The United Nations Convention for Contracts on International Sale of Goods (CISG) is an international trade agreement adopted in 1980 at the Vienna Convention for the International Sale of Goods. Its purpose is to eliminate any ambiguity caused by different domestic laws concerning the international sales of goods. Through this agreement, international trade becomes increasingly hassle-free, and the potential for disputes is reduced. The CISG applies to contracts between companies located in different countries. Over two-thirds of the world’s countries have adopted this agreement.
The Convention for the Uniform Law of International Sales (ULIS) and the Convention for the Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) were adopted in previous years, but were not accepted by many countries. The United Nations Commission on International Trade Law (UNCITL) received feedback indicating the lack of support for these agreements. Common reasons provided for this lack of support included the material deficiencies specified within the contracts, the lack of participation on the part of European countries in the ratification process, and the fact that the United States had not ratified either of the two conventions. Since the contracts were not widely accepted, the United Nations Commission on International Trade Law (UNCITRL) went on to use both ULIS and ULF as the basis for CISG.
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ULIS and ULF were also criticized because they were too obscure. CISG is noted for its simplicity and was ratified by the United States in 1988, which in turn prompted other countries to ratify the convention. The laws within CISG supersede domestic trade laws. Even if CISG is not mentioned specifically within a contract between two companies in countries that have ratified the convention, the companies are bound by the agreement. In order to have parts of the convention excluded, the contract has to explicitly mention the convention or the parts of it that do not apply.
One of the main benefits of CISG is its unified code of rules and regulations, making importing and exporting and other facets of international trade easier. Instead of dealing with the domestic laws for international trade in several foreign countries, companies can readily apply CISG. The convention is also a great way to build trust. Domestic laws within a foreign country can be interpreted in different ways, while the interpretations of CISG are static.