contract law

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Contractual liability

Critically compare the regimes of contractual liability under the United Nations Convention on Contracts for the International Sale of Goods, the Principles of European Contract Law and the Unidroit Principles of International Commercial Contracts.

This assignment will critically examine the regimes of contractual liability under the United Nations convention of the rights of contracts for International Sales of Goods and the Principles of the European Contracts Law and underlying principles of International Commercial contracts.

The swap over of goods and services is governed by contract law. Problems in relation to using, agreeing, interpreting and applying contracts in cross-border transactions may therefore affect the smooth functioning of the internal market.

The sale of goods is governed by the Act on the Law Applicable to the Sale of Goods (1964:528), which incorporates into domestic law the 1955 Hague Convention on the Law Applicable to International Sale of Goods. The Act is based on the rules in the Rome Convention. It does not, however, cover consumer contracts.

The general principle of freedom of contract also applies in relation to contracts on the sale of goods. As a consequence hereof, the provisions in the Danish Sale of Goods Act can as generally be deviated from. Thus, parties engaging in business-to-business will have great latitude to negotiate and enter into contracts on individual terms, provided such contracts do not conflict with public law, such as competition law, the rights of third parties or specific rules and regulations relating to certain kinds of businesses. However, this is only a general rule as the Act contains certain mandatory provisions, including provisions regarding business-to-consumer relations as mentioned above. Section3 allows the buyer and the seller to determine the applicable law by agreement. Section4 states that if the parties have not chosen the applicable law the law that applies is that of the seller's country of habitual residence. There is an exception to this rule if the seller accepted the order in the buyer's country of habitual residence, and for purchases on an exchange or at an auction.

To date the EC politician has intended to tackle inconvenience in contracting in the internal market by adopting methods relating to precise contracts or sectors. This sector-specific approach has, on the other hand, not been able to resolve a figure of problems. The European Parliament and Council have time after time avowed the need for better consistency in order to make sure the appropriate performance of the interior market. The European Commission has undertaken a sequence of initiative intended at increasing the overall coherence of European contract law.

The Unidroit Principles are a summary of the law appropriate to worldwide commercial contracts that have been developed on the foundation of a ground-breaking contrast of the most important contract laws. As such, their power rests on the status of UNIDROIT, the organization responsible for their training, and on the excellence of the rules they propose.

[1]The UN I D R O I T Principles stand for a totally new advance to sensible trade law. First of all, on explanation of their range which, opposing to that of all breathing worldwide conventions including CISG, is not limited to a exacting kind of business but cover the universal part of contract law. Moreover, and more significantly, the UN I D R O I T main beliefs pre p a red by a private group of expert which, though drama under the auspices of a prestigious Institute such as UNIDROIT, lacked any legislative power do not aim to unify conjugal law by means of particular legislation, but merely to "re state" existing international contract law. Finally, the decisive criterion in their preparation was not just which rule had been adopt by the mainstream of countries ("common core approach"), but also which of the rules under consideration had the most influential value and or appeared to be mainly well suitable for cross border dealings.

In the section on configuration, new-fangled requirements were built-in on the way in which a agreement may be finished, on writings in corroboration, on the container anywhere the parties make the wrapping up of their agreement independent upon attainment an accord on exact matters or in a unambiguous form, on contract with terms consciously left open, on consultation in bad faith, on the duty of privacy , on merger clauses, on constricting on the basis of standard terms, on astonishing supplies in standard terms, on the conflict between criterion terms and independently negotiate terms and on the battle of forms. Further, a whole chapter on validity was added which furthermore is not limited to the traditional belongings of invalidity, i . e . the three defects of permission such as error, fraud and danger, but also addresses the much more controversial issue of "gross disparity".

[2]Evenly newer middle of others, the contra proferentem rule, the stipulation on linguistic discrepancy and that on supply an misplaced term in the chapter on understanding, the stipulation on unspoken obligation in the episode on content. [3]Those on payment by cheque or other instrument, on payment by funds transfer, on currency of payment, on the determination of the money of imbursement where it is not indicate in the contract, on the costs of presentation, on the imputation of payments, on public permission requirements and on hardship in the chapter on performance; the supplies on the right to act, on immunity clause, on the case where the aggrieved party contributes to the harm, on interest rates and on agreed payment for non-performance in the chapter on non-performance.

