The Impact of the CISG on International Business Transactions - Coursework Example

The impact of the CISG on International Business Table of Contents Chapter Introduction 3 1.Background 3 2. Thesis ment 4 2.Literature Review 4 Chapter 2 Building on the CISG 5 2.1. International Commercial Law until 1988 5 2.2. Overview of international transactions until adoption of CISG 5 Chapter 3 CISG Adoption 5 3.1. Characterization of CISG – articles and implications 5 3.2. Evolution of international business practices following the CISG 6 3.3. Developments and trends of CISG 6 Chapter 4 Conclusions and Recommendations 7 References 9 Chapter 1 Introduction 1.1. Background The present age of business has been dubbed as the age of immense competition. Companies are striving hard to sustain in the market place and are taking various measures to continue their business operations. One of these indications is the increasing cross border trade. However other than competition, the growth of international trade is largely due to the development of national economies, improved communication system and advanced transportation methods. Such kind of developments has allowed the countries to focus highly on international trade as an approach to boost their economies. It is also a fact that countries no longer grow in isolation because of high interdependences in the market. Nevertheless increased trade has also given rise to a number of problems regarding the exchange value, currency rate etc. Hence for this reason, most of the countries around the world felt the need of harmonizing the international trade and eventually formed Contracts for the International Sale of Goods or the CIGS (Oosthuizen, 2008). The United Nations Convention on Contracts for the International Sale of Goods is popularly known as the CISG. It is basically an agreement to offer a uniform sales law in the global market place. The United Nations Convention on Contracts for the International Sale of Goods (CISG) was adopted in the year 1988. The principal purpose of CISG is to offer a uniform, modern and fair command for the agreements pertaining to international sale of goods. Moreover it tried to reduce the obstacles of international trade (Flechtner, 2009). CISG play imperative role in formulating an exchange platform that facilitates firmness in commercial exchange and also decreases the transaction cost (Uncitral, 2012). 1.2. Thesis statement Recent years have been proved to be challenging for financial markets all over the world due to a spread in the international business transactions as well as the risks behind it. Starting from this idea, and also the past customs in international trade, this paper proposes to analyze the impact of contracts for international sale of goods (CISG) on the international business transactions. 1.2. Literature Review According to Ferrari (2009) contracts for international sale of goods was a huge success. In his paper he has argued that it is one of the greatest legislative or governmental achievements in the process of harmonizing the classified commercial law. Within a short span of time a total of 70 countries became the member of CISG. A number of eminent scholars have highlighted the importance of CISG in the international arena. In order to cite an instance according to Fletcher (2009) the Contract for International Sale of Goods is one of the most successful attempts to harmonize the international trade. He further quoted that CISG project was a successor of the 2 substantive international sales agreements. The agreements were ‘Uniform Law on the Formation of Contracts for the International Sale of Goods’ and ‘Uniform Law for the International Sale of Goods’. It has to perform a number of functions. Some of them are highlighted below:- It administers the international sales agreements if both the associated parties are belong from the member countries. To manage the conflicts between the member countries with respect to international trade. It also tries to safeguard the private sovereignty of the member parties. Chapter 2 Building on the CISG 2.1. International Commercial Law until 1988 International commercial law is a governing body that administers transaction for international sales. Now a transaction is considered as an international transaction when there is an involvement of elements from more than one country. Until 1988 the primary task of international commercial law was to foster discussion regarding the new opportunities and challenges of an international trade. Furthermore it also used to examine the regular operations of business and also the cross border transactions. 2.2. Overview of international transactions until adoption of CISG Prior to the adoption of CISG other methods have been used to oversee any form of international trade. During the period of 1945 to 1970 harmonization of cross border private law was on effectual in the regions of dispute resolution and international transportation. Again in the mid 1960s the United States entered the process by joining UNIDROIT and Hague conference, which later became the body of United Nations (DiMatteo, Dhooge, Greene, Maurer & Pagnattaro, n.d.). However before its adaption there are numerous cases of failed international transaction due to complex rules and other barriers of trade, but the situation changed after the incorporation of CSIG. . Chapter 3 CISG Adoption 3.1. Characterization of CISG – articles and implications The CISG oversee agreements for