the cisg applies when it says it does, even if nobody argues it

49 Pages·2015·0.47 MB·English

T CISG A W I S D ,
HE PPLIES HEN T AYS IT OES
E N A :
VEN IF OBODY RGUES IT
WHY THE CISG SHOULD BE APPLIED EX OFFICIO IN THE UNITED STATES AND A
PROPOSED FRAMEWORK FOR JUDGES

TABLE OF CONTENTS
I. Case Study………………………………………………………………...2
II. Summary of Argument……………………………………………………4
III. Argument………………………………………………………………….6
A. CISG Applies Ex officio...................................................................6
1. Background of CISG......................................................6
2. CISG and State Sales law……………………………..8
3. American State Conflicts of law and Choice of law
Rules and the CISG……………………………………9
4. Ex officio application of the CISG………......…….....12
5. Ex officio Application and Iura Novit Curia………....15
6. Iura Novit Curia and International Obligations……...17
B. CISG Standard for Exclusion………………………………….…22
1. Clear Opt-Out………………………………...………22
2. Ex ante v. Ex post………………………………….…26
C. CISG Standard for Modification…………………………………29
D. Applying the Standard to Litigation Conduct……………………31
E. Options for the Judge…………………………………………….33
1. The Judge’s Interests…………………………………33
2. Option 1: Dismissal………………………………….34
3. Option 2: Sua Sponte ………………………………..35
4. Option 3: Request Re-argument……………………...36
F. Thwarting the Strategic Litigant…………………………………38
1. Defining the Problem…………………………...……38
2. Proposed Solution……………………………………40
3. Is the Behavior Strategic?............................................42
a. Second bite at the apple…………………...…42
b. Strategic Delay………………………...……..43
4. Weaknesses in the Approach………………….……..43
G. Normative Reasons for American Judges to Apply the CISG ex
officio…………………………………………………………………45

IV. Conclusion……………………………………………………………….48

John Michael Grant The CISG Should Apply Ex Officio in the U.S. 1

Electronic copy available at: http://ssrn.com/abstract=2619458
I. CASE STUDY
Consider the following scenario:
A South Korean buyer contracts to purchase bottled mineral water from a New
York seller. A dispute between the two arises. The South Korean buyer, the plaintiff,
submits a complaint to a New York State court that doesn’t specifically address the
applicable law, it merely states the facts and says that it is seeking damages due to
“Count two: breach of supply agreements under state law.”1 The New York seller’s reply
stated that the plaintiff failed to meet the requirements for a preliminary injunction under
New York State law and cited factors, and it did refer to a specific provision in New
York’s Uniform Commercial Code. 2 The South Korean plaintiff issued a reply
memorandum in support of the injunction that discussed why it did, in fact, meet these
requirements under New York law, but the plaintiff never mentioned the Uniform
Commercial Code in these written submissions.3 At the conclusion of discovery, in
March 2010, nearly three years after the submission of the initial complaint, the plaintiff,

1 Complaint for Plaintiff at 7, Ho Myung Moolsan, Co. Ltd. v. Manitou Mineral Water,
2 Def. Mem. of Law in Opp. at 1, Ho Myung Moolsan, available at westlawnext.com
(2007 WL 5041355) ( “In addition, Mr. Kwon notes that in or about June and July of
2007, the plaintiffs sent orders for approximately ten containers of water, which orders
were significantly greater than those previously placed by the plaintiff (paragraphs “28”
and “30” of Kwon opposition affidavit). While Mr. Kwon asserts that Manitou was
attempting to fulfill these inordinately large orders, it should be emphasized that
Manitou's efforts to fulfill them were not mandated by law. See N.Y. U.C.C. § 2-306(1)
provides as follows:
“A term which measures the quantity by the output of the seller or the requirements of the
buyer means such actual output or requirements as may occur in good faith, except that
no quantity unreasonably disproportionate to any stated estimate or in the absence of a
stated estimate to any normal or otherwise comparable prior output or requirements may
be tendered or demanded”).
3 See Pl.'s Mem. of Law in Supp. (Oct. 10, 2007) Ho Myung Moolsan, available at
westlawnext.com (2007 WL 5041358).
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 2

Electronic copy available at: http://ssrn.com/abstract=2619458
for the first time, argued that the U.N. Convention on International Sales of Goods
(hereinafter the “CISG”) applied, not New York’s Uniform Commercial Code
(hereinafter the “U.C.C.”).4 Given that both South Korea and the United States had
ratified the CISG5 and that the CISG applies to contracts for the sale of goods concluded
by parties whose places of business are in different Contracting States, this contract
appears to be clearly covered by the CISG.6 The New York defendant argued that the
parties had applied New York law throughout the course of the litigation, and as such,
plaintiff’s lawyers, through their conduct, had agreed to waive any right to apply the
CISG and that New York local sales law should apply.7
What is the proper course of action for the Judge at this point in the litigation
process? Should it affect the analysis if the South Korean buyer never brought up the

