale Contract

(Manufactured Goods Intended for Resale)

A. SPECIFIC CONDITIONS These Specific Conditions have been prepared in order to permit the parties to agree the particular terms of their sale contract by completing the spaces left open or choosing (as the case may be) between the alternatives provided in this document. Obviously this does not prevent the parties from agreeing other terms or further details in box A-16 or in one or more annexes. SELLER

CONTACT PERSON

BUYER

CONTACT PERSON

NAME AND ADDRESS

NAME AND ADDRESS

NAME AND ADDRESS

NAME AND ADDRESS

................................................................... ...................................................................... ...................................................................... .......................................................................... ................................................................... ...................................................................... ...................................................................... .......................................................................... ................................................................... ...................................................................... ...................................................................... .......................................................................... A-1 GOODS SOLD DESCRIPTION OF THE GOODS

IF THERE IS INSUFFICIENT SPACE PARTIES MAY USE AN ANNEX

A-2 CONTRACT PRICE (ART. 4) CURRENCY:

AMOUNT IN NUMBERS:

AMOUNT IN LETTERS:

A-3 DELIVERY TERMS

Recommended terms (according to Incoterms 2000): see Introduction, §5

■ ■ ■ ■ ■ ■ ■

EXW

Ex Works

named place:

FCA

Free Carrier

CPT

Carriage Paid To

named place of destination:

CIP

Carriage and Insurance Paid To


DAF

Delivered At Frontier

DDU

Delivered Duty Unpaid


DDP

Delivered Duty Paid


named place:

named place:

Other terms (according to Incoterms 2000: see Introduction, § 5)

■ ■ ■ ■ ■ ■

FAS

Free Alongside Ship

named port of shipment:

FOB

Free On Board

CFR

Cost, and Freight

CIF

Cost Insurance and Freight

named port of destination:

DES

Delivered Ex Ship


DEQ

Delivered Ex Quay


named port of shipment: named port of destination:

Other delivery terms

■ CARRIER (where applicable) NAME AND ADDRESS

CONTACT PERSON

............................................................................................................................................. ..................................................................................................................................................... ............................................................................................................................................. ..................................................................................................................................................... ............................................................................................................................................. ..................................................................................................................................................... A-4 TIME OF DELIVERY

The present contract of sale will be governed by these Specific Conditions (to the extent that the relevant boxes have been completed) and by the ICC General Conditions of Sale (Manufactured Goods Intended for Resale) which constitute part B of this document. SELLER

BUYER

SIGNATURE

SIGNATURE

_________________________________________ ___________________________________________ PLACE ________________________________

DATE ____________________________________

PLACE___________________________________

DATE ____________________________________

A-4 TIME OF DELIVERY

Indicate here the date or period (e.g. week or month) at which or within which the Seller must perform his delivery obligations according to clause A.4 of the respective Incoterm (see Introduction, § 6)

A-5 INSPECTION OF THE GOODS BY BUYER (ART. 3)

■ Before shipment ■ Other:

Place of inspection:

A-6 RETENTION OF TITLE (ART. 7)

■ ■

YES NO

A-7 PAYMENT CONDITIONS (ART. 5)

■ Payment on open account (art. 5.1) Time for payment (if different from art. 5.1)

days from date of invoice.

Other:

■ Open account backed by demand guarantee or standby letter of credit (art. 5.5)

■ Payment in advance (art. 5.2): ■ Total price

Date (if different from art. 5.2):

■

% of the price

■ Documentary Collection (art. 5.5) ■ D/P Documents against payment

■ D/A Documents against acceptance

■ Irrevocable documentary credit (art. 5.3)

■ Confirmed

■ Unconfirmed

Place of issue (if applicable):

Place of confirmation (if applicable):

Credit available:

Partial shipments:

Transhipment:

■ ■ ■ ■

■ Allowed ■ Not allowed

■ Allowed ■ Not allowed

By payment at sight By deferred payment at: By acceptance of drafts at:

days days

By negotiation

Date on which the documentary credit must be notified to seller (if different from art. 5.3)

■

■ other:

days before date of delivery

■ Other (e.g. cheque, bank draft, electronic funds transfer to designated bank account of seller) A-8 DOCUMENTS

Indicate here documents to be provided by Seller. Parties are advised to check the Incoterm they have selected under A-3 of these Specific Conditions. (As concerns transport documents, see also Introduction, § 8)

■ ■ ■ ■

Transport documents: indicate type of transport document required Commercial Invoice Packing list Insurance document

■ ■ ■

Certificate of origin Certificate of inspection Other:

A-9 CANCELLATION DATE

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ARTICLE 10.3 If the goods are not delivered for any reason whatsoever (including force majeure) by (date)

the Buyer will be entitled to CANCEL THE CONTRACT IMMEDIATELY BY NOTIFICATION TO THE SELLER

A-10 LIABILITY FOR DELAY (ART. 10.1, 10.4 AND 11.3)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 10.1, 10.4 OR 11.3 Liquidated damages for delay in delivery shall be:

■

% (of price of delayed goods) per week, with a maximum of

% (of price of delayed goods)

or:

■

(specify amount)

In case of termination for delay, Seller's liability for damages for delay is limited to of the price of the non-delivered goods

%

A-11 LIMITATION OF LIABILITY FOR LACK OF CONFORMITY (ART. 11.5)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.5. Seller's liability for damages arising from lack of conformity of the goods shall be:

■

limited to proven loss (including consequential loss, loss of profit, etc.) not exceeding contract price;

% of the

or:

■

as follows (specify):

A-12 LIMITATION OF LIABILITY WHERE NON-CONFORMING GOODS ARE RETAINED BY THE BUYER (ART. 11.6)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.6 The price abatement for retained non-conforming goods shall not exceed:

■

% of the price of such goods

or:

■

(specify amount)

A-13 TIME-BAR (Art.11.8)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.8. Any action for non-conformity of the goods (as defined in article 11.8) must be taken by the Buyer not later than from the date of arrival of the goods at destination. A-14(a), A-14(b) APPLICABLE LAW (Art.1.2)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO SUBMIT THE SALE CONTRACT TO A NATIONAL LAW INSTEAD OF CISG, the solution hereunder is not recommended (see Introduction, § 3) This sales contract is governed by the domestic law of

(country)

To be completed if the parties wish to choose a law other than that of the seller for questions not covered by CISG Any questions not covered by CISG will be governed by the law of

(country)

A-15 RESOLUTION OF DISPUTES (Art.14)

The two solutions hereunder (arbitration or litigation before ordinary courts) are alternatives: parties cannot choose both of them. If no choice is made, ICC arbitration will apply, according to art. 14

■

ARBITRATION

■

■ ICC (according to art. 14.1)

In case of dispute the courts of

LITIGATION (ordinary courts)

Place of arbitration

■ Other A-16 OTHER

(place) (specify)

shall have jurisdiction

ICC International Sale Contract (Manufactured Goods Intended for Resale) B. GENERAL CONDITIONS

ICC General Conditions of Sale (Manufactured Goods Intended for Resale) 2.2 Unless otherwise agreed, the Buyer does not acquire Art. 1 General

1.1 These General Conditions are intended to be applied together with the Specific Conditions (part A) of the ICC International Sale Contract (Manufactured Goods Intended for Resale), but they may also be incorporated on their own into any sale contract. Where these General Conditions (Part B) are used independently of the said Specific Conditions (Part A), any reference in Part B to Part A will be interpreted as a reference to any relevant specific conditions agreed by the parties. In case of contradiction between these General Conditions and any specific conditions agreed upon between the parties, the specific con-

any property rights in software, drawings, etc. which may have been made available to him. The Seller also remains the exclusive owner of any intellectual or industrial property rights relating to the goods.

Art. 3 Inspection of the goods before shipment

If the parties have agreed that the Buyer is entitled to inspect the goods before shipment, the Seller must notify the Buyer within a reasonable time before the shipment that the goods are ready for inspection at the agreed place.

ditions shall prevail. 1.2 Any questions relating to this Contract which are not expressly or implicitly settled by the provisions contained in the Contract itself (i.e. these General Conditions and any specific conditions agreed upon by the parties) shall be governed: A.

B.

by the United Nations Convention on Contracts for the International Sale of Goods (Vienna

Art. 4 Price

4.1 If no price has been agreed, the Seller's current list price at the time of the conclusion of the Contract shall apply. In the absence of such a current list price, the price generally charged for such goods at the time of the conclusion of the Contract shall apply.

Convention of 1980, hereafter referred to as CISG), and

4.2 Unless otherwise agreed in writing, the price does not include VAT, and is not subject to price adjustment.

to the extent that such questions are not covered by CISG, by reference to the law of the country where the Seller has his place of business.

4.3 The price indicated under A-2 (contract price) includes any costs which are at the Seller's charge according to this Contract. However, should the Seller bear any costs which, according to this Contract, are for the Buyer's account (e.g. for transportation or insurance under EXW or FCA), such sums shall not be considered as having been included in the price

1.3 Any reference made to trade terms (such as EXW, FCA, etc.) is deemed to be made to the relevant term of Incoterms published by the International Chamber of Commerce. 1.4 Any reference made to a publication of the International Chamber of Commerce is deemed to be

under A-2 and shall be reimbursed by the Buyer.

Art. 5 Payment conditions

made to the version current at the date of conclusion of the Contract. 1.5 No modification of the Contract is valid unless agreed or evidenced in writing. However, a party may be precluded by his conduct from asserting this provision to the extent that the other party has relied on that conduct.

Art. 2 Characteristics of the goods

2.1 It is agreed that any information relating to the goods and their use, such as weights, dimensions, capacities, prices, colours and other data contained in catalogues, prospectuses, circulars, advertisements, illustrations, price-lists of the Seller, shall not take effect as terms of the Contract unless expressly referred to in the Contract.

5.1 Unless otherwise agreed in writing, or implied from a prior course of dealing between the parties, payment of the price and of any other sums due by the Buyer to the Seller shall be on open account and time of payment shall be 30 days from the date of invoice. The amounts due shall be transferred, unless otherwise agreed, by teletransmission to the Seller’s bank in the Seller’s country for the account of the Seller and the Buyer shall be deemed to have performed his payment obligations when the respective sums due have been received by the Seller's bank in immediately available funds. 5.2 If the parties have agreed on payment in advance, without further indication, it will be assumed that such advance payment, unless otherwise agreed, refers to the full price, and that the advance payment must be received by the Seller's bank in immediately available

funds at least 30 days before the agreed date of delivery or the earliest date within the agreed delivery period. If advance payment has been agreed only for a part of the contract price, the payment conditions of the remaining amount will be determined according to the rules set forth in this article. 5.3 If the parties have agreed on payment by documentary

Art. 8 Contractual term of delivery

Unless otherwise agreed, delivery shall be “Ex Works” (EXW).

Art. 9 Documents

credit, then, unless otherwise agreed, the Buyer must arrange for a documentary credit in favour of the Seller to be issued by a reputable bank, subject to the

Unless otherwise agreed, the Seller must provide the documents (if any) indicated in the applicable Incoterm

Uniform Customs and Practice for Documentary Credits published by the International Chamber of

or, if no Incoterm is applicable, according to any previous course of dealing.

Commerce, and to be notified at least 30 days before the agreed date of delivery or at least 30 days before the earliest date within the agreed delivery period. Unless otherwise agreed, the documentary credit

Art. 10 Late-delivery, non-delivery and remedies therefor

shall be payable at sight and allow partial shipments and transhipments.

10.1 When there is delay in delivery of any goods, the Buyer is entitled to claim liquidated damages equal

5.4 If the parties have agreed on payment by documentary collection, then, unless otherwise agreed, documents will be tendered against payment (D/P) and the tender will in any case be subject to the Uniform Rules for Collections published by the International Chamber of Commerce. 5.5 To the extent that the parties have agreed that payment is to be backed by a bank guarantee, the Buyer is to provide, at least 30 days before the agreed date of delivery or at least 30 days before the earliest date within the agreed delivery period, a first demand bank guarantee subject to the Uniform Rules for Demand Guarantees published by the International Chamber of Commerce, or a standby letter of credit subject either to such Rules or to the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce, in either case issued by a reputable bank.

