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Legal issues in the application of CISG in online

sale (e-commence) contracts

Assaduzzaman *
Taylor’s Law School, Taylor’s University Lakeside Campus, Subang Jaya, Selangor Darul Ehsan, Malaysia

A B S T R A C T

Keywords: The objective of this article is mainly to determine whether the scope of application of the
CISG CISG covers online sale contracts since there is no mention about ecommerce in the
Sphere of application Convention. The United Nations Convention on Contract for International Sale of Goods
E-commerce 1980 was adopted a quarter of century ago while advanced electronic communication
Internationality technologies were not available. Today’s business transaction heavily depends on elec-
Cyberspace tronic commerce which is mostly operated through workable business website. The application
Virtual places of business of the CISG depends on the subject-matter and international character of the transaction
and its relationship to the Convention. Therefore, the most decisive factor for the scope of
application is subject-matter of the sale and parties’ places of business which helps
determining internationality of the contract. This paper examines the form requirement
under Article 13 of the Convention which includes telegram and telex to be considered as
writing and whether this also includes electronic transactions. This paper also scrutinises
the concept of cyberspace as a place of business to determine the requirement of interna-
tionality under the Convention. The final outcome of this paper is to assert that the use of
electronic communication technology does not turn the CISG inapplicable to International
sale transactions.
© 2016 Assaduzzaman. Published by Elsevier Ltd. All rights reserved.

sale in international trade.2 In the course of time, the reality

1. Introduction of international trade improved significantly with the devel-
opment of electronic means of communication. Parties started
The UN Convention on Contracts for the International Sale of to enter into international sale contracts by using electronic
Goods (“CISG”)1 was adopted in 1980 which entered into force means of communication technology; even in the situations
in 1988 as a uniform law for international sale of goods world- where the formal contract was concluded by traditional means
wide. The concept of uniformity reflects in the preamble of the the parties subsequently corresponded to each other elec-
CISG which states that the Convention is destined to be the tronically to deal with matters such as performance of the
adoption of a uniform set of rules governing contracts for the contract.
international sale of goods. This is in the interest of eliminat- The drafters of the Convention in the 1970s have not fore-
ing legal barriers and promoting the expansion of transnational seen the prospect of sharp development of electronic means

* Taylor’s Law School, Taylor’s University Lakeside Campus, No. 1 Jalan Taylor’s, 47500 Subang Jaya, Selangor Darul Ehsan, Malaysia.
E-mail address: [email protected].
1
United Nations Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, U.N. Doc. A/CONF.97/18, Annex I, reprinted
in 19 I.L.M.668.
2
Schlechtriem & Schwenzer, Commentary on the UN Convention on the International Sale of Goods (CISG) (4th Edition Oxford University Press
2016) 13, 17.
http://dx.doi.org/10.1016/j.clsr.2016.07.012
0267-3649/© 2016 Assaduzzaman. Published by Elsevier Ltd. All rights reserved.

Please cite this article in press as: Assaduzzaman, Legal issues in the application of CISG in online sale (e-commence) contracts, Computer Law & Security Review: The
International Journal of Technology Law and Practice (2016), doi: 10.1016/j.clsr.2016.07.012
 ARTICLE IN PRESS
2 computer law & security review ■■ (2016) ■■–■■

