CISG, Commodities and Manufactured Goods - Essay Example

CISG vs. English Law Concerning Commodities vs. Manufactured Goods Introduction In international legislation, passing of risk is important in developing international legislation that governs the issue of sales contract. In domestic or international sale, the issue of passing risk is of great significance to parties of business parties due to the peculiar nature of risk (Beheshti, 2014). When risk is not well evaluated, a number of unfair implications can affect the buyer of the product and lead to carrying burden that was supposed to be catered for by the seller. Judges and lawyers have demonstrated the significance of passing risk in contract through the rulings and arguments they deliver within the courts of law (Danov, 2011). In international business, the contract of sales lead to challenges associated with multimodal and bulk transport in foreign countries. Due to challenges associated with contract of sale in domestic and international business environment, laws such as the English sale of goods act of 1979 and the United Nations convention on international contracts of sales of goods of 1980 was introduced. In this paper, the two acts will comparatively be discussed to demonstrate their relevance in contracts of sale and the issue of passing risk (Kono, 2012). Comparing Negative and positive aspect of CISG and SGA While the CISG has been attributed to streamlining global business, it can only be used in the regulation of international sales of contract in the presence of two situations. The contracts in question must be from the contracting countries and the independent law of the contracting state must be preceded by a private international law governing commerce. On the other hand, SGA has the benefit of being more applicable as it has major influences on the development of international commerce laws in different countries. This is more so in situations where the exchanged products are to be moved to the destination using sea transport (Danov, 2011). As a result, the impacts of the SGA has been felt to date with various international contracts of sale making reference to the act during dispute mediation and resolution. Most international commercial disputes in different parts of the world have been litigated in the United Kingdom due to the applicability of the act to different judicial jurisdictions. The influence of the SGA has enabled international traders to develop contracts indicating how the risk is passed based on the SGA. However, the CISG convention only recognizes the passing of risk in the event that the goods are traded beyond borders and are not applicable to domestic trade (Ahmad-Tajudin, 2013). The two acts also stipulate different consequences to passing risk to the two parties involved in the trade, a fact the businesses consider when thinking on the best act to adopt. On surface analysis, few differences on the consequences of passing risks emerge which is misleading to most traders. For example, article 66 of the CISG convention indicate that the buyers obligation to pay for the products remain intact even if the products undergo specific losses or damage once the risk has been passed to him. This can only be excluded in the event that the damages or losses arise from the omissions or mistakes of the seller (Danov, 2011). Both the Vienna convention and the SGA acts have defined business risk in the event that goods are transported through a means that exposes it to the possibility of loss, damage or even deterioration (Markel, 2009). The acts therefore have similar approaches and rules that govern the right approach to solve issues associated to stranded or sinking ship in the event of sea carriage or even warehouse fire when there is need for product storage (Kono, 2012). While the Vienna convention stipulates the need for passing of risk irrespective of the presence of a carriage when signing the sales contract, the English only places prominence to passing of risk in exceptional circumstances (Beheshti, 2014). First, passing of risk can only be considered if it is indicated during the time of signing the contract, passing of the property or even the delivery of goods. The Vienna convention also recognizes the location of the seller to be the legitimate location of goods delivery, which should be considered in the process of passing risk (Ahmad-Tajudin, 2013). According to article 69(1), goods that are delivered from the business location of the seller only passes the risk to the buyer once the latter has full control of the goods placed within his own disposal (Neumann, 2012). However, in events where there is need to place the goods within the disposal of the buyers, special arrangements must be provided. Such provisions are lacking on the CISG convention, which make it less secure when risk is passed on goods that are transported by sea. Failure to provide such safeguards may lead to the emergence of a number of issues during the time when the buyer is taking over the control of the goods (Zahraa & Ghith, 2000). The English law however indicates that risk can be transferred from the seller to the buyer when the two agree on the terms of the contract. This is based on the concept of the party’s intention, which provides five rules for such provisions to be provided and accepted during the process of passing risk according to section 20 of the act. The English law has been preferred when it comes to passing of risks due to the aptness of its provisions on responsibility in the event that a risk is faced (Kono, 2012). For example, section 20(1) indicate that in the event of a delay in passing the goods from the seller to the buyer, any risk faced by the products which lead to damage and loss will be shouldered by the party responsible. However, such responsibility are only restricted to the losses that are attributed to the fault and not any other losses that