Vienna Convention

Introduction
The UN convention on contracts for the international sale of goods (CISG; the
Vienna Convention) is a treaty that is a uniform international sales law. As at Sep
14 it was ratified by 83 countries, making it one of the most successful
international uniform laws.
The convention deals with the uniformity of international sales law. It is not an
attempt to have uniform clauses such as INCO terms but the United Nations Law
Commission on International Trade) also started to develop agreements and draft
contracts to be used internationally.
The Vienna Convention is an attempt to create uniformity and it supersedes the
two Hague Conventions. Malta did not ratify this convention.
The Vienna Convention applies in two options: This is reflected in Article 1(1)
1. A contract of sale of goods where the parties live in a state that have
ratified the Convention. Where one state did not ratify the convention
shall not apply
2. The second option covers the proper law of the contract, and thus the
choice of law issue. Thus if a contract makes reference to the law of a
state of which the state is a signatory, then the Vienna Convention shall
apply.
The rules of international law are not merely applicable in situations of choice of
law. The Court will look at the connecting factors and thus it would be directing
the agreement and its closest links. What is important is that although Malta
doesnt form part of the convention, if the choice of law points us to a state
which is a signatory then the convention will apply.
Art 6 - The parties can also opt out of the convention, or subject to article 12,
derogate from or vary the effects of any of its provisions.

Non applicability
Article 2 This convention does not apply to sales:
a. Of goods bought for personal, family or household use, unless the seller,
at any time before or at the conclusion of the contract, neither knew nor
ought to have known that the goods were bought for any such use
b. By auction
c. On execution or otherwise by authority of the law
d. Of stocks, shares, investment securities, negotiable instruments or money
e. Of ships, vessels, hovercraft or aircraft
f. Of electricity

Contract may be verbal

Article 11 provides that a contract of sale need not be concluded in or evidenced
by writing and is not subject to any other requirement as to form. It may be
proved by any means including witnesses.
In our commercial code article 114 states that if the parties have agreed that the
verbal agreement is to be reduced to writing, it is deemed that they wish to
subject the validity thereof to the observance of such formality. However article
1232 civil code, holds that if there is no such agreement to render it in writing
then the verbal agreement on its own is sufficient.

Offer and acceptance

A contract of sale needs an offer and an acceptance. The convention had to cater
for the different rules in different contracting states.
14(1) provides that A proposal for concluding a contract addressed to one or
more specific persons constitutes an offer if it is sufficiently definite and
indicates the intention of the offer or to be bound in case of
acceptance. A proposal is sufficiently definite if it indicates the goods and
expressly or implicitly fixes or makes a provision for determining the quantity
and the price.
14(2) A proposal other than one addressed to one or more specific persons is
merely an invitation to accept offers, unless the contrary is clearly indicated by
the person making the proposal.
In this particular case the Vienna Convention is one step ahead of our law in
terms of certainty. However, Article 113 makes the distinction between offer and
the invitation to make offers, because it states that an offer made to the public
by means of catalogues or other advertisements is not binding unless it has been
expressly declared to be so. It only amounts to an invitation to offer.
Unlike in Malta, where we have adopted the theory of information, the
convention uses theory of transmission, article 15(1) provides that an offer
becomes effective when it reaches the offeree.
Article 15(2) an offer, even if irrevocable, may be withdrawn if the withdrawal
reaches the offeree before or at the same time as the offer.
Article 111 of the commercial code Code is slightly different because it states
that until the contract is complete, both the offer and the acceptance may be
revoked. If however, the person making the offer declares that he will keep it
open for a certain time, the revocation thereof before the lapse of such time will
not prevent the completion of the contract.

Now the question which begs to be answered over here is: when is a contract
complete under our law? Article 110 of our law says that a contract between

parties at a distance is not complete if the acceptance has not become known to
the party making the offer within the time fixed by him or within such time as is
ordinarily required. A distinction is being drawn here between the knowledge of
the acceptance, so in this particular case our law goes by the so-called theory
of information. So the contract is complete when the acceptance becomes
known. Until the acceptance becomes known the contract is not complete and
consequently both the offer and the acceptance may be revoked.