of communication and its integration into the international sale

agreements known as “electronic commerce” or “e-commerce”.3 2. Scope of application perceived by draft
In fact there are no specific provisions in the CISG which deal history of the CISG
with the issues that arise in relation to contracts concluded
electronically worldwide. At present much of international sales Draft history of the CISG suggests that much of its principles
take place through e-commerce. It is highly unlikely that the were carried forward from the 1964 European Conventions
Convention would be amended. The question is whether a con- (ULIS9, ULF10) on international sale contracts11 which were
tract entered into by using electronic means of communication ratified by five western European nations in 1972.12 These Con-
in a large scale international sale is possible by applying CISG ventions were adopted while the concept of electronic means
contract formation rules? If not, the issue becomes whether of communication was not even contemplated. European
the Convention itself could provide a feasible solution for nations started the draft process of the above Conventions in
e-commerce transactions? However, the General Assembly the 1930s under the patronage of the institute known as
adopted the ‘United Nations Convention on the Use of Elec- UNIDROIT.13 In 1935 the institute produced an initial draft of
tronic Communications in International Contracts 2005’ 4 the uniform law for international sales. In the midst of the
to mitigate certain formal requirements observed in Second World War the drafting process was interrupted and
widely adopted international treaties. These include the “New then restarted in 1956 with the support of twenty-one Euro-
York Convention 1958”5 and CISG in the use of electronic pean nations. After the Second World War the institute sent
communications.6 This Convention aims at extenuating the an updated version of the drafts to the respective nations in
gap and assisting the use of electronic means of communi- 1956 for acknowledgement followed by in 1963 the draft was
cations in international sale agreements by pledging that again sent for evaluation.14
ecommerce transactions and other electronic correspon- The 1964 Hague Conventions did not receive universal rec-
dence are to be considered as valid and enforceable as their ognition because of the existing diverse legal, political and
traditional paper-based counterparts. economic system: the Conventions were revised by the repre-
Since the provisions in the CISG are delimited to the for- sentation of fourteen European States. However, the revised Hague
mation of contracts for international sale of goods and electronic Conventions did not receive global acceptance.Therefore, on 17
commerce involves such contracts, then if CISG could provide December 1966 a UN General Assembly Resolution required global
a workable solution for e-commerce transactions it would be support for the adoption of a uniform law for the international
a noteworthy uniform set of rules for cross-border e-commerce sale of goods worldwide. To furnish the demand the United
contracts for the international sale of goods.7 Article 7(2) of the Nations Commission on InternationalTrade Law (UNCITRAL) was
CISG specifically deals with gap filling, under which situa- established; its first session was held in January 1968.15 The UN
tions administered by the Convention that are not expressly General Assembly realised that differences in international laws
dealt in it are to be negotiated in conformity with the general were an obstacle to the law of international sale of goods, and
principles of law on which it is based.8 Where this principle it regarded the UNCITRAL as a leading institution by which the
does not exist, disputes will have to be resolved by applying United Nations could play a more active role in reducing these
domestic law applicable under the principle of conflict of laws obstacles.16 Realising the demand for unification of the inter-
rules. Hence, matters related to e-commerce contracts are not national sales law in 1978 the updated Hague Conventions were
expressly settled by the Convention. This paper will examine combined into one document as a uniform sales law world-
whether the rules of the CISG on international sale of goods wide by the UNCITRAL named as United Nations Convention
can be applied on e-commerce transaction. on Contracts for the International Sale of Goods (CISG).

3 9
E-commerce in other words electronic commerce is the method Convention relating to a Uniform Law on the International Sale
of buying and selling of goods and services, over the Internet. These of Goods, Jul. 1, 1964, 834 U.N.T.S. 107, available at <http://www
business transactions occur in business-to-business, business-to- .unidroit.org/english/conventions/culis.htm> (last visited Apr. 6, 2015).
10
consumer, consumer-to-consumer or consumer-to-business. Convention relating to a Uniform Law on the Formation of Con-
Also the term e-tail is sometimes used referring to transactional tracts for the International Sale of Goods, Jul. 1, 1964, 834 U.N.T.S.
processes around online retail. 169, available at <http://www.unidroit.org/english/conventions/
4
‘United Nations Convention on the Use of Electronic Commu- culf.htm> (last visited Apr. 6, 2015).
11
nications in International Contracts’, The General Assembly adopted Schlechtriem & Schwenzer (2010), p. 5.
12
the Convention on 23 November 2005 by its resolution 60/21 and John O. Honnold, Uniform Law for International Sales Under the 1980
the Secretary-General opened it for signature on 16 January 2006 United Nations Convention (4th edition Wolters Kluwer Law & Busi-
which came into force on 1 March 2013. ness 2009), p. 109.
5 13
Convention on the Recognition and Enforcement of Foreign International Institute for the Unification of Private Law can be
Arbitral Awards (New York, 1958) (the “New York Convention”) The found in <http://www.unidroit.org/>; Jennifer E. Hill, ‘The Future
Convention entered into force on 7 June 1959 (article XII). of Electronic Contracts in International Sales: Gaps and Natural Rem-
6
Charles H. Martin, ‘The Electronic Contracts Convention, the CISG, edies under the United Nations Convention on Contracts for the
and New Sources of E-Commerce Law’ (2008) vol.16. No.2 Tulane International Sale of Goods’ (2003) 2 Nw. J. Tech. & Intell. Prop. 1,
Journal of International & Comparative Law, p. 34; Zhenzhong Ma, p. 12.
14
‘Mapping the intellectual structure of electronic commerce Jennifer E. Hill, p. 12.
research: 1997–2006’ (2010) Vol. 8 Issue 1, p. 23. 15
<http://www.uncitral.org/uncitral/en/commission/sessions/1st
7
Charles H. Martin, p. 36. .html> (last visited 23 January 2016).
8
Schlechtriem & Schwenzer, Commentary on the UN Convention on 16
<http://www.uncitral.org/uncitral/en/about/origin.html> (last
the International Sale of Goods (CISG) (3rd Edition OUP 2010) 133. visited 18 September 2015).