[4]Despite the world-wide acceptance of CISG, there might still be sales contract not govern by CISG. According to editorial 1 CISG, this is the container when at least one of the parties is not located in a constricting circumstances or the policy of concealed global law of the debate guide to the function of the law of a non-Contracting State. [5]In all such cases the UNIDROITP principles may be applied as an alternative set of internationally uniform rules, either because of an express choice to this effect by the parties themselves or because the contract is governed by "general principles of law", "lex merc atoria" or the like, and the UNIDROIT Principles are considered to be a particularly authoritative expression thereof. In actual practice, more and more cases are being reported in which the UN I D R O I T Principles have been applied as lex contractus of international sales contracts which do not fall within the scope of CISG.

In one case the party themselves had specifically selected the UNIDROIT Principles as the law leading their contract17. The case worried a sale agreement enters into flanked by a Hong Kong export company and a Russian trade system of government. [6]The contract did not contain any choice of law clause, but when the dispute arose, the parties agreed that the Arbitral Tribunal should apply the UNIDROIT Principles to resolve any questions not expressly regulated in the contract. In two other cases the UN I D R O I T Principles were applied even without any express reference to them by the parties. One is the ICC Award No. 850218 concerning a contract for the supply of rice entered into between a Vietnamese exporter and French and Dutch buyers. The contract did not contain any choice of law clause.

[7]The Arbitral Tribunal decided to base its award on "trade usages and generally accepted principles of intern a t i o n a l trade" and to refer "in particular to the 1980 Vienna Convention on Contracts for the International Sale of Goods (Vienna Sales Convention) or to the Principles of International Commerce i a l Contracts enacted by UNIDROIT, as evidencing admitted practices under international trade law".

[8]The individual supplies it then referred to were Articles 76 CISG and 7.4.6 (Proof of harm by current price) of the UNIDROIT Principles. Up till now another instance is the honour render by an ad hoc Arbitral court in Buenos Aires in 199719. [9]The case troubled a contract for the sale of shares flanked by shareholders of an Argentinean corporation and a Chilean company. The agreement did not hold a alternative of law paragraph and the parties official the process of Arbitral Tribunal to act as friendly compositor. Despite the fact that both party had based their claim on exact supplies of Argentine law, the Tribunal determined to be relevant the UN I D R O I T Principles. The Tribunal held that the UN I D R O I T Principles constitutes "usages of international trade reflecting the solutions of different legal systems and of international contract practice", and that as such, according to Article 28(4) of the UNCITRAL Model Law on worldwide business Arbitration, they should prevail over any domestic law20. The entity's provisions of the UNIDROIT Principles applied to the merits of the case were Articles 3.12 (Confirmation),

[10]Yet it is mainly in the perspective of so-called "State contracts" that the UN I D R O I T Principles are often practical yet in the nonattendance of an articulate orientation by the party. A primary example is provided by the ICC biased Awards in Case involvement No. 71102 1. The argument worried contracts for the supply of equipment concluded between an English company and a Middle Eastern law-making organization. While most of the contract was quiet as to the appropriate law, some did refer to resolution according to "rules of natural justice".

[11]In a first narrow-minded reward commerce with the appropriate law, the Arbitral Tribunal, by mainstream, supposed that the party had planned to keep out the request of any exact domestic rule and to have their contract govern by universal main beliefs and system which take pleasure in wide international agreement. According to the Arbitral Tribunal such "general rules and principles are first and foremost reflect by the UNIDROIT Principle, plus in the other biased award commerce with substantive issues it re f e r red to Articles 1.7 (Good faith and fair dealing), 2.4 (Revocation of off e r), 2.14 (Contracts with term s deliberately left open), 2.18 (Written modification clause), 7.1.3 (Withholding perform a n c e) and 7.4.8 (Mitigation of harm) of the UN I D R O I T Principles, bearing in mind them all to be terms of generally customary philosophy of law.

