Single Malt, Ltd. has signed a contract with Liquor Sales Co. to provide this company with Irish whiskey. However, Single Malt, Ltd. has not delivered the discussed product. The purpose of this paper is to describe the legislation that is associated with breaching the contract between companies that are located in different countries.
If Single Malt, Ltd. chooses to initiate litigation because of the possible repudiation and experienced damages that are caused by Liquor Sales Co., the company will bring the suit in Ireland as the country where the seller is located. Ireland belongs to the European Economic Community (EEC). Therefore, following the principles of the private international law, this case will be discussed according to the European Union’s 2008 Regulation the Law Applicable to Contractual Obligations known as “Rome I”. According to Article 4(1)(a) of the Rome I Regulation, when the parties cannot agree on the choice of the law to apply to their case, “a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence.”1 Therefore, since Single Malt, Ltd. is located in Ireland, a court needs to apply a national law that regulates international sales in the country to analyze the case and provide the solution.2 From this perspective, the suit will be considered and interpreted according to the principles of the Irish commercial or trade law.
In the situation when Liquor Sales Co. is focused on bringing its suit concerning the observed contract breach, the case will be discussed in a court in Southern California. Even though the United States can be viewed as a Contracting State of the United Nations Convention on Contracts for the International Sale of Goods (CISG), it is important to note that Ireland is not a Contracting State. Therefore, the CISG cannot generally be applied to the regulation of international sales and contracts between the United States and Ireland.
However, it is important to note that, according to Article 1(1)(b) of the CISG, the Convention is applied “when the rules of private international law lead to the application of the law of a Contracting State.”3 Still, while following Article 95 of the CISG, the United States can declare that, in its regulation of the case, the party will not “be bound by subparagraph (1)(b) of Article 1 of this Convention.”4 As a result, the application of the Uniform Commercial Code (UCC) that is adopted in the United States can be discussed as a reasonable choice for the party that brings the suit in a local court. To analyze the case related to this particular transaction, it is appropriate to refer to Article §1-301(b) of the UCC according to which international transactions similar to the contract between Single Malt, Ltd. and Liquor Sales Co. can be considered and resolved while following the norms presented in the UCC.
The parties which participate in the transaction under consideration are Single Malt, Ltd., a seller located in Ireland that is not a Contracting State according to the United Nations Convention on Contracts for the International Sale of Goods (CISG), and Liquor Sales Co., a buyer located in California, the United States, that is a Contracting State according to the CISG. These parties have agreed on the selection of the CISG for governing their contract. The provision for the inclusion in the contract should be formulated the following way:
“The contract under consideration shall be governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG) as the specific law that was selected and agreed on by the parties to govern their contract.”
The reason to focus on the provision is that, according to the CISG norms, when one party is a Contracting State, both parties can agree to choose the CISG as the law to govern their specific contract. The application of the CISG can be viewed as reasonable and adhering to the principles of the international sales law because, according to Article 3 of the European Union’s 2008 Regulation the Law Applicable to Contractual Obligations, both parties can choose a specific law to be followed in courts while analyzing the dispute.5 It is important to note that this statement is directly related to the case of Ireland that follows the Rome I Regulation while discussing international transactions. If Single Malt, Ltd. demonstrates its choice of the CISG clearly, this provision will be upheld by Irish courts.
The expressed decision of Liquor Sales Co., which is located in California, to refer to the CISG is also supported by Article §1-301(b) of the UCC. While considering these facts, the contract under discussion should be governed and analyzed according to the CISG because the parties have a right to agree on the law to refer to. Therefore, this provision should be followed and addressed by courts in Ireland and the United States, where the transaction and contract details will be resolved.
If the contract between Single Malt, Ltd. and Liquor Sales Co. includes the clause about the necessity of litigating disputes in California, the United States, the parties will not be able to insist on applying the CISG to govern their contract.6 The reason is that, in court disputes related to international sales, California refers to the Uniform Commercial Code (UCC). The application of this Code can be discussed as possible or appropriate as a result of interpreting Article 1(1)(b) and Article 95 of the CISG. Neither the CISG for the US company nor the Rome I Regulation for the Irish company can be applied in this case, and the focus is on referring to the Uniform Commercial Code when the dispute is litigated in California.
Although Article 1(1)(b) declares the necessity of applying the CISG norms to the case when the application of the law of one of the Contracting States results in following the Convention, the United States can be viewed as insisting on non-adherence to Article 1(1)(b) statements while following Article 95 of the Convention. From this point, in the majority of cases, the United States chooses to “exclude the applicability of the Convention under sub-paragraph (1)(b) by the declaration (reservation) permitted by Article 95.”7 From this perspective, it is important to pay attention to the fact that the discussed clause which is included in the contract prevents the parties from relying on the application of the CISG. On the contrary, it should be noted that the application of the Uniform Commercial Code is expected for the case of the United States.
Footnotes
- John Spanogle & Peter Winship, International Sales Law: A Problem-Oriented Coursebook 60 (2nd ed. 2012).
- John Spanogle & Peter Winship, 2000-2001 Documents Supplement to International Sales Law: A Problem-Oriented Coursebook 56 (2008).
- United Nations Commission on International Trade Law, United Nations Convention on Contracts for the International Sale of Goods 1 (2010).
- Id. at 29.
- Spanogle & Winship, supra, at 60.
- Id. at 78.
- Id. at 79.