Sales of Good Act and UN Convention

This essay looks at the interaction of the UK Sales of Good Act 1979 and the UN Convention on the International Sales of Goods concluded in Vienna, otherwise known as the Vienna Convention. It questions whether the UK should consider ratifying the CISG. In attempting to answer this question, the essay looks at the main aspects of the Vienna Convention and the UK Sales of Good Act and sees the instances in which the two regimes can be seen to be similar to each other, and instances in which the two regimes can be seen to be very different to each other. It also looks at possible reasons as to why the UK has been one of the relatively few states not to adopt the Vienna Convention and whether there are any aspects it should take into account in considering whether to adopt the Convention. It concludes that while clearly there are some differences between the Convention and the Sales of Good Act, the fact is that there are also many similarities as well as many good reasons for the UK to adopt the Convention, primarily being the advancement of harmonisation of laws.

The UK is recognised as a very strong player in the legal world both nationally and internationally. It established the common law system which is now being followed by many countries even today. It is seen as one of the main legal systems where countries contracting in private international law choose to go. The common law system means that sources of law come not only from codified statutory legislation but also from case-law. This means that there is extensive case-law in established areas of law, and no where can this be seen more in the area of contract law. Contract law in the UK therefore benefits from extensive legislation as can be seen in the Sales of Goods Act 1979. [1] In addition to this, there is extensive case-law on the application and interpretation of even the most minor provisions in the field of contract law. There is therefore much reason to retain the CISG.

On the other hand, in the international world, there is an increasing need for harmonisation of international rules. Indeed, the very reason why the CISG came about was because it was increasingly realised that there would be a need for harmonisation of substantive rules governing contracts. [2] The situation was that international trade was encouraged for the promotion of growth of economies and such trade was generally seen as beneficial in most aspects. However, on the occasions when there was dispute arising as a result of the contractual transactions that had taken place, there were problems as to which legal regime should apply over the dispute given that there was more than one country involved.

The Vienna Convention, formally known as the Convention on Contracts for the International Sale of Goods, [3] was approved by the UN sponsored diplomatic conference in March 1980. It required a minimum of ten ratifications to enter into force and it achieved this in 1988.

It is notable that the Convention prior to the CISG, the Convention in relation to a Uniform Law on the International Sale of Goods and a Convention relating to Uniform Law on the Formation of Contracts for the International Sale of Gods was adopted by the UK. They were seen as too long and too complicated, which academics cited as the reason for its relative non-success. [4] However, the fact is that these laws were greatly influential in the drafting of the Vienna Convention that is being considered in this essay. It might therefore seem strange as to why the UK has not adopted the current Convention.

The Convention applies to sale contracts for goods between parties whose place of business are in different states when the states are contracting parties and when the rules of private international law lead to the application of the law of a contracting state. [5] When this is done, instead of applying the law of that state, the laws of the Convention are applied. Therefore, if the rules of private international law of a state lead the rules of that contracting state to apply, if the contracting state is party to the Convention, the rules of the CISG will apply. In the UK however since the Convention is not ratified the rules of contract law governed by the Sales of Goods Act applies. [6] This is also criticised since the Vienna Convention is popular in numbers: It is described as being the uniform law for sale of two thirds of nations participating in world trade [7] . The UK has ratified the European Private International Law Conventions, [8] but not the CISG. Below it shall be seen that this may be due to the differences between the Convention and UK law which are seen as irreconcilable.

There are very similar provisions between the Convention and the UK Sales of Good Act. The underlying theme of the Convention can be seen in the fact that it provides for freedom of contract. [9] For this reason, the Convention generally applies in default but if parties provide in their contract that they wish to exclude the Convention from their agreement, then the party’s wishes will be respected and the Convention will not apply to the parties. [10] Therefore, just as UK Courts will honour the wishes of contracting parties, so too will the enforcers of the Vienna Convention.

