Robert in New York receives a telephone call requesting he deliver a container of his pickles to Toronto from a buyer he never dealt with. Robert agrees and delivers the pickles. Shortly thereafter, the customer complains that the type of pickles he ordered was not delivered. Robert wants to sue. What law governs?
While many businessmen (and a lot of lawyers) would say New York's Uniform Commercial Code (UCC) governs, but they would be wrong. Since 1988, sale of goods between the U.S. and most other countries have been governed by a treaty called the United Nations Convention on Contracts for the International Sale of Goods. Since it is a treaty, it overrides the law of all 50 states including the UCC. It has been acceded to by 83 countries including Canada, Mexico, Israel and most of Europe except for the United Kingdom.
The treaty applies to all sales of goods between parties whose places of business are in different states that have agreed to the treaty. It generally does not apply to sale of consumer goods, stocks, investment securities, negotiable instruments, boats or aircraft. Parties to a contract can opt out of the Convention but it must be specifically done. Merely stating that New York law applies is not good enough.
Merchants who have or contemplate international sales should be familiar with treaty. While there are many similarities with the UCC, the are significant differences. Not knowing this could result in a contract you did not want and paying damages you did not contemplate.
A contract requires an offer and acceptance. Under the UCC, an acceptance becomes effective upon transmission, such as putting it in a mailbox. The Convention states it is effective only upon receipt. If the acceptance contains additions, limitations or other modifications, it is considered by the Convention as a rejection and counteroffer. The UCC provides generally that the acceptance is effective with the modifications deemed to be proposals for additions to the contract which can be accepted or rejected, while the agreed contract stands. If a sale of goods is for $500 or more, generally it must be in writing under the UCC. The Convention allows for oral contracts no matter the monetary amount.
One major difference that could affect your bottom line is the issue of lost profits. In New York & New Jersey, lost profit damages are not easy to obtain. Among other things, you have to prove that this type of damage was within the contemplation of the parties at the time of contract. Under the Convention, the damages only have to be foreseeable as a possible consequence of the breach at the time of the breach.
Any businessman who has international sales must consult a lawyer to have his invoices, purchase orders or standard contracts reviewed in light of the treaty. Otherwise, he might suffer unforeseen consequences.
Kim Steven Juhase
Partner, Novak Juhase & SternCheck us out on Facebook, LinkedIn, and at njslaw.com