Risks and issues when drafting contracts for international sale of goods
International trade refers to the exchange of products and/or services with the following key elements: buyer and seller; export and import. Usually, the contracting parties are from two different countries in which they are incorporated under different laws. Hence, the contracting parties require a contract for the international sale of goods. This contract generally focuses on the benefits of a transaction between the contracting parties and on the potential risks that may arise between buyer and seller in the transaction, etc. Therefore, the contract for international sale of goods plays a vital role and as a bridge in international trade.
Drawing up a standard contract for the sale of goods in international business dealings can provide better legal protection and avoid potential trade disputes. Meanwhile, when drafting these types of international contracts, various rules of international law should be taken into account in order to achieve the best possible coordination and promotion of international trade and communication.
Which law applies to your contract for international sale of goods?
-United Nations Convention on Contracts for the International Sale of Goods (CISG)
Introduction: The United Nations Convention on Contracts for the International Sale of Goods, also known as the Vienna Sales Convention or by its English abbreviation CISG, was signed in Vienna on 11 April 1980. As of 1 January 1988, the CISG came also into force in China. The Convention applies in any case if there is a purchase agreement for movable property between professional parties formed in different countries of the Contracting Parties and the professional parties do not exclude the applicability of CISG from the agreement. The Vienna Sales Convention must be interpreted in the same way in all countries. This means that for the interpretation of the Convention in legal proceedings in the Netherlands, reference can be made to applicable foreign case law.
Opt out tool: When the agreement is concluded, it is sometimes overlooked that the Treaty is an opt-out instrument: it applies until the parties exclude it. Nevertheless, if the user of the general terms and conditions wishes to exclude the application of the Convention, he must do so in a correct and unmistakable manner: “If the meaning of a standard term provided by one party remains ambiguous despite interpretation the meaning more favorable to the other party shall prevail.”
Why do contracting parties sometimes exclude the CISG?
-Applicability of general terms and conditions tested according to the Vienna Sales Convention:
In a recent case which our law firm has been conducting, one of the contracting parties brought the court’s attention on the applicability of general terms and conditions and claimed that the opponent failed to fulfil the obligation set by its general terms and conditions, certain contractual disputes arose. It regularly happens that the application of the Vienna Sales Convention is not validly excluded.
The question whether a seller’s general terms and conditions apply at all must first be answered on the basis on the same Vienna Sales Convention, even if and insofar as those same general terms and conditions exclude the applicability of the Vienna Sales Convention. It can be read in Opinion 13 of the CISG Advisory Council 3 that general terms and conditions can only form part of a purchase agreement if they have been expressly or tacitly accepted and the other party has had sufficient opportunity to take cognizance of the general terms and conditions. According to Opinion No 13 of the CISG Advisory Council 6.2, it prescribes the terms need to be in a language that the other party must be reasonably able to understand: “ They are available in a language that the other party could reasonably be expected to understand. Such a language includes the language of the negotiated part of the contract, the negotiations or the language ordinarily used by that party.”
The general terms and conditions can, among other things, take place by handing over the general terms and conditions to the purchasing party on paper or by sending them by e-mail. However, a single reference to the general terms and conditions in an agreement or on the invoice is not sufficient. Insofar as this condition is an aggravation compared to national law, the users of general conditions in an international sales contract should be aware of this. If at the conclusion of the agreements the selling party has failed to hand over the general terms and conditions to the purchasing party on paper or by e-mail, these general terms and conditions will therefore not apply. According to Rule 3.3(d) of Opinion 13 of the CISG Advisory Council 3, it is always advisable to state in the contract that the general terms and conditions can be requested and/or downloaded. However, in this regard it should be emphasized what the Advisory Council under 3.6. of the aforementioned Opinion 13 considers: “It is reasonable to assume that where the standard terms have been used in previous dealings between the parties that they were available to the other party at the time of the negotiations or of contracting. This can only be assumed where the standard terms were previously validly incorporated into contracts between the parties. Where the terms were included in documents such as invoices after the fact and therefore not validly incorporated, they cannot be assumed to be incorporated in future contracts.”
As a result, a reasonable interpretation of the above advice shows that the general terms and conditions of the selling party are first legally incorporated in the agreements between the parties in the event that the general terms and conditions are provided or sent when the agreement is handed over or sent, at least that the handing over or forwarding takes place shortly before the conclusion of the agreement.
Insufficiently clear conditions
Unfortunately, it happens that the user has not described or defined in the general terms and conditions sufficiently clear, or at least insufficiently accurate, under what circumstances and to what extent a purchasing party falls short in the fulfillment of its (payment) obligations. However, general terms and conditions must be drafted sufficiently clear for the other party: “A reference to the inclusion of standard terms and the standard terms themselves must be clear to a reasonable person of the same kind as the other party and in the same circumstances.”
Unusual or unreasonably onerous terms
It may happen that the content and purport of general terms and conditions are so surprising or unusual that it would be unreasonable or unfair to apply them. In this regard, reference can be made to point 7 of CISG Advisory Council Opinion no 13: “Standard terms that are so surprising or unusual that a reasonable person of the same kind as the relevant party could not reasonably have expected such a term in the agreement, do not form part of the agreement.”
For example, in a certain industry or for certain goods, it can be unreasonably onerous for the purchasing party to agree on vague delivery dates, or at least under unclear conditions to have to wait in great uncertainty about what will or will not come. In some sectors the essence of the delivery of the goods within the short term agreed by the parties is evident.
In the event that no strict (fatal) delivery terms have been agreed, it is more likely that Article 33 CISG applies between the parties:
“The seller must deliver the goods:
(a) if a date is fixed by or determinable from the contract, on that date;
(b) if a period of time is fixed by or determinable from the contract,
at any time within that period unless circumstances indicate that the buyer
is to choose a date; or
(c) in any other case, within a reasonable time after the conclusion of the contract.”
Dissolution without notice of default
Pursuant to the Vienna Sales Convention, it is possible to dissolve immediately if there is an essential shortcoming in the fulfillment of the agreement. Contrary to Dutch law, sending a notice of default is not necessary. On the contrary, it follows from article 49 paragraph 2 sub (a) of the Vienna Sales Convention that in the event of late delivery, the buyer must invoke the dissolution as soon as possible.
If you have questions when drafting and reviewing the international contracts or Dutch contracts, we are pleased to discuss with you by phone or email. You can reach out to us via email firstname.lastname@example.org or email@example.com or call us by +31(0) 30 23 00230 or +31 (0) 6854835230.
 Parties from non-contracting states can also make use of the regime of the Vienna Sales Convention by making a choice of law for the Vienna Sales Convention.
 Punt 9 CISG-AC Opinion No. 13 Inclusion of Standard Terms under the CISG, adopted by the CISG Advisory Council following its 17th meeting, in Villanova, Pennsylvania, USA, on 20 January 2013.
 Opinion 13 of the CISG Advisory Council 3
 Opinion 5 of the CISG Advisory Council 3