Revocation
16(1) Until a contract is concluded an offer may be revoked if the revocation
reaches the offeree before he has dispatched an acceptance
16(2) However an offer cannot be revoked:
a. If it indicates, whether by stating a fixed time for acceptance or otherwise,
that it is irrevocable; or
b. If it was reasonable for the offeree to rely on the offer as being irrevocable
and the offeree has acted in reliance on the offer.
Article 17 provides that an offer, even if it is irrevocable, is terminated when a
rejection reaches the offeror.
Article 18(1) A statement made by or other conduct of the offeree indicating
assent to an offer is an acceptance. Silence or inactivity doesnt in itself amount
to acceptance.
Article 18(2) an acceptance of an offer becomes effective at the moment the
indication of assent reaches the offeree. An acceptance though is not effective if
received after the time fixed or within a reasonable time if no time is fixed. An
oral offer must be immediately accepted unless circumstances dictate otherwise.
However if it is customary for acceptance to be performed by an act, such act
constitutes acceptance if done within the time-frames mentioned above.

Distinction between acceptance and a counter offer

Article 19 a reply to an offer which purports to be an acceptance but contains
additions, limitations or other modifications is a rejection of an offer and
constitutes a counter-offer.
However, a reply to an offer which purports to be an acceptance but contains
additional or different terms which do not materially alter the terms of the offer
constitutes an acceptance, unless the offeror, without undue delay, objects orally
to the discrepancy or dispatches a note to that effect. If he does not object, the
terms of the contract are the terms of the offer with the modifications contained
in the acceptance.
Article 19 (3) states that these additional or different terms are considered to
alter the terms of the offer materially, i.e.

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the price;
payment;
quality and quantity of the goods;
place and time of delivery;
extent of one partys liability to the other;
the settlement of disputes.

What are settlement of disputes? If for example you offer to sell, but in the case
of a dispute we have to refer to the Court of Malta. And I say Ill accept all your
terms but the dispute is to be resolved by the Court of England. I have
materially altered your offer, likewise anything referring to price, quantity,
quality of goods etc. Anything else may be considered not to materially alter the
offer.
Article 112 of the Commercial Code is much more categorical because it says
that an acceptance subject to conditions, additions, restrictions or alterations
shall constitute a refusal. Our law makes no distinction between a material
alteration and a non-material alteration. Probably in this respect our law is
clearer because youll always have a problem of defining what a material
alteration is.

Fundamental breach of contract

Article 25 introduces the concept in the Vienna Convention of the so-called
fundamental breach of the contract by one of the parties and the consequences
of such a fundamental breach. In terms of Article 25, a breach of contract is
fundamental if it results in such detriment to the other party as to deprive him of
what he is entitled to expect under the contract, unless the party in breach did
not foresee and a reasonable person of the same kind in the same circumstances
would not have foreseen such a result.
Fundamental breach enables the party suffering it to avoid the contract, in other
words to avoid the consequences of the contract. Under our law we do not have
a concept known as fundamental breach. We generally look at the existence and
the nature of the breach rather than the consequences of the breach. The notion
of fundamental breach is an English notion, which is a bit alien to our continental
law based notions of sale.
In the case of fundamental breach theres a so-called notice of avoidance, which
basically states that the declaration of avoidance of a contract is effective only if
made by notice to the other party. So basically you have to inform the other
party that you intend not to consider the contract as binding.

Obligations of seller
The seller must deliver the goods, hand over any documents relating to them
and transfer the property in the goods, as required by the contract and this
Convention.

Delivery of goods and handing over documents

Article 31 if the seller is not bound to deliver the goods at any other particular
place, his obligation to deliver consists;
a. If the contract of sale involve the carriage of goods in handing the goods
over to the first carrier for transmission to the buyer
b. If, in cases not within the preceding sub-paragraph, the contract relates to
specific goods, or unidentified goods to be drawn from a specific stock to
be manufactured or produced, and at the time of the conclusion of the
contract the parties knew that the goods were at, or were to be
manufactured or produced at, a particular place in placing the goods at
the buyers disposal at that place.
c. In other cases in placing the goods at the buyers disposal at the place
where the seller had his place of business at the time of conclusion of the
contract
The convention doesnt specify what form the contract is to take.