the global sales of commodities among private businesses, but it does not take into account any form of service sales to the customers. Also it covers the sale of certain specified goods. The convention of united nation regarding the treaty for export of goods or cross border sale of goods has turned out to be a valuable instrument in promoting globalization and uniformity in the international laws of sales. It provides a number of default official rules in order to administer any form of international transaction. One of the apparent characteristics of CISG is that it is extremely straightforward and coherent. It consists of 101 articles that are segmented into four parts. The first part deals with the general provision and application of statute sphere. The second part deals with the establishment of the contracts. The third part deals with the sufficient provisions of an agreement and the fourth part deals with the issues pertaining to procedures. The convention on the other hand is only for the business transactions and not for the consumer transactions. Furthermore it also excludes the sales of certain category of commodities. However CSIG did not provided any explicit methodology for interpretation (Anyamele, n.d.). 3.2. Evolution of international business practices following the CISG The CISG may relate to an agreement for global sale of goods when the rules of private worldwide law point by virtue of the choice of the contractual parties, in spite of the fact whether their places of business are located in a Contracting State or not. 3.3. Developments and trends of CISG From the time of its inception CISG is facilitating international trade with lesser complications. It started with only 11 members, but now it has been able to assemble 70 countries of the world from the different levels of legal traditions and economic development. When the first two conventions of CSIG were in place it failed to attain or achieve the maximum participation of the countries. However with the passage of time and introduction new conventions the rate of participation had substantially increased. Nowadays it is considered as the facilitator of international trade and has been able to attain large acceptances in the market place. Chapter 4 Conclusions and Recommendations In general United Nations Convention on Contracts for the International Sale of Goods is a necessary convention for the member countries that provide rules to administer the cross border sale of goods. It mainly seeks to lessen the problems of international trade pertaining to law. It is also a fact that whenever a cross border transaction takes place some form of disputes is bound to happen. Hence in order to reduce it and facilitate smother transaction process harmonization of international trade took place. This has also led to the formation of CSIG. It offered easier ways to carry out foreign trade when compared with the complex laws and bodies found in most of national rules and regulations. After the incorporation of CSIG the system of international trade witnessed drastically changes. There were hassle free transactions, and the process become easier. Apart from that it was also notices that the transaction cost got highly reduced thereby offer benefits to both the parties involved. Furthermore after its incorporation there were also large relaxations in the international trade law. Hence on the basis of the recoded data and reviewing the literatures about the United Nations Convention on Contracts for the International Sale of Goods, it can be concluded that CSIG played an extremely important role in facilitating smoother international trade. Hence it has been able to impact positively on the international business transaction. The recommendations for the purpose of ensuring smoother international trade and also to ensure maximum participation the recommendation is provided below:- Till date there are around 70 countries which became the member of CSIG and the rules of CSIG is only applicable when a trade occurs between the parties of the member countries. On the other hand national laws become applicable when either of the parties belongs to the non member country. Therefore it is recommended that countries should join such bodies in order to reduce any trade barriers among themselves. Moreover these days international trade has become a necessity for a country to ensure strong economy. References Anyamele, U. (No Date). The united nations convention on contracts for the international sale of goods: A proposal for Nigeria. Retrieved from http://www.cisg.law.pace.edu/cisg/biblio/anyamele.html. DiMatteo, L. A., Dhooge, L. J., Greene, S., Maurer, V. G., & Pagnattaro, M. A. (No Date). International Sales Law - A Critical Analysis of CISG Jurisprudence. Retrieved from http://assets.cambridge.org/97805218/49807/excerpt/9780521849807_excerpt.htm. Flechtner, H. M. (2009). The United Nations convention on contracts for the international sale of goods. Retrieved from http://untreaty.un.org/cod/avl/pdf/ha/ccisg/ccisg_e.pdf. Oosthuizen, B. (2008). Rights, duties and remedies under the United Nations convention on contracts for the international sale of goods: An Investigation into the CISG’s compatibility with South African law. Retrieved from http://eprints.ru.ac.za/1681/1/Oosthuizen-LLM-TR09-64.pdf. Uncitral. (2012). United Nations Commission on International Trade Law. Retrieved from http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG.html. Read More