Tag Archives: #internationallaw #CISG #Indiancontractact #ICA #traderelations

 

“The whole duty of the government is to prevent crime and preserve contract”

William Lamb , 

A pillar of global trade, the Convention on International Sales of Goods (CISG) provides a consistent framework for policing cross-border transactions. It has been embraced by a sizable number of countries, enabling international trade by offering uniform guidelines for the sale of goods. India stands out as a conspicuous exception in this global convergence, not having ratified this crucial treaty.

This essay explores the complex circumstances underpinning India’s refusal to ratify the CISG, examining its ramifications, justifications, and potential advantages of doing so. There are four major stages to the voyage. First, we give a succinct summary of the CISG to highlight its importance globally. The difficulties that have contributed to India’s hesitant approach to ratifying the CISG are then explored.

In the third section, we begin a legal investigation by examining how India might be able to harmonise the CISG’s rules with its current domestic legal system, which is essentially the Indian Contract Act. Finally, we explore the unexplored realm of advantages by explaining how ratifying the CISG could not only improve India’s commercial ties but also provide priceless protections to both buyers and sellers involved in international trade. We aim to provide light on the way towards a more united and successful global trade landscape for India and its foreign partners as we navigate these murky seas.

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1. i) The United Nations convention for Contracts for the International Sales of Goods (CISG), 1980

Ratified by more than 60 countries, the CISG was a necessity for the curation of healthier international trade relations. It remained in the works from the 1920s to the 1980s when it was finalized. The CISG was an effort guided by the International Institute for the Unification of Private Law (UNIDROIT), the Hague Uniform Law of International Sales (ULIS), and Ernest Rebel, an Austrian scholar and academic. 

After the dust of World War II had settled, the United Nations was formed by the global superpowers in an attempt to create harmony within all nations and continents. If international conflicts were to be prevented from escalating to lethal stages, establishment of frameworks to monitor international relations was inegral. And at the heart of all such relations lay international sales, contracts, and agreements. This brought forth conventions such as the CISG, for legal uniformity, consumer protection, and most importantly dispute resolution. 

Article 1(1) of The CISG states that the convention applies to the sale of moveable goods between parties having their place of business situated in different states, 

these states are contracting parties.  Overall, the CISG deals with the conclusion of contracts, the obligations of buyers and sellers, and the remedies available to both parties. While the first and the second parts of the CISG deal with its sphere of application and formation of contracts, the third part is the substantial element of the CISG. It provides the actual “sales law” part of the convention, further subdivided into five chapters. 

When looking at conventions that concern themselves with international relations but the ratification of the same is not mandatory, a major concern that arises is the complications resulting from the interpretation and application of the rules laid down in these conventions. A similar concern plagues the CISG too. Although valid, this concern does not fail the purpose of the CISG. There are multiple databases available providing statistical as well as theoretical clarity to lawyers attempting to implement CISG..

1. ii) Creating harmony: The CISG and ICA read together despite legislative dissimilarities 

Now that it is established that the CISG and Indian contract law are faced with some major differences in their frameworks, the quest at hand is the creation of harmony between the two regardless of said differences. With India’s international trade bolstering,  

A similar conflict was faced by South Africa, and it was noted by South African legislators that the CISG was generally and vaguely framed, and its application was thus refused. Since the initial refusal it has been seen that African countries are slowly ratifying the CISG as they begin to overcome the gaps between the two legislations. A dissertation submitted by Leoni van der Merwe, an LLM student at the University of South Africa in 2017 provides a detailed account of the impact of the CISG would be on South African trade relations.

The European Union Commission claims that by increasing competition, facilitating export diversification, raising product quality, encouraging innovation, and expanding their options, international trade enables developing nations like South Africa to lower prices, advance development, and lessen poverty.

The number of nations that have ratified the CISG has been cited as one of the reasons to ratify the agreement, though not in isolation. The CISG gives parties the option to modify its provisions to match their unique needs and permits balancing the CISG’s requirements with the terms of the contract. Despite the fact that the CISG is not a “perfect” framework for the execution of international sales contracts for products, the convention gives the parties the chance to come to an agreement using both the convention and their regular contract terms.

iii) Ratification of CISG the next best move for the welfare of international relations.

As discussed in detail in the discourse above, it should be clear to the reader why the CISG and the ICA face barriers in their attempt to regulate international trade. Without prejudice to any of these obvious gaps between the two legislations, the author still urges for the ratification of the CISG by India. If all sectors of the country are swept in with the wave of globalisation, and international relations (political or commercial) between India and other countries begin, it is only right for legislators to absorb these relations into their legal parameters. 

A quick glance at the growing interactions between India and other countries would be sufficient in aiding the conclusion that international relations are an undeniable extension of the Indian legal system. Now with that assumption in mind, the CISG’s ratification will only help in fulfilling the aims of both India and the United Nations, which are globalized and standardized frameworks.

First and foremost, by establishing standardized guidelines for international sales contracts, it brings uniformity and predictability into cross-border transactions. As a result, legal disputes become less complicated and the corporate environment becomes more open. Additionally, the CISG’s universal acceptance lowers trade barriers—both legal and cultural—with nations that are also convention parties.

Indian companies can access a broader global market and potentially increase their export chances by adhering to CISG. The agreement also offers essential legal protection for both buyers and sellers, as well as rapid and efficient means for resolving disputes. 

Of all the arguments put up in favour of ratifying the CISG, a uniform interpretation and implementation that lowers the cost of contracts is viewed as being of tremendous benefit to governments. Practically, parties do not have to spend a lot of money negotiating with their legal teams and other contractors across multiple time zones and countries to agree on issues that are already covered by the CISG.

For a nation like India, ratifying the Convention on the International Sale of Goods (CISG) will have significant economic advantages. First of all, it encourages consistency and predictability in global commerce operations. Indian enterprises now have a standardised framework for international trade as a result of the CISG, which establishes uniform norms for contract formulation, risk distribution, and breach remedies. As a result, negotiations take less time and become less complicated from a legal standpoint.

Second, ratification of the CISG increases India’s appeal as a commercial partner on the international scene. Being a part of an internationally recognised convention sends a favourable message to potential investors and trading partners, which could increase foreign direct investment and increase India’s export opportunities.

Thirdly, it provides legal defence and means for resolving disputes. The established dispute resolution procedures of the convention can be advantageous to Indian buyers and sellers involved in international trade, possibly resulting in speedier and less expensive outcomes.

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Written by: Radhika Shekhawat