Art. 6 Interest in case of delayed payment

to 0.5% or such other percentage as may be agreed of the price of those goods for each complete week of delay, provided the Buyer notifies the Seller of the delay. Where the Buyer so notifies the Seller within 15 days from the agreed date of delivery, damages will run from the agreed date of delivery or from the last day within the agreed period of delivery. Where the Buyer so notifies the Seller after 15 days of the agreed date of delivery, damages will run from the date of the notice. Liquidated damages for delay shall not exceed 5% of the price of the delayed goods or such other maximum amount as may be agreed. 10.2 If the parties have agreed upon a cancellation date in Box A-9, the Buyer may terminate the Contract by notification to the Seller as regards goods which have not been delivered by such cancellation date for any reason whatsoever (including a force majeure event). 10.3 When article 10.2 does not apply and the Seller has not delivered the goods by the date on which the Buyer has become entitled to the maximum amount of liquidated damages under article 10.1, the Buyer may give notice in writing to terminate the Contract as regards such

6.1 If a party does not pay a sum of money when it falls due the other party is entitled to interest upon that sum from the time when payment is due to the time of payment. 6.2 Unless otherwise agreed, the rate of interest shall be 2% above the average bank short-term lending rate to prime borrowers prevailing for the currency of

goods, if they have not been delivered to the Buyer within 5 days of receipt of such notice by the Seller. 10.4 In case of termination of the Contract under article 10.2 or 10.3 then in addition to any amount paid or payable under article 10.1, the Buyer is entitled to claim damages for any additional loss not exceeding 10% of the price of the non-delivered goods.

payment at the place of payment, or where no such rate exists at that place, then the same rate in the State of the currency of payment. In the absence of such a rate at either place the rate of interest shall be the appropriate rate fixed by the law of the State of the currency of payment.

Art. 7 Retention of title

If the parties have validly agreed on retention of title, the goods shall remain the property of the Seller until the complete payment of the price, or as otherwise agreed.

10.5 The remedies under this article are exclusive of any other remedy for delay in delivery or non-delivery.

Art. 11 Non-conformity of the goods

11.1 The Buyer shall examine the goods as soon as possible after their arrival at destination and shall notify the Seller in writing of any lack of conformity of the goods within 15 days from the date when the Buyer discovers or ought to have discovered the lack of conformity. In any case the Buyer shall have no remedy for lack of conformity if he fails to notify the Seller thereof within 12 months from the date of arrival of the goods at the agreed destination.

11.2 Goods will be deemed to conform to the Contract despite minor discrepancies which are usual in the particular trade or through course of dealing between the parties, but the Buyer will be entitled to any abatement of the price usual in the trade or through course of dealing for such discrepancies.

Art. 12 Cooperation between the parties

12.1 The Buyer shall promptly inform the Seller of any claim made against the Buyer by his customers or third parties concerning the goods delivered or intellectual property rights related thereto.

11.3 Where goods are non-conforming (and provided the Buyer, having given notice of the lack of conformity in compliance with article 11.1, does not elect in the notice to retain them), the Seller shall at his option:

12.2 The Seller will promptly inform the Buyer of any claim which may involve the product liability of the Buyer.

(a)

replace the goods with conforming goods, without any additional expense to the Buyer, or

Art. 13 Force majeure

(b)

repair the goods, without any additional expense to the Buyer, or

13.1 A party is not liable for a failure to perform any of his obligations in so far as he proves:

(c)

reimburse to the Buyer the price paid for the non-conforming goods and thereby terminate

(a)

the Contract as regards those goods.

(b)

that the failure was due to an impediment beyond his control, and that he could not reasonably be expected to

The Buyer will be entitled to liquidated damages as quantified under article 10.1 for each complete week

have taken into account the impediment and its effects upon his ability to perform at the time of

of delay between the date of notification of the nonconformity according to article 11.1 and the supply of substitute goods under article 11.3(a) or repair under article 11.3(b) above. Such damages may be accumulated with damages (if any) payable under article 10.1, but can in no case exceed in the aggregate 5% of the price of those goods.

the conclusion of the Contract, and

11.4 If the Seller has failed to perform his duties under article 11.3 by the date on which the Buyer becomes entitled to the maximum amount of liquidated damages according to that article, the Buyer may give notice in writing to terminate the Contract as regards the nonconforming goods unless the supply of replacement goods or the repair is effected within 5 days of receipt of such notice by the Seller. 11.5 Where the Contract is terminated under article 11.3(c) or article 11.4, then in addition to any amount paid or payable under article 11.3 as reimbursement of the price and damages for any delay, the Buyer is entitled to damages for any additional loss not exceeding 10% of the price of the non-conforming goods. 11.6 Where the Buyer elects to retain non-conforming goods, he shall be entitled to a sum equal to the difference between the value of the goods at the agreed place of destination if they had conformed with the Contract and their value at the same place as delivered, such sum not to exceed 15% of the price of those goods. 11.7 Unless otherwise agreed in writing, the remedies under this article 11 are exclusive of any other remedy for non-conformity. 11.8 Unless otherwise agreed in writing, no action for lack of conformity can be taken by the Buyer, whether before judicial or arbitral tribunals, after 2 years from the date of arrival of the goods. It is expressly agreed that after the expiry of such term, the Buyer will not plead non-conformity of the goods, or make a counterclaim thereon, in defence to any action taken by the Seller against the Buyer for non-performance of this Contract.

(c)

that he could not reasonably have avoided or overcome it or its effects.

13.2 A party seeking relief shall, as soon as practicable after the impediment and its effects upon his ability to perform become known to him, give notice to the other party of such impediment and its effects on his ability to perform. Notice shall also be given when the ground of relief ceases. Failure to give either notice makes the party thus failing liable in damages for loss which otherwise could have been avoided. 13.3 Without prejudice to article 10.2, a ground of relief under this clause relieves the party failing to perform from liability in damages, from penalties and other contractual sanctions, except from the duty to pay interest on money owing as long as and to the extent that the ground subsists. 13.4 If the grounds of relief subsist for more than six months, either party shall be entitled to terminate the Contract with notice.

Art. 14 Resolution of disputes

14.1 Unless otherwise agreed in writing, all disputes arising in connection with the present Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. 14.2 An arbitration clause does not prevent any party from requesting interim or conservatory measures from the courts.


Annexes • Specimen form of Model Contract • Incoterms 2000 Preambles

• United Nations Convention on Contracts for the International Sale of Goods (CSIG)

23


Specimen form of model contract

ICC International Sale Contract

(Manufactured Goods Intended for Resale)

A. SPECIFIC CONDITIONS These Specific Conditions have been prepared in order to permit the parties to agree the particular terms of their sale contract by completing the spaces left open or choosing (as the case may be) between the alternatives provided in this document. Obviously this does not prevent the parties from agreeing other terms or further details in box A-16 or in one or more annexes. SELLER

CONTACT PERSON

BUYER

CONTACT PERSON

NAME AND ADDRESS

NAME AND ADDRESS

NAME AND ADDRESS

NAME AND ADDRESS

Continental .....................................Export .......................plc ....... ..Alan ................Bell .................................................... 7.....Smithfield ....................................Terrace .......................... ..7......Smithfield ....................................Terrace .......................... London EC34RP UK ................................................................... ..London .......................EC34RP ............................................. UK A-1 GOODS SOLD

.VERONESE ............................spa ......................................... Stefano ..........................Romani ................................................ .Via ............Borgia .......................15 .................................. Via .............Borgia ......................15 ....................................... .Torino ..................................................................... Torino .......................................................................... Italy

Italy

DESCRIPTION OF THE GOODS

1500 English widgets; Model: classic Size 13 Colour: dark blue IF THERE IS INSUFFICIENT SPACE PARTIES MAY USE AN ANNEX

A-2 CONTRACT PRICE (ART. 4) CURRENCY:

AMOUNT IN NUMBERS:

US Dollar 1,570,000

one million five hundred and seventy thousand

AMOUNT IN LETTERS:

A-3 DELIVERY TERMS

Recommended terms (according to Incoterms 2000): see Introduction, §5

■ X ■ ■ ■ ■ ■ ■

EXW

Ex Works

named place:

FCA

Free Carrier

named place:

CPT

Carriage Paid To


CIP

Carriage and Insurance Paid To


DAF

Delivered At Frontier

DDU

Delivered Duty Unpaid


DDP

Delivered Duty Paid


DOVER

named place:

Other terms (according to Incoterms 2000: see Introduction, § 5)

■ ■ ■ ■ ■ ■

FAS

Free Alongside Ship

FOB

Free On Board


CFR

Cost, and Freight


CIF

Cost Insurance and Freight


DES

Delivered Ex Ship


DEQ

Delivered Ex Quay



Other delivery terms

■ CARRIER (where applicable) NAME AND ADDRESS

CONTACT PERSON

TRANSWORLD ................................plc ............................................................................................................. .Tom .............Bungee ....................................................................................................................................... 13......East ................Lane ................Dock ....................................................................................................... ..................................................................................................................................................... Dover ............................................................................................................................................. .....................................................................................................................................................

A-4 TIME OF DELIVERY

The present contract of sale will be governed by these Specific Conditions (to the extent that the relevant boxes have been completed) and by the ICC General Conditions of Sale (Manufactured Goods Intended for Resale) which constitute part B of this document. SELLER

BUYER

SIGNATURE

SIGNATURE

_________________________________________ ___________________________________________ PLACE ________________________________

London

24

DATE ____________________________________

23 October 1997

PLACE___________________________________

Torino

DATE ____________________________________

27 October 1997


Specimen form of model contract A-4 TIME OF DELIVERY

Indicate here the date or period (e.g. week or month) at which or within which the Seller must perform his delivery obligations according to clause A.4 of the respective Incoterm (see Introduction, § 6) FOURTH WEEK OF MARCH 1998

A-5 INSPECTION OF THE GOODS BY BUYER (ART. 3) X Before shipment ■ ■ Other:

Place of inspection:

CARRIER’S TERMINAL - DOVER

A-6 RETENTION OF TITLE (ART. 7) X ■ ■

YES NO

A-7 PAYMENT CONDITIONS (ART. 5)

■ Payment on open account (art. 5.1) Time for payment (if different from art. 5.1)

days from date of invoice.

