Business activities in the oil and gas sector, which definitely involves the extraction of natural resources which are essential for the maintenance and sustenance of so many inventions begins definitely with the negotiation of oil and gas exploration and exploitation contracts. Putting aside the well established and the traditional partiesâ contractual autonomy, determining the legal regime of these contracts brings to fore the role of international law.
Oil and Gas business activities are divided into two main sectors, upstream operation identify deposits, drill wells and getting and materials underground, it also includes rig operations, feasibility studies, machinery rental and extraction channel supply. Downstream operations includes refineries and marketing. These service turn crude oil into usable products such as gasoline, fuel oils and petroleum based products . All of these operations are legally framed by contracts and because of the location of these resources hydrocarbons on one side and infrastructure and economic and human capital on the other) coupled with the global nature of the demand these contracts are mostly international.
Going by various resolutions of the United Nations which bothers on permanent control (sovereignty) over natural resources, have established that states have a sovereign and undiluted permanent right that must be exercised on national development and to the benefit of the people, to cater for owner nations, welfare and to freely dispose .
So, to profit from these resources in actual sense requires a very high level of investments which states with the resources (unfortunately) cannot on themselves do alone because the necessary expertise for both the upstream and downstream sectors are usually with private professional companies which are foreign to the host nations. Bringing the private foreign companies into a joint venture agreement with the host nation. Pursuant to article 1, the CISG only applies to contracts involving the sale of Goods when the partiesâ places of business are in different states in principle, International Law should not be used unless the parties have expressly so agreed . For the sake of this thesis, we are openly concerned with how the provisions of the CISG applies to the sale of hydrocarbons (Oil and Gas) and how the contents of the CISG operates to form a sales agreement contract.
Article 1 of the Convention for the international sale of Goods deal with Basic Rules of Applicability and states categorically that the mere fact that the parties have their places of business in different states is to be disregarded whenever the fact does not appear in the face of the contract at any time before or at the conclusion of the contract . This simply implies that the mere fact that places of business of parties differs does not make the CISG automatically usable, it must be stated on the face of the contract as seen in Impuls I.D International, S.L Impuls I.D, systems Inc, PSIAR, S.A vs. Psion Teklo gix Inc. (2002) 1122, U.S District Court, Southern District of Florida.
Article 2 of the CISG states categorically where the convention does not apply or when/where not applicable, goods bought for personal and household use, gods by auction, or on execution or otherwise by authority of the law, shares, stocks, negotiable instruments or money, ships, vessels, aircraft and electricity are not to be governed by the CISG . This has been pronounced upon in M+H. GambH V.AS.P.T. KFT
Article 4 and 5 enunciates the Conventionâ stance forgiven only the formation of the contract of sale and the rights and obligations of the seller and buyer and states categorically that the CISG is not concerned with the validity of the contract or any of its provisions or of any usage and the CISG is intact not concerned with the effect the contract or any of its provisions may have on the property in the goals sold
Article 7 states clearly The international nature of the convention and its essence is basically to promote uniformity in international trade and also enunciates that questions and issues concerning the convention are to be resolved in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law. It should be made known that the difference between Article 7 (1) and Article 8 lies simply in the fact that Article 7 is directed towards the courts and Article 8 to the parties but it can be argued again that both are directed towards the court since the court is the body that delivers judgment, and both are also directed to the parties since they are the ones to comply with the convention.
Article 9 states clearly that the parties are bound by the usage to which they have agreed and also parties are bound by the parties established between themselves, also practices known to international trade and business unless otherwise agreed are impliedly believed to be part of the agreement
Article 12 of the CISG makes compulsory, the documentation of international trade and states emphatically that any provision of the CISG that is not in fandom with article 12 does not apply A Chinese court in the year 2000 pronounced on this provision and lucidly explained how necessary it is to have contracts governed by the CISG written and documented, see MITERNET S.A. VS. HENAN LOCAL PRODUCT IMPORT AND EXPORT COMPANY (2050) HIGH PEOPLEâS COURT (APPELLATE COURT) OF HENAN PROVINCE, CHINA, see also HISPAFRUIT BV. V. AMUYEN S.A (2001) DISTRICT COURT, ROTTERDAM, NETHERLANDS.
