Opting In to the CISG : Avoiding the Redline Products Problems

In the more than 25 years that the United States has been a party to the United Nations Convention on Contracts for the International Sale of Goods (CISG), most U.S. cases applying the Convention have resulted from either a failure by the parties to provide a choice of law clause that excludes the CISG, or the inclusion of a choice of law clause that implicitly leads to the application of the CISG. Contract lawyers report that they routinely attempt to opt out of the CISG because of simple lack of familiarity. The case of FPM Financial Services, LLC v. Redline Products, LTD, provides an new opportunity, both to consider the proper approach to opting in to the CISG, as well as the problems generated by the U.S. declaration under Article 95 of the CISG, which prevents the application of the CISG through Article 1(1)(b). In this chapter, the authors consider the problematic (pathological) choice of law clause in the contract which was the focus of the Redline Products decision, as well as the law applicable to the exercise of party autonomy in order to choose the substantive law applicable to an international sales contract. This brings together both the substantive law of the CISG and national law, as well as the relevant choice of law (private international law) rules. This discussion includes consideration of approaches to governing party choice of law in the United States and the European Union, as well as the approach found in the 2015 Hague Principles on Choice of Law in International Commercial Contracts. The chapter also considers the U.S. Article 95 declaration, which prevents the application of the CISG when the sales contract is between a U.S. party and a party with its place of business in a non-Contracting State (such as South Africa), even if the rules of private international law lead to the application of the law of a U.S. state, which includes the CISG. The declaration adds levels of complexity which make opting in to the CISG particularly difficult when the non-U.S. party to the contract is from a non-Contracting State – as was the case in Redline Products