Please cite this article in press as: Assaduzzaman, Legal issues in the application of CISG in online sale (e-commence) contracts, Computer Law & Security Review: The
International Journal of Technology Law and Practice (2016), doi: 10.1016/j.clsr.2016.07.012
 ARTICLE IN PRESS
computer law & security review ■■ (2016) ■■–■■ 3

In the 1980s when the CISG was adopted, usage in the for- ventions. Draft history suggests that it received minimal debate
mation of contracts for international sales was conducted by in the plenary sessions and finalising process. 23 Conse-
traditional paper-based means. The only indication of an in- quently, forty-two delegates voted for the Article 13 in the
stantaneous means of communication is found in Article 13 Plenary Meeting and it was quickly adopted. However, three
of the CISG which recognised telegram and telex.17 Literal in- delegates abstained from voting.24
terpretation of this provision as regards the application of the
CISG in the contract concluded by electronic means does not
provide solutions. The provisions of the CISG as a whole con-
3. The problem posed by technological
cerning its sphere of application triggers important issues in
advancement in contract formation under CISG
relation to the international sale contracts concluded by elec-
tronic means. Drafters of the Convention aimed at setting the
limits to the application of the CISG relying on traditional legal The sharp development of communication technology plays
concepts that may cause certain difficulties if applied in the a significant role in the change of business conduct which re-
international sale contracts concluded by electronic means of quires the development of new regulations to govern business
communication. relations. The development of new legal rules is significantly
The draft history of Article 13 indicates that two forms of slower compared to the evolution of communication technol-
‘writing’ requirement were suggested by German delegates in ogy. Therefore, any legislation that provides legal solutions for
the CISG Working Group.18 The motive behind these two dis- the involvement of any particular technological advance-
tinct forms of ‘writing’ to be included in the Article 13 was to ment may soon become obsolete following technological
provide options to the reserving States which have a domes- development. Consequently, a generic approach should be pre-
tic ‘writing’ requirement for the modification, rescission, or ferred in the process of developing legal rules. A similar
conclusion of a contract.19 Telegram and telex were not in- approach should be taken to provide legal solutions to the issues
cluded in the earlier draft as Dr. Peter Schlechtriem indicated arising from ecommerce contract in relation to the scope of
they were probably included in the final draft of Article 13 based application of the CISG. The following sections will examine:
on the provision of the Limitation Convention.20 Article 1(3) (g) (i) the function and role of communication technology in
of the said Convention provides “in this Convention ‘writing’ ecommerce contract and (ii) the challenges of these technolo-
includes telegram and telex”. gies that create some problems under the CISG.
Therefore, including telex and telegram would remove am-
biguity in relation to the ‘writing’ requirement in the formation 3.1. The function and role of communication technology
of contract. Article 13 of the CISG can be compared to Article in ecommerce contract
1.10 of the UNIDROIT principles which define writing as any
mode of communication that preserves a record of the infor- The scope of application of the CISG will be discussed broadly
mation contained therein and is capable of being reproduced in two different groups based on the available technologies that
in tangible form.21 The use of UNIDROIT Principles helps to in- play a role in the transaction. The first group comprises tech-
terpret Article 13 of the CISG which suggests that it was nologies that help the parties to communicate with each other,
included to achieve a uniform objective standard for form re- i.e., technologies that are used only to permit two parties to over-
quirements in the international sale contract. The drafters come the distance between them and interact with each other.25
inserted this to avoid the higher standard of requirements from The second group comprises technologies that play a direct role
domestic laws.22 Much of the CISG was based on the provi- in the formation of the sales contract, i.e., technologies that help
sions of 1964 Hague Conventions (ULF and ULIS). However, there to conclude a contract without human intervention.
is no such provision as Article 13 of the CISG in the Hague Con- The first category of communication technologies com-
prises the non-instantaneous and instantaneous means of
17
communication technologies. There is a slight delay before a
Article 13 of the CISG.
18 message becomes available to the recipient by the use ofnon-
Peter Schlechtriem, Uniform sales law, the UN Convention on
Contracts for the International Sale of Goods (manzche verlags 1986), instantaneous means of communication technologies.26 The
p. 34–47. Available at <http://www.cisg.law.pace.edu/cisg/ impact of those communication technologies in ecommerce
biblio/schlechtriem.html> (last visited 19 September 2015). contracts is similar to regular mail. For example when an email
19
Ulrich G. Schroeter, ‘Interpretation of “Writing”: Comparison is sent it might take some time to become available to the re-
between provisions of CISG (Article 13) and counterpart provi- cipient. This is because an email is delivered to the recipient
sions of the Principles of European Contract Law’ (2002 Pace Law
School Institute of International Commercial Law Jul.) p. 17 at
<http://www.cisg.law.pace.edu/cisg/text/peclcomp13.html#er> (last 23
U.N. Convention on Contracts for the International Sale of Goods,
visited on 19 September 2015). 33rd meeting, Apr. 2, 1980, U.N. Doc. A/Conf.97/C.1/SR.33 (on file with
20
Convention on the Limitation Period in the International Sale author); see Honnold, p. 109.
24
of Goods, 14 June 1974, U.N. Doc. (A/CONF.63/17), amended by a Pro- See Honnold, p. 109; UNCITRAL, 6th Plenary Meeting, U.N. Doc.A/
tocol amending the Convention on the Limitation Period in the Conf.97/SR.6/Doc C (7) (Apr. 8, 1980).
25
International Sale of Goods (A/CONF.97/18, Annex II); Peter Francisco Duarte, Suzana Dantas Hecksher, ‘The role of infor-
Schlechtriem, p. 17–20. mation technology in small and medium enterprises in the Brazilian
21
Article 1.10 of the UNIDROIT Principles of International Com- oil offshore industry’ (2012) Vol. 43, Issue 3, p. 285.
mercial Contracts (1994); <http://www.cisg.law.pace.edu/cisg/ 26
Fernando Gava Verzoni, ‘Electronic Commerce and the UN Con-
principles/uni13.html> (last visited 19 September 2015). vention on Contracts for the International Sale of goods (CISG)’
22
Peter Schlechtriem, p. 34–47. (2006Nordic Journal of Commercial Law), p. 3.