The dictum of âofferâ is the dominant position in article 14 of the convention and states clearly thatâ a proposal for concluding a contract addressed to one or more specific person constitutes an offer if it is sufficiently definite and indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. A statement which is intended to be an offer but lacks definite price will be treated as an invitation to make offer, while the addresseeâs reply may contain sufficient indication of the price or of its determination to be an offer; the addresseeâs conduct, such as the acceptance of delivered gods, can then be considered as an indication of assent . Article 17 of the CISG states lucidly that an offer, even if it is irrevocable, is terminated when a rejection reaches the offeror. Another may be rejected expressly or by implication, thus, an offer is terminated once it is rejected, it is also terminated when the period or time stated or scheduled for acceptance fixed by offeror lapses or when a counter offer is given or sent to the offeror although, late acceptance may be accepted or remedied as seen at article 21 of the CISG. The purport or article17 is to assure the offeror of freedom to contract with another state without fear or anxiety that the offered state will change its mind and accept an offer earlier disallowed â.
Article 22 talks about withdrawal of offer and says that an offer may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective. Article 22 thus allows the offeree to withdraw acceptance if the withdrawal reaches the offerror not later than the time when the acceptance becomes effective. As seen under Article 18, the time when the acceptance become effective is generally the moment and time the indication of assent to the offer reaches the offeror .
Article 27 of the CISG is optional, the parties are free and at liberty to set other requirements. Article 27 does not include a rule for oral declarations. The wording âtransmission of the communicationâ and âfailure to arriveâ makes it clear, however, the article refers only to messages transmitted by means of similar means or correspondence. All that is required to make any notice effective or make any request effective is for the notice to be sent by a means that is appropriate and appears reasonable to the circumstances of the transaction, business or agreement
Article 29, a CISG contract of sale under the CISG are not subject to any other requirement as to form. Following up on his, Article 29 eliminate the formal necessity as regards CISG contract modification and contract termination. The general rule is thus enunciated in paragraph 1, âA contract may be modified or terminated by the mere agreement of the partiesâ.
Article 29 (1) thus serves to extend the postulation of Article 11, unless the state parties so otherwise agree, a contract to modify or terminate a CISG agreement need not be in writing
Article 34 provides that documents relating to goods purchased must be given at the time and place and in the form as stated and required by the contract agreement and if the documents are delivered before due date as agreed, the seller may incur or run afoul of nonconformities with the document/agreement until the date agreed upon. Although, the buyer is entitled to damages as a result of the sellerâs exercise of the right to cure non- conformities in the document Article 38 is of opium importance as it states firstly that the goods as the object of the contract must be examined within a reasonable short period as it looks practicable in the circumstance. The circumstances as enunciated in this section also applies to situation/destination of the goods actually delivered but if the seller fixes failure to perform his obligations in accordance with the position of the Convention or if the buyer refuses to accept performance by the seller in accordance with those articles, the buyer may not reduce the price.
Article 54 to 58 of the CISG obliges the buyer to pay price either as fixed in the contract or as determined according to contractual terms. The provision on determination of the price renewed the argument concerning the need for a definite price term, and it has been widely accepted by authors and courts that in the absence a fixed price, the parties implicitly made reference to the â price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concernedâ
Article 60 of The CISG talks about the buyerâs obligation to take delivery, it is important to state that it also corresponds with the sellerâs obligation to deliver as seen in article 30 of the Convention. So, the obligation to take delivery of goods as specified by agreement of parties is premised on the obligation to deliver and also relates to time and place of delivery
According to Ziegel, Article 65 of the CISG is consistent with the theory of specific performance adopted by the Convention but, from a practical point of view, the number of occasions when a seller needs to substitute his own specifications for the buyerâs specification in order to protect his interests are likely to be frequent. Thus, in most cases, damages should be an adequate remedy. Article 70 talks about the sellerâs fundamental breach of contract. Therefore, in the case of fundamental breach, although the risk has passed, the buyer may be able to insist on the delivery of substitute goods or to avoid the contract that is, avail herself of remedies which would not ordinary be available as regards goods lost or damaged as a result of Acts of God etc.