4 See Pl.'s Mem. of Law in Supp. of Summary Judgment Ho Myung Moolsan, available at
12 westlawnext.com (2010 WL 2333974).
5 The original exclusivity contract was signed in December 2004, and the original
negotiations for the merger were in 2004. However, new versions of the contract as well
as additional orders, i.e. new contracts, for water bottles were made and filled throughout
June and July 2007. See Def. Mem. of Law in Opp. supra note 2 at 7. Thus, the contracts
in dispute were concluded well after the effective date of ratification in both Countries.
See CISG Database List of Contracting States (“South Korea (March 1 2005), United
States (1 January 1988)”) available at
http://www.cisg.law.pace.edu/cisg/countries/cntries.html.
6 See CISG Art 1(1)(a) “(1) This 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” available at http://www.cisg.law.pace.edu/cisg/text/e-text-01.html.
7 Def. Pre-Trial Mem. of Law in Opp. at 3, Ho Myung Moolsan available at
westlawnext.com (2010 WL 4901172) (“In making this argument for the first time,
Plaintiffs ignored the fact that the parties have applied New York Law throughout the
course of the within litigation that has included extensive motion and appellate practice.
Indeed, in Plaintiffs' amended complaint, Plaintiffs explicitly describe its breach of
contract cause of action as a “breach of supply agreement under state law.” (Emphasis
added). As such, Plaintiffs have waived any right to apply the law of the CISG and New
York Law applies. In any event, under either New York Law or the CISG, it is
respectfully submitted that Plaintiff will be unable to prove its cause of action for breach
of contract”).
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 3
CISG’s applicability and the Judge became aware of the CISG on her own? What if the
Judge became convinced that the South Korean buyer’s lawyer sought to game the
system by arguing local law until the eve of trial, and only once things appeared bleak,
would he try to get a “second bite at the apple” using the CISG? What if the Judge
becomes convinced the litigant argued only the local law and waited until the end of the
process to argue the actually applicable CISG in order to achieve a strategically valuable
delay?
II. SUMMARY OF ARGUMENT
This case is not a mere hypothetical. These are the facts of Ho Myung Moolsan,
Co. Ltd. v. Manitou Mineral Water, Inc. a Federal United States trial court decision out of
the Southern District of New York.8 Moreover, this common scenario is likely
underreported. In the United States, knowledge of the CISG is rare among both Judges
and lawyers.9 Thus, in cases such as the above, where the case is filled with complicated
matters of fact and law and a foreign party is relying on foreign counsel to make its case
in a distant forum, it is quite possible for both lawyers to miss the fact that the
circumstances are such that local law is displaced by the CISG. Whether one side argues

8 Ho Myung Moolsan, Co. Ltd. v. Manitou Mineral Water, Inc., No. 07 Civ. 07483
(S.D.N.Y. 2010) available at westlawnext.com (2010 WL 4892646) and
http://cisgw3.law.pace.edu/cases/101202u1.html.
9 9 P.L. Fitzgerald, The International Contracting Practices Survey Project" (2008) 27
JOURNAL OF LAW AND COMMERCE 1 at p. 32 (Question 3) (surveying on this question 134
lawyers in 2006-7) (“In the US, 44% of lawyers were 'not at all familiar' with the CISG”)
available at: http://ssrn.com/abstract=1127382. ; Lisa Spagnolo A Glimpse through the
Kaleidoscope: Choices of Law and the CISG (Kaleidoscope Part I)
Vindobona Journal of International Commercial Law & Arbitration (1/2009) 135-156 at
p. 137 available at http://www.cisg.law.pace.edu/cisg/biblio/spagnolo3.html#7 (“Lawyer
unfamiliarity seems to vary a great deal by jurisdiction, from high levels of baseline
"unawareness" in US to much lower rates of 'unawareness' in Germany.”).

