INTERNET LAW - Can the UN Convention on Contracts for the International Sale of Goods Be Applied to E-commerce Contracts?

IBLS Editorial DepartmentMonday, March 31, 2008

Although the United Nations Convention on Contracts for the International Sale of Goods ("CISG") was enacted in 1980 when e-commerce was still a distant prospect, its precepts are applicable international law for e-commerce nowadays. E-commerce involves contracts for the international sale of goods, among others. Thus, CISG is a significant international legislative tool for cross-border e-commerce contracts. This article explores the CISG precepts and its relevancy for e-commerce contracts.
The United Nations Convention on Contracts for the International Sale of Goods ("CISG") applies to contracts for the sale of goods between parties whose businesses are located in different states, when the States are acting as Contracting States; or when private companies, applying private international law, choose the law of the Contracting State. CISG, art. 1. Therefore, e-commerce businesses transacting in goods on a large international scale may seek uniformity, if advantageous for them, on their international contracts by applying CISG contract formation rules to their e-commerce contracts. Moreover, e-government procurement contracts between nations may also be subject to CISG if the Contracting States so agree. CISG rules are limited to the formation of contracts of sale and the sellers' and buyers" obligations and rights arising out of those international trade contracts.
It is important to note that CISG rules may be more effectively applied to the formation of B2B (business to business) e-commerce contracts or B2G (business to government), or G2G (government to government) contracts rather than B2C (business to consumers) e-commerce contracts. The reason for this is that CISG is not applicable to the sale of goods bought for personal, family, or household use. Commonly, in B2C e-commerce contracts individuals buy goods online for their personal or family use.
Also, CISG does not apply to good bought through auctions (like online auctions), stocks, shares, investment securities, ships, vessels, hovercraft, aircrafts (CISG, art. 2.), which are also mostly bought online by individual customers rather than businesses. CISG may be applied to e-commerce contracts involving both the manufacture or production and sale of goods (CISG, art. 3(1)). Yet, CISG does not apply to contracts whose main part is the supply of labour or other services (CISG, art. 3(2)). Thus, it could be noted that CISG cannot apply to e-commerce contracts involving the supply of online services or, subject to special analysis in a case by case basis, the transfer of digital products or services.
As e-commerce allows businesses to have presence in multiple jurisdictions or just a 'web' presence, a basic question is: what would be the place of business for purposes of CISG rules? CISG, art. 10 says that when one a party has more than one place of business, the place of business, for purposes of CISG application, would be ‘the place of business with the closest relationship to the contract and its performance' before the conclusion of the contract. Then, if the party does not have a place of business (e.i. ‘Web presence'), the place of business is the habitual residency. CISG, art. 10(b). CISG does not say ‘whose' habitual residency. Obviously, at the time this convention was drafted, they preconceived ‘individual or corporate parties.'
CISG, as most current legislations on e-commerce contracts, does not require any specific form for the contract to be valid; no writing is required. CISG, art. 11. This characteristic facilitates e-contracts accomplished through simple purchase orders or any other online form.