45

Other:

■ Open account backed by demand guarantee or standby letter of credit (art. 5.5)

■ Payment in advance (art. 5.2): ■ Total price

Date (if different from art. 5.2):

■

% of the price

■ Documentary Collection (art. 5.5) ■ D/P Documents against payment

■ D/A Documents against acceptance

X Irrevocable documentary credit (art. 5.3) ■

■ Confirmed

■ Unconfirmed

Place of issue (if applicable): TORINO, ITALY

Place of confirmation (if applicable): LONDON, UK

Credit available:

Partial shipments:

Transhipment:

X ■ ■ ■ ■

X Allowed ■

X ■ Allowed

■ Not allowed

■ Not allowed

By payment at sight By deferred payment at: By acceptance of drafts at:

days days

By negotiation

Date on which the documentary credit must be notified to seller (if different from art. 5.3) X ■

30

■ other:

days before date of delivery

■ Other (e.g. cheque, bank draft, electronic funds transfer to designated bank account of seller) A-8 DOCUMENTS

Indicate here documents to be provided by Seller. Parties are advised to check the Incoterm they have selected under A-3 of these Specific Conditions. (As concerns transport documents, see also Introduction, § 8) X ■ X ■ X ■ X ■

Transport documents: indicate type of transport document required Multimodal Transport Document Commercial Invoice Packing list Insurance document

X ■ X ■ ■

Certificate of origin Certificate of inspection Other:

A-9 CANCELLATION DATE

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ARTICLE 10.3 If the goods are not delivered for any reason whatsoever (including force majeure) by (date)

the Buyer will be entitled to CANCEL THE CONTRACT IMMEDIATELY BY NOTIFICATION TO THE SELLER

A-10 LIABILITY FOR DELAY (ART. 10.1, 10.4 AND 11.3)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 10.1, 10.4 OR 11.3 Liquidated damages for delay in delivery shall be:

■

% (of price of delayed goods) per week, with a maximum of

% (of price of delayed goods)

or:

■

(specify amount)

In case of termination for delay, Seller's liability for damages for delay is limited to of the price of the non-delivered goods

%

25


Specimen form of model contract A-11 LIMITATION OF LIABILITY FOR LACK OF CONFORMITY (ART. 11.5)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.5. Seller's liability for damages arising from lack of conformity of the goods shall be:

■

limited to proven loss (including consequential loss, loss of profit, etc.) not exceeding contract price;

% of the

or:

■

as follows (specify):

A-12 LIMITATION OF LIABILITY WHERE NON-CONFORMING GOODS ARE RETAINED BY THE BUYER (ART. 11.6)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.6 The price abatement for retained non-conforming goods shall not exceed:

■

% of the price of such goods

or:

■

(specify amount)

A-13 TIME-BAR (Art.11.8)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO MODIFY ART. 11.8. Any action for non-conformity of the goods (as defined in article 11.8) must be taken by the Buyer not later than 1 month

from the date of arrival of the goods at destination.

A-14(a), A-14(b) APPLICABLE LAW (Art.1.2)

TO BE COMPLETED ONLY IF THE PARTIES WISH TO SUBMIT THE SALE CONTRACT TO A NATIONAL LAW INSTEAD OF CISG, the solution hereunder is not recommended (see Introduction, § 3) This sales contract is governed by the domestic law of

(country)

To be completed if the parties wish to choose a law other than that of the seller for questions not covered by CISG Any questions not covered by CISG will be governed by the law of

(country)

A-15 RESOLUTION OF DISPUTES (Art.14)

The two solutions hereunder (arbitration or litigation before ordinary courts) are alternatives: parties cannot choose both of them. If no choice is made, ICC arbitration will apply, according to art. 14 X ■

■

ARBITRATION X ICC (according to art. 14.1) ■

Place of arbitration

■ Other A-16 OTHER

26

LITIGATION (ordinary courts)

In case of dispute the courts of

Paris

(place) (specify)

shall have jurisdiction


Incoterms 2000, preambles © ICC, publication No. 560, available from ICC Publishing SA, 38 Cours Albert 1er, 75008 Paris, France

EXW EX WORKS (... named place) "Ex works" means that the seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the seller’s premises. However, if the parties wish the seller to be responsible for the loading of the goods on departure and to bear the risks and all the costs of such loading, this should be made clear by adding explicit wording to this effect in the contract of sale1. This term should not be used when the buyer cannot carry out the export formalities directly or indirectly. In such circumstances, the FCA term should be used, provided the seller agrees that he will load at his cost and risk. FCA FREE CARRIER (... named place) "Free Carrier" means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the seller’s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading. This term may be used irrespective of the mode of transport, including multimodal transport. "Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes. If the buyer nominates a person other than a carrier to receive the goods, the seller is deemed to have fulfilled his obligation to deliver the goods when they are delivered to that person.

1 2

FAS FREE ALONGSIDE SHIP (... named port of shipment) "Free Alongside Ship" means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. The FAS term requires the seller to clear the goods for export. THIS IS A REVERSAL FROM PREVIOUS INCOTERMS VERSIONS WHICH REQUIRED THE BUYER TO ARRANGE FOR EXPORT CLEARANCE. However, if the parties wish the buyer to clear the goods for export, this should be made clear by adding explicit wording to this effect in the contract of sale2. This term can be used only for sea or inland waterway transport. FOB FREE ON BOARD (... named port of shipment) "Free on Board" means that the seller delivers when the goods pass the ship's rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the FCA term should be used. CFR COST AND FREIGHT (... named port of destination) "Cost and Freight" means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. The CFR term requires the seller to clear the goods for export. This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the CPT term should be used.

Refer to Introduction paragraph 11. Refer to Introduction paragraph 11. 27


CIF COST, INSURANCE AND FREIGHT (... named port of destination) "Cost, Insurance and Freight" means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. However, in CIF the seller also has to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that under the CIF term the seller is required to obtain insurance only on minimum cover3. Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements. The CIF term requires the seller to clear the goods for export. This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the CIP term should be used. CPT CARRIAGE PAID TO (... named place of destination) "Carriage paid to..." means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any other costs occurring after the goods have been so delivered. "Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. The CPT term requires the seller to clear the goods for export. This term may be used irrespective of the mode of transport including multimodal transport. CIP CARRIAGE AND INSURANCE PAID TO (... named place of destination) "Carriage and Insurance paid to..." means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage

3 4 5 28

Refer to Introduction paragraph 9.3. Refer to Introduction paragraph 9.3. Refer to Introduction paragraph 11.

necessary to bring the goods to the named destination. This means that the buyer bears all risks and any additional costs occurring after the goods have been so delivered. However, in CIP the seller also has to procure insurance against the buyer’s risk of loss of or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that under the CIP term the seller is required to obtain insurance only on minimum cover4. Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements. "Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. The CIP term requires the seller to clear the goods for export. This term may be used irrespective of the mode of transport including multimodal transport. DAF DELIVERED AT FRONTIER (... named place) "Delivered at Frontier" means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export, but not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country. The term "frontier" may be used for any frontier including that of the country of export. Therefore, it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term. However, if the parties wish the seller to be responsible for the unloading of the goods from the arriving means of transport and to bear the risks and costs of unloading, this should be made clear by adding explicit wording to this effect in the contract of sale5. This term may be used irrespective of the mode of transport when goods are to be delivered at a land frontier. When delivery is to take place in the port of destination, on board a vessel or on the quay (wharf), the DES or DEQ terms should be used. DES DELIVERED EX SHIP (... named port of destination) "Delivered Ex Ship" means that the seller delivers when the goods are placed at the disposal of the buyer on


board the ship not cleared for import at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination before discharging. If the parties wish the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used. This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on a vessel in the port of destination. DEQ DELIVERED EX QUAY (... named port of destination) "Delivered Ex Quay" means that the seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay (wharf) at the named port of destination. The seller has to bear costs and risks involved in bringing the goods to the named port of destination and discharging the goods on the quay (wharf).The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. THIS IS A REVERSAL FROM PREVIOUS INCOTERMS VERSIONS WHICH REQUIRED THE SELLER TO ARRANGE FOR IMPORT CLEARANCE. If the parties wish to include in the seller’s obligations all or part of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sale6. This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on discharging from a vessel onto the quay (wharf) in the port of destination. However if the parties wish to include in the seller’s obligations the risks and costs of the handling of the goods from the quay to another place (warehouse, terminal, transport station, etc.) in or outside the port, the DDU or DDP terms should be used.

formalities and bear the costs and risks resulting therefrom as well as some of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sale8. This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or on the quay (wharf), the DES or DEQ terms should be used. DDP DELIVERED DUTY PAID (... named place of destination) "Delivered duty paid" means that the seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear all the costs and risks involved in bringing the goods thereto including, where applicable9, any "duty" (which term includes the responsibility for and the risks of the carrying out of customs formalities and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination. Whilst the EXW term represents the minimum obligation for the seller, DDP represents the maximum obligation. This term should not be used if the seller is unable directly or indirectly to obtain the import licence. However, if the parties wish to exclude from the seller’s obligations some of the costs payable upon import of the goods (such as value-added tax : VAT), this should be made clear by adding explicit wording to this effect in the contract of sale10. If the parties wish the buyer to bear all risks and costs of the import, the DDU term should be used. This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or on the quay (wharf), the DES or DEQ terms should be used.

DDU DELIVERED DUTY UNPAID (... named place of destination) "Delivered duty unpaid" means that the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto, other than, where applicable7, any "duty" (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination. Such "duty" has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time. However, if the parties wish the seller to carry out customs

6 7 8 9 10

Refer to Introduction paragraph 11. Refer to Introduction paragraph 14. Refer to Introduction paragraph 11. Refer to Introduction paragraph 14. Refer to Introduction paragraph 11. 29


Incoterms 2000, extracts from the introduction © ICC, publication No. 560, available from ICC Publishing SA, 38 Cours Albert 1er, 75008 Paris, France

9.3 The "C"-terms require the seller to contract for carriage on usual terms at his own expense. Therefore, a point up to which he would have to pay transport costs must necessarily be indicated after the respective "C"-term. Under the CIF and CIP terms the seller also has to take out insurance and bear the insurance cost. Since the point for the division of costs is fixed at a point in the country of destination, the "C"-terms are frequently mistakenly believed to be arrival contracts, in which the seller would bear all risks and costs until the goods have actually arrived at the agreed point. However, it must be stressed that the "C"-terms are of the same nature as the "F"-terms in that the seller fulfils the contract in the country of shipment or dispatch. Thus, the contracts of sale under the "C"-terms, like the contracts under the "F"-terms, fall within the category of shipment contracts. It is in the nature of shipment contracts that, while the seller is bound to pay the normal transport cost for the carriage of the goods by a usual route and in a customary manner to the agreed place, the risk of loss of or damage to the goods, as well as additional costs resulting from events occurring after the goods having been appropriately delivered for carriage, fall upon the buyer. Hence, the "C"-terms are distinguishable from all other terms in that they contain two "critical" points, one indicating the point to which the seller is bound to arrange and bear the costs of a contract of carriage and another one for the allocation of risk. For this reason, the greatest caution must be observed when adding obligations of the seller to the "C"-terms which seek to extend the seller’s responsibility beyond the aforementioned "critical" point for the allocation of risk. It is of the very essence of the "C"-terms that the seller is relieved of any further risk and cost after he has duly fulfilled his contract by contracting for carriage and handing over the goods to the carrier and by providing for insurance under the CIF- and CIP-terms. The essential nature of the “C”-terms as shipment contracts is also illustrated by the common use of documentary credits as the preferred mode of payment used in such terms. Where it is agreed by the parties to the sale contract that the seller will be paid by presenting the agreed shipping documents to a bank under a documentary credit, it would be quite contrary to the central purpose of the documentary credit for the seller to bear further risks and costs after the moment when payment had been made under documentary credits or otherwise upon shipment and dispatch of the goods. Of course, the seller would have to bear the cost of the contract of carriage irrespective of whether freight is pre-paid upon shipment or is payable at destination (freight collect); however, additional costs which may result from events occurring subsequent to shipment and dispatch are necessarily for the account of the buyer. If the seller has to provide a contract of carriage which involves payment of duties, taxes and other charges, such costs will, of course, fall upon the seller to the extent that they are for his account under that contract. This is now explicitly set forth in the A6 clause of all “C”-terms. If it is customary to procure several contracts of carriage involving transhipment of the goods at intermediate places in order to reach the agreed destination, the seller would have to pay all these costs, including any costs incurred when the goods are transhipped from one means of conveyance to the other. If, however, the carrier exercised his rights under a transhipment – or similar clause – in order to avoid unexpected hindrances (such as ice, congestion, labour disturbances, government orders, war or warlike operations) then any additional cost resulting therefrom would be for the account of the buyer, since the seller's obligation is limited to procuring the usual contract of carriage. It happens quite often that the parties to the contract of sale wish to clarify the extent to which the seller should procure a contract of carriage including the costs of discharge. Since such costs are normally covered by the freight when the goods are carried by regular shipping lines, the contract of sale will frequently stipulate that the goods are to be so carried or at least that they are to be carried under "liner terms". In other cases, the word "landed" is added after CFR or CIF. However, it is advisable not to use abbreviations added to the "C"-terms unless, in the relevant trade, the meaning of the abbreviations is clearly understood and accepted by the contracting parties or under any applicable law or custom of the trade.

