3. to cross border transactions.[2] Besides that, the principle

3.
Introduction

CISG
Convention on Contracts for the International Sale of Goods (Vienna Convention)
1980 was
intended to replace the 1964 Hague Convention. The Convention has been almost
universally adopted by number of great
trading countries of the world such as United States of America, Russia, China
and most of the European Union member states. Although United Kingdom is an
active member of the EU, it does not, until now, ratify the law. Similarly, Malaysia
is also not a signatory to the Convention. Since most Malaysian laws are based
on the English law during the British occupation therefore it is not surprising
to find judges in reading a Malaysian case refer to English law for precedents
and case principles.1

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Thus, it can be assumed that Malaysia will
only ratify the CISG if the UK do the same. However, Malaysia can rely on the
CISG if it chooses to opt for the law in their cross-border commercial
transaction by applying “choice-of-law” clause in the contract. CISG, which is considered
as lingua franca of international trade, eliminates legal barriers to cross
border transactions.2

 

Besides that, the principle of contractual
freedom is being emphasized by the CISG in the international sale of goods.
Parties are given the right to choose which parts of the CISG they agree to be
bound and also to exclude the application at their wish3 under Article 6.4 Therefore, the purpose of
the Convention is to promote equality and mutual benefit between relations
among States. More importantly is to create harmonization of International
Trade law. Buyers and sellers on the international market therefore would have
a relatively simple and common uniform regime governing theirs contracts and
their performance.5

 

3.1
Application of the CISG Vienna Convention

The Convention only applicable to international commercial
sale of goods. Following are some important limitations to the scope of the
application. Firstly, the sale must be international in nature in which the
parties to a contract of sale must have their places of business in different
countries.6 The Convention becomes
applicable to the contract either because the countries where the parties have
their places of business are members of the Convention, or as the result of the
operation of conflicts rules. Besides that, the subject matter of the contract,
or the particular issue to be dealt with by a court of law, does not fall under
one of the exceptions to the application of the Convention.7

 

Moreover, the CISG does not apply to
service contracts and only covers the sale of goods.8 Furthermore, the CISG only
applicable to commercial transactions that is sales of goods between merchants.9
However, CISG does not cover sale of consumer goods, sale at an auction, sales
of investment securities or negotiable instruments, and also sales of oceangoing
vessels or aircraft.10

 

3.2
How Beneficial is CISG Vienna Convention? – Advantage and Disadvantage

The preamble of the CISG provides that the Convention wants
to contribute to the removal of legal barriers in international trade and
promote the development of international trade.11 Legal scholars and
legislators have worked on unified trade legislation on international sales law
to reduce as many problems as possible. With rapidly changing economic
situations of nations and furtherance of globalization, it has been a positive
decision to bring in CISG but its effects are justifying or not must be
assessed critically and carefully.

3.2.1
Simplification and Certainty

It has been believed by legal scholars that an instrument
such as the CISG increases legal certainty, as they believe that the
applicability of different national laws has the obvious consequence of
impairing this certainty.12
If there would not have been such a case, it would be difficult to determine which
law governs the contract. Agreed, but there could also be instances where the
parties do not wish to be concerned about the issue of applicable law to make
the choice of this legislation and therefore, not very concerned with legal
certainty.

 

The problem could be that they had to
comply with this legislation if they are contracting parties at some stage when
they never actually reached the clause of applicable law at the time of
conclusion of the contract. But at the same time, the CISG has been thought to
be simpler because the convention has borrowed numerous provisions from the
existing laws of various legal traditions.13

3.2.2
Uniformity

The success of CISG has been relied on its uniformity.
Uniform law depends on how that law is to be interpreted and the consistency of
such interpretation and application by the courts and tribunals in different
countries. For CISG, the growing number of reported cases has borne out this
optimism.14
Most of the cases decided in the common law countries prove that the task of
interpreting general rules, interpreting by analogy, and relying on general
principles and applying them to specific facts is certainly not beyond the
capabilities of the courts. Nor has the fact that civil law countries do not
adhere to the stare decisis
principle prevented them from giving adequate consideration to cases that have
already been decided.15

