SR. NO.

CONTENT

PAGE NO.

Zaman

Ali
B-1/602, Sea Breeze Towers,
Sector-16, Off Palm Beach Rd.,
Nerul, Navi Mumbai
Maharashtra, India 400706
zaman.ali@jgu.edu.in
zamanali1602@gmail.com
Law Term 2013 Transnational Commercial Law
Prof. Dr. Matthias Weller
07/12/2013

MODULE 3: LEGAL ESSAY WRITING (3 ECTS)

Examining the importance of CISG: Is it viable for

Indian Sales Law?

TABLE OF CONTENTS

A. Introduction.3
B. How beneficial is CISG?..............................................................4
I. Simplification and Certainty.4
II. Uniformity...4
III. Conflict of Law..5
IV. Validity of Contract...6
V. Party Autonomy..6
VI. Language....7
C. Sale of Goods: Indian Scenario....7
D. Conclusion..10
BIBLIOGRAPHY12

A. INTRODUCTION
After restoring peace in the post-war era, the need for a unification of specific areas of law
arose and one such area has been the sales law. It is to be kept in mind that enough

concentration on sales law is needed because it forms the single most important type of
contract in trade relationships.
Today, as per the Convention adopted by UNICTRAL in Vienna in 1988, international
sales law is harmonized to a very significant extent through the United Nations
Convention on Contracts for International Sale of Goods (CISG).1 This has been
initiated to bring into focus the existence of divergent national laws that may cause
material problems for businesses. In this paper, the usefulness of this Convention will
be dealt with because other factors like linguistic and cultural differences, tax
regulations and other logistical concerns also cause problems for businesses.
Therefore, the question of whether CISG has simplified or complicated cross-border
trade businesses and if it is benefitting anybody holds a great importance.
India is one the largest growing economies due to its private sector being flourished
with rising cross-border businesses. This enhances the need for the best legal system
when it comes to such trade. Indian sales law is governed under The Sale of Goods
Act, 1930. The rights of buyers and sellers, when trading domestically or
internationally, are taken care under this Act. This Act is modeled on the English Sale
of Goods Act of 1893, which is continued to be relevant. The question mark stands on
whether the CISG could be a comprehensive treaty for India in dealing with these
cross-border sales because the ratification of CISG would mean India to let go its own
Act and transfer CISG in its domestic regime of private international law. To consider
such an option, the importance of CISG is to be assessed with an Indian perspective
and this paper tries to exactly examine the same.

B. HOW BENEFITIAL IS CISG?

The preamble of the CISG provides that the Convention wants to contribute to the
removal of legal barriers in international trade and promote the development of
international trade.2 Legal scholars and legislators have worked on unified trade
1
Schlechtriem, CISG, p. 18.
2 Text, United Nations Convention on Contracts for International Sale of Goods, pg. 1.
3

legislation on international sales law to reduce as many problems as possible. With

rapidly changing economic situations of nations and furtherance of globalization, it
has been a positive decision to bring in CISG but its effects are justifying or not must
be assessed. Several researchers have taken due care on this topic and I shall intrigue
their thoughts and base my opinions/contradictions on the same.
I. SIMPLIFICATION AND CERTAINTY
To start with, it has been believed by legal scholars that an instrument such as the
CISG increases legal certainty, as they believe that the applicability of different
national laws has the obvious consequence of impairing this certainty.3 If there would
not have been such a case, it would be difficult to determine which law governs the
contract. Agreed, but there could also be instances where the parties do not wish to be
concerned about the issue of applicable law to make the choice of this legislation and
therefore, not very concerned with legal certainty. The problem could be that they had
to comply with this legislation if they are contracting parties at some stage when they
never actually reached the clause of applicable law at the time of conclusion of the
contract. But at the same time, the CISG has been thought to be simpler because the
convention has borrowed numerous provisions from the existing laws of various legal
traditions.4
II. UNIFORMITY
The success of CISG has been relied on its uniformity. Uniform law depends on how
that law is to be interpreted and the consistency of such interpretation and application
by the courts and tribunals in different countries. For CISG, the growing number of
reported cases has borne out this optimism. Most of the cases decided in the commonlaw countries prove that the task of interpreting general rules, interpreting by analogy,
and relying on general principles and applying them to specific facts is certainly not
beyond the capabilities of the courts. Nor has the fact that civil-law countries do not
adhere to the stare decisis principle prevented them from giving adequate

