Through these Frequent Questions and Answers, BLawyers Vietnam will provide an overview of the United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG). Kind find Part 1 here.
Offer and acceptance
14. What is an offer? Can an offer be withdrawn once it has been sent?
An offer 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 offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.
Under CISG, an offer even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. The laws of Vietnam also have similar provisions for changing or withdrawing an offer to enter a contract (Article 389 of the Civil Code 2015).
15. Is an offer sent to more specific persons considered an offer?
An offer to enter a contract to be considered as an offer must meet 03 conditions including the clarity of the offer, the identity of the offeree and the will of the offeree and the offeror’s wishes to be bound by that offer.
The offer must be sent to one or more specified persons. However, CISG provides two exceptions to the case where an offer is sent to more specific persons. In particular:
- Where an offer is sent to multiple unidentified persons without claiming it is an offer (e.g., advertising, handing out leaflets), it shall only be considered as an introduction to the offer. goods, products, or an invitation to make offers that do not constitute a legally binding offer.
- Where an offer is made to one or more unspecified parties, but the offer represents the offeror’s will to consider it a genuine offer, then the offer has met sufficient determinism to constitute an offer.
16. Is revoking an offer different from withdrawing an offer? When can an offer be revoked?
Revoking an offer is the cancellation or termination of an offer that has already been validated. Withdrawing an offer is the withdrawal of an offer before it becomes effective. As such, both terms are used in the event of a termination of an offer. However, considering the criteria of different times, each term is used and understood differently. In particular:
- The term “Withdrawal of an offer” (defined in Article 15.2 of CISG): the time of withdrawal is the time when the notice of withdrawal is sent to the offeree before or at the same time as the offer.
- The term “Revoking of an offer” (defined in Article 16 of CISG): the time of offer revoking is the time when the notice of revoking of an offer reaches the offeree before he/she submits his/her acceptance of the offer.
Applying conditions for withdrawal and revoking of offers are also different:
- The offeror can withdraw an offer even for an irrevocable offer (in business practice often called a fixed offer);
- An offer cannot be revoked if it indicates whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or f it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.
17. What behavior is indicated as acceptance of an offer? Is silence considered acceptance of the offer?
An acceptance of an offer is not necessarily expressed in writing, or orally, but can also be recognized by behavior. In addition to accepting by signing a written agreement between parties, the acceptance of an offer can be expressed through acts related to the parties’ fundamental obligations when the contract is agreed such as sending goods or paying money in advance.
Acceptance of an offer by behavior can be expressed in 03 main forms:
- The offer represents or explicitly confirms that the offer can be agreed upon by an act;
- The parties base on similar transactions in the past and have established a habit of acting accepting; and
- Commercial practice is widely recognized as a form of acceptance of an offer.
In some special cases, the fact that the buyer includes the seller’s offer in one of his offers to a third party and enters a contract with that third party can also be considered as acceptance by acts in which the offer obliges the seller to deliver the goods to the buyer.
Silence or inaction (inaction/inactivity) does not automatically qualify as acceptance. In other words, silence by itself cannot guarantee an offeror that his offer has been accepted. In all cases, after a period of silence, the offeree must inevitably perform an act that clearly shows his or her intent to accept the offer (such as sending the goods or paying).
18. What is the period for acceptance? How does CISG regulate late acceptance?
CISG has a different period for accepting offers for different means by which offers are sent as below:
- The offers are sent in a telegram, or a letter begins to run from the moment the telegram is handed in for dispatch or from the date shown on the letter or if no such date is shown, from the date shown on the envelope;
- The offers are sent by telephone, telex or other means of instantaneous communication begins to run from the moment that the offer reaches the offeree.
Late acceptance of an offer occurs when the offeree replies to accept the offer after the time set by the offeror as a deadline for a reply. If after receiving an acceptance in the above case, the offeror still intends to enter a contract, he or she must notify the offeree orally without delay. In this case, the contract is considered as an agreement from the time the offeror receives late acceptance of the offer.
19. Can acceptance of an offer be withdrawn?
Although the acceptance of an offer has been sent following the law, it may still be revoked with condition that the notice of revocation comes before or at the same time as the notice of acceptance. Thus, the principle for withdrawing an offer assent is the same as for withdrawing an offer.