 

However, in certain aspects, there exists
a lack of uniformity. For instances, Article
7 which emphasized on good faith16 mentions that the courts
must regard the case to have an international character and questions not
settled must be in conformity with general principles.17 This Article being too
wide and vague, there could be numerous interpretations on the same by
different national courts leading to a non-uniform and a flexible application
of similar principles because of lack of highest court to reconcile such
different interpretations. In addition, the lack of clarity on price fixation
exists under Article 14 and Article 55.
On the interpretation of these articles, Article
55 applies when price is not fixed but the contract is validly made18 and Article 14 makes the contract invalid if the price is not fixed.19 This makes Article 15 an empty set.20

3.2.3
Conflict of Law

Guidelines for interpreting international sales
transactions are being provided by CISG to deal with the problem of conflict of
law.  Nowadays, however, it is easier to
not differentiate between local and international transactions as too many cross-border
initiatives are going on. The Convention uses the places of business of the
parties as a deciding factor, which should be of no problem. This creates an
artificial division between national and international transactions.21
If parties agree to the application of domestic law, it shall apply. This
division could exist for a much longer time because CISG is an international
code with no provisions for its modification and hence, ratification by a
country could be a daunting task for that country.

3.2.4
Validity of Contract

The CISG deals with matters concerning contract formation,
contract interpretation, the rights and obligations of the buyer and seller,
and the remedies for non-performance. Article
4 of CISG,22
however, excludes issues concerning the validity of the contract; any of its
provisions or any usage, and the effect the contract may have on the property
in the goods sold from the scope of the convention. Consequently, CISG does not
deal with matters such as defects in consent, information duties and the
fairness and validity of standard terms. These problems need to be resolved by
the applicable law as they leading to fragmentation and complexity.

 

An instrument that covers the whole development
of the contract and avoids fragmentation of applicable laws is preferred to simplify
the legal environment for businesses.23 The
validity of contract failed to get much attention from the drafters as the
rules regarding fraud, consideration, property or tort are non-existent. Also, fraud,
property and tortious liabilities have been the subject of being treated under
the national regime and are outside the scope of validity under CISG. In
addition, consideration is deemed to be not necessary under CISG.

3.2.5
Party Autonomy

An important feature of the CISG is that it is based on the
principle of party autonomy, where most of its provisions may be modified or
excluded to suit the needs of the parties. This provides a great deal of
flexibility to the parties, who can accept, change or reject the provisions of
the Convention to suit their needs.24 The
terms of contract, rather than the CISG, bear an upper hand due to CISG’s
flexible interpretation and therefore, leave parties with the freedom to shape
the contract as per its requirements. If there exists ambiguity in certain
terms, the CISG fills these gaps. This autonomy might pull a weak point on this
as well because business parties might just end up excluding the convention
leading to a slower acceptance of the Convention.

3.2.6
Language

The Convention is available in six major official languages,
all with equal authority, by providing a common understanding of rights and
duties of buyers and sellers and transaction itself. But given the differences
of language and the likelihood that courts will interpret the convention
provisions through their domestic lens, and although Article 7 of the Convention calls for an interpretation taking into
account the international character of the instrument, the chances are high
that diverging interpretations will arise.25
Such interpretations lead up to different judicial techniques of looking at
substantive law. The biggest fear is not really the difference in style of
interpretation but rather whether courts will be able to rise above their
national laws and resist the temptation to refer to the familiar concepts and
doctrines of their national law in cases of uncertainty.26  

 

So, as we can see that there are pros and
cons involved in this Convention. Nevertheless, the idea to focus on a unified
treaty has been given its due center of attraction by the parties and the
judicial systems are trying enough to make sure the interpretations are not
diverse. The major single aim has been to simplify the legal environment for
businesses in relation to their cross-border transactions. It is a first step
towards harmonization and several flaws that exist may disappear slowly if
given due encouragement. It is suggested that a country like Malaysia is able
sustain this convention because of its economic progress but its applicability
would depend upon existence of disfavored rules that Malaysia’s legislature,
executive and judiciary may determine.  

