Presenting a live 90-minute webinar with interactive Q&A International Sale of Goods Contracts: Navigating CISG, Formation, Performance, Payment and Opt-Outs WEDNES DAY, FEBRUARY 19, 2014 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: S teven M. Richman, Partner, Duane Morris , Princeton, N.J. elden, Gartenberg Gelfand Hayton & Selden , S Barton S an Francisco The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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International Sale of Goods Contracts: Navigating CISG, Formation, Performance, Payment and Opt-Outs Presented by: Steven Richman, New York, NY smrichman@duanemorris.com Bart Selden, San Francisco, CA bselden@gghslaw.com 4
I. Initial Considerations • Cultural and Language Issues • Differences from the UCC • Other Laws That May be Implicated 5
General Comments • Law is territorial • Boilerplate is not boilerplate • You are responsible for what you sign (even if in a different language) and maybe even for what you don’t sign • You break it, you own it • Prevention • “We have this in all our agreements”—NOT • Contract as roadmap • Contract as legal rights and obligations 6
Cultural and Language Issues • You need to understand the transaction and make sure the contract reflects it • Do not assume any of the “legal stuff” is standard; make sure you understand it. • Make sure you know whose law applies so the enforceability of terms is understood up front • Do not settle for ambiguity and if there is pushback, rethink your transaction • Understand the cultural context and signals 7
Kicking the Can • Agreement to not decide has ramifications • Can lead to application of CISG or even other law • Surprises are for birthdays 8
Civil Law vs. Common Law • Code versus Case • Non or limited precedent versus precedent • Separately trained judges versus experience • Substantive differences: no punitive damages, limited or non-existent juries in non-criminal cases, oral versus written agreements, statutory versus non-existent rights (e.g., third party beneficiaries) • Lengthy US contracts versus minimal civil law ones 9
Language Issues • Different translations of English and idioms • English English versus American English • A Dane may “gor,” but an American may “walk,” “amble,” “stroll,” “perambulate,” “go” Cultural nuances: yes means maybe, maybe means no, up and down versus sideways headshakes, and so forth • Use of uncommon terms: “contract avoidance,” e.g. 10
The Impact of International • International parties engaged in agreements spanning different countries implicate foreign law concerns • Parties are not necessarily independent legal entities, but divisions or units of others • Choice of law issues arise 11
Philosophical Differences Between UCC and CISG (1) UCC CISG business and consumer business objective standards subjective standards writings required (some exceptions) writings not required (some exceptions) mailbox rule receipt basis addresses formation and validity formation only “material breach” rights of cure; “fundamental breach” knock out rule rejection/counteroffer 12
Philosophical Differences Between UCC and CISG (2) UCC CISG no specific performance specific performance applies to sale of goods some goods excluded consideration no consideration damages for buyer (perfect tender) rights to reduce price incidental and consequential damages anticipated lost profits no statement re interest interest warranties and exclusions not address warranty, but conforming goods no opt out but modify opt out/modify 13
Philosophical Similarities • Goods portion of contract must dominate • Analogous provisions for “fill in” of absent terms • Recognition of party and industry customs and practices 14
General Provisions of CISG • Interpret in recognition of international character • Settle questions consistent with private international law principles (i.e., conflicts of law) • Conduct interpreted based on intent • Reasonable person’s understanding standard • Parties bound by their practices between them 15
Other Laws Implicated • E-Signature federal/state laws (US) • Digital signature laws (EU) • Local contract law (combined goods/services) • Attorneys fees: civil law grants versus common law need for statute or by contract 16
Applicability of CSIG • If a party has more than one place of business in more than one nation, then the CISG becomes applicable if the place of business that has the closest relationship to the contract and its performance is within a signatory state. CISG, Art. 10; Asante Techs., Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d 1142, 1148-49 (N.D. Cal. 2001) • CISG disregards nationality in favor of this “place of business” determination; if an American company’s foreign subsidiary conducts business in a non-CISG location, the Convention will not apply 17
Goods and Services • CISG will not apply where not clearly a contract for sale of goods. Helen Kaminski Pty. Ltd. v. Mktg. Austl. Prods., Inc ., M-47 (DLC), 1997 U.S. Dist. LEXIS 10630, 1997 WL 414137 (S.D.N.Y. July 23, 1997) • Exclusive distributorship and sales commission agreements failed to refer to the sale of goods with enough specificity to justify application of CISG. • ( Viva Vino Imp. Corp. v. Farnese Vini S.r.l ., No. 99-6384, 2000 U.S. Dist. LEXIS 12347, at *4 (E.D. Pa. Aug. 29, 2000) 18
Solutions? • Address CISG issue, especially if in doubt • Two agreement solution? Depends on context, legal relationship of companies • Profit margin in sales price can affect Transfer Pricing • Service component may relate to internal affairs and not always work 19
II. Formation Issues • Common law: “mirror image”—any deviation is a rejection. • UCC: – Contract formed if acceptance has additional or different non-material terms, unless acceptance conditioned on acceptance of those. – Additional non-material terms are part of contract between merchants unless certain exceptions apply 20
Formation--CISG Article 19 • • (1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer. • (2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance. • (3) Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially 21
Formation--CISG • Contract must specify quantity and price, • Any response to an offer that rejects or offers a material change to any provision will be deemed a counteroffer • No “mailbox” rule. • The CISG requires that material terms such as price and quantity be specified in any contract. CISG, art. 14. However, CISG, Art. 55 establishes price as that generally charged for the goods under comparable circumstances, where the contract does not explicitly or implicitly reference price. 22
Formation -- CISG • Offer must be sufficiently definite and reflecting an intent to be bound. Those provisions are satisfied if price and quantity are expressly or implicitly specified. Article 14 • It is effective, pursuant to Article 15, if and when it reaches the specified person, and can be withdrawn only if the withdrawal reaches the person at or before the time the offer reaches the offeree. • If the offeree has already dispatched an acceptance, the revocation is not effective. CISG, Art. 16. • An offer, even an irrevocable one, is terminated, once the rejection reaches the offeror. CISG, Art. 17. 23
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