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Why India should opt for CISG

Yashasvi Nain and Shashank Manish

Board of Editors comment on why India should become a
(in alphabetical order) signatory to the United Nations
Convention on Contracts for the Sale of
International Goods Act, 1988.
Advisory Council

Bishwajit Bhattacharyya
Introduction
C.R.Dua
The movement to make laws that are applicable uniformly on the issue of sale of
Diljeet Titus goods, worldwide, is not new. It started in 1920 and because of it United Nations
Convention on Contracts for the Sale of International Goods Act (hereinafter referred
Hemant Batra to as "CISG") came into existence in 1980. CISG came into force on January 1, 1988
and it currently has been adopted by seventy seven (77) States including China,
John Callagy
Japan, Canada, Mexico, Germany, France, Switzerland, and virtually every other major
trading country (but not the United Kingdom, Brazil, India, or South Africa). CISG is a
K.K.Lahiri
set of legal rules concerning formation of contracts, obligation of sellers and buyers
K.S.Bagga and remedies for the breach of contracts. The preamble of the CISG clearly mentions
the object and purpose of the Convention.
Lalit Bhasin
Like any other Convention CISG is also facing agreement and disagreement towards its
Dr. Linda S. Spedding acceptance and inclusion by countries in their national laws and trade practices. This
dilemma within the countries could be observed from the reports submitted by experts
Martin Rogers in this regard. The recommendation of Singapore Law Reform Committee’s Report on
the CISG is in favour of the Convention on the other hand commentators like Arthur
M.L.Sarin Rossett and Professor G. H. Trietel express reservations about its adoption. The two
primary reasons for the success of CISG are its applicability and the way it is
Prof. V.S.Mani
interpreted.
Rajiv Atmaram
CISG is applicable only on international sale of goods contracts. This is the primary
Rajiv K.Luthra reason why this Convention has received such an acceptance from the majority of the
countries involved in world trade. Although, CISG is applicable on international sale of
Rajiv Nayar goods contracts, its application may have effects on domestic law. Furthermore, mere
ratification or adoption is not adequate to create true uniformity, but it creates
harmony in the application of an instrument. Uniformity comes next with the member
Editors country legislating a new law or amending the existing laws on the issue.
Gitanjali Saraf About the Convention

Vikramaditya Rai Various attempts were made to unify the law of international sale of goods and this
practice is not new in the international arena. Indeed, the work of the United Nations
Sagar S.P. Singamsetty
Commission on International Trade Law (UNCITRAL) is appreciated as it resulted in
the adoption of the Convention and this was the culmination of a long process of
Founder & Managing Editor unification in this area. UNCITRAL's effort in bringing this uniformity is not new as it
goes back to a decision of the International Institute for the Unification of Private Law
Vikrant Pachnanda (UNIDROIT) in 1930 to proceed with the preparation of a uniform law on the
international sale of goods under the patronage of the League of Nations . The
Associate Editors unification effort, with an interruption between 1939 and 1951 due to the Second
World War, carried on into the early 1960s, and consequently the diplomatic
conference at The Hague in 1964 was convened. After much deliberation, a final
Naina Pachnanda
version of the Uniform Law on the International Sale of Goods was proposed in 1964
Shashank Manish by the special committee at The Hague (Hague Conference). At the same time,
UNIDROIT submitted a draft Uniform Law on the formation of contracts for the
Vishwam Jindal International Sale of Goods. This conference adopted both the Uniform Law on the
International Sale of Goods and the Uniform Law on the Formation of Contracts for the
Apurv Kumar Mishra International Sale of Goods (1964 Uniform Laws) and the conventions to which they
were attached. Both Conventions entered into force in 1972. These laws have not
Editorial Team been widely ratified primarily owing to the European dominance in their production
and the European orientation in their content, thus making them highly unacceptable
Conference Corner for the non-European countries. In 1978, the UNCITRAL integrated both these
conventions into a simple text and adopted the UNCITRAL Draft Convention on
Internship Corner Contracts for the International Sale of Goods. This draft was submitted to a Diplomatic
Conference in Vienna. Following extensive discussion and numerous amendments, the
Scholarship Corner Convention was approved so as to suit the needs of both common and civil law
countries.

This drafting history of the CISG itself shows that the earlier conventions relating to
international sales were inadequate and had a European orientation which made them
unacceptable to the rest of the nations. Thus, CISG, a new convention was brought,
which tried to achieve a comprehensive view of international sales keeping in view the
interests of all the countries involved in world trade.