30


In particular, the seller should not – and indeed could not, without changing the very nature of the "C"-terms - undertake any obligation with respect to the arrival of the goods at destination, since the risk of any delay during the carriage is borne by the buyer. Thus, any obligation with respect to time must necessarily refer to the place of shipment or dispatch, for example, "shipment (dispatch) not later than...". An agreement for example, "CFR Hamburg not later than..." is really a misnomer and thus open to different possible interpretations. The parties could be taken to have meant either that the goods must actually arrive at Hamburg at the specified date, in which case the contract is not a shipment contract but an arrival contract or, alternatively, that the seller must ship the goods at such a time that they would normally arrive at Hamburg before the specified date unless the carriage would have been delayed because of unforeseen events. It happens in commodity trades that goods are bought while they are at sea and that, in such cases, the word "afloat" is added after the trade term. Since the risk of loss of or damage to the goods would then, under the CFR- and CIFterms, have passed from the seller to the buyer, difficulties of interpretation might arise. One possibility would be to maintain the ordinary meaning of the CFR- and CIF-terms with respect to the allocation of risk between seller and buyer, namely that risk passes on shipment: this would mean that the buyer might have to assume the consequences of events having already occurred at the time when the contract of sale enters into force. The other possibility would be to let the passing of the risk coincide with the time when the contract of sale is concluded. The former possibility might well be practical, since it is usually impossible to ascertain the condition of the goods while they are being carried. For this reason the 1980 United Nations Convention on Contracts for the International Sale of Goods article 68 stipulates that "if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage". There is, however, an exception to this rule when "the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer". Thus, the interpretation of a CFR- or CIF-term with the addition of the word "afloat" will depend upon the law applicable to the contract of sale. The parties are advised to ascertain the applicable law and any solution which might follow therefrom. In case of doubt, the parties are advised to clarify the matter in their contract. In practice, the parties frequently continue to use the traditional expression C&F (or C and F, C+F). Nevertheless, in most cases it would appear that they regard these expressions as equivalent to CFR. In order to avoid difficulties of interpreting their contract the parties should use the correct Incoterm which is CFR, the only world-wide-accepted standard abbreviation for the term "Cost and Freight (... named port of destination)". CFR and CIF in A8 of Incoterms 1990 obliged the seller to provide a copy of the charterparty whenever his transport document (usually the bill of lading) contained a reference to the charterparty, for example, by the frequent notation "all other terms and conditions as per charterparty". Although, of course, a contracting party should always be able to ascertain all terms of his contract – preferably at the time of the conclusion of the contract – it appears that the practice to provide the charterparty as aforesaid has created problems particularly in connection with documentary credit transactions. The obligation of the seller under CFR and CIF to provide a copy of the charterparty together with other transport documents has been deleted in Incoterms 2000. Although the A8 clauses of Incoterms seek to ensure that the seller provides the buyer with "proof of delivery", it should be stressed that the seller fulfils that requirement when he provides the "usual" proof. Under CPT and CIP it would be the "usual transport document" and under CFR and CIF a bill of lading or a sea waybill. The transport documents must be "clean", meaning that they must not contain clauses or notations expressly declaring a defective condition of the goods and/or the packaging. If such clauses or notations appear in the document, it is regarded as "unclean" and would then not be accepted by banks in documentary credit transactions. However, it should be noted that a transport document even without such clauses or notations would usually not provide the buyer with incontrovertible proof as against the carrier that the goods were shipped in conformity with the stipulations of the contract of sale. Usually, the carrier would, in standardized text on the front page of the transport document, refuse to accept responsibility for information with respect to the goods by indicating that the particulars inserted in the transport document constitute the shipper's declarations and therefore that the information is only "said to be" as inserted in the document. Under most applicable laws and principles, the carrier must at least use reasonable means of checking the correctness of the information and his failure to do so may make him liable to the consignee. However, in container trade, the carrier's means of checking the contents in the container would not exist unless he himself was responsible for stowing the container.

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There are only two terms which deal with insurance, namely CIF and CIP. Under these terms the seller is obliged to procure insurance for the benefit of the buyer. In other cases it is for the parties themselves to decide whether and to what extent they want to cover themselves by insurance. Since the seller takes out insurance for the benefit of the buyer, he would not know the buyer's precise requirements. Under the Institute Cargo Clauses drafted by the Institute of London Underwriters, insurance is available in "minimum cover" under Clause C, "medium cover" under Clause B and "most extended cover" under Clause A. Since in the sale of commodities under the CIF term the buyer may wish to sell the goods in transit to a subsequent buyer who in turn may wish to resell the goods again, it is impossible to know the insurance cover suitable to such subsequent buyers and, therefore, the minimum cover under CIF has traditionally been chosen with the possibility for the buyer to require the seller to take out additional insurance. Minimum cover is however unsuitable for sale of manufactured goods where the risk of theft, pilferage or improper handling or custody of the goods would require more than the cover available under Clause C. Since CIP, as distinguished from CIF, would normally not be used for the sale of commodities, it would have been feasible to adopt the most extended cover under CIP rather than the minimum cover under CIF. But to vary the seller's insurance obligation under CIF and CIP would lead to confusion and both terms therefore limit the seller's insurance obligation to the minimum cover. It is particularly important for the CIP-buyer to observe this: should additional cover be required, he should agree with the seller that the latter could take out additional insurance or, alternatively, arrange for extended insurance cover himself. There are also particular instances where the buyer may wish to obtain even more protection than is available under Institute Clause A, for example insurance against war, riots, civil commotion, strikes or other labour disturbances. If he wishes the seller to arrange such insurance he must instruct him accordingly in which case the seller would have to provide such insurance if procurable.

11. VARIANTS OF INCOTERMS In practice, it frequently happens that the parties themselves by adding words to an Incoterm seek further precision than the term could offer. It should be underlined that Incoterms give no guidance whatsoever for such additions. Thus, if the parties cannot rely on a well-established custom of the trade for the interpretation of such additions they may encounter serious problems when no consistent understanding of the additions could be proven. If for instance the common expressions "FOB stowed" or "EXW loaded" are used, it is impossible to establish a world wide understanding to the effect that the seller's obligations are extended not only with respect to the cost of actually loading the goods in the ship or on the vehicle respectively but also include the risk of fortuitous loss of or damage to the goods in the process of stowage and loading. For these reasons, the parties are strongly advised to clarify whether they only mean that the function or the cost of the stowage and loading operations should fall upon the seller or whether he should also bear the risk until the stowage and loading has actually been completed. These are questions to which Incoterms do not provide an answer: consequently, if the contract too fails expressly to describe the parties’ intentions, the parties may be put to much unnecessary trouble and cost. Although Incoterms 2000 do not provide for many of these commonly used variants, the preambles to certain trade terms do alert the parties to the need for special contractual terms if the parties wish to go beyond the stipulations of Incoterms. EXW

the added obligation for the seller to load the goods on the buyer's collecting vehicle;

CIF/CIP the buyer's need for additional insurance; DEQ

the added obligation for the seller to pay for costs after discharge.

In some cases sellers and buyers refer to commercial practice in liner and charter party trade. In these circumstances, it is necessary to clearly distinguish between the obligations of the parties under the contract of carriage and their obligations to each other under the contract of sale. Unfortunately, there are no authoritative definitions of expressions such as "liner terms" and "terminal handling charges" (THC). Distribution of costs under such terms may differ in different places and change from time to time. The parties are recommended to clarify in the contract of sale how such costs should be distributed between themselves. Expressions frequently used in charterparties, such as "FOB stowed", "FOB stowed and trimmed", are sometimes used in contracts of sale in order to clarify to what extent the seller under FOB has to perform stowage and trimming

32


of the goods onboard the ship. Where such words are added, it is necessary to clarify in the contract of sale whether the added obligations only relate to costs or to both costs and risks. As has been said, every effort has been made to ensure that Incoterms reflect the most common commercial practice. However in some cases – particularly where Incoterms 2000 differ from Incoterms 1990 – the parties may wish the trade terms to operate differently. They are reminded of such options in the preamble of the terms signalled by the word "However".

14. CUSTOMS CLEARANCE The term "customs clearance" has given rise to misunderstandings. Thus, whenever reference is made to an obligation of the seller or the buyer to undertake obligations in connection with passing the goods through customs of the country of export or import it is now made clear that this obligation does not only include the payment of duty and other charges but also the performance and payment of whatever administrative matters are connected with the passing of the goods through customs and the information to the authorities in this connection. Further, it has – although quite wrongfully - been considered in some quarters inappropriate to use terms dealing with the obligation to clear the goods through customs when, as in intra-European Union trade or other free trade areas, there is no longer any obligation to pay duty and no restrictions relating to import or export. In order to clarify the situation, the words "where applicable" have been added in the A2 and B2, A6 and B6 clauses of the relevant Incoterms in order for them to be used without any ambiguity where no customs procedures are required. It is normally desirable that customs clearance is arranged by the party domiciled in the country where such clearance should take place or at least by somebody acting there on his behalf. Thus, the exporter should normally clear the goods for export, while the importer should clear the goods for import. Incoterms 1990 departed from this under the trade terms EXW and FAS (export clearance duty on the buyer) and DEQ (import clearance duty on the seller) but in Incoterms 2000 FAS and DEQ place the duty of clearing the goods for export on the seller and to clear them for import on the buyer respectively, while EXW – representing the seller's minimum obligation – has been left unamended (export clearance duty on the buyer). Under DDP the seller specifically agrees to do what follows from the very name of the term – Delivered Duty Paid – namely to clear the goods for import and pay any duty as a consequence thereof.

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United Nations Convention on Contracts for the International Sale of Goods*

PREAMBLE

The States Parties to this Convention Bearing in mind the broad objectives in the resolutions adopted by the sixth special session of the General Assembly of the United Nations on the establishment of a New International Economic Order, Considering that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States, Being of the opinion that the adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade, Have agreed as follows:

Part I

CHAPTER II

Sphere of application and general provisions

SPHERE OF APPLICATION Article 1

(1)

This Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State.

(2)

The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.

(3)

Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention. Article 2 This Convention does not apply to sales: (a) of goods bought for personal, family or household use, unless the seller, at any time

* 34

Reproduced with the permission of the United Nations Commission on International Trade Law (UNCITRAL)


before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; (b) by auction; (c) on execution or otherwise by authority of law; (d) of stocks, shares, investment securities, negotiable instruments or money; (e) of ships, vessels, hovercraft or aircraft; (f) of electricity. Article 3 (1)

Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production.

(2)

This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services. Article 4 This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold. Article 5 This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person. Article 6 The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.

CHAPTER II

GENERAL PROVISIONS Article 7

(1)

In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.

(2)

Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. Article 8

(1)

For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.

(2)

If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person

35


of the same kind as the other party would have had in the same circumstances. (3)

In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties. Article 9

(1)

The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.

(2)

The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. Article 10 For the purposes of this Convention: (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract; (b) if a party does not have a place of business, reference is to be made to his habitual residence. Article 11 A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses. Article 12 Any provision of article 11, article 29 or Part II of this Convention that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention. The parties may not derogate from or vary the effect of this article. Article 13 For the purposes of this Convention “writing” includes telegram and telex.

Part II

Formation of the contract Article 14

36

(1)

A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.

(2)

A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.


Article 15 (1)

An offer becomes effective when it reaches the offeree.

(2)

An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. Article 16

(1)

Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.

(2)

However, an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer. Article 17 An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror. Article 18

(1)

A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance.

(2)

An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately unless the circumstances indicate otherwise.

(3)

However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph. Article 19

(1)

A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counteroffer.