20. Is a reply to an offer that purports to be an acceptance but contains supplement, or amendment terms considered an acceptance of the proposal or a new offer?
In principle, the offeree’s response is only considered as an acceptance if the offeree accepts the entire content of the offer (mirror image rule).
However, Article 19.2 of CISG regulates the exceptions. Accordingly, unless the offeror objected without delay orally or by sending a notice of objection, a reply containing supplement, amendment terms may still constitute an acceptance of the offer if those terms are not fundamental or do not substantially alter the content of the offer (non-essential terms).
Certain amendments that are considered non-essential include adjustments to the number of goods in each lot without changing the total quantity of goods; bank guarantee; transportation costs; terms reserve the right to change the delivery date in the seller’s sample terms, etc.
Obligations of seller and buyer
21. According to CISG, within what period must the seller deliver the goods? If the contract does not specify the place of delivery, how should the seller deliver the goods?
The seller’s delivery term is specified in 03 specific cases:
i. If the contract includes a specific date, or a specific date can be determined by reference to the contract, the seller must deliver the goods exactly at the appointed time. Any delay in delivery will constitute a breach of contract;
ii. If the seller is not obliged to deliver the goods at a certain place, the place of delivery shall be determined as follows:
- If the contract of sale includes carriage of the goods, the seller must deliver the goods to the first carrier for delivery to the buyer;
- In the cases not specified in the above point. In case, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or 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 buyer’s disposal at that place;
- In other cases, in placing the goods at the buyer’s disposal at the place where the seller had his place of business at the time of the conclusion of the contract.
iii. In case there is no agreement between the parties, CISG allows to determine the place of delivery in three specific cases, specifically:
- If the contract includes carriage of the goods, the seller must deliver the goods to the first carrier.
- When the goods are being placed at a particular place, the seller delivers the goods to the buyer at that place.
- In other cases, the seller will deliver the goods to the buyer at the seller’s place of business as determined at the time of entering into the contract.
22. What are non-conforming goods? How does the CISG regulate the inspection of goods?
Under CISG, the seller would breach his obligations if the goods delivered do not suitable to the provisions of the contract. The seller must deliver goods that are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.
Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:
- Are fit for the purposes for which goods of the same description would ordinarily be used;
- Are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely upon, or that it was unreasonable for him to rely upon, on the seller’s skill and judgment;
- Possess the qualities of goods that the seller has held out to the buyer as a sample or model;
- Are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.
The buyer must inspect the goods or ensure that there is an inspection of the goods within the shortest time practicable, depending on the particular situation. In addition, CISG allows for the determination of the inspection of goods where the contract of carriage provides for carriage and where the destination of the goods is changed during the period goods are in transit.
23. Is the seller liable for any lack of conformity that occurs after the time the risk passed to the buyer?
The seller is still liable under the contract or CISG if the non-conformity of the goods arises at the time the risk is transferred to the buyer, even if the non-conformity of the goods is discovered only later. Accordingly, the time when the nonconformity occurs, instead of the time when the nonconformity is discovered, is the determining factor for the seller’s liability. This is especially important in the trading of agricultural, forestry, and fishery products. Conversely, if the goods become non-conforming after the risk has passed to the buyer, the seller is not liable for the non-conformity.
In the event of non-conforming goods due to the fault of the seller, the seller shall be liable even if the non-conformity of the goods appears after the risk has been transferred to the buyer.
If the seller gives a guarantee that for a certain period the goods will remain fit for a particular use or purpose or will retain other properties or characteristics which are specified in the contract, the seller will be responsible if the goods become unsuitable after the risk has passed to the buyer. The buyer will have to prove that the seller has given the aforementioned guarantee.
24. What is the time limit for the buyer to complain to the seller when there is a breach of the contract for the international sale of goods? Does the buyer have the right to enforce the contract enforcement?
When a seller breaches a contract for the international sale of goods, under CISG, the buyer can file a complaint against the seller. In all cases, the buyer must bring a claim against the seller within 02 years from the date on which the goods have been delivered to the buyer unless this period is contrary to the warranty period specified in the contract.