Shipping Arrangements
Article 32 deals with shipping arrangements to be effected by the seller, which
our law does not talk about. It says that if the seller hands the goods over to a
carrier and the goods are not clearly identified by shipping documents, the seller
must give the buyer notice of the consignment specifying the goods.
Sub-Article (2) then tells you that if the seller is bound to arrange for carriage of
the goods, he must make such contracts as are necessary for carriage to the
place fixed by means of transportation appropriate in the circumstances and
according to the usual terms for such transportation.
Sub-Article (3) deals with insurance. If the seller is not bound to effect insurance
in respect of the carriage of the goods, he must, at the buyers request, provide
him with all available information necessary to enable him to affect such
insurance.
So here we find certain provisions dealing with shipping arrangements and
information on insurance. Generally speaking, however, these shipping
arrangements are covered by the INCO terms.

Time for Delivery

Article 33 states that the seller must deliver the goods:
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if a date is fixed or determinable from the contract, on that date;

if a period of time is fixed by or determinable from the contract, at any
time within that period unless circumstances indicate that the buyer is to
choose a date; or
In any other case, within a reasonable time after the conclusion of the
contract.

To be fair, it isnt really

have to deliver by that
have to deliver within
reasonable time after
established.

telling us much here. If the date is fixed, you obviously

date, if the date is a period of time then you obviously
that period of time, otherwise it has to be within a
the conclusion. That is the principle that is being

Our law doesnt deal with time of delivery, it only deals with the consequence of
the failure to deliver on time. Article 1385 of the Civil Code says that if the seller
fails to make delivery at the time agreed, the buyer may elect either to demand
the dissolution of the contract or to demand that he be placed in possession of
the things sold. So hes not bound to dissolve the contract, he can insist that
you have to place me in delivery and hold the seller responsible for damages.
Article 34 - If the seller is bound to hand over documents relating to the goods,
he must hand them over at the time and place and in the form required by the
contract. If the seller has handed over documents before that time, he may, up
to that time, cure any lack of conformity in the documents, if the exercise of this
right does not cause the buyer unreasonable inconvenience or unreasonable
expense. However, the buyer retains any right to claim damages as provided for
in this Convention.
Article 1380 of our Civil Code is one of the few sections of our law dealing with
documents. And the law basically says that delivery of movable property takes
place either by handing the goods or amongst other ways by handing to the
buyer the documents of title the delivery of which operates, according to law, the
transfer of the property to which such documents refer. Our sale of goods is also
deemed to be a sale of documents.

Remedies
The convention also deals with the remedies which are intertwined with the
obligations of the buyer and the seller.
Article 35 provides that The seller must deliver goods which are of the quantity,
quality and description required by the contract and which are contained or
packaged in the manner required by the contract.
Article 35(2), the law goes on to give you examples of non-conformity of the
goods and it says that the goods are not confirmed unless;

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They are fit for the purpose for which the goods of the same description
would ordinarily be used;
They must be fit for any particular purpose made known to the seller at
the time of the contract;
They must possess the qualities of goods which the seller had shown to
the buyer in the sample;
They must be contained or packaged in the manner usual for such goods.

In Sub-Article (3) there is an exemption of liability of the seller. In terms of SubArticle (3), the seller is not liable for any lack of conformity if at the time of the

conclusion of the contract the buyer knew or could not have been unaware of
such lack of conformity.
Article 1425 of our Civil Code contains a similar provision to this, and this is the
article which deals with latent defects. Even here, in the case of a latent defect,
we find that the seller under our law is not answerable for any apparent defect
which the buyer might have discovered for himself. So here again we see that
we dont have that much of a difference in our Code.
Article 37 of the Vienna Convention provides that, if the seller delivers before the
due date of delivery, he may up to that date when the delivery becomes due,
make up for any deficiency or non-conformity to the goods. So he can either
replace the goods or if he has delivered less than they had agreed upon, he can
send the remainder, provided however that the exercise of this right on the part
of the seller does not cause the buyer unreasonable inconvenience or
unreasonable expense.
In other words, if the due date was end of May and the seller delivered on the
15th May, and he realized that certain goods did not conform, in this particular
case he can decide to replace them. It could be that the buyer did not realize
they did not conform and sold them to third parties, so this is where it could
cause unreasonable inconvenience. Or maybe he altered the goods already;
sometimes you buy goods in an unfinished state. So if the buyer did not realize
they did not conform totally and processed the goods, this could be a problem,
because hed have to reprocess them again. We have no similar provision in our
law.
Article 38 speaks of the obligations of the buyer The buyer must examine the
goods or cause them to be examined, within as short a period as is practicable in
the circumstances.
Article 39, in terms of which the buyer loses the right to rely on lack of
conformity of the goods if he does not give notice to the seller specifying the
nature of the lack of conformity within a reasonable time after he has discovered
it or ought to have discovered it.
The law is imposing on the buyer a duty to examine the goods as soon as
practicable. Secondly, for the buyer to rely on lack of conformity of the goods,
he has to give notice to the seller of the lack of conformity within a reasonable
time from when he noticed it or should have noticed it. If he does not give this
notice, he risks losing his right to hold the seller responsible.
The Vienna Convention then goes on to put a statute of limitation of two years.
It says, in any event, the buyer loses the right to rely on a lack of conformity of
the goods if he does not give the seller notice thereof at the latest within a
period of two years from the date of hand-over. To a certain extent, this is
similar to the provision we have in our law, which gives you a two-year period to
sue the seller if the goods are not of the quality stipulated. We have a remedy
under our law, i.e. either ask for a reduction in price or resolve the contract.
Article 41 the seller must deliver the goods which are free from any right or
claim of a 3rd party, unless the buyer has agreed to take the subject to that right
or claim. However if such right or claim is based on industrial property or other
intellectual property the sellers obligation is governed by art 42.