occurs within the process which are not as a direct consequence of the seller or buyer. The seller must pay commodities that depreciate during shipment as the act assumes the loss is attributed to miscalculated merchant time (Ahmad-Tajudin, 2013). Based on the analysis of the two laws that have been provided, it is evident that the English law ignores the rule of res perit domino. This results into a situation where the risk can only be passed if the good has also exchanged hand between the buyer and the seller and terms of the contract met by both. In the event of unascertained products, risk cannot be passed to the buyer unless a provision of the contract appropriates the goods directly to the buyer. In the CISG convention, contracts in which actual dispatch of the goods is not involved requires the seller to provide a positive identification of the goods before placing them under the control of the buyer. However, the SGA and the convention have similar approaches in handling commodities where the purchaser must provide proof of accepting the products during the time of delivery (Neumann, 2012). Benefits of adopting the convention over English law The development of the convention has provided ground for the unification of international sales acts and statutes, a situation that has triggered increase volume of goods traded across borders. As a result, the convention has significantly contributed to the removal of various legal barriers, which were affected international trade, giving room for the promotion of international trade. According to Peter Pfund, former legal advisor on international law in the United States, the CISG convention was the only that would increase the trade volume between international corporations in the country and foreign markets (Zahraa & Ghith, 2000). In the absence of the convention, Pfund argued that most of the multinationals from the United States would operate in an environment full of different uncertainties. The determination of the legal regime will also remain high and most international contract disputes will be placed under the jurisdiction of the English law, a situation that would favour British companies (Schlechtriem & Butler, 2009). The convention has the advantage of spurring international trade by increasing the volume of goods transacted and levelling the playing field to ensure that the seller and the buyer have equal liability on the transfer of risk. A number of legal scholars have supported these arguments that the negotiators of the convention used to acquire support for it across different states in the world. The unification of international laws provided for by the convention has improved the legal environment significantly and allowed for first conclusion of international trade (Neumann, 2012). By increasing the legal certainty of the international business environment, the CISG has enhanced the level of trust and pushed upwards the volume of goods transacted. The implementation of the convention also requires the presence of certain national rules, a situation that has led to various legal reforms in various countries including the United Kingdom. For example, countries that have not enacted recognized domestic commercial laws may find it difficult to transact with countries that have complied with the convention’s provision. Such a requirement has forced most countries to develop domestic laws that enhance their position on the global business environment based on the provisions of CISG (Zahraa & Ghith, 2000). The superiority of the CISG convention in relation to other domestic laws governing sales in various countries has affected its implementation and adoption. In most cases, states like the United Kingdom argue that the English cover similar provisions indicated in the convention, thus arguing that there is no need to adopt other international laws. However, the provisions of SGA cannot be easily accepted by other countries like the United States or even Canada when it comes to international trade. This is because these countries have also developed independent laws and provisions similar to the English law that direct international and domestic trade (Friehe & Tröger, 2012). With the SGA, any issues that may require litigation and dispute resolution will be sent to Britain, a decision that most other international businesses may not accept. The convention thus provide for a common group for agreeing to the terms of a contract and solving a dispute without giving UK based businesses undue advantage as is the case when SGA act is used (Magnus, 2010). References Ahmad-Tajudin, A.B., 2013. Legal enforceability of intentional open price in the US, England and the United Nations, British Library EThOS. Beheshti, R., 2014. Comparative and Normative Analysis of Damages under the SGA and the Cesl, St. Thomas Law Review, 26, 4, pp. 413-443. Danov, M., 2011. Jurisdiction and Judgments in Relation to EU Competition Law Claims, Oxford: Hart Publishers. Friehe, T, & Tröger, T., 2012, Sequencing of remedies in sales law, European Journal of Law & Economics, 33, 1, p. 159. Kono, T., 2012. Intellectual Property and Private International Law: Comparative Perspectives, Oxford, UK: Hart Publishers. Magnus, U., 2010. Vienna Sales Convention (CISG) between Civil and Common Law - Best of All Worlds’, Journal Of Civil Law Studies, 1, p. 67. Markel, A., 2009. American, English and Japanese Warranty Law Compared: Should the U.S. Reconsider her Article 95 Declaration to the CISG, Pace International Law Review, 1, p. 163. Neumann, T., 2012. The Duty to Cooperate in International Sales: The Scope and Role of Article 80 CISG, Berlin: Sellier. European law publishers. Schlechtriem, P, & Butler, P., 2009. Part III of the CISG, UN Law on International Sales, p. 91. Zahraa, M, & Ghith, A., 2000, Specific Performance under the Vienna Sales Convention, English Law and Libyan Law, Arab Law Quarterly, 15, 3, p. 304. Read More