John Michael Grant The CISG Should Apply Ex Officio in the U.S. 4
the issue quite late in the process, or whether the Judge determines the law applicable on
her own, Judges have little guidance as to how best to proceed in this scenario.
It is this author’s contention that the CISG, as a self-executing international treaty
in the United States with the preemptive force of Federal law, applies to cases where by
its own terms it is applicable. This is so regardless of any local New York State rules that
determine a certain length of delay in invoking the CISG amounts to a “tacit waiver.”
Thus, when it has rules on point, the CISG displaces local law, even procedural law. In
other words, the CISG applies ex officio.
Moreover, because the CISG applies, only an effective exclusion of the CISG, as
defined by the CISG, gets the parties back out of the CISG. Because the CISG covers
agreements to exclude and a post-contractual agreement to exclude is governed by Article
6 on exclusion, Articles 11, 14-24 on formation, and Article 29 on modification, in order
to determine that a lawyer’s conduct amounts to a “tacit waiver,” or an agreement to
exclude the CISG, the Judge should analyze the conduct under the standards set forth in
those articles. It is submitted that under these standards it will be exceptionally rare to
fairly conclude that the litigants had either the incentive, or the requisite awareness of the
CISG’s existence, to come to an agreement to exclude it in favor of local sales law.
Thus, regardless of the stage in the process it is realized or argued, the CISG
should prevail over local sales law when by its terms it is applicable. In a circumstance
such as Ho Myung Moolsan, I argue that the Judge should either request additional briefs
or decide the case under the CISG sua sponte10.

10 Latin for “on own’s own accord.” Accoding to Cornell University’s law dictionary sua
sponte is, “used to indicate that a court has taken notice of an issue on its own motion
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 5
Nevertheless, because decisions such as Rienzi & Sons, Inc. v. N. Puglisi & F.
Industria Paste Alientari11 (hereinafter Rienzi), a United States Federal trial court opinion
from the Eastern District of New York, which cites Ho Myung Moolsan as precedent,
evidence American Judges’ fear of gamesmanship by litigators either seeking to cause
delay or attain a “second bite at the apple” under a different law, I propose a path within
the CISG for thwarting the strategic litigant. Still, I remain ambivalent as to whether its
use would on balance encourage positive results. Finally, I conclude by offering
normative reasons, grounded in advancing national interests, for American Judges to
apply the CISG ex officio and to follow a framework that promotes uniformity in the
application of international sales law.
III. ARGUMENT
A. THE CISG APPLIES EX OFFICIO
1. Background of the CISG
The 1980 U.N. Convention in Vienna on Contracts for the International Sale of
Goods (hereinafter the “CISG”) is an international treaty that has been signed and ratified
by the United States and over eighty other countries.12 According to one U.S. opinion, the

without prompting or suggestion from either party.” available at
https://www.law.cornell.edu/wex/sua_sponte.
11 Rienzi & Sons, Inc. v. N. Puglisi & F. Industria Paste Alimentari S.P.A 08-CV-2540
(DLI)(JMA) (E.D.N.Y. 2014) available at westlawnext.com (2011 WL 1239867) and at
http://cisgw3.law.pace.edu/cases/140327u1.html.
12 See LIST OF PARTICIPATING COUNTRIES CISG database available at
http://www.cisg.law.pace.edu/cisg/countries/cntries.html (“Albania, Argentina, Armenia,
Australia, Austria, Bahrain, Belarus, Belgium, Benin, Bosnia and Herzegovina, Brazil,
Bulgaria, Burundi, Canada, Chile, China (PRC), Colombia, Congo: Croatia, Cuba,
Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador,
Estonia, Finland, France, Gabon, Georgia, Germany, Ghana, Greece, Guinea, Guyana,
Honduras, Hungary, Iceland, Iraq, Israel, Italy, Japan, Republic of Korea, Kyrgystan,
Latvia, Lebanon, Lesotho, Liberia, Lithuania, Luxembourg, Republic of Macedonia,
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 6
“CISG was adopted for the purpose of establishing provisions of law to govern the
formation of international sales contracts and the rights and obligations of the buyer and
the seller. The CISG applies to ‘contracts of sale of goods between parties whose place of
business are in different States when the States are Contracting States.’”13 An opinion
discussing the Contracting States’ and Congress’s intent in ratifying the CISG said that,
“the adoption of uniform rules which govern contracts for the international sale of goods
and take into account the different social, economic, and legal systems would contribute
to the removal of legal barriers in international trade and promote the development of
international trade.”14 Congress’s intent in ratifying the CISG as an attempt to reduce
transaction costs and promote uniformity and legal certainty can also be inferred from
Secretary of State George Schultz’s letter of transmission to Congress explaining, “Sales
transactions that cross international boundaries are subject to legal uncertainty - doubt as
to which legal system will apply and the difficulty of coping with unfamiliar foreign law.
The sales contract may specify which law will apply, but our sellers and buyers cannot
expect that foreign trading partners will always agree on the applicability of United States
law. Insistence by both parties on this sensitive point can prolong and jeopardize the
making of the contract.”15 Thus, the evidence suggests Congress ratified the CISG with

