This answer will address a dispute that has arisen between a Buyer from the United States and a Seller from France concerning the applicable law governing their contract. Both parties’ home countries are signatories to the United Nations Convention on Contracts for the International Sale of Goods (CISG). The contract between them states that the law of the United States is the applicable law. A disagreement has occurred where the Seller believes the CISG should apply, while the Buyer argues that the specific mention of United States law excludes the CISG. This analysis will use the Issue, Rule, Application, and Conclusion (IRAC) method to determine which party is correct and to discuss the role of the CISG in such matters.
Issue
When there is a contract for the international sale of goods between parties from two different countries that have adopted the CISG, the central point of conflict is whether a general choice of law clause is enough to exclude the CISG’s application. Looking at the scenario, the conflict involves the interpretation of the clause “the applicable law shall be that of the United States.” The issue can be formulated as a question:
Whether or not the contractual clause selecting “the law of the United States” is specific enough to exclude the application of the CISG, as permitted under Article 6 of the Convention?
Rule
The rule section is where we look at the legal authorities that govern the issue. For international sales contracts, the primary authority is the United Nations Convention on Contracts for the International Sale of Goods (1980), often referred to as the CISG or the Vienna Convention. The purpose of the CISG is to provide a modern, uniform, and fair regime for contracts for the international sale of goods. By doing so, it contributes to removing legal barriers in international trade and promotes its development (United Nations, 1980).
The starting point for determining if the CISG applies is Article 1. According to Article 1(1)(a) of the CISG, the Convention applies to contracts of sale of goods between parties whose places of business are in different States when those States are Contracting States. In this scenario, the Buyer is from the United States and the Seller is from France. Both the United States and France have ratified the CISG, making them Contracting States. Therefore, the conditions of Article 1(1)(a) are met, and the CISG applies to the contract by default.
However, the CISG respects the freedom of contract, which is a core principle in commercial law. This is often referred to as party autonomy. This principle is contained within Article 6 of the CISG, which states: “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.” This means that the Buyer and Seller had the power to agree that the CISG would not govern their contract. The key legal question that arises from this is what the parties must do to effectively “exclude the application” of the Convention. Does simply choosing the law of a Contracting State count as an exclusion?
The legal position on this matter, particularly in the jurisdiction chosen by the parties (the United States), is quite developed. When the parties choose the law of a country that has adopted the CISG, the courts must decide if that choice refers to the domestic sales law of that country (like the Uniform Commercial Code, or UCC, in the United States) or if it refers to the entire body of law of that country, which includes the CISG itself. As a ratified treaty, the CISG is part of the federal law of the United States. Under the Supremacy Clause of the U.S. Constitution, federal law preempts inconsistent state law.
American courts have consistently held that a general choice of law clause is not sufficient to opt out of the CISG. In the case of *Asante Technologies, Inc. v PMC-Sierra, Inc.* (2001), the parties chose the law of a specific jurisdiction, but the court decided that because the transaction was international and fell under the CISG’s scope, the Convention applied. The court reasoned that for the CISG to be excluded, the parties must do so explicitly. It stated that the CISG is the governing law for international sales contracts, and a general choice of law clause pointing to a jurisdiction that has adopted the CISG does not displace it.
A similar conclusion was reached in *Italdecor, S.A.S. v. Yoe Fashions, Inc.* (2011). In that case, the contract contained a clause stating that it was to be “governed by the laws of the State of New York.” The court found that this was not enough to exclude the CISG. It explained that the CISG is part of U.S. federal law and therefore governs the transaction unless the parties have clearly expressed their intention to opt out. To effectively exclude the CISG, the contract should have contained more specific language, such as “This contract shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods,” or by explicitly choosing a body of law that is not the CISG, such as “the Uniform Commercial Code of New York.”
Therefore, the rule is that the CISG applies automatically to international sales contracts between parties from Contracting States. While parties can opt out under Article 6, a general clause choosing the law of a Contracting State is, according to U.S. courts, insufficient to do so because the CISG itself is part of that State’s law.
Application
Applying these rules to the facts of the problem, we can determine which party’s argument is stronger. The contract is between a Buyer in the United States and a Seller in France. As established, both are Contracting States to the CISG. This means that the conditions of Article 1(1)(a) are fulfilled, and the CISG is the default applicable law for their transaction.
The parties included a choice of law clause in their contract, which reads: “the applicable law shall be that of the United States.” The Buyer argues that this clause means that domestic U.S. law, and not the CISG, should apply. The Seller argues that the CISG should apply.
Based on the legal rules outlined above, the Seller’s argument is the correct one. The Buyer’s argument rests on a misunderstanding of how the CISG operates within the legal framework of the United States. Since the CISG has been ratified by the United States, it is not a foreign or separate body of law; it is incorporated into U.S. federal law. Therefore, when the parties chose “the law of the United States,” their choice encompassed the entire body of applicable U.S. law for an international sale, which includes the CISG.
The clause in the contract does not show a clear and explicit intention to exclude the CISG, which is the standard required by courts interpreting Article 6. As seen in cases like *Asante Technologies* and *Italdecor*, a simple reference to the law of a U.S. jurisdiction is not enough to opt out. The contract does not say “the CISG shall not apply” or “the Uniform Commercial Code shall apply instead of the CISG.” Without such specific language, the general clause is interpreted as including the CISG, not excluding it. The choice of the United States as the jurisdiction to hear disputes has no bearing on the applicable substantive law; it is a separate matter of procedural forum selection.
Therefore, the Buyer’s belief that mentioning “the law of the United States” serves to exclude the CISG is incorrect. The clause is too general to meet the threshold for an effective opt-out under Article 6. The CISG, as the relevant part of U.S. law for this international transaction, will govern the contract.
Conclusion
In conclusion, the Seller is correct. The United Nations Convention on Contracts for the International Sale of Goods (CISG) should be the applicable law for settling the dispute between the Buyer and the Seller.
This is because the contract falls squarely within the scope of the CISG under Article 1(1)(a), as it is an international sale between parties from two Contracting States. While the parties are free to exclude the CISG under Article 6, the clause they used (“the applicable law shall be that of the United States”) is not specific enough to do so. Based on the interpretation of U.S. courts, such a general clause is understood to incorporate the CISG as part of U.S. federal law, rather than to exclude it in favour of domestic state law like the UCC. For the Buyer’s argument to have succeeded, the contract would have needed to state explicitly that the CISG was being excluded.
References
- Asante Technologies, Inc. v PMC-Sierra, Inc. 164 F. Supp. 2d 1142 (N.D. Cal. 2001).
- Italdecor, s.a.s. v. Yoe Fashions, Inc. No. 09-Civ-9430 (S.D.N.Y. July 18, 2011).
- United Nations (1980) United Nations Convention on Contracts for the International Sale of Goods. Vienna.
