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40 years of CISG

In 1980, 40 years ago now, the United Nations Convention on Contracts for the International Sale of Goods (CISG) was adopted. It entered into force in Germany in 1991 and is therefore part of German law.

Since then, international sales contracts that are governed by the laws of Germany (or the laws of another contracting state) have been primarily governed by the CISG, where its regulatory content is sufficient. Issues not addressed by the CISG (such as on representation or interest levels) are subject to the additional application of non-uniform national sales law (e.g., that of the German or the French Civil Code).

Where the parties have not chosen the law applicable to the contract, a European judge will determine that the law governing international sales contracts is usually the law of the country where the seller has his habitual residence (Article 4(1)(a) Rome I Regulation). For export contracts, this leads to the application of German law. Since, as mentioned above, the CISG is part of German law, this is what will then be applicable. It has priority over the provisions of the Civil Code. For import contracts, in the absence of a contractual choice of law, it depends on whether the seller is domiciled in one of the currently 92 other contracting states (consequence: CISG will be applicable) or not (consequence: the non-uniform sales law of that country will be applicable). Among Germany’s top 20 trading partners, only the United Kingdom and Japan are not contracting states.

Thus, the CISG should be applicable to the vast majority of international sales contracts involving a German party. The parties are free, though, to exclude the UN Convention on Contracts for the International Sale of Goods (for which, however, the wording “the contract is governed by the laws of Germany” is not sufficient, since the CISG is part of German law). Practice shows that the parties, if they are even aware of the issue at all, exclude the UN Convention on Contracts for the International Sale of Goods almost by default and frequently without further discussion of the pros and cons of doing so.

The CISG is, however, quite acceptable in terms of content and fairly similar to the sales law according to the German Civil Code in its current form, even if there are relevant differences obviously. The CISG is also well structured and linguistically efficient. Non-lawyers will feel more at home in it than in the less easily accessible sales law in the German Civil Code.

In general, the CISG will be preferable to agreeing on the law of the foreign contractual partner, because neither German foreign traders nor their legal counsel are usually able to sufficiently assess the effects of the foreign law with certainty. The CISG also has the advantage of agreeing on it more easily, as both parties are usually not prepared to accept the application of non-uniform law of the contractual partner. The CISG was developed as a compromise to promote international trade. Legal experts from many countries were involved in its development. Accordingly, the CISG is also a compromise between different legal systems. The rules are available in many languages. Foreign contractual partners will frequently be prepared to accept these rules, as their legal counsel will also have access to the provisions of the CISG.

Nonetheless, there are also structural disadvantages: as pointed out above, non-uniform national law must be applied additionally, at least to fill the gaps. National law and the CISG do not always interlock seamlessly. And there is good reason why this is the case: The UN Convention on Contracts for the International Sale of Goods was conceived with the intention to fit into any national legal system. Obviously, this includes provisions that do not fit in without stretching or compressing in individual cases. Nevertheless, users will not feel as tied up to a bed of Procrustes. Another disadvantage is the higher degree legal uncertainty, at least in comparison with the German Civil Code. The decisions on the sales law according to the Civil Code fill libraries and many legal issues have been decided by the highest court. On the other hand, there are a lot fewer published decisions on the CISG, and those are spread over many different jurisdictions. It is therefore often more uncertain how a German court will answer a particular question.

Plenty of light, little shadow: The authors of the UN Convention on Contracts for the International Sale of Goods have achieved great success. It is a pity that it is so often excluded without reflection. In any event, what is better than following the reflex to excluding it is to get an overview of its content and then make a well-informed decision for or against the application of the CISG.