Art 42 The seller must deliver goods which are free from any right or claim of a
third party based on industrial property or other intellectual property, of which at
the time of the conclusion of the contract the seller knew or could not have been
unaware, provided that the right or claim is based on industrial property or other
intellectual property.
Articles 45 and 46 of the Vienna Convention state that the buyer may require
performance by the seller of his obligations unless the buyer has resorted to a
remedy which is inconsistent with this requirement. It goes on to say that if the
goods do not conform with the contract, the buyer may require delivery of
substitute goods only if the lack of conformity constitutes a fundamental breach.
It also says in Article 47 that the buyer may fix an additional period of time of
reasonable length for performance by the seller of his obligations.
Article 1390 of our Civil Code in case of non-conformity gives the right to reject
and demand payment or to reduce the price. And Article 1427 of the Civil Code
as well talks of non-conformity due to latent defects.
Article 48 of the Vienna Convention gives an additional remedy not found under
our law to the seller, which says that the seller may even, after the date of
delivery, remedy, at his own expense, any failure to perform his obligations if he
can do that without causing the buyer unreasonable inconvenience and all this
without prejudice to the buyers right to damages. He still retains his right for
damages.
Article 49 stipulates the circumstances under which the buyer may declare the
contract avoided in two circumstances:

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if the seller fails to perform his obligations and this amounts to a

fundamental breach;
In the case of non-delivery of the goods, the seller fails to deliver the
goods within an additional time given to him by the buyer.

In our case, in the case of late delivery Article 1385 states that you can either
ask for the dissolution of the contract or to be placed in possession of the goods.
Article 50 gives the buyer the right, in the case of non-conformity, to ask for a
reduction of the price, similar to our Article 1390.
In Article 51, the buyer can declare the contract avoided if the seller delivers
only part of the goods.
Then there is the issue of passing of risk, which is found in Articles 67 to 69 of
the Vienna Convention. If the contract of sale involves the carriage of the goods,
the risk passes to the buyer when the goods are handed over to the first carrier.
If the seller is bound to hand the goods over to a carrier at a particular place, the
risk does not pass to the buyer until the goods are handed over to the carrier at
that place. In the case of goods sold already in transit, the risk passes in terms
of Article 68 to the buyer from the time of the conclusion of the contract. And
then in other cases in terms of Article 69 when he takes over the goods.
However if the buyer takes over the goods at a place which is not the sellers

place of business, risk passes when delivery is due and the buyer becomes
aware of the fact that the goods are placed at his disposal.
Refer to Article 1347 of our Civil Code in terms of which risk passes with the
completion of the sale. Because it tells you that the moment the sale is complete
and from that moment the thing itself remains at the risk and for the benefit of
the buyer.

Breach of contract
In article 53, If the seller delivers the goods before the date is fixed, the buyer
may refuse delivery or refuse to take delivery.
53(2) if the seller delivers a quantity of goods greater than that provided than
that provided for in the contract, the buyer may take delivery or refuse to take
delivery of the excess quantity. If the buyer takes delivery of all or part of the
excess quantity, he must pay for it at contract rate.
Article 74 deals with damages, and Article 79 deals with force majeur. There are
certain exemptions on the part of the seller because of issues beyond his control.