Article 74-76 of the convention discusses the extent and measure of damages recoverable and it is trite according to the provisions of the CISG that it is only breach foresaw or ought to have foreseen at will be compensated with damages. The underlying idea is that the parties at the conclusion of the contract, should be able to calculate risks and potential liability they assume in their agreement. Again, when a contract is avoided, damages generally amount to the difference between the contract price and the costs of a cover transaction together with any further damages and definitely the cover transaction must as a matter of fact be undertaken within a reasonable time after advance . And where the goods have a started well-known price, the injured party can also measure his damages âabstractlyâ that is independent from any cover transaction.
Article 80 allows a party to rely on the fact that the other state/party as a result of non- performance or breech impaired his own performance. As such, clearly, a party may not rely on a failure of the other party to perform to the extent that such failure was caused by the first partyâs own act or omission . If the buyer is in delay in taking delivery of the goods or, where payment of the price and delivery of the goods are to be made concurrently, if he fails to pay the price, and the seller is either in possession of the goods or otherwise able to control their disposition, the seller must take such steps as are reasonable in the circumstances to preserve them. The seller is then entitled to retain the goods until he has been reimbursed reasonable expenses by the buyer . Article 90 go to the CISG states clearly that the Cisgdoes not prevail over any international document which has already been or may be entered into and which contains provisions concerning the matters governed by this convention (i.e. CISG) provided that the parties have their places of business in state parties to such agreement
Article 99 is concerned with the entry into force of the convention as regards the international obligations of the state contracting states that contracts under the CISG. Article 100 determines the true and point the convention becomes applicable to specific transactions or when international sales contract are to be governed by the CISG.
3.2 ELEMENTS OF CONTRACT UNDER THE CISG
A contract is an exchange of assents between two or more persons that creates an enforceable legal obligation. In order to create a binding contract, the exchange of intentions of the contracting parties must be necessary and real. Where the exchange of assent of parties is inconsistent, if must be interpreted according to the rules of good faith
The CISG adheres strictly to the classical manner in which actors create legal and binding obligations which thus makes international contractual obligations arise out of expressions of mutual agreement. A contract is therefore concluded on concurrent statements of the parties will, the convention for the international sale of goods does not vitiate the need to prove concepts familiar to the common law, including Offer, Acceptance, Validity and performance. The CISG also allows for a contract to be formed without following the offer and acceptance structure. It is also provided for in article 18 of the CISG that a statement (including terms of agreement) are to be interpreted to include terms and trade usages and the partiesâ practices and also are to be constructed in the light of âany subsequent contact of the partiesâ. Common Law qualified Lawyers are confronted with the challenges of how the elements of formation of contract can be proven by any means since the statute of frauds does not apply nor does the Parol Evidence rule under the CISG. According to Article 11 of the CISG, a contract for the sale of goods does not have to be concluded in writing, nor do any other requirements regarding form exist with the sole exception of countries who have declared an Article 92 reservation.
Hence, all documentations, actions in accordance with the contract can be admissible to prove a contract. Thus, the usages and practices of the parties and the industry guides and norms are incorporated automatically into any agreements governed by the convention for the international sale of Goods unless expressly excluded by the parties it is important to state that the CISG opted for the civil law approach eliminating the element of consideration.