 

3.3 Sale
of Goods in Malaysia

Malaysian sales law is governed under the Contract Act 1950 and the Sale of Goods Act 1957. The SGA does
not provide a complete law and operates against the background of the law of
contract that are not inconsistent with its express provision. Section 3 of the SGA expressly provides
for the continual application to contracts for the sale of goods of the
provisions of the Contracts Act 1950 ‘in so far as they are not inconsistent
with the express provisions of this Act’.27 Thus, those rules
relating to fraud, misrepresentation, coercion and other invalidating causes
provided from section 13 to 21 of the
Contracts Act 1950 will continue to apply to contracts for the sale of
goods.28  

 

CISG can be considered as one the most
successful treaties in private
international law due to its reach and use in international commercial
transactions. Malaysia’s open
economy underpinned by outward looking trade policies and practices including its policy of trade liberalization provide the
means for economic growth and adaptability to an increasingly global economy.29 It is undoubtedly the fact
that Malaysia has seen a healthy growth since the trade liberalization in 1997
and also most of the trade barriers have fallen away. CISG holds 115 members30 currently and all
signatories apply this convention in a uniform fashion. Malaysia holds
long-term trade relations with some of the members. It is also necessary to consider
what exactly is beholding this nation’s stance to not to ratify this Convention.

 

From a rational perspective, it is
therefore important to scrutinize why many common law countries have not
accepted the ratification. Under common law jurisdictions, the precedence is
given a lot of importance. The unwillingness of common law judges to apply CISG
is due to the lack of precedence among common law jurisdictions applying CISG,
simply because common law judges want to get their precedents in first.31 There is plenty of case
law in non-common law jurisdictions, but it does not seem to carry much
authority in common law courts.32

 

Also, there are cases that do not
coordinate with one another, which is disheartening because the harmonizing
intention of CISG has been to promote uniformity when applied. As a reference
to several US cases, the courts’ reluctance to look beyond the US border for
CISG case law does little to accelerate the unification of international trade
law. Worse, courts do not seize the opportunity to expand at length about CISG
due to its comparison with the Uniform
Commercial Code (UCC) in regards to non-availability of major provisions
for validity of a contract like statute of frauds, consideration, parol
evidence rule as examples.33
The authority of precedents shall remain a focal point of determining this
convention’s direction even though it is too early to judge where CISG is
headed.

 

The validity of contract forms one of the
core essentials in Malaysia sales law and therefore, non-existence of such
validity like fraud, consideration or misrepresentation contributes to the
major factors involved with Malaysia not signing the treaty. According to
Arthur Rossett, the language, first of all, is foreign with regards to the law
of contract and therefore has no clearly defined meaning and, secondly, is too
wide and inexact and therefore leads to uncertainty.34 The language used in the
text is so vague and wide that it is uneasy to ascertain what these provisions
are.35 An example of Article 25 of the Convention, the
fundamental breach as an example could be taken in such a case.36

 

One academic precisely indicated that this
article is welcoming criticism as it is likely to lead to uncertainty since the
open-textured nature of the definition in Article
25 makes it difficult to predict just when a breach will be regarded as
fundamental.37
As mentioned above, unlike UNIDROIT
principles or Principles of European
Contract Law (PECL), the CISG is silent regarding the interpretation of
good faith as it fails to bring clarity on whether it signifies towards fair
dealings or towards how parties behave and appear. Also, CISG does not mention
about middlemen involved in the transactions and if a dispute arises, the
complication on granting interim relief advances. It is right to agree that
these are the considering factors as to why Malaysia hold back from the convention
when such opacity in the convention occurs without any self-sustaining
jurisdiction.