Need for uniform sales laws

We are in the era of globalization and with the advent of internet and faster modes of
communication, world has been reduced into a global village where almost each and
every country are in trade relations with one another. Lifting of legal barriers and with
attempt to move on the lines of developed countries, businessmen of developing
countries are now involved in trade with traders from a wide array of jurisdiction
whose laws are not familiar or uniform. Thus, this has resulted into many encountering
legal problems associated with an unfamiliar system of laws. In such circumstances, in
case of any dispute, it leads to several problems for all its stakeholders such as
traders, businessmen, policy-makers, lawyers and legal systems. The problem which a
lawyer has to face is that he has to familiarize himself with the niceties and
complexities of that particular legal system to determine the existing legal position for
issues raised by any given international transaction, at the same time the latter has to
also evolve solutions for problems of an international nature. This increases the work
burden and unnecessary complexities in the trade relations.

Such a situation can be done away or dealt with if the trading countries have a
uniform or similar legal system based on a model international instrument. For a
uniform sales law in general and in particularly, CISG is an attempt to lessen such risks
in the area of sales of goods.

Why India should adopt the CISG

CISG is said to be one of the most successful treaties in private international law. The
reason is its wide adoption and the corresponding recent growth of international
business transactions . Growing from an original group of 11 countries in 1988, the
Convention is now accepted and signed by 77 nations . Countries who are signatories
to the CISG are accounted for a staggering two-thirds of all goods moving in
international trade and it more or less cover a majority of the world’s population .
Fortunately, in the interest of promoting uniform law , and the uniformity of its
application; and regardless of reservations made by some signatories to the CISG, all
signatories have agreed to implement the CISG in a uniform fashion. The extent of
ratification by a large number of states shows that there is a sharp chance of the
Convention becoming a norm for international trade in future, thus emphasising the
need for India as well to become a party to the Convention. Further, with the wave of
liberalization, which started in the year 1991, India has seen a robust growth in its
external trade statistics.

If we review our trade relations, we will find that almost all our major trade partners
are signatories to this Convention . For that reason having a familiar sales law with the
host nation will certainly help in facilitation of trade between India and its trading
partners.

Firstly, Indian sales law i.e. The Sale of Goods Act, 1930 was written by English and
was heavily inspired from English Sales of Goods Act, 1893, which is very old and is
outdated now. Since the introduction of modern techniques and means of transport
has drastically changed, the modes of entering into contract, it is not suited for the
modern and contemporary commercial contracts. Here lies the importance of CISG as
it is universal in nature and drafted in several languages that makes it more accessible
and comprehendible to international commercial parties across the globe.

Secondly, the Convention works as a gap-filling technique in case where trans-border

contract is made by phone or even by fax or telex but in only a few words. Sometimes
contracts are incomplete or they are not in condition to cover every type of
contingencies. Resultantly it creates certain gaps in the contract. In theory, a uniform
sales law confers significant benefits on parties, at least to the extent that it embodies
in its default rules which are the solution to these gaps . For instance CISG resolves
the issue of choice of law clause.

It should not be forgotten that this Convention’s primary aim is not to obstruct the
parties’ ability and freedom to enter into contract but only to fill the gaps left upon by
the drafters of the international sales contracts . It proposes to do so by replacing
conflicting domestic contract laws with one uniform set of international rules.

Thirdly, CISG recognises broad contractual freedom to the parties of international sales
contracts which is mostly desired. Article 6 of CISG enables them to derogate from or
vary the effect of any of its provisions and even to exclude the application of the
Convention.

Fourthly, modern trade practices and realities are taken into account in this
Convention. CISG contains provisions regarding the interpretation of contracts which
are considered as wider than the Common Law rules.

Fifthly, CISG contains useful provisions to practical problems which are very important
in day to day trade practices now a days for instance asking the parties to preserve
goods in their possession which otherwise belong to other party.

Sixth, CISG provides a boost to the Indian economy. Law and economy are
indispensible. Legal system of country is one of the important factors in facilitating its
economy. Though it is not very true to claim that a strong legal system guarantees a
robust economy, but it is difficult to find a robust economy without a strong legal
system. As said by Prof. Baker:

"If economic factors and economic interests have partly determined the legal
framework, it is even more true that law has furnished the whole general framework
of rules within which and under which the factors and interests of economists have
had to work."

