The Uniform Commercial Code (UCC), first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America. The goal of harmonizing state law is important because of the prevalence of commercial transactions that extend beyond one state. For example, goods may be manufactured in State A, warehoused in State B, sold from State C and delivered in State D.
The UCC therefore achieved the goal of substantial uniformity in commercial laws and, at the same time, allowed the states the flexibility to meet local circumstances by modifying the UCC’s text as enacted in each state. The UCC deals primarily with transactions involving personal property (movable property), not real property (immovable property) Firm offers (offers that cannot be revoked for a set time) are valid without consideration and irrevocable for time stated (or up to 3 months) and must be signed.
Offer to buy goods for “prompt shipment” invites acceptance by either prompt shipment or a prompt promise to ship. Therefore, this offer is not strictly unilateral. However, this “acceptance by performance” does not even have to be by conforming goods. Consideration — modifications without consideration may be acceptable in a contract for the sale of goods. Failure to state price—in a contract for the sale of goods, the failure to state a price will NOT prevent the formation of a contract if the parties’ original intent was to form a contract.
A reasonable price will be determined by the court. Assignments — a requirements contract can be assigned if the quantity required by the assignee is not unreasonably disproportionate to original quantity In 1980 the United Nations Convention on Contracts for the International Sale of Goods (‘the CISG’) was introduced to create international certainty and uniformity in the law and to govern issues that arise in an international sale of goods transaction.
This paper focuses on the international sale of commodity type goods and the ability of the CISG to govern contracts for the sale of such commodities. Commodity type goods comprise a broad range of products including grains, wheat, oil, soybeans, rice, cotton and chemicals. Commodities are characterized as being substitutable goods that are produced in bulk quantities by a large number of producers. As will be illustrated, commodity markets have many unique characteristics that distinguish the international sales of commodities from the international sale of goods intended for commercial consumption.
The natural flexibility of the CISG warrants it a suitable instrument of law to govern contracts for the international sale of commodities, particularly given the contractual freedom and precedence afforded to parties involved in a sale by Arts. 6 and 9. It is an appropriate tool for use in a commodity sales contract, especially when applied to a contract that incorporates internationally recognized trade terms or standard usages into the contract.
Interestingly, although the CISG is an apt and fitting instrument of law to govern international commodity sales, it is generally excluded in standard form contracts that instead opt for English law in arbitration and as the proper law of the contract. At present the CISG does not hold the same measure of reported judgments and case law that the United Kingdom retains on commodity sales, but it is more and more frequently being referred to in arbitration cases and national decisions.
The CISG is capable of being developed and extended to meet the requirements of international trade in a uniform manner that cannot be accomplished by a single domestic law. Generally, the CISG applies only to contracts for the sale of goods between parties whose relevant places of business are in different Contracting States or when the rules of private international law lead to the application of the law of a Contracting State. Nations adhering to the Convention may exclude the latter basis of applicability, so you will have to check for declarations and reservations.
Under the Convention, the fact that the parties to the contract 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. Consequently, you should consider identifying the parties’ places of business in the contract in a way that makes evident the applicability or non-applicability of the Convention. The CISG is the product of a long process of development by legal and commercial experts.
At this writing it has been adopted by 62 nations. When you are negotiating a sales contract choice of law clause, even if the Convention would not apply to your sales contract, it could be a suitable neutral ground between the law of your contract partner’s home and your domestic law. The ICC model contract incorporates the CISG with the intention that the Convention apply whether or not the countries of the seller and buyer have ratified it. Consider adopting the CISG as part of your contract, where it would not apply otherwise.
You should be able to make the CISG part of your contract by using a choice of law clause. Domestic law will govern the validity of such a clause, but under usual conflicts of law rules, most often, choice of law clauses are enforceable. The laws of many nations differ as to whether contracts for the sales of goods must be in writing. Under the UCC, American law requires that contracts for the sales of goods of $500 or more be in writing. (Under proposed amendments to the UCC, the requirement would be increased to $5,000 and the requirement of a signed “writing” would be changed to signed “record. Writing requirements in common law countries date back to an act of the English Parliament in 1677. In 1954, however, the United Kingdom repealed its law. Under CISG Article 11, a contract for the international sale of goods “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. “This is in keeping with a basic concept found in the CISG: that the parties should have flexibility in contracting and as much freedom of contract as possible. The “Battle of the forms” under the UCC:
In the United States the mirror image rule has been modified by statute to deal with modern business practices and to avoid the problems in the preceding examples. Under subsections 1 and 2 of the original UCC 2-207: 1. A written confirmation that is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those in the purchase order, unless the confirmation “is expressly made conditional on assent to the additional of different terms. ” 2. If both parties are merchants, any additional terms contained in the seller’s confirmation automatically become a part of the contract unless: a.
The buyer’s purchase order “expressly limits acceptance” to the terms in that order; b. The additional terms in the confirmation “materially alter” the terms of the order; or c. The buyer notifies the seller of an objection to the additional terms within a reasonable time after receiving the confirmation containing the new terms. A careful reading of UCC 2-207 shows that the UCC attempts to uphold the intentions of the parties by keeping the contract in existence where there are only minor differences between the forms used by the parties.
The UCC states that, between merchants, an acceptance by a confirmation that contains additional terms that reflect only minor changes from the buyer’s order will be effective to produce a contract, and the minor terms become a part of it (unless the buyer notifies the seller of an objection to the new term). A minor term might be one that is in usual and customary usage in the trade. Adding a provision that calls for an interest penalty for late payment is an example of a minor term (only because such penalties are common in sales contracts).
The battle of the forms under the CISG: The CISG rules fall somewhere between the rules set out by the common and civil law and the UCC. In an international sales transaction governed by the CISG, an acceptance containing new terms that do not materially alter the terms of the offer becomes a part of the contract, unless the offeror promptly objects to the change. However, a purported acceptance that contains additional or different terms that do materially alter the terms of the offer would constitute a rejection of the offer and a counteroffer.
No contract would arise at all unless the offeror in return accepted all of the terms of the counteroffer. (Recall that under the UCC a contract would arise, albeit without the new terms). Continuing the previous example, no contract would be formed between DownPillow and Federhaus under the CISG, and Federhaus’s new material term would amount to no more than a counteroffer. Unlike the UCC, the CISG states those key elements of a contract that will materially alter a contract: price, payment, quality and quantity of goods, place and time of delivery, extent of one party’s liability to the other, and settlement of disputes.
This list is so broad that almost any term could conceivably be interpreted as “material. ” Thus, under the CISG, almost any new of different term in the acceptance could constitute a counteroffer. The effect is that many businesspeople may believe that they are “under contract” when they really are not. Consequently, those businesspeople negotiating an international contract must make certain that all material terms of the contract are understood and agreed upon by the parties.