As it is established, contract to be binding requires at least two persons and two corresponding declaration of intent. The first of these corresponding declaration is called offer. An offer is a declaration of the intent of the offeror to another party in order to enter into a contract and it is seen as the first declaration of assent and for an offer to be effective, it has to be communicated to the offeree. The basic criteria for an offer are set out under Article 14 of the CISG, thus, each proposal does not mean an offer and according to the CISG, proposal to constitute an offer must fulfill certain requirements which are:
(a) sufficient definiteness of the proposal;
(b) intention to be bound in case of acceptance;
(c) Effectiveness of the offer, in order to be accepted as an offer.
SUFFICIENT DEFINITENESS OF THE OFFER
According to the CISG article 14 to be precise, an offer must addressed to one or more specific persons in order to be definite, and if it is not specifically addressed, it will be treated as a mere invitation to make an offer. That is why it said, offers made to the public are not considered or regarded as offers for lack of definiteness. Offers such as price list, circulars, newspaper advertisements etc. According to Hannold, offers made to the general public will cause practical difficulties in acceptance
INTENTION TO BE BOUND IN CASE OF ACCEPTANCE
The CISG is very clear and definite and allows for no ambiguity. Accordingly, a proposal requires being âbindingâ in order to be an effective offer under the CISG and therefore the offer being made must categorically include the offerorâs intention to be bound by the offer when the offeree accepts the offer. Such criterion provides to an offer to be distinguished from a simple nonbinding proposals.
EFFECTIVENESS OF THE OFFER, IN ORDER TO BE ACCEPTED AS AN OFFER
According to article (14) (1) of the CISG, for an offer to be effective, it must efficiently indicate the goods and expressly or implicitly fixes or makes provision for determining the quantity and price. Therefore, all essential elements must be stated in an offer for it to be effective. It is obvious that if the essential terms of the contract are explicitly fixed, there will be no problem of determination
For the sake of clarity and express understanding of an offer, the following are to be clearly indicated.
(A) Price indication: According to the construction of article 14 of the CISG, the contract is not to be concluded without specifying the price as such, the indication of price. Price has to be determined or at least determinable one, an effective offer does not exist moreover, in case a proposal refers to a price list or a market price, it is adequate to accept a determination impliedly.
(B) Indication of nature and quantity of goods: The nature and quantity of goods offered must be spelt out or at least determinable in the offer but it has also been said by some learned authors that the explicit description of the goods is not strictly required and may be impliedly determined . Schlectriem accepts that there may be just a simple indication of the goods and their amounts but at least, that indication must be interpretable. So also, besides written form of indications, a verbal/oral indication of the goods in nature and quantity is also acceptable.
TERMINATION OF OFFER
Withdrawal and revocation of offer:
The CISG distinguishes between âwithdrawal of an offerâ and a ârevocation of an offerâ. An offer, even if it is irrevocable, may be withdrawn provided the withdrawal reaches the offeror. However, after the offer reaches the offeree, the offeror may no longer withdraw the offer but may been entitled to revoke the offer in accordance with Article 16 of the CISG. According to the CISG, an offer can be revoked at any time provided the revocation reaches the Offeree before he has dispatched acceptance. In a nutshell, Article 16 (1) of the CISG allows for revocation of offer, until the offeree dispatches his acceptance. The revocation must therefore get to the offeree before the offeree dispatches acceptance to an effective offer it is fair to say that the ârevocability of offer â under the CISG is limited because, the offeror is bound by his offer between the dispatch time for acceptance and its arrival at the offeror.
REJECTION OF OFFER AND EXPIRY TIME SET FOR ACCEPTANCE
With regards to the CISG ârejectionâ is the third termination ground apart from withdrawal and revocation of offer. According to Article 17 of the CISG, an offer can also be terminated through rejection of the offer by the Offeree. Accordingly, rejection of an offer must be either expressly or by an implication but an explicit rejection must reach the offeror. The receipt theory here applies to declaration of rejection as well. An offer may be rejected even after acceptance has been dispatched but this acceptance does not have to receive to the offeror. â it can be said that the rejection avoid the conclusion of a contract only if it reaches the offerror before or at the same time of the receipt of acceptance of the offeror.