The Convention will strengthen the legal caricature to assist the Government’s move to
boost economic expansion overseas by facilitating Indian businessmen and Indian
corporations with a consistent sales law with the countries with whom they are trading
with

Why India is hesitating in signing the CISG

One of the major reasons why India is not signing this Convention is that it thinks that
CISG is not a comprehensive treaty. It does not relate itself with the validity of the
contract that is to say with issues like illegality, fraud, misrepresentation pertaining to
the contract. Therefore, it was correctly remarked by Barry Nicholas that the CISG
would not therefore achieve one of the main objective of the uniform laws.

The CISG applies inexact language for a common law lawyer. It gives a sense of
unease for a common law lawyer, as described by Professor Farnsworth . According to
Arthur Rossett it is using ‘language which, first of all, is foreign with regards to the law
of contract and therefore has no clearly defined meaning and, secondly, is too wide
and inexact and therefore leads to uncertainty’.

Therefore, the CISG divests the buyer of his legislative right imbibed under the
domestic law to refuse the goods when they do not match to the quantity or quality.
The Indian trading bodies and their legal counselors have found errors in CISG rules
worrying because of the vague language of the CISG and foreword of the
'fundamental breach' notion . Similarly, in Article 8 of CISG, the act is vulnerable to
incongruity. The intent clause fetches in the judgments the function of representation
flouting the genuine value. Furthermore, CISG builds a more confounding situation in
facet of 'good faith' . CISG is completely silent about the elucidation of good faith,
whether it is good faith with respect to the demeanor of the parties or does it signify
towards fair dealings. In CISG, Article 7(2), which is usually referred to as gap-filling
provision, acts as the mayhem as it again it takes us to the tour of a random terrain
and is therefore very prejudiced as per the state of affairs. The wordings of using the
general principles makes CISG provision a lot vague. Additional international laws like
UNIDROIT Principles and the Restatement, Principles of European Contract Law
(PECL) also relate good faith as an interpretative principle but it furthermore mentions
that it is forced as an obligation upon the parties demeanor .

Taking into consideration a further state of affairs why India has not ratified CISG. For
eg. "X" a contracting state makes a contract with a trader in India where India is the
buyer. It's a situation where no particular decision is taken with respect to delivery of
goods. The compulsion of the seller terminates with the delivery of goods to the first
carrier. Under a position where the delivery between the buyer and the seller is
through any middle supply, India loses the right to move towards its courts for interim
relief. A variety of unknown situations are created by 'The closest point' test applied by
the CISG. In case of a dispute in the above acknowledged instance the watchfulness
lies on the court of the place of the first carrier.

Conclusion

The fact that the CISG has been "the most successful international document so far"
cannot be denied. The need of the hour requires that Indian traders have to familiarise
themselves with the laws of many other foreign countries. Is it not levelheaded to
offer them with the prospect of subscribing to a single homogeneous law, tailored as
they see fit. CISG does precisely that.

It is desirable to follow complete legal and management reassessment of procurement

and sales procedures to be followed under the new system by international persons
and their legal advisors. An increasing number of countries ratifying and increasing
draw on is made of the CISG. Such traders require identification of clients and
conditions in which use of the CISG is preferable over use of domestic law.
Additionally, the opportunities, inadvertently and unknowingly, to develop into subject
to the CISG remains very real. Failure to think clearly about choice of governing law
issues at the time of contracting is quite expected to lead to disagreeable surprises in
the occurrence of a dispute."

CISG is not a complete code like most other Conventions that aspires to complement
particular areas of law, regulating all matters falling within its area of application.
Some matters were considered to be too contentious for inclusion in the CISG since
the national laws differed too much to complement the various approaches . To ensure
maximum support for the Convention, the drafters decided to leave these issues
outside the CISG’s scope of application. They opted for a widely acceptable
Convention as an alternative of a complete but controversial text.

For any legal system it is an exigent task to demarcate between cases where the
contract continues regardless of its breach by one party and cases where the
aggrieved party has to be permitted to terminate the contract and to recover its
freedom to contract once more. The CISG reacts with a whole set of rules to that
problem . The Convention grants the remedy of avoidance rather unenthusiastically
and this policy is accepted by the courts.
After working for almost thirty years, the age when adults are fully aware of their
strength and have already gathered adequate knowledge to put it to work, CISG has a
huge prospects to be converted into the truly global sales law . It is upto us to ensure
that this goal turns up at the velocity we estimate most advantageous.

SHASHANK MANISH is a Law Clerk cum Research Assistant at the Supreme Court of India &
YASHASVI NAIN is a fourth year student pursing law at Rajiv Gandhi National University of
Law, Patiala.
REFERENCES

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