Mauritania, Mexico, Republic of Moldova, Mongolia, Montenegro, Netherlands, New
Zealand, Norway, Paraguay, Peru, Poland, Romania, Russian Federation, Saint Vincent
and Grenadines, San Marino, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden,
Switzerland, Syrian Arab Republic, Turkey, Uganda, Ukraine, United States, Uruguay,
Uzbekistan, Bolivarian Republic of Venezuela, Zambia.”).
13 Asante Technologies, Inc. v. PMC-Sierra, Inc. 164 F. Supp. 2d 1142 (N.D. Cali. 2001)
at 1143.
14 Id. at 1144
15 LETTER OF TRANSMITTAL FROM PRESIDENT RONALD REAGAN TO THE SENATE
(September 21, 1983) available at http://www.cisg.law.pace.edu/cisg/biblio/reagan.html.
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 7
the intent to promote uniformity, legal certainty, the development of international trade,
and the reduction of transaction costs.
2. The CISG and State Sales Law in the United States
Under the United States Constitution all States are bound by treaties of the United
States.16 The importance in subordinating State law to international treaties was
recognized in American Constitutional thinking as early as the Republic itself.17 U.S.
Courts and commentators have recognized that the CISG, as a duly ratified and self-
executing treaty of the United States, preempts contract claims arising under State law.18

16 U.S. Const. art VI, cl 2 ("This Constitution and the laws of the United States which
shall be made in pursuance thereof, and all treaties made, or which shall be made, under
the authority of the United States, shall be the supreme law of the land, and the judges in
every State shall be bound thereby, any thing in the constitution or laws of any State to
the contrary notwithstanding.").
17 James Madison THE FEDERALIST PAPERS (44 January 25, 1788) Restrictions on the
Authority of the Several States (“in the third place, as the constitutions of the States differ
much from each other, it might happen that a treaty or national law, of great and equal
importance to the States, would interfere with some and not with other constitutions, and
would consequently be valid in some of the States, at the same time that it would have no
effect in others. In fine, the world would have seen, for the first time, a system of
government founded on an inversion of the fundamental principles of all government; it
would have seen the authority of the whole society every where subordinate to the
authority of the parts; it would have seen a monster, in which the head was under the
direction of the members.”) available at http://www.constitution.org/fed/federa44.htm.
18 Asante Technologies, supra note 13; Delchi Carrier v. Rotorex Corp., 71 F.3d at 1027
(2d Cir. 1995) (stating that "[t]he CISG ... [is] a self-executing agreement ..."); Filanto v
Chilewich, 789 F. Supp. At 1237 (S.D.N.Y. 1992) (“The Convention, as a treaty, is the
supreme law of the land …and preempts the Vermont Statute.”); Chicago Prime Packers,
Inc. v. Northam Food Trading Co. 408 F.3d 894 (7th Cir. 2005) (“the contract is
governed by the CISG - a self-executing agreement between the Untied States and other
signatories”); See David Frisch, Commercial Common Law, The United Nations
Convention on the International Sale of Goods, and the Inrertia of Habit, 74 TUL. L.
REV. 495, 503-04 (1999) (“Since the CISG has the preemptive force of federal law, it will
preempt article 2 when applicable.”); William S. Dodge, Teaching the CISG in Contracts,
50 J. LEGAL EDUC. 72, 72 (March 200)(“As a treaty the CISG is federal law, which
preempts state common law and the UCC.”); M. Cantora, ‘The CISG after Medellin v.
Texas: Do U.S. Businesses Have It? Do they Want It?’, 8 J. INT’L BUS. & L. 111, at 113,
114 (2009) (concluding that sufficient indications of an intention by the President and the
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 8
Thus, with respect to substantive matters such as performance and formation of the
contract, the CISG indisputably displaces State sales law when it is applicable.
3. American State Conflicts of law and Choice of Law Rules and the CISG
A slightly more difficult question is whether the CISG displaces State conflicts of
laws and choice of law rules. Considering the above Ho Myung Moolsan case as an
example, our litigants in a New York forum would be subject to New York’s “center of
gravity” test to determine which law, South Korean or New York, was most closely tied
to their case.19 However, New York’s conflict of law provision clearly conflicts with the
CISG’s definition of internationality, which states that the CISG applies if “parties’
places of business are in two different Contracting States.”20 Thus, even if the jurisdiction
of South Korea had the more direct relationship to their contract, because the litigants are
from two Contracting States, the CISG is the applicable law. A Judge who applied New

