International sale of goods
The UN Convention on Contracts for the International Sale of Goods (CISG) came into effect in Germany on 1st January 1991.
The convention lays down uniform rules for selling goods internationally. It applies to the sale of goods between parties which have their places of business in different states which are party to the convention. The nationality of the parties to the transaction has no bearing on whether the convention applies.
The provisions of CISG also apply if the rules of international private law provide for their application. This means that it applies to transactions for the international sale of goods from businesses based in Germany to the UK, even though the UK is not a member of the UN convention.
Although the CISG is part of national law of those states which have ratified the convention, the parties to a transaction can, subject to certain restrictions, choose to exclude all or some of its provisions.
In a transaction for the international sale of goods with companies based in Germany, the contracting parties should give careful thought to whether they wish for German domestic provisions or the CISG rules to apply.
The CISG and German law
While major modifications have been made to German contract law leading to a convergence of Germany’s domestic legal provisions with those of the CISG, there are some important differences which businesses need to consider.
A thorough understanding of these differences and taking account of them in light of a business’s negotiating position can help to ensure the right legal provisions are chosen to offer certainty for an international sale of goods transaction.
Some of these differences include:
CISG and German law*
|Offer||CISG: An offer made by one party can be withdrawn provided the withdrawal reaches the recipient before or at the same time as the offer. An offer which has reached the recipient can also be revoked provided the recipient has not yet dispatched an acceptance.
BGB: An offer made by one party can be withdrawn provided the withdrawal reaches the recipient before or at the same time as the offer. Once the offer has reached the other party, the offeror is bound by it.
|Acceptance||CISG: If a party accepts an offer but with minor variations, the contract is deemed to have been concluded based on the original offer together with the modifications.
BGB: If the recipient of an offer makes even minor modifications, the modified offer is considered to be a counter-offer.
|General terms and conditions||CISG: The UN convention contains no specific provision automatically incorporating a party’s general terms and conditions.
BGB: German law allows for terms and conditions to be incorporated if they have been drawn to the attention of the other party and where the other party has had opportunity to take note of them and accepts them.
|Sample and packaging||CISG: The UN convention provides that the goods sold must conform to any samples previously shown and must be sufficiently packaged.
German law: These obligations do not exist.
|Defective goods||BGB: Where the seller delivers defective goods, the buyer has the right to require the delivery of substitute goods or rectification of the defect. The buyer is only entitled to rescind the contract where the breach of contract is more than a minor breach.
CISG: A buyer may only require the seller to deliver substitute goods if the lack of conformity constitutes a fundamental breach of contract.If the lack of conformity is only minor, the buyer may only request a repair. The seller must repair the goods unless it is unreasonable to do so, in which case the buyer has only the right to a price reduction or compensation.
|Fault||BGB: A party which fails to fulfil their contractual obligations is only liable if it is at fault.
CISG: The question of fault is irrelevant. However, if the breach of contract is caused as a result of events beyond the party’s control, then liability is excluded.
|Damages||German law: There is no statutory restriction on damages.
CISG: The UN convention restricts damages to loss which was foreseen or ought to have been foreseen by the parties at the time the contract was concluded.
*For ease of reference, referred to as BGB (i.e. German Civil Code, Bürgerliches Gesetzbuch).
Dis-applying the CISG provisions
Parties to an international sale of goods transaction may decide that domestic provisions are more beneficial and therefore want to exclude the CISG provisions. However, to dis-apply the provisions of the CISG, it is important to properly word the exclusion clause.
A clause stating that “German law shall prevail” is insufficient, as the CISG has been incorporated into German law. Instead, it is important to include clear and express clauses in a transaction agreement excluding the CISG provisions if necessary. Such a clause could read “German law prevails and the UN convention on the International Sale of Goods is excluded”.
For more information on the international sale of goods in transactions involving German businesses, contact our team of expert German lawyers on +49 (0) 221 / 951 563 0 or use our contact form.