[12]Other examples are ICC Awards No. 7375 and No. 8261 relating to contracts for the supply of goods between a United States corporation and a Middle Eastern law-making agency2 2, and between an Italian concern and another Middle Eastern governmental agency2 3, respectively.

[13] In together with the cases the contract was quiet as to the appropriate law. The Arbitral Tribunal, presumptuous that neither party was equipped to recognize the other's domestic law, decided in the first case to apply "those general principles and rules of law applicable to international contractual obligations , including the UN I D R O I T Principles, as far as they can be considered to reproduce usually conventional values and rules", while in the moment it affirmed that it would base its decision on the "terms of the contract, supplement by general main beliefs of deal as personified in the lex merc atoria" and eventually practical some individual supplies of the UN I D R O I T Principles with no further explanation.

The U.N. Convention on the International Sale of Goods ("CISG") entered into force in the United States on January 1, 1988. If applicable to a given transaction, the CISG supplies "gap filling" rules that govern contract formation and set forth the rights and obligations of the buyer and seller. The CISG provides, however, that express contractual provisions take precedence over the default provisions of the CISG. Thus, contracting parties remain free to specify whatever law or terms they wish to apply to their transaction, and may exclude altogether the application of the CISG to their contractual relationship.

The CISG only apply to worldwide for profit sales of goods. Each of these rudiments constitutes a significant restraint on the range to the CISG's applicability. First, the auctions have got to be global in nature. A sale is measured "international" if it involves "party whose places of commerce are in dissimilar state." In passing the CISG the joint States predetermined that, not present state accord to the opposing, the CISG would not apply to contract flanked by a U.S. party and a party whose place of trade is in a state that has yet to adopt the CISG.

Subsequent, the CISG cover the sale of goods, and does not mechanically be relevant to services contracts. Anywhere a agreement include both goods and services rudiments, the CISG will apply at what time the sale of goods constitute the "preponderant part of the [seller's] obligations Contracting party are free to be relevant the CISG to services (or predominantly-services) contracts, so long as this choice of law is made explicit in the contract itself.

Finally, the CISG only apply to industrial dealings, i.e., sales between merchants of goods. Among other boundaries, it does not envelop purchaser sales; auction sales; sales of flexible instrument or securities; or sales of ships, vessels, or aircraft.

Adoption of the CISG by the United States provides important benefits to U.S. exporters. Parties negotiating international sales contracts often find the "choice of law" issue to be among the most contentious. Each party is familiar with its own domestic sales law, and prefers that its local rules apply to the transaction.

[14]The CISG enable the party to steer clear of difficulties in negotiate "whose law will govern" by put into place globally acknowledged substantive system on which constricting party, courts, and arbitrator may rely.


The two principles studied above do not have a variation that is completely non identical. The sales of goods act and the international sales of goods have their own characteristics which and devote to their origin. The sales of good act have a underlying principle that allows the consumer to practice a legally binding contract which has the ability to rein fine the legally binding contract between the principle and the purchaser. This when compared with the international sole of goods act shows a variation the sale of goods has been governed by the Act on the Law Applicable to the Sale of Goods, which has the ability to incorporate into domestic law this is shown in the Hague Convention on the Law Applicable to International Sale of Goods which is this assignment comparison. The Act is based and designed on the complexity of the rules in the Rome Convention. It does not, however, cover consumer contracts, when the Sales of Goods Act does. This major comparison shows the different ability of the conventions by the European council.

The universal code of freedom of contract also apply in next of kin to contracts on the sale of goods. As the only result hereof, the provisions in the Sale of Goods Act can as usually be deviate from. Consequently, parties attractive in business-to-business will have huge freedom to discuss and enter into contract on human being terms, provide such contract do not disagreement with public law, such as rivalry law, the rights of third parties or specific rules and regulations relating to certain kinds of businesses. However, this is only a general rule as the Act contains certain mandatory provisions, including provisions regarding business-to-consumer relations as mentioned above.