Under the CISG, there is no provision that indicates whether the expiry time period as fixed by the offeror for acceptance terminates the offer itself or not. It should be noted that expiration of time for acceptanceâ which has been written under article18 (2) does not terminate the offer itself. As postulated by Kindler, the time set for acceptance has a meaning that shows until when offeror is bound by his offer, which is governed under Article 16 (2), it does not have a function to terminate offer after the time period expires. It should be noted that the CISG does not govern the potential termination grounds like death or loss of capacity of the offeror.
Article 18 (1) provides that âa statement made by or other conduct of the offeree indicating as sent to the offer made is an acceptanceâ The most important thing here is âassentâ and it is to be determined by the rules set in Article 8 of the CISG. Assent to an offer can be in a verbal or written statement or by conduct. Oral offers must be accepted immediately unless circumstances indicate otherwise according to Article 18 (2) of the CISG. Oral offer includes conversation face to face, by telephone, or by any other technical or electronic means of communication that allows immediate oral contract but does not include statements captured in a material medium such as most notably fax electronic acceptance becomes effective when an electronic indication of assent has entered the offerorâs server provided the offeror has consented either expressly or implicitly to electronic communication
Request for modifications, issuance of credit, confirmation of invoice, and execution and/or performance of condition set forth in the offer or contract in general would not as been taken as fact of assent. Silence or inactivity does not amount to acceptance. It is noteworthy to state that, former usage to which parties have agreed and any practices which parties may have established in their past contractual relations may indicate assent to an offer
TIME LIMITATION FOR ACCEPTANCE
For an acceptance to be valid effective, it must be reviewed and within the time limitation set forth in the offer or late acceptance in accordance with article 21 of the CISG if acceptance is not received by the offeror, the offeree bears the risk of transmission. The CISG uses the âreceipt theoryâ of acceptance absent contrary agreement between parties. The receipt theory is common in a civil law tradition and is based on the premises that âthe senderâ has a greater opportunity to know whether the medium he uses is then subject to hazards or delays
It is important to state that the mode of communication determines the time period for acceptance and time period begins to run immediately the letter, telegrams or mail is handed in for dispatch or from the date shown on the letter/envelope. A period of time for acceptance fixed by the offeror by telephone, telex or other means of instantaneous communication begins to run from the moment that the offer reaches the offeree thus, an offer from the Iraq government to Shell Petroleum Company to help exploit oil gets to Shell if by instantaneous communication, the moment a Shell staff or representative receives the message. Official Holidays or non business days occurring during the period for acceptance are include in estimating the period.
A late acceptance is nevertheless effective as an acceptance if without delay, the offeror orally so inform the offeree or dispatches a notice to that effect . thus, if a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if its transmission has been normal, it would have reached the offeror to due time, the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs the offeree that he considers his offer as having lapsed or dispatches a notice to that effect
ASSENT WITH MODIFICATION AND/OR ADDITIONS BATTLE OF THE FORMS.
Any reply to an offer which contains additional terms or modification of the initial offer is a rejection of the offer and does not qualify as an acceptance, it is called a counter offer. Article 19 (3) CISG that additional or different terms relating to price, payment, quality of goods, place and time of delivery, liability and settlement of disputes etc. amounts to counter offer and as such cannot be referred to or accepted as acceptance. If additional terms do not materially alter the terms of the offer, then the terms of the contract are the terms of the offer with the modifications contained in the acceptance unless the offeror, without undue delay, objects orally to the discrepancy or dispatched notice to that effect
STANDARD USER TERMS
It is today accepted that standard user terms provides facilitation to daily trade and practice and although the CISG is silent on standard user terms, a majority of Courts applies Standard User Terms and Courts do apply part II of the CISG and particularly rules found in article 8 to determine whether the parties have agreed incorporate standard terms into their agreement Pursuant to Article 19 (2) of the CISG, for the standard user terms to be effective and have legal force the partiesâ assent is very necessary. Standard user terms must not be opposed by any party to the contract.
