The United Nations Convention on Contracts for the International Sale of Goods (“CISG”) is a treaty that is binding on all States that sign it. That is, it becomes law in that State. It is an example of a uniform law.
The CISG was created by The United Nations Commission on International Trade Law (UNCITRAL) in 1980. Under its terms, any party in a Contracting State (currently 95) is automatically subject to the provisions of the CISG when completing a contract for the international sale of commercial goods.
Signatory states can register declarations and reservations excluding the CISG or parts of it. For example, Iceland, Sweden, Norway, Denmark and Finland have registered declarations that the CISG will not apply to trade between parties in their countries. Where no declarations or reservations exist, a party in a Contracting State who does not wish to be subject to the rules of the CISG must specifically exclude it from their contract.
Since the CISG has been signed by the Government of Canada and Canada has not registered any declarations or reservations excluding it or parts of it, it automatically applies to international contracts for the sale of commercial goods between Canadian and foreign businesses. Since contract law falls under provincial jurisdiction, each Canadian province enacted legislation to make the CISG law within their borders. The federal government extended application of the CISG to all 3 of Canada’s territories.
In Ontario, the CISG was made law through the International Sales Conventions Act, R.S.O. 1990, c. I.10. The CISG appears as a schedule to that legislation. According to Article 1(1) of the CISG, the “convention applies to contracts of sale of goods between parties whose places of business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law of a Contracting State.”
The nationality of the parties and the civil or commercial character of the parties or of the contract are not relevant. The CISG does not apply to goods bought for personal, family or household use, like souvenirs you might buy on a trip. It also does not apply to contracts for the supply of labour or other services, the sale of negotiable instruments, money, investments, securities, shares, ships, vessels, hovercraft, aircraft, electricity, or sales made by auction.
Most of the businesses with which Canadian businesses contract are in countries that are signatories to the CISG. Of our top 5 trading partners, only the United Kingdom is not a signatory to the CISG, while the United States, China, Japan and Mexico are.
To exclude the application of the CISG, you could make U.K. the governing law of the contract or exclude the CISG in part or completely. However, you cannot ignore it and just assume that the common law or Ontario sale of goods laws will apply to your contract simply by naming Ontario as the governing law. At the same time, before excluding it or parts of it, you may wish to determine if allowing application of the CISG may be beneficial to your contract, given its differences from Ontario sale of goods law. For instance, Article 46 of the CISG entitles a buyer to specific performance as a remedy, which is very rarely awarded in common law jurisdictions. Specific performance could be a useful remedy where goods are unique, hard to source, needed right away, or the seller cannot pay damages or enforcement of a damages award would cost too much. For this and other reasons, the value of the CISG should not be perfunctorily dismissed.
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