(2)

However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

(3)

Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially. Article 20

(1)

A period of time of acceptance fixed by the offeror in a telegram or a letter begins to run from the moment the telegram is handed in for dispatch or from the date shown on the letter or, if no such date is shown, from the date shown on the envelope. A period

37


of time for acceptance fixed by the offeror by telephone, telex or other means of instantaneous communication, begins to run from the moment that the offer reaches the offeree. (2)

Official holidays or non-business days occurring during the period for acceptance are included in calculating the period. However, if a notice of acceptance cannot be delivered at the address of the offeror on the last day of the period because that day falls on an official holiday or a non-business day at the place of business of the offeror, the period is extended until the first business day which follows. Article 21

(1)

A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs the offeree or dispatches a notice to that effect.

(2)

If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time, the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs the offeree that he considers his offer as having lapsed or dispatches a notice to that effect. Article 22 An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective. Article 23 A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention. Article 24 For the purposes of this Part of the Convention, an offer, declaration of acceptance or any other indication of intention “reaches” the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence.

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Part III

CHAPTER I

Sale of goods

GENERAL PROVISIONS Article 25 A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. Article 26 A declaration of avoidance of the contract is effective only if made by notice to the other party. Article 27 Unless otherwise expressly provided in this Part of the Convention, if any notice, request or other communication is given or made by a party in accordance with this Part and by means appropriate in the circumstances, a delay or error in the transmission of the communication or its failure to arrive does not deprive that party of the right to rely on the communication. Article 28 If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention. Article 29

(1)

A contract may be modified or terminated by the mere agreement of the parties.

(2)

A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct.

CHAPTER II

OBLIGATIONS OF THE SELLER Article 30 The seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention.

Section I

Delivery of the goods and handing over of documents Article 31 If the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists: (a) if the contract of sale involves carriage of the goods—in handing the goods over to the first carrier for transmission to the buyer; (b) if, in cases not within the preceding subparagraph, the contract relates to specific

39


goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place— in placing the goods at the buyer’s disposal at that place; (c) in other cases—in placing the goods at the buyer’s disposal at the place where the seller had his place of business at the time of the conclusion of the contract. Article 32 (1)

If the seller, in accordance with the contract or this Convention, hands the goods over to a carrier and if the goods are not dearly identified to the contract by markings on the goods, by shipping documents or otherwise, the seller must give the buyer notice of the consignment specifying the goods.

(2)

If the seller is bound to arrange for carriage of the goods, he must make such contracts as are necessary for carriage to the place fixed by means of transportation appropriate in the circumstances and according to the usual terms for such transportation.

(3)

If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer’s request, provide him with all available information necessary to enable him to effect such insurance. Article 33 The seller must deliver the goods: (a) if a date is fixed by or determinable from the contract, on that date; (b) if a period of time is fixed by or determinable from the contract, at any time within that period unless circumstances indicate that the buyer is to choose a date; or (c) in any other case, within a reasonable time after the conclusion of the contract. Article 34 If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. If the seller has handed over documents before that time, he may, up to that time, cure any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.

Section II

Conformity of the goods and third party claims Article 35

(1)

The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.

(2)

Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller’s skill and judgement; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;

40


(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. (3)

The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity. Article 36

(1)

The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time.

(2)

The seller is also liable for any lack of conformity which occurs after the time indicated in the preceding paragraph and which is due to a breach of any of his obligations, including a breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics. Article 37 If the seller has delivered goods before the date for delivery, he may, up to that date, deliver any missing part or make up any deficiency in the quantity of the goods delivered, or deliver goods in replacement of any non-conforming goods delivered or remedy any lack of conformity in the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention. Article 38

(1)

The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.

(2)

If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination.

(3)

If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination. Article 39

(1)

The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.

(2)

In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this timelimit is inconsistent with a contractual period of guarantee. Article 40 The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer. Article 41 The seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim. However, if

41


such right or claim is based on industrial property or other intellectual property, the seller’s obligation is governed by article 42. Article 42 (1)

The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property: (a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or (b) in any other case, under the law of the State where the buyer has his place of business.

(2)

The obligation of the seller under the preceding paragraph does not extend to cases where: (a) at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or (b) the right or claim results from the seller’s compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer. Article 43

(1)

The buyer loses the right to rely on the provisions of article 41 or article 42 if he does not give notice to the seller specifying the nature of the right or claim of the third party within a reasonable time after he has become aware or ought to have become aware of the right or claim.

(2)

The seller is not entitled to rely on the provisions of the preceding paragraph if he knew of the right or claim of the third party and the nature of it. Article 44 Notwithstanding the provisions of paragraph (1) of article 39 and paragraph (1) of article 43, the buyer may reduce the price in accordance with article 50 or claim damages, except for loss of profit, if he has a reasonable excuse for his failure to give the required notice.

Section III

Remedies for breach of contract by the seller Article 45

(1)

If the seller fails to perform any of his obligations under the contract or this Convention, the buyer may: (a) exercise the rights provided in articles 46 to 52; (b) claim damages as provided in articles 74 to 77.

(2)

The buyer is not deprived of any right he may have to claim damages by exercising his right to other remedies.

(3)

No period of grace may be granted to the seller by a court or arbitral tribunal when the buyer resorts to a remedy for breach of contract. Article 46

(1)

42

The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement.


(2)

If the goods do not conform with the contract, the buyer may require delivery of substitute goods only if the lack of conformity constitutes a fundamental breach of contract and a request for substitute goods is made either in conjunction with notice given under article 39 or within a reasonable time thereafter.

(3)

If the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A request for repair must be made either in conjunction with notice given under article 39 or within a reasonable time thereafter. Article 47

(1)

The buyer may fix an additional period of time of reasonable length for performance by the seller of his obligations.

(2)

Unless the buyer has received notice from the seller that he will not perform within the period so fixed, the buyer may not, during that period, resort to any remedy for breach of contract. However, the buyer is not deprived thereby of any right he may have to claim damages for delay in performance. Article 48

(1)

Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention.

(2)

If the seller requests the buyer to make known whether he will accept performance and the buyer does not comply with the request within a reasonable time, the seller may perform within the time indicated in his request. The buyer may not, during that period of time, resort to any remedy which is inconsistent with performance by the seller.

(3)

A notice by the seller that he will perform within a specified period of time is assumed to include a request, under the preceding paragraph, that the buyer make known his decision.

(4)

A request or notice by the seller under paragraph (2) or (3) of this article is not effective unless received by the buyer. Article 49

(1)

The buyer may declare the contract avoided: (a) if the failure by the seller to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed.

(2)

However, in cases where the seller has delivered the goods, the buyer loses the right to declare the contract avoided unless he does so: (a) in respect of late delivery, within a reasonable time after he has become aware that delivery has been made; (b) in respect of any breach other than late delivery, within a reasonable time: (i) after he knew or ought to have known of the breach; (ii) after the expiration of any additional period of time fixed by the buyer in accordance with paragraph (1) of article 47, or after the seller has declared that he will not perform his obligations within such an additional period; or

43


(iii) after the expiration of any additional period of time indicated by the seller in accordance with paragraph (2) of article 48, or after the buyer has declared that he will not accept performances. Article 50 If the goods do not conform with the contract and whether or not the price has already been paid, the buyer may reduce the price in the same proportion as the value that the goods actually delivered had at the time of the delivery bears to the value that conforming goods would have had at that time. However, if the seller remedies any failure to perform his obligations in accordance with article 37 or article 48 or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price. Article 51 (1)

If the seller delivers only a part of the goods or if only a part of the goods delivered is in conformity with the contract, articles 46 to 50 apply in respect of the part which is missing or which does not conform.

(2)

The buyer may declare the contract avoided in its entirety only if the failure to make delivery completely or in conformity with the contract amounts to a fundamental breach of the contract. Article 52

(1)

If the seller delivers the goods before the date fixed, the buyer may take delivery or refuse to take delivery.

(2)

If the seller delivers a quantity of goods greater than that provided for in the contract, the buyer may take delivery or refuse to take delivery of the excess quantity. If the buyer takes delivery of all or part of the excess quantity, he must pay for it at the contract rate.

CHAPTER III

OBLIGATIONS OF THE BUYER Article 53 The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.

Section I

Payment of the price Article 54 The buyer’s obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made. Article 55 Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned.

44


Article 56 If the price is fixed according to the weight of the goods, in case of doubt it is to be determined by the net weight. Article 57 (1)

If the buyer is not bound to pay the price at any other particular place, he must pay it to the seller: (a) at the seller’s place of business; or (b) if the payment is to be made against the handing over of the goods or of documents, at the place where the handing over takes place.

(2)

The seller must bear any increase in the expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract. Article 58

(1)

If the buyer is not bound to pay the price at any other specific time he must pay it when the seller places either the goods or documents controlling their disposition at the buyer’s disposal in accordance with the contract and this Convention. The seller may make such payment a condition for handing over the goods or documents.

(2)

If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price.

(3)

The buyer is not bound to pay the price until he has had an opportunity to examine the goods, unless the procedures for delivery or payment agreed upon by the parties are inconsistent with his having such an opportunity. Article 59 The buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller.

Section II

Taking delivery Article 60 The buyer’s obligation to take delivery consists: (a) in doing all the acts which could reasonably be expected of him in order to enable the seller to make delivery; and (b) in taking over the goods.

Section III

Remedies for breach of contract by the buyer Article 61

(1)

If the buyer fails to perform any of his obligations under the contract or this Convention, the seller may: (a) exercise the rights provided in articles 62 to 65; (b) claim damages as provided in articles 74 to 77.

(2)

The seller is not deprived of any right he may have to claim damages by exercising his right to other remedies.

(3)

No period of grace may be granted to the buyer by a court or arbitral tribunal when the seller resorts to a remedy for breach of contract.

45


Article 62 The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement. Article 63 (1)

The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations.

(2)

Unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance. Article 64

(1)

The seller may declare the contract avoided: (a) if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or (b) if the buyer does not, within the additional period of time fixed by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed;

(2)

However, in cases where the buyer has paid the price, the seller loses the right to declare the contract avoided unless he does so: (a) in respect of late performance by the buyer, before the seller has become aware that performance has been rendered; or (b) in respect of any breach other than late performance by the buyer, within a reasonable time: (i) after the seller knew or ought to have known of the breach; or (ii) after the expiration of any additional period of time fixed by the seller in accordance with paragraph (1) of article 63, or after the buyer has declared that he will not perform his obligations within such an additional period. Article 65

(1)

If under the contract the buyer is to specify the form, measurement or other features of the goods and he fails to make such specification either on the date agreed upon or within a reasonable time after receipt of a request from the seller, the seller may, without prejudice to any other rights he may have, make the specification himself in accordance with the requirements of the buyer that may be known to him.

(2)

If the seller makes the specification himself, he must inform the buyer of the details thereof and must fix a reasonable time within which the buyer may make a different specification. If, after receipt of such a communication, the buyer fails to do so within the time so fixed, the specification made by the seller is binding.

CHAPTER IV

PASSING OF RISK Article 66 Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.

46


Article 67 (1)

If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.

(2)

Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise. Article 68 The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller. Article 69

(1)

In cases not within articles 67 and 68, the risk passes to the buyer when he takes over the goods or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery.

(2)

However, if the buyer is bound to take over the goods at a place other than a place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place.

(3)

If the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract. Article 70 If the seller has committed a fundamental breach of contract, articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the breach.

CHAPTER V

Section I

PROVISIONS COMMON TO THE OBLIGATIONS OF THE SELLER AND OF THE BUYER

Anticipatory breach and instalment contracts Article 71

(1)

A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of: (a) a serious deficiency in his ability of perform or in his creditworthiness; or (b) his conduct in preparing to perform or in performing the contract.

(2)

If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller.

