Convention on International Sale of Goods (CISG)
The general convention regarding international trade in movable goods of the United Nations, i.e. the Convention on Contracts for the International Sale of Goods (CISG), was concluded in Vienna in 1980. CISG can be characterized as a compromise between different jurisdictions. The convention is applied in more than 50 countries.
As a general rule, the CISG is applied whenever the contracting parties have their principal place of businesses in different countries. countries in question have ratified the CISG. If the parties have agreed on application of the laws of Finland, the CISG is applied unless the parties have specifically agreed to not to apply the CISG. On the other hand, in case the parties have agreed on application of the laws of England, the CISG is not applied since the United Kingdom has not ratified the CISG. The CISG is not applied to trade between parties from the Nordic countries.
The provisions of the Convention are mostly non-mandatory, meaning that the contracting parties may also agree upon application of the law of a certain country. One reason for excluding application of the CISG may be that the country of residence of a contracting party has not ratified the CISG, or that a contracting party deems application of the CISG to be adverse to the party’s interests.
The CISG is not applied to consumer sales. Certain other sales, such as execution, auction or trade in negotiable instruments are excluded from scope of application of the CISG. Also, in situations where the purchaser supplies the majority of materials required for manufacturing and supplying the end product, the CISG is not applied.
The ratifying countries of the CISG may have issued certain reservations at the time of ratification, in which case national law may be applied to a transaction instead of the CISG. For instance, certain countries have made a reservation according to which an agreement must be made in writing.
It is advisable to familiarize oneself with the provisions of the CISG in detail, if trade is carried out with international counterparties. The Finnish Sale of Goods Act and Contract Act have a lot in common with the CISG, however, certain differences exist also. One of the most important differences concerns liability for damages. The CISG does not make a distinction between direct and indirect damages, as does the Finnish Sale of Goods Act. Instead, liability for breach of contract covers all foreseeable damages. Liability for damages arises, unless the party in breach can demonstrate that the breach is due to Force Majeure circumstances. Also, the CISG does not include a provision regarding equitability of damages, as does the Sale of Goods Act. Therefore, agreeing upon limitations of liability is of utmost importance especially in international agreements.