However, before making a claim, the buyer must also fulfill several other requirements as prescribed by CISG such as:
- Notify the seller of the non-conformity of the goods within a reasonable time from the time the buyer discovers or should have discovered the non-conformity goods. Failure to do so will result in the buyer losing the right to claim the seller for non-conformity with the contract;
- Inform the seller of the nature of a third party’s right or claim, within a reasonable time from the time when the buyer knew or ought to have known of such right or claim. This case applies where there is a right or claim of a third party concerning the ownership of goods or intellectual property right under the provisions of CISG. If the buyer fails to give notice, the buyer will also lose the right to claim the seller in respect of the matter in question.
When the seller commits a breach of contract, under CISG, the buyer has the right to impose a remedy for the correct performance of the contract. CISG allows the buyer to require the seller to perform his obligations (such as requiring the seller to deliver the goods, requiring the seller to provide a bank guarantee under the terms of the contract, requesting the seller to deliver documents, requiring the seller to deliver the goods of the right quality, etc.). The enforcement of the contract for performance is the first of the remedies provided by CISG (Articles 46 to Article 52) that can be applied by the buyer when their interests are affected, indicating that CISG is aimed at maintaining a contractual relationship between the parties to the extent possible.
25. What is the buyer’s payment obligation? Can the buyer extend its obligations?
The buyer’s payment obligation includes the performance of such measures and procedures as required by the contract or any law to make the payment possible. goods payment. This places the buyer on the obligation to perform the steps and procedures for payment as required by contract or law, it also implies that the buyer must bear the costs of such activities.
The seller has the right to extend to the buyer a reasonable period for the performance of the obligation (here, the obligation to pay or the obligation to take a delivery). This is a “right” of the seller, not an obligation. This means that the seller can choose to extend or not extend it to the buyer in case the buyer is late in performing the obligation.
26. Does the buyer have to receive the goods in all cases? In what cases is the buyer allowed not to receive the goods?
Receiving goods is the buyer’s obligation, but in not all cases the buyer has to receive the goods. There are cases where the buyer does not have to receive the goods, such as the seller delivers the goods ahead of time, and the buyer has the choice to accept or refuse to accept the goods specified in this clause because if the buyer buyers must receive goods, it will cause inconvenience and incur storage costs for them; or where the seller delivers more than the specified quantity, the buyer has the right to accept or refuse such delivery.
Cancelation of contract and compensation for damage
27. In what cases can the seller and the buyer cancel the contract? In which case, the seller and the buyer lose the right to declare the cancellation of the contract?
The Buyer’s right to cancel the contract:
If the seller’s failure to perform any of his obligations arising from the contract or CISG constitutes a fundamental breach of the contract, the buyer has the right to declare the contract cancelation. In addition, the buyer may declare the contract cancelation if the seller fails to deliver the goods within the reasonable additional time fixed by the buyer or if the seller declares that the goods will not be delivered within the extended period.
If prior to the date for the performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract cancelation.
The seller’s right to cancel the contract:
The seller has the right to declare the cancellation of the contract when one of the following cases occurs:
- If the failure by the buyer to perform any of his obligations under the contract or provision of CISG amounts to a fundamental breach of contract; or
- If the buyer does not perform his obligation to pay the price or take delivery of the goods, or if he declares that he will not do so within the period so fixed.
The buyer loses the right to declare the contract cancelation as follows:
- The buyer loses the right to declare the contract when the buyer fails to inform the declaration within a reasonable time; or
- If the goods are non-conformity, the buyer loses the right to inform the declaration of the contract cancelation if he is unable to return the goods in essentially the same condition as when he received them.
28. What is a fundamental violation?
A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially 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.
Therefore, a breach of contract to be considered a fundamental breach must satisfy the following elements:
- The breach of contract by the violation party must cause damage to the aggrieved party to the extent that it deprives the aggrieved party tells what the aggrieved party is entitled to expect from the contract; and
- The breaching party foresees such damage.