47


(3)

A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance. Article 72

(1)

If prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided.

(2)

If time allows, the party intending to declare the contract avoided must give reasonable notice to the other party in order to permit him to provide adequate assurance of his performance.

(3)

The requirements of the preceding paragraph do not apply if the other party has declared that he will not perform his obligations. Article 73

(1)

In the case of a contract for delivery of goods by instalments, if the failure of one party to perform any of his obligations in respect of any instalment constitutes a fundamental breach of contract with respect to that instalment, the other party may declare the contract avoided with respect to that instalment.

(2)

If one party’s failure to perform any of his obligations in respect of any instalment gives the other party good grounds to conclude that a fundamental breach of contract will occur with respect to future installments, he may declare the contract avoided for the future, provided that he does so within a reasonable time.

(3)

A buyer who declares the contract avoided in respect of any delivery may, at the same time, declare it avoided in respect of deliveries already made or of future deliveries if, by reason of their interdependence, those deliveries could not be used for the purpose contemplated by the parties at the time of the conclusion of the contract.

Section II

Damages Article 74 Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract. Article 75 If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74. Article 76

(1)

48

If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance.


(2)

For the purposes of the preceding paragraph, the current price is the price prevailing at the place where delivery of the goods should have been made or, if there is no current price at that place, the price at such other place as serves as a reasonable substitute, making due allowance for differences in the cost of transporting the goods. Article 77 A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.

Section III

Interest Article 78 If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74. Section IV. Exemption Article 79

(1)

A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.

(2)

If the party’s failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if: (a) he is exempt under the preceding paragraph; and (b) the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him.

(3)

The exemption provided by this article has effect for the period during which the impediment exists.

(4)

The party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such nonreceipt.

(5)

Nothing in this article prevents either party from exercising any right other than to claim damages under this Convention. Article 80 A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party’s act or omission.

Section V

Effects of avoidance Article 81

(1)

Avoidance of the contract releases both parties from their obligations under it, subject to any damages which may be due. Avoidance does not affect any provision of the contract for the settlement of disputes or any other provision of the contract governing the rights and obligations of the parties consequent upon the avoidance of the contract.

(2)

A party who has performed the contract either wholly or in part may claim restitution

49


from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently. Article 82 (1)

The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them.

(2)

The preceding paragraph does not apply: (a) if the impossibility of making restitution of the goods or of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission; (b) the goods or part of the goods have perished or deteriorated as a result of the examination provided for in article 38; or (c) if the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity. Article 83 A buyer who has lost the right to declare the contract avoided or to require the seller to deliver substitute goods in accordance with article 82 retains all other remedies under the contract and this Convention. Article 84

(1)

If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid.

(2)

The buyer must account to the seller for all benefits which he has derived from the goods or part of them: (a) if he must make restitution of the goods or part of them; or (b) if it is impossible for him to make restitution of all or part of the goods or to make restitution of all or part of the goods substantially in the condition in which he received them, but he has nevertheless declared the contract avoided or required the seller to deliver substitute goods.

Section VI

Preservation of the goods Article 85 If the buyer is in delay in taking delivery of the goods or, where payment of the price and delivery of the goods are to be made concurrently, if he fails to pay the price, and the seller is either in possession of the goods or otherwise able to control their disposition, the seller must take such steps as are reasonable in the circumstances to preserve them. He is entitled to retain them until he has been reimbursed his reasonable expenses by the buyer. Article 86

50

(1)

If the buyer has received the goods and intends to exercise any right under the contract or this Convention to reject them, he must take such steps to preserve them as are reasonable in the circumstances. He is entitled to retain them until he has been reimbursed his reasonable expenses by the seller.

(2)

If goods dispatched to the buyer have been placed at his disposal at their destination and he exercises the right to reject them, he must take possession of them on behalf


of the seller, provided that this can be done without payment of the price and without unreasonable inconvenience or unreasonable expense. This provision does not apply if the seller or a person authorized to take charge of the goods on his behalf is present at the destination. If the buyer takes possession of the goods under this paragraph, his rights and obligations are governed by the preceding paragraph. Article 87 A party who is bound to take steps to preserve the goods may deposit them in a warehouse of a third person at the expense of the other party provided that the expense incurred is not unreasonable. Article 88 (1)

A party who is bound to preserve the goods in accordance with article 85 or 86 may sell them by any appropriate means if there has been an unreasonable delay by the other party in taking possession of the goods or in taking them back or in paying the price or the cost of preservation, provided that reasonable notice of the intention to sell has been given to the other party.

(2)

If the goods are subject to rapid deterioration or their preservation would involve unreasonable expense, a party who is bound to preserve the goods in accordance with article 85 or 86 must take reasonable measures to sell them. To the extent possible he must give notice to the other party of his intention to sell.

(3)

A party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them. He must account to the other party for the balance.

Part IV

Final provisions Article 89 The Secretary-General of the United Nations is hereby designated as the depositary for this Convention. Article 90 This Convention does not prevail over any international agreement which has already been or may be entered into and which contains provisions concerning the matters governed by this Convention, provided that the parties have their places of business in States parties, to such agreement. Article 91

(1)

This Convention is open for signature at the concluding meeting of the United Nations Conference on Contracts for the International Sale of Goods and will remain open for signature by all States at the Headquarters of the United Nations, New York until 30 September 1981.

(2)

This Convention is subject to ratification, acceptance or approval by the signatory States.

(3)

This Convention is open for accession by all States which are not signatory States as from the date it is open for signature.

(4)

Instruments of ratification, acceptance, approval and accession are to be deposited with the Secretary-General of the United Nations. Article 92

(1)

A Contracting State may declare at the time of signature, ratification, acceptance,

51


approval or accession that it will not be bound by Part II of this Convention or that it will not be bound by Part III of this Convention. (2)

A Contracting State which makes a declaration in accordance with the preceding paragraph in respect of Part II or Part III of this Convention is not to be considered a Contracting State within paragraph (1) of article 1 of this Convention in respect of matters governed by the Part to which the declaration applies. Article 93

(1)

If a Contracting State has two or more territorial units in which, according to its constitution, different systems of law are applicable in relation to the matters dealt with in this Convention, it may, at the time of signature, ratification, acceptance, approval or accession, declare that this Convention is to extend to all its territorial units or only to one or more of them, and may amend its declaration by submitting another declaration at any time.

(2)

These declarations are to be notified to the depositary and are to state expressly the territorial units to which the Convention extends.

(3)

If, by virtue of a declaration under this article, this Convention extends to one or more but not all of the territorial units of a Contracting State, and if the place of business of a party is located in that State, this place of business, for the purposes of this Convention, is considered not to be in a Contracting State, unless it is in a territorial unit to which the Convention extends.

(4)

If a Contracting State makes no declaration under paragraph (1) of this article, the Convention is to extend to all territorial units of that State. Article 94

(1)

Two or more Contracting States which have the same or closely related legal rules on matters governed by this Convention may at any time declare that the Convention is not to apply to contracts of sale or to their formation where the parties have their places of business in those States. Such declarations may be made jointly or by reciprocal unilateral declarations.

(2)

A Contracting State which has the same or closely related legal rules on matters governed by this Convention as one or more non-Contracting States may at any time declare that the Convention is not to apply to contracts of sale or to their formation where the parties have their places of business in those States.

(3)

If a State which is the object of a declaration under the preceding paragraph subsequently becomes a Contracting State, the declaration made will, as from the date on which the Convention enters into force in respect of the new Contracting State, have the effect of a declaration made under paragraph (1), provided that the new Contracting State joins in such declaration or makes a reciprocal unilateral declaration. Article 95 Any State may declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph (1) (b) of article 1 of this Convention. Article 96 A Contracting State whose legislation requires contracts of sale to be concluded in or evidenced by writing may at any time make a declaration in accordance with article 12 that any provision of article 11, article 29, or Part II of this Convention, that allows a contract of sale or its modification or termination by agreement or any offer, acceptance, or other indication of intention to be made in any form other than in writing, does not apply where any party has his place of business in that State.

52


Article 97 (1)

Declarations made under this Convention at the time of signature are subject to confirmation upon ratification, acceptance or approval.

(2)

Declarations and confirmations of declarations are to be in writing and be formally notified to the depositary.

(3)

A declaration takes effect simultaneously with the entry into force of this Convention in respect of the State concerned. However, a declaration of which the depositary receives formal notification after such entry into force takes effect on the first day of the month following the expiration of six months after the date of its receipt by the depositary. Reciprocal unilateral declarations under article 94 take effect on the first day of the month following the expiration of six months after the receipt of the latest declaration by the depositary.

(4)

Any State which makes a declaration under this Convention may withdraw it at any time by a formal notification in writing addressed to the depositary. Such withdrawal is to take effect on the first day of the month following the expiration of six months after the date of the receipt of the notification by the depositary.

(5)

A withdrawal of a declaration made under article 94 renders inoperative, as from the date on which the withdrawal takes effect, any reciprocal declaration made by another State under that article. Article 98 No reservations are permitted except those expressly authorized in this Convention. Article 99

(1)

This Convention enters into force, subject to the provisions of paragraph (6) of this article, on the first day of the month following the expiration of twelve months after the date of deposit of the tenth instrument of ratification, acceptance, approval or accession, including an instrument which contains a declaration made under article 92.

(2)

When a State ratifies, accepts, approves or accedes to this Convention after the deposit of the tenth instrument of ratification, acceptance, approval or accession, this Convention, with the exception of the Part excluded, enters into force in respect of that State, subject to the provisions of paragraph (6) of this article, on the first day of the month following the expiration of twelve months after the date of the deposit of its instrument of ratification, acceptance, approval or accession.

(3)

A State which ratifies, accepts, approves or accedes to this Convention and is a party to either or both the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods done at The Hague on 1 July 1964 (1964 Hague Formation Convention) and the Convention relating to a Uniform Law on the International Sale of Goods done at The Hague on 1 July 1964 (1964 Hague Sales Convention) shall at the same time denounce, as the case may be, either or both the 1964 Hague Sales Convention and the 1964 Hague Formation Convention by notifying the Government of the Netherlands to that effect.

(4)

A State party to the 1964 Hague Sales Convention which ratifies, accepts, approves or accedes to the present Convention and declares or has declared under article 92 that it will not be bound by Part II of this Convention shall at the time of ratification, acceptance, approval or accession denounce the 1964 Hague Sales Convention by notifying the Government of the Netherlands to that effect.

(5)

A State party to the 1964 Hague Formation Convention which ratifies, accepts, approves or accedes to the present Convention and declares or has declared under article 92 that it will not be bound by Part III of this Convention shall at the time of ratification, acceptance, approval or accession denounce the 1964 Hague Formation Convention by notifying the Government of the Netherlands to that effect.

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(6)

For the purpose of this article, ratifications, acceptances, approvals and accessions in respect of this Convention by States parties to the 1964 Hague Formation Convention or to the 1964 Hague Sales Convention shall not be effective until such denunciations as may be required on the part of those States in respect of the latter two Conventions have themselves become effective. The depositary of this Convention shall consult with the Government of the Netherlands, as the depositary of the 1964 Conventions, so as to ensure necessary co-ordination in this respect. Article 100

(1)

This Convention applies to the formation of a contract only when the proposal for concluding the contract is made on or after the date when the Convention enters into force in respect of the Contracting States referred to in subparagraph (1) (a) or the Contracting State referred to in subparagraph (1) (b) of article 1.

(2)

This Convention applies only to contracts concluded on or after the date when the Convention enters into force in respect of the Contracting States referred to in subparagraph (1)(a) or the Contracting State referred to in subparagraph (1)(b) of article 1. Article 101

(1)

A Contracting State may denounce this Convention, or Part II or Part III of the Convention, by a formal notification in writing addressed to the depositary.