3.3 CISG AND OTHER RELATED DOCUMENTS
THE CISG AND THE UNIFORM COMMERCIAL CODE;
If a sales contract between a foreign corporation and a US corporation provides that the contract will be governed by a specific state’s âUniform Commercial Codeâ (UCC) rules, then all of the disputes arising under your contract will be so resolved. The UCC has been enacted and in force by all fifty (50) of the United States. If the country of one of the parties of the agreement is one the seventy (70) countries that have signed and ratified the 1980 âUnited Nations Convention on Contracts for the International Sales of Goodsâ (CISG), Then, the parties must clearly, explicitly and specifically exclude the applicability of the CISG , The CISG will apply to sales contract, where the Buyer and Seller’s respective dominant places of business are both in CISG contracting states. In other words, if both parties’ principal places of business are in CISG countries the CISG is the default and applicable choice.
The UCC contains the statute of fraud which automatically means that any business transaction above $500 must be evidenced in writing so as to be enforceable in courts in the United States of America. The CISG on the other hand was drafted to meet the needs of businessmen who prefer to conduct business without restraints imposed by formalistic requirements. Unlike contracts governed by the UCC, a contract of sale under the CISG need not to be in writing, and is not subject to any form requirements. The writing requirement in the UCC is believed to prevent fraudulent claims. However, one should keep in mind that although the CISG does not require a written contract, the existence of the contract still needs to be proved by the party seeking enforcement. Under the CISG a party can prove a sales contract by any means, i.e. invoices, purchase orders, witnesses, etc.
US Courts when applying the UCC will generally exclude trial testimony that contradicts the specific terms of the parties’ written agreement. This is known as the Parol Evidence Rule (PER), and it has been a bedrock of the Common Law. The Parol Evidence Rule presumes that a written contract encapsulates the parties’ all-inclusive agreement. Therefore, under the UCC, oral evidence cannot be used to contradict the terms of a written contract. This is a big difference to the postulation of the CISG that will allow an oral evidence vary or vitiate the terms of written agreements of transactions
The term âBattle of the Formsâ refers to the situation where the customer sends in a purchase order containing certain terms of sale, and the seller respond with an acceptance, or an invoice, that contains different terms of sale. The issue that now arises is whether there is a valid contract and if so, what are the terms in which the parties have agreed upon. The CISG and UCC differ on these important questions: The UCC deems a valid contract to have been formed as long as both sets of forms (basically the offer and acceptance) agree on basic business terms, such as the description of the goods, the price involved in the transaction, the quantity, and maybe a few additional terms. The additional terms you have put in your acceptance are disregarded, and the terms of the original purchase order govern the contract. This is the UCC rule unless you make it clear in your acceptance form that your additional terms are mandatory. Then, if the buyer refuses to accept your terms, the UCC provides that there is no contract. On the other hand, in this situation, the CISG follows the old rule and provides that a contract is formed only when âconsentâ occurs, that is the parties or states to the agreements must have met at a point accepted by both parties. The CISG has express provisions to handle the problem of forms that contain additional terms. If the additional terms do not materially alter the facts of the offer, then a contract is formed under CISG. If the additional terms alter the offer, there is no âmeeting of the mindsâ and no valid contract.
Both the CISG and UCC places the obligation to provide good and service fit for purpose obligation on the seller. The UCC calls this fitness âimplied warranty of merchantability.â This warranty enforces on the seller to make provision in accordance with the contract merchantable services Because it is by operation of law implied in every such contract, regardless of whether the merchant seller is aware of such a warranty, its impact is widespread and generally recognized. It is important to state that this does not mean the seller is to provide perfect and flawless goods but merely goods that will be usable for the ordinary purposes for which such goods are generally used. This condition is implied to put the buyer at ease of expecting good in reasonable condition and fit for what it is meant for. Again, once a sample was used during the bargain, or a model was shown, it automatically becomes the minimum standard in terms of quality of good expected .
