CISG v. UCC: Three Noteworthy Differences
The United Nations Convention on Contracts for the International Sale of Goods, otherwise known as the CISG, is an international treaty that has been ratified by 81 countries, including the United States, Canada, and Mexico. The purpose of the CISG is to provide a uniform body of international sales law. In other words, the CISG is comparable to an international version of Article 2 of the Uniform Commercial Code (UCC) which has been adopted by statute in every state but Louisiana. The CISG automatically applies to any contract for the sale of goods between parties whose principal places of business are in different CISG countries.
Though similar in their purposes, there are some notable differences between the CISG and the UCC that should be considered by any party who is deciding whether to enter a contract subject to the CISG. Importantly, the CISG may be excluded by express contractual language as discussed in a prior article. This article will focus on three important differences between the CISG and the UCC.
First, the CISG does not include a statute of frauds. Under section 2-201 of the UCC, contracts for the sale of goods of $500 or more are not enforceable unless there is a writing sufficient to indicate a contract has been made between the parties and signed by the party against whom enforcement is sought. Conversely, article 11 of the CISG provides that a contract of sale need not be evidence by writing and may be proved by any means, including witnesses.
Second, the CISG does not contain a parol evidence rule. Under section 2-202 of the UCC, the agreed upon terms of the contract may not be contradicted by evidence of any prior agreements, but may only be explained or supplemented by course of performance, course of dealing, or usage of trade. Evidence of consistent additional terms is permitted unless the parties intended the written contract to be a complete statement of their agreement. Conversely, article 8 of the CISG permits the court to consider the parties’ negotiations, course of dealing, and subsequent conduct to determine the parties’ intent when interpreting the contract.
Third, the CISG more closely follows the mirror image rule, where the UCC permits an acceptance to be effective even though it offers additional terms. Section 2-207 of the UCC provides that an acceptance is effective even though it states terms additional to or different than the terms in the offer. Conversely, under article 19 of the CISG, a reply to an offer that contains additional terms or limitations is a rejection of the offer and constitutes a counter-offer.
There are many more important distinctions between the UCC and the CISG that bear close scrutiny when determining whether to enter into a contract subject to the CISG. Although there may be situations where it may be beneficial to enter into a contract under the CISG, it is critical that the parties appreciate the differences in substantive law that the CISG provides.
Submitted by Attorney Joel E. Engel III