A parallel can also be seen between the Sales of Good Act and the Vienna Convention in that both provided for a complete substantive law in relation to contracts and transactions, which is not the position with other contract laws of other countries and even other international conventions on contract law. [11]

However, the fact is that the Convention is almost always seen as more akin to the provisions of European civil law rather than the provisions of contract law in common law UK. The Convention often tried to incorporate common law provisions into civil law, which resulted in unclear concepts. [12] One such example can be seen as to how the doctrine of good faith, which is given differing precedents by the UK Sales of Good Act and other European law, would apply in the Convention. [13] The provision in Art 7(1) provides that in interpreting the Convention, one must have regard to the fact that is international in character, there should be uniformity in its application, and regard must also be held to ‘the observance of good faith in international trade’. This can be seen to be unclear in character in that interpretation does not provide a substantive provision and it is not clear how this lines up with the Sales of Goods Act.

Another similar factor that can be seen between the Convention and contract law can be seen in the principle of how consideration of objective factors pertaining to the parties and the conduct between them is taken into account. The approach taken in the CISG taken towards contractual intent can be seen in Article 8 in how the Convention takes into account the conduct of contracting parties. Conduct is defined as any act or statement ‘by which the intent of the respective party is to be expressed’. Therefore, the Convention can be seen to adopt both a subjective and an objective approach in looking at intent behind a terms and a contract. The Convention first looks at conduct subjectively, and asks whether a party’s intention in contracting was what it is alleged to be. However, it then goes in Art 8(2) and asks whether it would be reasonable for that party to have such an intent. If it is considered that there has been a subjective intent, but that this has not been clearly made or communicated, then the Convention considers that the objective interpretation should take precedence. In taking the objective interpretation into account, the Convention looks at all circumstances, including the course of the dealings between the parties and what occurs mostly in trade. Furthermore, the Convention goes on to appreciate the importance of custom, usage and practice in Article 9. Therefore, it provides that there can be implied terms into an international sales contract on the basis that parties ought to have known that a particular usage was widely used and accepted in international trade and would be considered as usual in that form of contract. [14]

In this regard, the Convention can be seen to be very similar to how English Contract law including the Sales of Good Act takes objective factors into account, and indeed takes the approach where terms can be implied into a contract based on such objective factors. Therefore, case-law has long provided that terms may be implied into a contract if they are terms that are common to that industry and are widely used. A basis of implication of terms is therefore based on custom or usage. Another method in which terms can be implied is the officious bystander test. [15] This provides that even if a party do not expressly agree to a term, if a bystander were to pass by and suggest the term which is the topic of contention, the parties would not see a reason to expressly include it in the contract and would say ‘oh but of course’ that the term applied. Such terms are therefore implied into the contract based on the objective situation of the contract, and it can be seen here the that Sales of Good Act takes objective factors into account and even implies term to that effect in the same way that the Vienna Convention does.

Another key issue in the UK Sales of Good Act is that of repudiation of contracts. As is well known in the UK, where a fundamental breach of a term of a contract takes place, the aggrieved party is entitled to consider the contract as repudiated and no longer proceeds with performance under the contract. [16] The British Sales of Goods Act implies obligations in contracts and creates a distinction between conditions and warranties so that where there has been a breach of a condition there is a right to repudiation whereas a breach of a warranty might not lead to such a result. The Convention does not adopt such a distinction. Rather it provides that repudiation and the remedy of avoidance is available only if there is a ‘fundamental breach’ of the contract. This of course led to much dispute over the exact definition of what fundamental breach constituted. [17] In such a case, it might be seen that adoption of the Convention would have a disproportionate impact on contract law in the UK which might be seen as a reason for the UK not to ratify the Convention.