 

Furthermore, Malaysia’s sales law is based
on the old English Sale of Goods Act 1893
and therefore, they are not in a condition to be able to assess and
particularly suited for the modern commercial contracts.38 Instead of an unknown law,
it is better to apply a single known law in case of disputes. CISG might enhance
the Malaysian economy. Legal system of a country is one of the important
factors in facilitating its economy. Although it is not very true to claim that
a strong legal system guarantees a healthy economy, but it is difficult to find
a healthy economy without a strong legal system. It is suggested that the improvement
in economy may occur if the entrepreneurs are provided with a dependable and
also consistent international sales law for Malaysia.

                                        

3.4
CONCLUSION

The aim of CISG has been to harmonize international trade
relations and such a treaty is undeniably a benefit to maintain harmonious
relations between countries. If efforts from the international community made
towards speeding up this process, then definitely it will be ideal for
international trade but then again, the willingness has to be determined. Malaysian
legal community and the entrepreneurs and dealers must evaluate whether CISG is
able to meet the Malaysian standards or there still existing of doubtful
elements. Predictability is often described as the heart of the legal practice
for lawyers and thus, a knowledgeable legal counsel is required before entering
into a legal contract for the critical predictability and also efficiency. It
is suggested that predictability shall be continued when the law is clear and
CISG lacks many of those valid concerns.

 

CISG brings international law to be
applied locally and it carries a local cast when the interpretation of this law
takes place. This shows weakness because issues may raise over the uniformity
of CISG again. Despite the Sale of Goods Act 1957 being old, it does not lack
ambiguity in regards to core principles of validity of a contract, the contractual
capacity, illegality, fraud, tortious liability and also good faith, when
compared to the CISG.

 

Another academic has correctly indicated
in her article that there is a domino effect between CISG and courts of law where
the courts are worried about the lack of case law, which in turn prohibits the
development of case law. There is curiosity in considering how many
transactions would be administered by CISG.39
When commercial disputes are taken over by arbitration, CISG has been still
used where it seems to have well performing than the courts of law for the
reason that that degree of choice over both procedural and substantive law
makes party autonomy far more
important in arbitration than
litigation, the national courts do not face conflict of laws and conflict of
issues with their own local laws and through setting up of UNCITRAL Arbitration Rules, UNCITRAL has also promoted the international commercial arbitration as a useful
procedural model for international trade. 40

 

An ideal contract is the one that is not
too vague and the options may depend on how lawyers predict the consequence of
disputes that could arise. Instead of relying on an international contract which
is lacking definition, shadowy and leading to ambiguity of international law, it
is suggested to create a better contract agreement with international sellers
or customers. Through such evluation, it is suggested that with current
situation, it is necessary to further develop the CISG in order to being accepted
by and also to fit the demands of Malaysia as it will bring difficulty to the
business transactions that are governed under the Sale of Goods Act 1957. However,
it is to believe that one day the defects of CISG will be dissolved and though
it may have been an opening step towards harmonization and this harmonization
could not be accomplished in the blink of eye. Hence, all that is required
right now are improvisation and careful drafting and formulation of
international contracts and therefore, leading to welcoming the nations to
maintain healthier international relations.

1 Ahmad Shahriman
Ahamad Tekmezi, ‘The Vienna Convention on Contracts for the International Sale
of Goods 1980 (CISG) and Malaysian Contract Act 1950 (Act 136): A Comparison on
the Formation of Contract’ (MARA
Innovation Journal Volume 4, Issue 2, December 2015) available at
accessed 21 December 2017.

2 Ibid.

3 John S Mo,
‘Chapter 5 Contracts of Sale under the Vienna Sales Convention’ International Commercial Law
(Butterworths 1997) 149.

4 CISG Convention on
Contracts for the International Sale of Goods (Vienna Convention) 1980, Art 6.

5 Gabriel Moens and Peter Gillies,
‘Chapter 1 The UN Convention on Contracts for the International Sale of Goods’ International Trade and Business: Law,
Policy and Ethics (1st edn, Routledge-Cavendish 2000) 1-2.