(2)

The denunciation takes effect on the first day of the month following the expiration of twelve months after the notification is received by the depositary. Where a longer period for the denunciation to take effect is specified in the notification, the denunciation takes effect upon the expiration of such longer period after the notification is received by the depositary.

DONE at Vienna, this day of eleventh day of April, one thousand nine hundred and eighty, in a single original, of which the Arabic, Chinese, English, French, Russian and Spanish texts are equally authentic. IN WITNESS WHEREOF the undersigned plenipotentiaries, being duly authorized by their respective Governments, have signed this Convention.

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Explanatory note by the UNCITRAL secretariat on the United Nations convention on contracts for the international sale of goods*

INTRODUCTION

* This note has been prepared by the Secretariat of the United Nations Commission on International Trade Law for informational purposes; it is not an official commentary on the Convention

1.

The United Nations Convention on Contracts for the International Sale of Goods provides a uniform text of law for international sales of goods. The Convention was prepared by the United Nations Commission on International Trade Law (UNCITRAL) and adopted by a diplomatic conference on 11 April 1980.

2.

Preparation of a uniform law for the international sale of goods began in 1930 at the International Institute for the Unification of Private Law (UNIDROIT) in Rome. After a long interruption in the work as a result of the Second World War, the draft was submitted to a diplomatic conference in The Hague in 1964, which adopted two conventions, one on the international sale of goods and the other on the formation of contracts for the international sale of goods.

3.

Almost immediately upon the adoption of the two conventions there was wide-spread criticism of their provisions as reflecting primarily the legal traditions and economic realities of continental Western Europe, which was the region that had most actively contributed to their preparation. As a result, one of the first tasks undertaken by UNCITRAL on its organization in 1968 was to enquire of States whether or not they intended to adhere to those conventions and the reasons for their positions. In the light of the responses received, UNCITRAL decided to study the two conventions to ascertain which modifications might render them capable of wider acceptance by countries of different legal, social and economic systems. The result of this study was the adoption by diplomatic conference on 11 April 1980 of the United Nations Convention on Contracts for the International Sale of Goods, which combines the subject matter of the two prior conventions.

4.

UNCITRAL’s success in preparing a Convention with wider acceptability is evidenced by the fact that the original eleven States for which the Convention came into force on 1 January 1988 included States from every geographical region, every stage of economic development and every major legal, social and economic system. The original eleven States were: Argentina, China, Egypt, France, Hungary, Italy, Lesotho, Syria, United States, Yugoslavia and Zambia.

5.

As of 31 January 1988, an additional four States, Austria, Finland, Mexico and Sweden, had become a party to the Convention.

6.

The Convention is divided into four parts. Part One deals with the scope of application of the Convention and the general provisions. Part Two contains the rules governing the formation of contracts for the international sale of goods. Part Three deals with the substantive rights and obligations of buyer and seller arising from the contract. Part Four contains the final clauses of the Convention concerning such matters as how and when it comes into force, the reservations and declarations that are permitted and the application of the Convention to international sales where both States concerned have the same or similar law on the subject.

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Part One

A

Scope of application

7.

The articles on scope of application state both what is included in the coverage of the Convention and what is excluded from it. The provisions on inclusion are the most important. The Convention applies to contracts of sale of goods between parties whose places of business are in different States and either both of those States are Contracting States or the rules of private international law lead to the law of a Contracting State. A few States have availed themselves of the authorization in article 95 to declare that they would apply the Convention only in the former and not in the latter of these two situations. As the Convention becomes more widely adopted, the practical significance of such a declaration will diminish.

8.

The final clauses make two additional restrictions on the territorial scope of application that will be relevant to a few States. One applies only if a State is a party to another international agreement that contains provisions concerning matters governed by this Convention; the other permits States that have the same or similar domestic law of sales to declare that the Convention does not apply between them.

9.

Contracts of sale are distinguished from contracts for services in two respects by article 3. A contract for the supply of goods to be manufactured or produced is considered to be a sale unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for their manufacture or production. When the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services, the Convention does not apply.

10.

The Convention contains a list of types of sales that are excluded from the Convention, either because of the purpose of the sale (goods bought for personal, family or household use), the nature of the sale (sales by auction, on execution or otherwise by law) or the nature of the goods (stocks, shares, investment securities, negotiable instruments, money, ships, vessels, hovercraft, aircraft or electricity). In many States some or all of such sales are governed by special rules reflecting their special nature.

11.

Several articles make clear that the subject matter of the Convention is restricted to the formation of the contract and the rights and duties of the buyer and seller arising from such a contract. In particular, the Convention is not concerned with the validity of the contract, the effect which the contract may have on the property in the goods sold or the liability of the seller for death or personal injury caused by the goods to any person.

B 12.

C 13.

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Scope of application and general provisions

Party autonomy The basic principle of contractual freedom in the international sale of goods is recognized by the provision that permits the parties to exclude the application of this Convention or derogate from or vary the effect of any of its provisions. The exclusion of the Convention would most often result from the choice by the parties of the law of a noncontracting State or of the domestic law of a contracting State to be the law applicable to the contract. Derogation from the Convention would occur whenever a provision in the contract provided a different rule from that found in the Convention.

Interpretation of the Convention This Convention for the unification of the law governing the international sale of goods will better fulfill its purpose if it is interpreted in a consistent manner in all legal systems.


Great care was taken in its preparation to make it as clear and easy to understand as possible. Nevertheless, disputes will arise as to its meaning and application. When this occurs, all parties, including domestic courts and arbitral tribunals, are admonished to observe its international character and to promote uniformity in its application and the observance of good faith in international trade. In particular, when a question concerning a matter governed by this Convention is not expressly settled in it, the question is to be settled in conformity with the general principles on which the Convention is based. Only in the absence of such principles should the matter be settled in conformity with the law applicable by virtue of the rules of private international law.

D 14.

E

Interpretation of the contract; usages The Convention contains provisions on the manner in which statements and conduct of a party are to be interpreted in the context of the formation of the contract or its implementation. Usages agreed to by the parties, practices they have established between themselves and usages of which the parties knew or ought to have known and which are widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned may all be binding on the parties to the contract of sale.

Form of the contract

15.

The Convention does not subject the contract of sale to any requirement as to form. In particular, article 11 provides that no written agreement is necessary for the conclusion of the contract. However, if the contract is in writing and it contains a provision requiring any modification or termination by agreement to be in writing, article 29 provides that the contract may not be otherwise modified or terminated by agreement. The only exception is that a party may be precluded by his conduct from asserting such a provision to the extent that the other person has relied on that conduct.

16.

In order to accommodate those States whose legislation requires contracts of sale to be concluded in or evidenced by writing, article 96 entitles those States to declare that neither article 11 nor the exception to article 29 applies where any party to the contract has his place of business in that State.

Part Two

Formation of the contract

17.

Part Two of the Convention deals with a number of questions that arise in the formation of the contract by the exchange of an offer and an acceptance. When the formation of the contract takes place in this manner, the contract is concluded when the acceptance of the offer becomes effective.

18.

In order for a proposal for concluding a contract to constitute an offer, it must be addressed to one or more specific persons and it must be sufficiently definite. For the proposal to be sufficiently definite, it must indicate the goods and expressly or implicitly fix or make provision for determining the quantity and the price.

19.

The Convention takes a middle position between the doctrine of the revocability of the offer until acceptance and its general irrevocability for some period of time. The general rule is that an offer may be revoked. However, the revocation must reach the offeree before he has dispatched an acceptance. Moreover, an offer cannot be revoked if it indicates that it is irrevocable, which it may do by stating a fixed time for acceptance or otherwise. Furthermore, an offer may not be revoked if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.

57


20.

Acceptance of an offer may be made by means of a statement or other conduct of the offeree indicating assent to the offer that is communicated to the offerer. However, in some cases the acceptance may consist of performing an act, such as dispatch of the goods or payment of the price. Such an act would normally be effective as an acceptance the moment the act was performed.

21.

A frequent problem in contract formation, perhaps especially in regard to contracts of sale of goods, arises out of a reply to an offer that purports to be an acceptance but contains additional or different terms. Under the Convention, if the additional or different terms do not materially alter the terms of the offer, the reply constitutes an acceptance, unless the offeror without undue delay objects to those terms. If he does not object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

22.

If the additional or different terms do materially alter the terms of the contract, the reply constitutes a counter-offer that must in turn be accepted for a contract to be concluded. Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or settlement of disputes are considered to alter the terms of the offer materially.

Part Three

A

Obligations of the seller

23.

The general obligations of the seller are to deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention. The Convention provides supplementary rules for use in the absence of contractual agreement as to when, where and how the seller must perform these obligations.

24.

The Convention provides a number of rules that implement the seller’s obligations in respect of the quality of the goods. In general, the seller must deliver goods that are of the quantity, quality and description required by the contract and that are contained or packaged in the manner required by the contract. One set of rules of particular importance in international sales of goods involves the seller’s obligation to deliver goods that are free from any right or claim of a third party, including rights based on industrial property or other intellectual property.

25.

In connection with the seller’s obligations in regard to the quality of the goods, the Convention contains provisions on the buyer’s obligation to inspect the goods. He must give notice of any lack of their conformity with the contract within a reasonable time after he has discovered it or ought to have discovered it, and at the latest two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee.

B 26.

C 27.

58

Sale of goods

Obligations of the buyer Compared to the obligations of the seller, the general obligations of the buyer are less extensive and relatively simple; they are to pay the price for the goods and take delivery of them as required by the contract and the Convention. The Convention provides supplementary rules for use in the absence of contractual agreement as to how the price is to be determined and where and when the buyer should perform his obligation to pay the price.

Remedies for breach of contract The remedies of the buyer for breach of contract by the seller are set forth in connection with the obligations of the seller and the remedies of the seller are set forth in connection with the


obligations of the buyer. This makes it easier to use and understand the Convention. 28.

The general pattern of remedies is the same in both cases. If all the required conditions are fulfilled, the aggrieved party may require performance of the other party’s obligations, claim damages or avoid the contract. The buyer also has the right to reduce the price where the goods delivered do not conform with the contract.

29.

Among the more important limitations on the right of an aggrieved party to claim a remedy is the concept of fundamental breach. For a breach of contract to be fundamental, it must result in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the result was neither foreseen by the party in breach nor foreseeable by a reaonsable person of the same kind in the same circumstances. A buyer can require the delivery of substitute goods only if the goods delivered were not in conformity with the contract and the lack of conformity constituted a fundamental breach of contract. The existence of a fundamental breach is one of the two circumstances that justifies a declaration of avoidance of a contract by the aggrieved party; the other circumstance being that, in the case of non-delivery of the goods by the seller or non-payment of the price or failure to take delivery by the buyer, the party in breach fails to perform within a reasonable period of time fixed by the aggrieved party.

30.

Other remedies may be restricted by special circumstances. For example, if the goods do not conform with the contract, the buyer may require the seller to remedy the lack of conformity by repair, unless this is unreasonable having regard to all the circumstances. A party cannot recover damages that he could have mitigated by taking the proper measures. A party may be exempted from paying damages by virtue of an impediment beyond his control.

D

Passing of risk

31.

Determining the exact moment when the risk of loss or damage to the goods passes from the seller to the buyer is of great importance in contracts for the international sale of goods. Parties may regulate that issue in their contract either by an express provision or by the use of a trade term. However, for the frequent case where the contract does not contain such a provision, the Convention sets forth a complete set of rules.

32.

The two special situations contemplated by the Convention are when the contract of sale involves carriage of the goods and when the goods are sold while in transit. In all other cases the risk passes to the buyer when he takes over the goods or from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery, whichever comes first. In the frequent case when the contract relates to goods that are not then identified, they must be identified to the contract before they can be considered to be placed at the disposal of the buyer and the risk of their loss can be considered to have passed to him.

59


E 33.

F 34.

G 35.