29. What are the legal consequences of contract cancelation?
According to CISG, the cancelation of a contract will lead to legal consequences not only for the contract itself, which is agreed upon, signed and performed by the parties but also for the rights and obligations of the parties. In particular:
- Terminating the validity of the contract. When the contract is canceled, it will no longer be valid for the parties, which means that the parties no longer need to perform their rights and obligations towards each other. release the parties from the performance of their contractual obligations.
- Raising an obligation to return what has been provided or paid. The cancellation of the contract takes effect retroactively and puts the parties back in their pre-contractual status. The obligations which are not performed will be canceled and the performed obligations will be revoked.
30. What is the obligation to mitigate the loss of the party in breach?
According to CISG, 02 types of damages are compensated as follows:
- The loss suffered by the aggrieved party. Damages caused by the breach of contract will usually be property lost or destroyed, damage, loss of property, expenses paid by the aggrieved party in the contract to prevent, minimize and fix the consequences caused by the breaching party (for example, the cost of repairing damaged goods);
- Foregone profit (actually lost, reduced income) to the aggrieved party, as a result of the breach of contract.
When there is a breach of contract, the aggrieved party must take reasonable measures based on the specific circumstances to minimize the loss, including the lost profit caused by the breach of contract. If the aggrieved party fails to limit the loss, the breaching party may claim a reduction in damages equal to the amount of the loss that could have been mitigated.
31. What is compensation for emotional damage?
CISG does not specify whether emotional damage, for example, damage to a party’s reputation, can be compensated.
Although the claim for emotional damage is rare in the case of a contract of sale of goods (it usually occurs only in contracts signed with artists, high-level athletes, or consultants of a certain company or an organization), the official CISG comments assert that the aggrieved party is entitled to compensation, provided that it complies with CISG requirements for the predictability of damages and must demonstrate reasonably justify such mental harm.
Compensation for emotional damages may be determined in different forms and the determination of these forms, individually or in combination, which is the most appropriate for compensation is decided by Courts. Courts can not only decide on damages but also decide on other forms of redress, such as forcing publication in the newspaper (e.g. compensation for breach of reputation, etc.).
32. What is the risk to goods?
The risk to the goods is the loss or damage which could happen to the goods. Loss of goods includes cases where the goods cannot be found, have been stolen, or have been transferred to another person. Loss of goods includes the destruction of goods, damage, deterioration of goods, and lack of quantity of goods during transportation or storage.
33. When is it exempt from liability in an international sale of goods contract? What is the legal consequence of an exempt from liability?
A party is not liable for its failure to perform any of its obligations if it can prove that the failure is caused by:
- An impediment beyond their control and one cannot reasonably expect that they should foresee the impediment at the time of entering into the contract or avoid or overcome its consequences; or
- Acts or omissions of the other party in the contract. However, the non-performing party must notify the other party about the impediment and its effect on its ability to perform within a reasonable period and shall be only exempted from liability during the period in which the impediment exists.
Regarding the legal consequences of liability exemption, according to Article 79.5, although the breaching party is exempt from liability for damages caused by encountering an obstacle, the aggrieved party still has the right to apply the remaining remedies following the provisions of CISG, including:
- Request for a reduction in the price of goods;
- Forced performance of the contract;
- Declaration of contract declaration;
- Payment of interest on late payments.
34. Is “impediment” under CISG the same as “force majeure” under Vietnamese law?
An impediment to being considered as a case of exemption must concurrently satisfy the following 03 conditions:
- Occurring beyond the control of the parties;
- Having been reasonably foreseeable at the time of entering into the contract; and
- The event and its consequences cannot be avoided or cannot be remedied.
Compared with the concept of force majeure in Vietnamese law (Article 156 Civil Code 2015), the concept of “objective impediment” in CISG is quite like the concept of “force majeure” in Vietnamese law.
35. What is the Hardship clause (change of basic circumstances)?
The CISG Advisory Board considers that a change in circumstances that cannot reasonably be foreseen, resulting in extreme difficulty in the performance of the contract can be considered grounds for a disclaimer. When Hardship occurs, trial practice shows that courts and arbitrators tend to consider relief or discharge in a manner compatible with the CISG and based on the general principles of the CISG.
Date: 22 December 2022
Writer: Linh Nguyen & Tinh Nguyen
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