There are many issues in the legal field today regarding international contracts for the sale of goods, differences of legal regimes, religion, culture, and language, for instance, come as a barrier to cross-border transactions between companies and entrepreneurs from all over the World. These hindrances serve as discouragement to companies to expand their activities and prevent economies to thrive, affecting not only the biggest players in the market, but especially medium and small sized enterprises from developing and underdeveloped countries, as they often carry out their businesses in a position of low or even inexistent bargaining power, being constantly submitted to impositions and abusive practices of other companies. Therefore, the unification of international sales law has been understood as indispensable to commerce’s integration and development, once only one uniform law would govern the transactions. Due to its importance, it is no coincidence that during the past centuries and more intensely in the past five decades, the unification of international sales law – given that sale is the most frequent and common transaction in the World – has been at the center of legal discussions, aiming at equalizing cross-border commercial relations, simplifying the rules of commerce, and integrating the most varied social, economic, and legal perspectives, granting a higher degree of foreseeability and legal certainty to cross border transactions.
One of the most significant efforts towards the unification of sales law is the United Nations Convention on Contracts for the International Sale of Goods (namely the ‘CISG’), signed at the Vienna Convention held in 1980. The CISG has officially come into force on January 1st, 1988, to its first eleven signatory nations and, as of now, 85 countries have already ratified its terms, introducing the Convention’s norms and concepts to their national legal system. Apart from United Kingdom and India, all the World’s biggest economies adopt the CISG as the law regulating contracts for international sale of goods. Brazil has adhered to the CISG in 2013, and later incorporated its norms to national legal system by the enactment of Decree n. 8.327, dated of October 16th, 2014.
On February 14th, 2017, the State of Rio Grande do Sul’s Court of Appeal became the first Brazilian Court to decide a case (Appeal n. 70072362940) based upon the CISG and the Unidroit’s Principles concerning commercial contracts. In the decision, the referred Court convicted a Brazilian company to give back almost eighty-thousand American dollars to a Danish company for breach of contract. In a country that faces an unreliable legal system, the CISG can represent a benefit, once the companies would be offering their trading partners an already developed set of rules known by most active global players for more than three decades.
It is essential to enhance that the CISG is automatically applied to all international sale of goods’ contracts celebrated by parties with places of business in different contracting Member States, those considered as the nations that have already ratified/internalized its norms, or by following the rules of conflict of law established by international private law, when it results on the adhesion of a contracting Member State’s national law. Evidently that the Convention has, or will, come into force in different dates for each contracting Member State, given this, considering the joint analysis of articles 1 and 100, the contract celebrated by the parties must be concluded after the CISG’s enforcement date in each parties’ national legal system or in the chosen or appointed legal system to secure its application to the transaction itself. Given its automatic applicability, the parties that do not wish to have the CISG as the governing law of their business transaction must expressively opt out, inserting a specific clause on the contract stating that the Convention will not be applied.
As most attorneys are not yet familiarized with this issue, or with the Convention itself, it is possible that many sale transactions are already being governed by the CISG without the parties or their legal representatives being aware. Thus, the parties can be misled into wrongly calculate probable outcomes in future conflicts or disputes that could arise out of the contract, leading to prejudicial decisions.
Another issue surrounding the CISG is whether local Courts are duly prepared to deal with an international legislation. As established in the core of the Convention, its norms must be interpreted and applied completely free of all domestic law influence and understandings. Also, as local Courts are entitled to apply the CISG in a daily basis, there is no final instance Court designated to pacify and harmonize understanding surrounding its concepts and norms, which can lead to many different rulings about the same matter.
The incompleteness of the CISG is also a matter of attention, once many subjects are left out of its substantive scope of application, therefore only partially harmonizing sales law. Provided that, it is still necessary to determine in a choice of law clause which law will be applied for the matters not covered by the Convention’s scope of application, such as validity for instance. If applying one international law is already a challenging task for local Courts, the application of two different set of rules for the same contract can result in significant inconsistencies. Consequently, many scholars and practitioners defend its exclusion (by an opt out clause) in every situation. This seems very extreme and a direct consequence of reluctance in changing exiting and consolidated patterns, or even a sign of ignorance. In some cases, if duly analyzed, the CISG can not only be beneficial and suitable to the companies’ interests, but also encourage partners to engage in or intensify cross border transactions.