3 Paul B. Stephan, The Futility of Unification and Harmonization in International Commercial Law,
pg. 746.
4 Gilles Cuniberti, Is the CISG benefitting anybody? Pg. 1518.

consideration to cases that have already been decided.5 But in certain aspects, there
exists a lack of uniformity. For example:
1. Article 7 (on good faith) - This article mentions that the courts must regard the
case to have an international character and questions not settled must be in
conformity with general principles.6 This Article being too wide and vague,
there could be numerous interpretations on the same by different national
courts leading to a non-uniform and a flexible application of similar principles
because of lack of highest court to reconcile such different interpretations.
2. Article 14 & 55 The lack of clarity on price fixation exists. On the
interpretation of these articles, Article 55 applies when price is not fixed but
the contract is validly made; and Article 14 makes the contract invalid if the
price is not fixed.7 This makes Article 15 an empty set.
III. CONFLICT OF LAW
The CISG deals with the problem of conflict of law by providing necessary guidelines
for interpreting international sales transactions. But in todays world, it is easier to not
distinguish between local and international transactions because too many cross
border initiatives are taking place. The Convention uses the places of business of the
parties as a deciding factor, which should be of no problem. This creates an artificial
division between national and international transactions.8 But not to forget, if parties
agree to the application of domestic law, it shall apply! This division could exist for a
much longer time because CISG is an international code with no provisions for its
modification and hence, ratification by a country could be a daunting task for that
country.
IV. VALIDITY OF CONTRACT
The CISG deals with matters concerning contract formation, contract interpretation,
the rights and obligations of the buyer and seller, and the remedies for nonperformance. Article 4 of CISG, however, excludes issues concerning the validity of
the contract; any of its provisions or any usage, and the effect the contract may have
5 Sieg Eiselen, Adoption of CISG in South Africa, pg 343-344.
6 Supra at 2, pg. 3
7 Ibid, pg. 5, 17.
8 Supra at 5, pg. 359.
5

on the property in the goods sold from the scope of the convention. The CISG
consequently does not deal with, for instance, defects in consent, information duties,
and the fairness and validity of standard terms. These issues need to be addressed by
the applicable law, causing fragmentation and complexity. An instrument that covers
the whole lifecycle of the contract and avoids fragmentation of applicable laws is
preferred to simplify the legal environment for businesses.9 The validity of contract
failed to get much attention from the drafters as the rules regarding fraud,
consideration, property or tort are non-existent. Fraud, property and tortious liabilities
have been the subject of being treated under the domestic regime; are not included as
validity under CISG and also, consideration is sought to be not necessary under CISG.
V. PARTY AUTONOMY
An important feature of the CISG is that it is based on the principle of party
autonomy, where most of its provisions may be modified or excluded to suit the needs
of the parties. This provides a great deal of flexibility to the parties, who can accept,
change or reject the provisions of the Convention to suit their needs.10 The terms of
contract, rather than the CISG, bear an upper hand due to CISGs flexible
interpretation and therefore, leave parties with the freedom to shape the contract as
per its requirements. If there exists ambiguity in certain terms, the CISG fills these
gaps. This autonomy might pull a weak point on this as well because business parties
might just end up excluding the convention leading to a slower acceptance of the
Convention.

VI. LANGUAGE
The Convention is available in six major official languages, all with equal authority,
by providing a common understanding of rights and duties of buyers and sellers and
transaction itself. But given the differences of language and the likelihood that courts
will interpret the convention provisions through their domestic lens, and although
9 Nicole Kornet, The CESL and the CISG: Complicating or simplifying the legal environment?, pg.
11.

10 G A Barton 'The United Nations Convention on Contracts for the International Sale of Goods'
(1985) 18 CILSA, pg. 29.

Article 7 of the Convention calls for an interpretation taking into account the
international character of the instrument, the chances are high that diverging
interpretations will arise.11 Such interpretations lead up to different judicial techniques
of looking at substantive law. The biggest fear is not really the difference in style of
interpretation but rather whether courts will be able to rise above their national laws
and resist the temptation to refer to the familiar concepts and doctrines of their
national law in cases of uncertainty.12
So, we observe that there are pros and cons involved in this Convention. Nevertheless,
the idea to focus on a unified treaty has been given its due center of attraction by the
parties and the judicial systems are trying enough to make sure the interpretations are
not diverse. The major single aim has been to simplify the legal environment for
businesses in relation to their cross-border transactions. It is a first step towards
harmonization and several flaws that exist may disappear slowly if given due
encouragement. A country like India can sustain this convention because of its
economic progress but its applicability depends upon existence of disfavored rules
that Indias legislature, executive and judiciary may determine.

