Contracting State

The Vienna Convention (CISG) is particular and selective as to transaction that is only within its scope. It basically demarcates the distinguishing line between sales and other contracts by expressly stating the forms of transaction that is not within its coverage.

Article 2 of the Vienna Convention (CISG) provides that “This Convention does not apply to sales: (a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; (b) by auction; (c) on execution or otherwise by authority of law; (d) of stocks, shares, investment securities, negotiable instruments or money; (e) of ships, vessels, hovercraft or aircraft; (f) of electricity ”.

The Vienna Convention (CISG) is trying to avoid complexities and ambiguities by trying to exclude within its coverage of application troublesome transactions that would arise future questions and conflicts in the application and enforcement of the law. The Vienna Convention (CISG) is explicit in its terms that it only applies to sales of goods. It does not apply to sales or transfer of services. However, it does try to anticipate the future question on the nature of a contract of sale of goods when services is being contributed or added in the transaction.

“Article 3 provides that (1) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. (2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.

” Hence, in a particular transaction, when a substantial part of the obligation of either the buyer or the seller consists in the performance of a particular service or the rendition of labor, the nature of a contract of sale of goods is thereby lost. The contract is treated either as a contract of employment, or for a piece of work, etc. A contract of sale for the Vienna Convention (CISG) to be applied must be for a sale of goods, and not just of any other object of sale like real property or securities.

The term “goods” however was not defined in the provisions of the Vienna Convention (CISG) owing the wide range of items that may be considered as goods. The term “goods” should rather be construed according to its ordinary acceptance, usage and meaning as used in the context of ordinary trading. The convention is therefore trying to resort to the ordinary meaning of the term as used in its mercantile usage. Rather than provide for a strict definition of the concept, the Vienna Convention presents the particular item or objects of sale, which is not within the contemplation of the meaning of the word “goods”.

Article 2 of the Vienna Convention (CISG) enumerates the particular subject matter of sale not covered by the convention such as commercial papers, investment securities, aircraft, ships, hovercraft, and electricity, simply because of the fact that they are not considered as “goods”. The sale involving the enumerated items is almost governed by the laws of individual states and many international agreements. These items have also been excluded from the lists of “goods” covered by the earlier convention on the international sale of goods just like the Hague Convention.

The Vienna Convention requires the substantial relation between the transaction and the contracting state. A contracting State is one which has ratified and acceded to be bound by the provisions of the Vienna Convention on Contract for the International Sale of Goods, and has incorporated the latter as a law of its land. This is however subject to any reservation of a Contracting State as to any provision or Article of the Vienna Convention (CISG), whereby the particular provision to which reservation was expressed will be suspended as to the reserving state.

Under Article 1 it states that “This Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State ”. However, Article 95 provides for the “compromise nature” of the Vienna Convention (CISG), which states that: “Any State may declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph (1) (b) of article 1 of this Convention ”.

Such a state is deemed a non-contracting state as the said state does not choose to be bound by subparagraph (1) (b) of article 1 of the Vienna Convention (CISG). A forum in a Contracting State, which has not made an Article 95 declaration, is bound by paragraph 1(b) Article 1 of the Convention if its conflict-of-laws rules lead to the application of the law of a “Contracting Party ”.