Part Four

Suspension of performance and anticipatory breach The Convention contains special rules for the situation in which, prior to the date on which performance is due, it becomes apparent that one of the parties will not perform a substantial part of his obligations or will commit a fundamental breach of contract. A distinction is drawn between those cases in which the other party may suspend his own performance of the contract but the contract remains in existence awaiting future events and those cases in which he may declare the contract avoided.

Exemption from liability to pay damages When a party fails to perform any of his obligations due to an impediment beyond his control that he could not reasonably have been expected to take into account at the time of the conclusion of the contract and that he could not have avoided or overcome, he is exempted from paying damages. This exemption may also apply if the failure is due to the failure of a third person whom he has engaged to perform the whole or a part of the contract. However, he is subject to any other remedy, including reduction of the price, if the goods were defective in some way.

Preservation of the goods The Convention imposes on both parties the duty to preserve any goods in their possession belonging to the other party. Such a duty is of even greater importance in an international sale of goods where the other party is from a foreign country and may not have agents in the country where the goods are located. Under certain circumstances the party in possession of the goods may sell them, or may even be required to sell them. A party selling the goods has the right to retain out of the proceeds of sale an amount equal to the reasonable expenses of preserving the goods and of selling them and must account to the other party for the balance.

Final clauses

36.

The final clauses contain the usual provisions relating to the Secretary-General as depositary and providing that the Convention is subject to ratification, acceptance or approval by those States that signed it by 30 September 1981, that it is open to accession by all States that are not signatory States and that the text is equally authentic in Arabic, Chinese, English, French, Russian and Spanish.

37.

The Convention permits a certain number of declarations. Those relative to scope of application and the requirement as to a written contract have been mentioned above. There is a special declaration for States that have different systems of law governing contracts of sale in different parts of their territory. Finally, a State may declare that it will not be bound by Part II on formation of contracts or Part III on the rights and obligations of the buyer and seller. This latter declaration was included as part of the decision to combine into one convention the subject matter of the two 1964 Hague Conventions.

Further information can be obtained from UNCITRAL Secretariat P.O. Box 500 / Vienna International Centre A-1400 Vienna - Austria Telex: 135612 Telephone: (43-1) 21131-4060 Telefax: (43-1) 237485

60


ICC at a glance ICC is the world business organization. It is the only representative body that speaks with authority on behalf of enterprises from all sectors in every part of the world. ICC's purpose is to promote an open international trade and investment system and the market economy worldwide. It makes rules that govern the conduct of business across borders. It provides essential services, foremost among them the ICC International Court of Arbitration, the world's leading institution of its kind. Within a year of the creation of the United Nations, ICC was granted consultative status at the highest level with the UN and its specialized agencies. Today ICC is the preferred partner of international and regional organizations whenever decisions have to be made on global issues of importance to business. Business leaders and experts drawn from ICC membership establish the business stance on broad issues of trade and investment policy as well as on vital technical or sectoral subjects. These include financial services, information technologies, telecommunications, marketing ethics, the environment, transportation, competition law and intellectual property, among others. ICC was founded in 1919 by a handful of far-sighted business leaders. Today it groups thousands of member companies and associations from over 130 countries. National committees in all major capitals coordinate with their membership to address the concerns of the business community and to put across to their governments the business views formulated by ICC. Some ICC Services ICC International Court of Arbitration (Paris) ICC International Centre for Expertise (Paris) ICC International Bureau of Chambers of Commerce – IBCC (Paris) ICC Institute of International Business Law and Practice (Paris) ICC Centre for Maritime Co-operation (London) ICC Commercial Crime Services (London), grouping: ICC Counterfeiting Intelligence Bureau ICC Commercial Crime Bureau ICC International Maritime Bureau

61


Selected ICC Publications E: English – F: French – D: German – S: Spanish – EF: English/French bilingual edition – E-F: separate edition in each language

INTERNATIONAL TRADE AND CONTRACTS / INCOTERMS The ICC Model Commercial Agency Contract When negotiating agency agreements abroad, parties must rely on national laws on agency agreements which do not take into account the specific needs of international trade and which differ substantially from one country to another. Accordingly, ICC has prepared this model form, which incorporates prevailing practice in international trade as well as principles generally recognize by domestic laws on agency agreements. E-F

32 pages

ISBN 92-842-1124-7

N°496

The ICC Model Commerical Agency Contract: a Commentary (+ diskette E-F-D-I) An ICC Publishing/Kluwer Law International co-publication A clause-by-clause commentary by the experts who wrote the ICC Model Commercial Agency Contract, this publication provides extensive illustrations of the clauses of the contract and gives lawyers and business people a comprehensive explanation of the problems encountered by those who negotiate commercial agency agreements. The commentary enriches the original text and provides new insights into the drafting process. In addition, it also includes two disks (Apple and MS DOS) with English, French, German and Italian versions of the contract. This added feature is a useful tool for drafting agency agreements in several languages. E

180 pages

ISBN 92-842-1146-8

N°512

The ICC Model Distributorship Contract (Sole Importer–Distributor) In this model form, ICC provides a set of uniform contractual rules for those distributorship agreements where distributors act as buyers-resellers and as importers who organize distribution in the country for which they are responsible. Containing flexible and general rules, the contract can also be employed on its own as a ready-to-use balanced model form if the parties are not in a position to prepare a specific contract. E-F

40 pages

ISBN 92-842-1153-0

N°518

The ICC Model International Franchising Contract The model contract on franchising, which applies to distribution franchise agreements, overcomes the difficulties caused by a lack of uniform international rules on this subject. Complete with commentary and explanation, the ICC Model International Franchising Contract brings harmony to a field of growing commercial importance. E

76 pages

ISBN 92-842-1211-1

No. 557

ICC Model Occasional Intermediary Contract (with diskette) Designed to take into account the interests of all parties involved in a non-circumvention and nondisclosure agreement, minimizing the risk of fraud and misunderstanding and so providing legal security. Includes general and special conditions, both of which are provided on a diskette. E

35 pages

ISBN 92-842-1272-3

No. 619

Incoterms 2000 ICC's standard definitions of trade terms has been fully revised for the first time in ten years. Incoterms such as FOB, CIF and DDU have become part of the language of international trade and are in constant use throughout the world. Most sales contracts drafted after 1 January 2000 will make reference to this latest revision in the text of the contract. Incoterms 2000 will provide traders, lawyers, transport officials and insurers with a modern text reflecting the latest changes in the trading environment. EF

272 pages

ISBN 92-842-1199.9

N°560

ICC Guide to Incoterms 2000 Written by Professor Jan Ramberg, international expert, chair of the revision of Incoterms 2000 and author of Guide to Incoterms 1990, the guide provides a term-by-term review of the new Incoterms, with commentary on each of the seller and buyer's obligations. Clearly written and attractively laid out, including full-colour illustrations, this is the indispensable companion to Incoterms 2000. E-F

62

192 pages

ISBN 92 842 1269 3

No. 620


Incoterms 2000 Wall Chart A full-colour chart, ideal for hanging on the office wall or for slotting into a file. With a clear illustration of the buyers' and sellers' responsibilities under each of the Incoterms, plus a list of the critical points, traders will find this the ideal tool for quick reference at a glance. E

poster

29.7 x 63 cm

No. 614

Transfer of Ownership in International Trade An ICC Publishing/Kluwer Law International co-publication The issue of ownership, although vital in international trade, is not fully covered by existing international conventions. This unique comparative study, with its detailed analysis of the legal issues arising in connection with transfer of ownership in 19 countries, fills the gap in providing an extensive comparative study for international trade practitioners. E

437 pages

N°546

Key Words in International Trade (4th edition) This revised edition includes translations of more than 3,000 entries. The translated terms and abbreviations are those most commonly used in international law and commerce, providing a source of accurate and up-to-date business terminology in the five main languages of European trade. EFSDI

408 pages

ISBN 92-842-1187-5

N°417/4

BANKING AND FINANCE Guide to the ICC Uniform Rules for Demand Guarantees by Prof. Roy Goode Explains the reasoning behind the rules and provides concrete examples of how they work in practice. Contains an introduction to the rules, a general overview and an Article-by-Article commentary; not only explains the key issues but analyses points of doubt or difficulty. For bankers, lawyers and students. (See also N°s 458 & 503.) E

140 pages

ISBN 92-842-1145-X

N° 510

ICC Guide to Bank-to-Bank Reimbursements By Dan Taylor A practical guide to daily operations in the area of bank-to-bank reimbursements written from the perspective of each bank party to a reimbursement transaction – the Issuing Bank, Reimbursing Bank and Claiming Bank. The guide provides step-by-step guidance to each party and includes detailed explanations of the principles behind each part of a reimbursement transaction. Mini case studies are provided for points of particular interest to the parties and, for each bank involved in a reimbursement, a checklist is provided, including pointers to common mistakes. There are crossreferences to URR 525 throughout the text. E

80 pages

ISBN 92-842-1232-3

N° 575

Opinions of the ICC Banking Commission 1998-1999 Queries and responses on UCP 500, UCP 400 and URC 522 More than 80 Opinions of the Banking Commission are found in this valuable reference work, which will serve as a guide to bankers, traders, practitioners and the courts as to how UCP 500 should be applied on a daily basis. The third volume in a series of ICC Banking Commission Opinions interpreting ICC's universally used rules on letters of credit. The new edition includes a consolidated key words index covering all three volumes. E

136 pages

ISBN 92-842-1268-5

N° 613

More Queries and Responses on UCP 500 (1997) E

92 pages

ISBN 92-842-1253-7

N° 596

Opinions of the ICC Banking Commission (1995-96) E

104 pages

ISBN 92-842-1220-0

N° 565

Documentary Credits Insight This ICC newsletter, published four times a year, gives the reader a direct connection to the ICC experts who analyse how UCP 500 is implemented in everday situations. It also offers a country-by-country update on documentary credit developments from correspondents in more than thirty countries. E

Periodical/subscription

4 issues a year

63


DC-PRO Focus A web site developed by ICC providing bankers and traders with information relative to documentary credits. No more leafing through reams of documents to find the L/C information needed. DC-PRO Focus puts it all on your screen for immediate access. More information on ICC's web site at www.iccwbo.org.

Trading and Investing in Emerging Markets by Nick Douch Written by an emerging market strategist and risk adviser, this publication highlights the risks and reveals the opportunities to be had in investing in emerging markets. The emphasis is on maintaining a structured approach that will allow investment and/or trading with an acceptable risk/reward ratio. An invaluable primer which will be returned to again and again as new opportunities present themselves, this practical book is packed with references to real-life events. E

140 pages

ISBN 92-842-1240-5

No. 582

Managing Interest Rate Risk by Nick Douch This publication looks at what factors may change interest rates and then goes on to examine how these changes can in themselves affect the economic and business environment. Setting out a simple model which any company or businessman can adapt to their own needs, it covers the setting of objectives in interest rate management and how this should be linked to a firm's other objectives and then looks in-depth at the types of interest rate exposure a company may face. Each of the many ways of reducing the risks caused by interest rate movements is examined in detail, as well as the tax and accounting implications of interest rate hedging and an examination of the most appropriate measurement systems for companies. A practical book packed with examples, many based on reallife incidents. E

104 pages

ISBN 92-842-1228-6

N° 572

How to obtain ICC publications ICC Publications are available from ICC National Committees or Councils which exist in some 60 countries or from:

ICC PUBLISHING S.A. 38, Cours Albert 1er 75008 Paris (France) Customer Service: Tel: +33 (1) 49.53.29.23/56 Fax: +33 (1) 49.53.29.02 E-mail: [email protected]

ICC PUBLISHING, INC. 156 Fifth Avenue, Suite 417 New York, N.Y. 10010 USA Tel: +1 (212) 206 1150 Fax: +1 (212) 633 6025 E-mail : [email protected]

To find out more about the latest ICC publications, visit our web site at www.iccbooks.com

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