International Sale of Goods – Does Failure to Assert the CISG in Litigation Operate as Waiver?
The United Nations Convention on Contracts for the International Sale of Goods (the “CISG”) was adopted in 1980 and ratified by some 85 parties (including the United States, effective as of 1/1/88). Its aim, in large part, is to modernize and make uniform contracts involving international commercial trade.
It is well settled that CISG terms apply to covered international transactions unless the parties specifically opt out of or exclude the CISG – in whole or in part. See e.g.,Syral Belgium NV v. U.S. Ingredients, Inc., No. 15-1172 (D. Del. Sept. 9, 2016) (CISG applied to international sale of goods based on purchase orders, confirmations and invoices despite lack of written contract as well as subsequent modification concerning storage costs and timing of shipments).
In a recent summary (non-precedential) decision of the Second Circuit Court of Appeal, the Court declined to apply the CISG to a distribution agreement between a New York importer and an Italian manufacturer. Significantly, the Court held that the CISG did not apply based solely on the importer’s conduct and positions asserted before the New York district court in litigation. The Court decided that the importer impliedly consented to application of New York law, in large part, by failing to raise the CISG in its pleadings for three years during the pending litigation, advancing legal arguments inconsistent with application of the CISG (notably arguing in favor of applying the New York statute of frauds), and consistently arguing positions under New York law.
The Court also rejected the importer’s argument that the CISG was incorporated into New York law and, therefore, should be applied. As a treaty, the Court recognized that the CISG is incorporated into federal law “so long as the parties have not elected to exclude its application.” (citation omitted). As a federal law, the CISG would have preempted local contract law (NY law) absent the parties’ agreement to the contrary.
The case is significant because it raises the issue of whether parties can essentially opt out of the CISG belatedly by failing to advocate for its application in Court despite not having done so at the contracting stage. The case is Rienzi & Sons, Inc. v. N. Puglisi & F. Industria Paste Alimentari S.p.A., Case No. 15-791-cv (2d Cir. Feb. 10, 2016).
Ava Borrasso is the Principal of Ava J Borrasso, P.A., a Miami-based law firm that concentrates on business and international arbitration and litigation. She also serves as an Arbitrator and is a member of the commercial panel of the American Arbitration Association.