C. SALE OF GOODS: INDIAN SCENARIO

Indian sales law is governed under the Indian Contract Act, 1872 and the Sale of
Goods Act, 1930. This law relating to sale of goods has to be read as a part of the
Indian Contract Act, 1872.13 This Act covers all aspects of sale of goods. CISG can be
considered as one the most successful treaties in private international law due to its
reach and use in international commercial transactions. It is undoubtedly a fact that
India has seen a robust growth since its liberalization in 1991 as most of the trade
barriers have fallen away since then. CISG holds 80 members currently and all
signatories apply this convention in a uniform fashion.14 India holds long-term trade
relations with these members, as they are major trade parties to her. So what exactly is
11 Supra at 5, pg. 7.
12 Supra at 5, pg. 362.
13 Section 3 of The Indian Contract Act, 1872.
14 Status, United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980),
available at http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html.

beholding this nations stance to not to ratify this Convention?

To hold a rational approach on this, it is also important to look into why many
common law countries have not accepted the ratification. Under common law
jurisdictions, the precedence is given a lot of importance. The unwillingness of
common law judges to apply CISG is due to the lack of precedence among common
law jurisdictions applying CISG, simply because common law judges want to get
their precedents in first. There is plenty of case law in non-common law jurisdictions,
but it does not seem to carry much authority in common law courts.15 Undoubtedly,
there are cases that do not coordinate with one another, which is disheartening
because the harmonizing intention of CISG has been to promote uniformity when
applied. As a reference to several US cases, the courts reluctance to look beyond the
U.S. border for CISG case law does little to accelerate the unification of international
trade law. Worse, courts do not seize the opportunity to expand at length about CISG
due to its comparison with UCC in regards to non-availability of major provisions for
validity of a contract like statute of frauds, consideration, parol evidence rule as
examples.16 Though it is too early to judge where CISG is headed, the authority of
precedents shall remain a focal point of determining this conventions direction.
The validity of contract forms one of the core essentials in Indian sales law and
therefore, non-existence of such validity like fraud, consideration or misrepresentation
contributes to the major factors involved with India not signing the treaty. According
to Arthur Rossett, the language, first of all, is foreign with regards to the law of
contract and therefore has no clearly defined meaning and, secondly, is too wide and
inexact and therefore leads to uncertainty. The language used in the text is so vague
and wide that it is uneasy to ascertain what these provisions are. An example of
Article 25 (fundamental breach) could be taken in such a case. The Article says:
Fundamental breach is one which results in such detriment to the other party as
substantially to deprive him of what he is entitled to expect under the contract, unless

15 Monica Kilian, CISG and The Problem with Common Law Jurisdictions, pg. 233.
16 Helen Kaminski Pty. Ltd. v. Marketing Australian Prods.1997 U.S. Dist. LEXIS 10630,
Calzaturificio Claudia s.n.c. v. Olivieri Footwear Ltd., 1998 U.S. Dist. LEXIS 4586

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.
Professor Treitel here rightly points out that this article is open to criticism on the
ground that it is likely to lead to uncertainty since the open-textured nature of the
definition in Article 25 makes it hard to predict just when a breach will be regarded as
"fundamental".17 As already discussed, CISG is so hushed about interpretation of good
faith because it fails to bring clarity on whether it signifies towards fair dealings or
towards how parties behave and appear, unlike UNIDROIT principles or Principles of
European Contract Law (PECL). Also, CISG does not mention about middlemen
involved in the transactions and if a dispute arises, the complication on granting
interim relief advances. When such opacity in the convention exists without any selfsustaining jurisdiction, it is correct to concur that these are the considering factors as
to why India hesitates to sign this convention.
On the other hand, Indias sales law is based on the very old English Sale of Goods
Act and therefore, they are not in a condition to be able to assess and particularly,
suited for the modern commercial contracts. Other logical legal advantages could be
that it is always better to apply a single known law in case of disputes rather than an
unknown law (French law or German law). CISG might help in providing a boost to
the Indian economy. Legal system of a country is one of the important factors in
facilitating its economy. Though it is not very true to claim that a strong legal system
guarantees a robust economy, but it is difficult to find a robust economy without a
strong legal system. It must not be forgotten that the boost in economy may happen if
the businessmen are provided with a consistent international sales law for India.