Senate for the CISG to apply as a self-executing treaty pursuant to the principles
espoused by the majority in Medellin can be found in a clear statement by the U.S.
President to the Senate demonstrating an understanding that the CISG was self-
executing); See generally James E. Bailey Facing the Truth: Seeing the Convention on
Contracts for the International Sale of Goods as an Obstacle to a Uniform Law of
International Sales 32 CORNELL INTERNATIONAL LAW JOURNAL (1999) 273-317; See,
e.g., Richard E. Speidel, The Revision of UCC Article 2, Sales in Light of the United
Nations Convention on Contracts for the International Sale of Goods, 16 NW. J. INT'L L.
& BUS. 165, 166 (1995) (stating that "[I]n the United States, [the CISG] is a self-
executing treaty with the preemptive force of federal law.").
19 See Babcock v. Jackson, 12 N.Y. 2d 473 (1963); Betsy Rosenblatt & Michael
Silverman Conflicts of Law 2007 (“The "center of gravity" approach, first adopted by the
Court of Appeals of New York, might be characterized as a simplified version of the
"most significant relationship" test of the Second Restatement. This approach authorizes
courts to look at all the existing contacts between the various parties to a suit and various
jurisdictions. Ultimately, the court should choose the law of whatever jurisdiction is most
closely tied to the case.”) available at
http://cyber.law.harvard.edu/property00/jurisdiction/conflicts.html.
20 CISG Article 1(1)(a) available at http://www.cisg.law.pace.edu/cisg/text/treaty.html;
15 U.S.C App. Art. 1(1)(a) (1997).
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 9
York’s center of gravity test21 instead of the CISG’s Article 1(1)(a) to determine the law
applicable would breach New York’s obligations under the CISG.22 Moreover, while
New York has its own choice of law rule, which enforces parties’ choice of the applicable
law,23 the CISG has its own provision on party autonomy. Article 6 of the CISG says that
parties “may exclude the application of this Convention or… derogate from or vary the
effect of any of its provisions.”24 Thus, scholars and courts from around the world have
recognized that when the CISG appears on its face to be applicable, the parties’ choice to
exclude the CISG in favor of a different sales law is to be judged according to the
standards inside the CISG, namely Article 6.25 Similarly, many U.S. courts have

21 Admittedly the Judge could still correctly end up with the CISG by applying South
Korean law and accurately applying the CISG as part of South Korean law.
22 Lisa Spagnolo, Iura Novit Curia and the CISG: Resolution of the Faux Procedural
Black Hole (2010) at 192 in I. Schwenzer & L. Spagnolo (eds), Towards Uniformity: the
2nd Annual MAA Schlechtriem CISG Conference (2011, Eleven International Publishing,
The Hague) available at
http://ssrn.com/abstract=2050215.
23 Frankel v. Citi- Corp Ins. Servs. 913 N.Y.S.2d 254, 259 (2d Dept. 2010) (“New York
Courts will enforce a choice of law clause unless 1) the provision is illegal; (2) there is no
reasonable relationship between the provision and the parties or transaction; or (3) the
provision contravenes “some fundamental principle of justice, some prevalent conception
of good morals, some deep-rooted tradition of the common weal.”).
24 CISG Article 6 available at http://www.cisg.law.pace.edu/cisg/text/e-text-06.html.
25 See, e.g.,”Industrial Shoes Case” Oberlandesgericht [Appellate Court](OLG)
Oldenburg, Germany, (20 December 2007) available at
http://cisgw3.law.pace.edu/cases/071220g1.html; Golden Valley Grape Juice and Wine,
LLC v. Centrisys Corp., 2010 U.S. Dist. LEXIS 11884 (E.D. Cal.) available at
http://cisgw3.law.pace.edu/cases/100121u1.html; Easom Automation Systems, Inc. v.
Thyssenkrupp Fabco, Corp., 2007 WL 2875256 (E.D. Mich. 2007) available at
http://cisgw3.law.pace.edu/cases/070928u1.html; L. Spagnolo, The Last Outpost:
Automatic CISG Opt Outs, Misapplications and the Costs of Ignoring the Vienna Sales
Convention for Australian Lawyers, 10 MELBOURNE J. INT'L L. 141, AT 205; (CISG
should determine the matter, at least until the point at which exclusion is established
under its formation provisions); I. Schwenzer & P. Hachem, in I. Schwenzer (Ed),
Schlechtriem & Schwenzer: COMMENTARY ON THE UN CONVENTION ON THE
INTERNATIONAL SALE OF GOODS (CISG), Art. 6, at 104 & 105 (2010)('Schwenzer 3nd
edn') (“formation and interpretation of exclusion clauses subject to CISG rules”); M.
John Michael Grant The CISG Should Apply Ex Officio in the U.S. 10