International sales transactions and applicable law – why is it important to be aware of regulations?

One of the first questions when an international sales transaction case is referred to our Legal Partnership is of the applicable law. Determining the rules of provisions governing the international sales contract is essential in order to advise our Clients on the possibilities.

Vienna Convention as a legal regulation relating to the international sale of goods.

In case of international sales contracts, an internationally uniform instrument should always be considered. The Vienna Convention on the International Sale of Goods (CISG) was drafted by the UNCITRAL and as of today, 97 States have adopted it. The CISG provides for rules on the international sales contracts and is applicable even in case of a choice of law as part of the chosen national law of every Contracting State.

The Parties can exclude the application of the CISG. Our Legal Partnership, however, recommends the contrary for businesses that trade abroad, namely, to get known the basic principles and provisions of the CISG and to apply to their international sales contract. This is based on three reasons.

Choosing a partner who has extensive experience in international sales transactions and litigation relating to them – why is this so important for a business?

First, sometimes international claims should be made in a country different from the applicable law. If the buyer wishes to sue the seller and the sellers’ place of business is in Poland, the default rule gives jurisdiction to the Polish courts. If the Parties, however, stipulated the application of German law with the exclusion of the CISG, the Polish court and attorneys have to apply legal provisions not known to them. The CISG, however, is widely known amongst the legal professionals of the Contracting States. If German law is chosen to an international sales contract and the CISG is not excluded, the latter will be the main legal source applicable to the dispute. In this example, Polish courts and attorneys can apply a legal instrument they know.

Second, the CISG is a legal source with international character. It is based on the principles and practice of international commercial relationships. Therefore, the CISG will not favour one party more than another, because it does not give a “home-advantage” to one party.

Third, opting for the CISG means applying provisions drafted specially for international sales contracts. The provisions of the CISG are tailored exclusively to sales transactions and their main focus is on the rights and obligations of the seller and the buyer. Thus, the legal situation and the issues to be decided by the Court is simpler to clarify.

Our Legal Partnership has a wide range of experience on international sales transactions. Would you have any questions regarding the CISG, drafting international sales contract clauses or disputes with partners from aboard, do not hesitate to contact us.

BALÁZS & KOVÁTSITS Legal Partnership