Again Where certain terms of the agreement, specifically the price, are actually not set forth in the offer, the CISG would most likely conclude that no contract was created. Article 14 of the CISG has been interpreted to mean that the offer must either explicitly or implicitly refer to the price, quantity and quality etc. Under the UCC, a valid contract can be created even if the offer fails to state certain items such as quantity or price. This can be of advantage in the common situation where the contract was essentially negotiated orally or there is only a purchase order from the buyer, but it does not state the price, and you, as the seller, are now in the difficult situation to prove the existence of a valid contract
Under the UCC, a party may revoke an offer at any time before acceptance by the other party. However, if the offering party has promised in writing to keep the offer open, then the party making the offer is not allowed to revoke the offer, either for the period specified or, if none is specified for a reasonable time period not to exceed three months. The CISG, however, makes an offer irrevocable if the recipient of the offer has reasonably taken action by relying on the offer before receiving a notice that the offer is revoked. The CISG does not set an express time limit for the offer to remain open (however, Article 18 (2) states that when there is no set time for the acceptance, it must occur within a âreasonableâ time).If, for example, an overseas seller makes an offer to an American buyer, under the CISG it may be obligated to perform on this offer if the buyer can show that it acted in reasonable reliance on the offer. The UCC permits the supplier to retract the offer as long as the offeror did not promise the contrary, and provided the offer is revoked before the offeree has accepted the offer. Under these circumstances, the UCC provides an easier way out if you made an offer on which you do not want to follow through afterwards.
THE CISG AND ORGANISATION POUR LâHARMONIZATION EN AFRIQUE DU DROIT DES AFFAIRES (OHADA)
The common goal for both OHADA and the CISG is to unify the international sales law. However, the former focuses on the regional level, and the latter on âuniversalâ or world-wide unification. Although OHADA was modelled after the CISG, there are notable differences.
The rules guiding the formation of contract under both laws are by and large comparable. However, there is one notable exception. Whereas under the CISG it is in principle possible to conclude a contract without specifying a price – although this has been subjected to a very high debate by authors and fellows on the International law field.
However, unlike the CISG, the OHADA has a point related to the payment of the price, whereby the price stated in the contract of sale is presumed free from other charges, like taxes. We can therefore draw inference that OHADA provides therefore more predictability for the seller to receive the price of the good sold and thus, provides more certainty in application of a contract of sales .
The OHADA rules relating to giving adequate notice as per provisions are quite similar to those of the CISG. Both regimes imposes an obligation on the buyer to examine the goods and to give notice to the seller of any non-conformity. A buyer that does not comply with this duty loses all remedies relating to the non-conformity. However, there is a major striking difference between the two regimes. The CISG tends to guide and protect the buyer that has a reasonable excuse for its failure to give the required notice, by allowing such party a chance to reduce the price of the goods if they are non-conforming to the contract, or to claim damages except for loss of profit. OHADA fails to protect a buyer that does not provide a timely notice, even if it has a reasonable excuse. Thus, under the OHADA, even a buyer with a reasonable excuse for not giving timely notice will lose all remedies and will have to pay the full purchase price for non-conforming goods. Again, the CISG allows the buyer to give notice of non-conformity for up to two years from the date on which the goods were actually delivered to the buyer while the OHADA gives just a year period .
As regards the termination of the contract, both regimes allows for unilateral termination by mere declaration. However, OHADA differs from the CISG by stating in clear terms that unless a reasonable and timely warning was given to the defaulting party, any consequence resulting from a unilateral termination remains on the party declaring it, even if the court later confirms the breach to have been fundamental. Given the sophisticated procedure under the OHADA, that as such means that even a serious breach may not be fundamental, reducing certainty and definiteness, and therefore the security, of a contract of sale. It is expedient to say that the duty to mitigate damages is covered in the OHADA only in cases related of fundamental breach, while the CISG applies the duty more broadly