International Sale of Goods

Under Vienna Convention, 1980

[United Nations Convention on Contracts for International Sale of Goods]

Framework
1. 2. 3. 4. 5. 6. 7. Scope of application Party autonomy Formation of contract Obligations of the seller Obligations of the buyer Remedies for Breach of contract Passing of risk

Framework
8. Suspension of performance and anticipatory breach 9. Exemption from liability to pay damages 10. Preservation of the goods

Scope of Application
This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
1. When the States are Contracting States; or 2. When the rules of private international law lead to the application of law of a Contracting State.

Scope of Application
This Convention deals only with the following aspects of a Contract for Sale of Goods: Formation of Contract of sales Rights and obligations of the seller and buyer arising from the contract The Convention does not deal with Validity of contract or Effect that the contract would have on the property in the goods sold.

Goods does not include Goods bought for personal, family or household use, unless the seller, at any time before or at the contract is to be taken into consideration, Goods bought by way of auction Goods bought on execution or otherwise by authority of law Contract for sale of shares, stocks, investment securities, negotiable instruments or money Contract for sale of ships, vessels, hovercraft or aircraft Contract for sale of electricity

Party autonomy
The principle of contractual freedom is apparent in the Convention from the clause that permits the parties to a contract for sale of goods to exclude the application of this Convention whether the Forum having jurisdiction in case of dispute is a Contracting State or not. Even partial derogation from the Convention may be done by way of express terms in the contract which are not in conformity with the provisions of the Convention.

Formation of Contract
Contract must be in writing. (includes telex and telegram) A proposal must be addressed to a specific person or more than one specified persons. But if a proposal is addressed to other than one or more specified persons then the same is to be treated as an invitation to make offer and not offer in itself. An offer will be effective when it reaches the offeree, but it may be revoked at any time before or at the same time it reaches the offeree. An offer will be irrevocable if it states to be so for the period of acceptance, or if the offer may reasonably be presumed to be irrevocable and the offeree has acted upon the same.

Formation of Contract (contd.)

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. An acceptance must be absolute and unqualified, i.e., should not contain terms altering the original offer. If the acceptance contains terms materially altering the original offer the same would be treated as counter offer. However, 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.

Obligations of the seller

Deliver the goods to the buyer or place the same to the disposal of the buyer as per agreement or do all things necessary to place them so as required under the contract Hand over the documents of title to goods to the buyer Transfer the property in goods to the buyer Goods should be of the quantity, quality and description as agreed in the contract for sale Goods should be packaged in manner required under the contract and in absence of stipulation as to manner of packing, it should be in the usual manner suitable to such goods

Obligations of seller (..contd.)

The seller would be liable for any non-conformity in the goods at the time risk passes to the buyer The seller would also be liable for any nonconformity in the documents to be handed over to the buyer The goods delivered must be free from third party claims based on industrial property or other intellectual property unless the buyer could not have been unaware of such third party claims

Obligations of buyer
Payment of price The price may be fixed as per weight of goods Must enable payment to be made to the seller Take delivery of goods Payment must be made at the place stated in the contract Payment must be made within the time stipulated for payment under the contract. In absence of such a term, it must be made within a reasonable time Payment must be made without request of buyer

Obligations of buyer ( contd.)

The buyer must upon receipt of goods examine them for any non-conformity In case of carriage by sea, or cases where the examination is not possible at the place of unloading, it has to be deferred until the goods arrive at their final destination The buyer cannot invoke sellers liability in case the buyer was aware of the infirmity in the goods or of third party claims on industrial property or other intellectual property.

Remedies against seller

Rights under articles 46 to 52; and Damages may be sought as per articles 74 77

Remedies against seller (.. contd.)

No period of grace can be offered by a court or tribunal when the buyer resorts to exercise his rights Additional period may be agreed for performance of the contract Buyer may seek delivery of substituted goods or repair of any infirmity in the goods Buyer may refuse to take late delivery or early delivery

Remedies against buyer

Exercise rights under articles 62 to 66; Claim damages under articles 74 to 77

Remedies against buyer (..contd.)

No period of grace can be offered by a court or tribunal when the buyer resorts to exercise his rights Additional period may be fixed for payment Require the buyer to take delivery

Claim to damages
Damages for breach would include loss of profits But damages cannot exceed what could have been reasonably foreseen by the party suffering the breach In case a contract is avoided and the buyer has bought the goods in replacement or the seller has resold the goods, then the party claiming damages can recover only the difference between contract price and the substitute transaction. In case no such substitute transaction is entered into then the difference between the current price and the contract price may be recovered. If a party relies on breach of contract and takes action thereon, then, that party must do everything possible to mitigate its losses. If the party suffering breach fails to do so then the amount of damages may be reduced by the amount which could have been mitigated

Passing of Risk
Aft r t ri i li l f r l r ft li ti t I f ifi t t r l t t tr t. N r ll , t ri tr t. r, t i r ft ir t ri If t r t l t r t l t ri ll t li r i t r l t i i ri t t t t t , t ri l r l irr ti li r l t r i tifi t

l i f t ri t t r t t rri r r t r rt tr t t r t r t f i f t ll r, t t r t ri r t tt l

Suspension of performance of contract

Performance of contract for sale of goods may be suspended by a party ifThere are serious doubts raised as to the creditworthiness of the other party, or It becomes apparent that the other party would not perform its obligations A notice to this effect must be immediately given However, if sufficient assurance is given for performance of the contract by the other party then the performance under the contract may not be suspended

Anticipatory breach of contract

If prior to the date of performance it becomes apparent that the other party shall not perform its obligations the contract may be avoided. Reasonable notice for the same may be given if time permits In case there is a fundamental breach as to delivery of goods by way of installments the contract may be avoided by the buyer.

Interest
Interest is recoverable without prejudice to damages

Exemptions to liability
If it is proved that the failure to perform its obligations were as a result of circumstances beyond its control The party alleged to have breached the contract was prevented from performing its obligations on account of act of third party This provision applies for the period during which the impediment subsists A party may not rely on the non-performance of a party to the extent the same was due to the formers default.

Effect of avoidance
Releases both the parties from their obligations (subject to liability for damages) Restitution of party who has partly or wholly performed its obligations Restitution is subjected to possibility of such restitution Buyer would be liable to account for all benefits accrued to him on account of the goods delivered

Preservation of goods
Until reasonable expenses are paid to the seller for delay in taking delivery, the same may be retained by the seller and must be preserved by the seller. If the buyer is exercising his right of rejection of goods that are not in conformity with the contract, the same may be held by him on behalf of the seller. They must be preserved till returned. The party preserving the goods for the other may recover reasonable expenses for such preservation If the preservation of the goods would involve unreasonable expense or preservation may not be possible then the same may be sold and the sale proceeds must be reimbursed to the other party. The party so reimbursing the proceeds is entitled to reasonable expenses in preserving or disposing the same