On the other hand, as stated above there is need to harmonise laws throughout the trading world, particularly considering the level of trades that go on. The convention has gone some way towards creating such harmonisation between civil law and common law concepts. An example in this can be seen in the remedy of specific performance, which is seen as an exception in the UK Sales of Good Act but as a norm in European law. [18] Article 28 therefore provides that specific performance as a remedy would not be granted unless under the usual laws of the country in which the applicable law applies, specific performance would be granted. Therefore, if the applicable law is in a civil jurisdiction specific performance would be granted. If the applicable law was that of a common law jurisdiction however, then it was less likely that specific performance would be granted. This would provide that jurisdictions such as the UK would be able to retain their preferences with reference to such a remedy even if they were to ratify the Convention.

The fact that the UK has not ratified the Convention seems to be a leading factor in the fact that other common law jurisdictions have also not ratified the Convention. Most European countries have adopted the Convention, save for the UK and Ireland which as stated above has quite a big impact. In Asia, while China has adopted the Convention, India or Japan, large players in sales of goods around the world have not joined the Conventions. Very few African states have adopted the Convention. The largest players can be seen to be in North America where all the NAFTA (North American Free Trade Area) including the US have signed up to the convention. As these are some of the largest traders in the world, the Convention is clearly of great importance. [19] It might therefore be said that if the UK does take steps to ratify the Convention it will lead the rest of the common law world into also doing so thus creating further steps for harmonisation of the law. It is currently the case that civil law jurisdictions ratify the convention a lot more and that there is much more case-law in the civil law system rather than in the common law system, [20] meaning that interpretation of the Convention is not being adopted in a harmonious manner. [21]

Commentators have looked to the factors as to why the Convention has not been as widely adopted as it could have done have considered that a variety of factors can be used to explain why the Convention has not been as successful in unifying the law and applying as universally as it intended.

However, there are failures in the Convention to provide for a complete substantive law and this can be seen as a reason why the UK does not decide to adopt the Convention. The Convention fails to provide substantive provisions to govern the validity of the contract or the property effects of the contract. The rules which govern the validity of a contract are therefore that of the domestic law. [22]

It must also be noted that the validity of the contract is not the only aspect that is not covered by the Convention. Other aspects include factors such as how the rate of interest to be applied to any potential damages can be determined. As interest provisions differ across states, both in terms of their rates and in terms of where and when how they apply to damages, this is another substantial failure of the Convention and can apply in very different judgements depending on which states’ laws apply in the situation, detracting from the aim of the Convention of harmonising the law relating to international sales of goods.

The Convention also excludes other provisions from its reach including purchasers for personal use as they are not considered to be international in scope. [23]

Furthermore, a particular problem with the Convention is that it does not have a hierarchal authority. The system of courts in the UK operates on one of precedent and there is a certain hierarchy where each lower court is bound to adopt the precedents of the higher courts. The Vienna Convention however lacks this. Suggestions have been made for an international commercial tribunal or even for European Countries to give the European Court of Justice Jurisdiction in interpreting the provisions of the Convention. [24]

Furthermore, another problem with the Vienna Convention is that while it tried to unify the laws of different countries at the time, it had no provision and has not been amended or modified to apply to new technology which could influence the law applicable for the enforceability of contracts, most notably electronic technology. The problem in this regard can be seen in Article 13. This describes an international sales contract writing as including telegram and telex. Therefore, these are acceptable contracting methods but there is no indication as to whether electronic writing methods are acceptable and if so to what extent for the Convention to apply. [25] This applies to a wide variety of electronic writing including the general use of the internet and email and click-wrap agreements which occurred by the millions daily. [26]

Conclusion

In conclusion, it can clearly be seen that the Vienna Convention was clearly a milestone in attempts to unify rules for international sales across the globe. However there are much distinctions between the Convention and the UK Sales of Good Act. This can be seen in important concepts such as fundamental breaches as well as the fact that the Convention does not provide for certain provisions. However, attempts at harmonising should be made and if improvements are made to reconcile the Convention and the UK Sales of goods act, the UK should consider ratifying the convention.