D. CONCLUSION
The purpose of CISG has been to harmonize international trade relations and such a
treaty is definitely an asset to maintain harmonious relations between countries. If
efforts from the international community made towards accelerating this process, then
definitely it will be ideal for international trade but the willingness has to be
17 A.G. Guest, Benjamin on Sale of Goods (4th ed), para 18-116, footnote 31.

determined. Indian legal fraternity and the businessmen and dealers must assess
whether CISG is able to meet the Indian standards or there still exists doubtful
elements. Predictability is often depicted as the crux of the legal practice for lawyers
and therefore, a knowledgeable legal counsel is sought before entering a legal contract
for the required efficiency and predictability. It is important that predictability shall be
maintained when the law is clear and CISG lacks many of those valid concerns.
CISG brings international law to be applied locally and when the interpretation of this
law takes place, it carries a local cast. This marks an impediment because a question
mark is raised over the uniformity of CISG again. In spite of the Sale of Goods Act,
1930 being old, it does not lack ambiguity in regards to core principles of validity of a
contract (contractual capacity, illegality, fraud, tortious liability) and good faith, when
compared to the CISG.
Monica Kilian has rightly pointed out in her article that there is a vicious circle
between CISG and courts of law: courts are nervous about the lack of case law, which
in turn prohibits the development of case law. This is a little odd, considering how
many transactions would be governed by CISG.18 When commercial disputes are
taken over by arbitration, CISG has been still used where it seems to have performed
well than at courts of law because that degree of choice over both procedural and
substantive law makes party autonomy far more important in arbitration than
litigation, the national courts do not face conflict of laws and conflict of issues with
their own local laws and UNCITRAL has also promoted the international commercial
arbitration as a desirable procedural model for international trade through setting up
of UNCITRAL Arbitration Rules. 19
Inadvertently, a good contract is the one that is not too vague and the options do rest
on how lawyers predict the outcome of disputes that could arise. It is recommended to
formulate a better contract agreement with international dealers/clients rather than be
dependent on an international contract that is lacking definition, is blurry and leading
to ambiguity of international law. After such assessment, I opt to say that with current
18 Supra at 15. Pg. 243.
19 Jeffrey Waincymer, CISG and International Commercial Arbitration, pg. 583, 586, 595.
10

situation, CISG is in a need to be further developed and accepted so as to suit Indias

demands because it will complicate the business transactions that are governed under
the Sale of Goods Act, 1930. Nonetheless, the flaws of CISG will disappear one day
and though it may have been a first step towards harmonization, this harmonization
could not be achieved there and then. The quality must improve. Therefore, all that is
required right now are improvisation and careful drafting and formulation of
international contracts and therefore, leading to welcoming the nations to maintain
healthier international relations.

BIBLIOGRAPHY
Schlechtriem, Peter: Uniform Sales Law The UN Convention on Contracts for the
International Sale of Goods, 1986
B. Stephan, Paul: The Futility of Unification and Harmonization in International

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Commercial Law, 39 Virginia Journal of International Law, 1999

Cuniberti, Gilles, Is the CISG benefitting anybody?, Vanderbilt Journal of
Transnational Law (Vol. 39:1511), 2006
Eiselen, Sieg, Adoption of the Vienna Convention for the International Sale of Goods
(the CISG) in South Africa, South African Law Journal (Part II), 1999
Kornet, Nicole, The Common European Sales Law and the CISG: Complicating or
Simplifying the Legal Environment?, Maastricht Journal of European and
Comparative Law (Vol. 19), 2012
Arton, G.A., The United Nations Convention on Contracts for the International Sale
of Goods, Comparative and International Law Journal of South Africa (Vol. 18), 1985
Kilian, Monica, CISG and The Problem with Common Law Jurisdictions, The Journal
of Transnational Law and Policy (Vol. 10:2), 2001
Guest, A.G. Benjamins Sale of Goods (4th edition), 1992
Waincymer, Jeffrey, The CISG and International Commercial Arbitration: Promoting
a Complimentary Relationship Between Substance and Procedure, Sharing
International Commercial Law across National Boundaries: Festschrift for Albert H
Kritzer, 2008

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