6 CISG Convention
on Contracts for the International Sale of Goods (Vienna Convention) 1980, Art
1.

7 John S Mo (n 3) 147-148.

8 CISG Convention on Contracts for the
International Sale of Goods (Vienna Convention) 1980, Art 3.

9 Ibid (n 7).

10 CISG
Convention on Contracts for the International Sale of Goods (Vienna Convention)
1980, Art 2.

11 Gilles
Cuniberti, ‘Is the CISG Benefiting Anybody?’ available at
accessed 21 December 2017.

12 Paul
B. Stephan, ‘The Futility of Unification and Harmonization in International
Commercial Law’ available at
accessed 21 December 2017.

13 Gilles Cuniberti, ibid (n 11).

14 Sieg
Eiselen, ‘Adoption of the Vienna Convention for the International Sale of Goods
(the CISG) in South Afica’ available at
accessed 21 December 2017.

15 Ibid.

16 CISG Convention on Contracts for the
International Sale of Goods (Vienna Convention) 1980, Art 7.

17 Gilles Cuniberti, ibid (n 11).

18 CISG Convention on Contracts for the
International Sale of Goods (Vienna Convention) 1980, Art 55.

19 CISG Convention on Contracts for the
International Sale of Goods (Vienna Convention) 1980, Art 14 and Art 15.

20 Shishir Dholakia, ‘Ratifying the CISG – India’s Options’ available at

accessed 21 December 2017.

21 Sieg
Eiselen, ibid (n 14).

22 CISG Convention
on Contracts for the International Sale of Goods (Vienna Convention) 1980, Art
4.

23 Nicole Kornet, ‘The Common European Sales Law and the CISG –
Complicating or Simplifying the Legal Environment?’ (February 28, 2012).
Maastricht European Private Law Institute Working Paper 2012/4. Available at
SSRN:  or 
accessed 21 December 2017.

24 Sieg Eiselen, ibid (n 14).

25 Ibid.

26 Sieg Eiselen, ibid (n 14).

27 Sale of Goods Act 1957, s 3.

28 Beatrix Vohrah and Wu Min Aun, ‘Chapter 9 Sale of Goods’ The
Commercial Law of Malaysia (Longman 2000) 189-190.

29 WTO –
Trade Policy Review available at
accessed 22 December 2017.

30 As of
November 2017, 115 state parties have ratified the convention, and a further 15
states have signed but have not ratified the convention which available at
accessed 22 December 2017.

31
Henning Lutz, ‘The CISG and Common Law Courts: Is There Really a Problem?’
available at
accessed 22 December 2017.

32 Monica
Kilian, CISG and The Problem with Common
Law Jurisdictions, pg 233 available at
accessed 22 December 2017.

33 Helen
Kaminski Pty. Ltd. v. Marketing Australian Prods.1997 U.S. Dist. LEXIS 10630 and Calzaturificio
Claudia s.n.c. v.
Olivieri Footwear Ltd., 1998 U.S. Dist. LEXIS 4586.

34
Shishir Dholakia, ibid (n 20).

35 Guide
to Article 25: Comparison with Principles of European Contract Law (PECL)
accessed 22 December 2017.

36 CISG Convention on Contracts for the
International Sale of Goods (Vienna Convention) 1980, Art 25.

37 Alastair C.L. Mullis, ‘Termination for
Breach of Contract in C.I.F. Contracts Under the Vienna Convention and English
Law; Is There a Substantial Difference?’ available at accessed 22 December 2017.

38 Beatrix Vohrah and Wu Min Aun (n 28)
188-189.

39 Monica
Kilian, ibid (n 32).

40 Jeffrey Waincymer, ‘The CISG and International Commercial
Arbitration: Promoting a Complimentary Relationship Between Substance and
Procedure’ available at accessed 22 December 2017.