Please cite this article in press as: Assaduzzaman, Legal issues in the application of CISG in online sale (e-commence) contracts, Computer Law & Security Review: The
International Journal of Technology Law and Practice (2016), doi: 10.1016/j.clsr.2016.07.012
 ARTICLE IN PRESS
4 computer law & security review ■■ (2016) ■■–■■

through a third-party server.27 On the other hand, messages Commercial communication was previously made through
sent through instantaneous means of communication technolo- traditional letter and telephone which is now mostly re-
gies become available to the recipient at the moment of placed by electronic means of communication. In this
transmission e.g., voice transferring system and text messag- instantaneous means of communication, where face-to-face
ing system.28 interaction is non-existent, as opposed to traditional methods,
The second category of the communication technologies it falls somewhere between the traditional letter and
comprises the technologies based on a human + machine in- telecommunications. 31 When parties proceed with their
teraction and Machine + Machine interaction.29 In such a offer and acceptance it is instantaneously transmitted to the
situation where one of the parties interacts with an informa- respective parties.32 If there are any mistakes in the commu-
tion system, a buyer makes an offer to buy certain products nication it is difficult to identify, particularly when a party relied
from the seller and an information system (fully working on the contract.33
website) on behalf of the seller, accepts the buyer’s offer. It also This is even harder when the online contract is made by
includes interactions between two interactive communica- computer programs and without human intervention, e.g.,
tion technologies operating from both sides, where an making an online order of a large quantity of goods for com-
information system (i.e., any communication technology that mercial purpose from an online seller such as Alibaba.com or
can be used to access the internet) on behalf of the buyer makes amazon.com where a customer places an order which is im-
an offer and an information system (fully working website) on mediately processed and delivery confirmed.34 Electronic
behalf of the seller accepts the offer. In this case, the buyer communication technology made distance sale and pur-
will by himself issue a data message indicating his intention chase easier which is less formal compared to formal interaction
of being bound by an agreement and an information system with paper contracts between buyer and the seller. This has
on behalf of the seller will issue a reply indicating his inten- created difficulties in providing remedies where there is a con-
tion to be bound. tractual dispute between the parties. Therefore, a uniform
In this section we have seen the function and role of elec- system of remedies is needed for all disputes in interna-
tronic communication technologies in the ecommerce contract. tional online sales contracts. Remedies provided under the CISG
The following section will examine the challenges of these tech- for international sales contracts are meant to be fairly appli-
nologies that create problems in the formation of contract under cable to all relevant jurisdictions.
the CISG. The sphere of application of the CISG involves two differ-
ent business phenomena, one of which is the international sale
3.2. The challenges of these technologies that create some of intangible goods such as software35 (software as goods are
problems under the CISG discussed in detail in Section 4.1) and the other is electronic
means of entering into contracts such as email, online order,
Speed and automation are the two most problematic issues
in the formation of an electronic contract. This is because the
above-mentioned two issues increase the possibility of error
31
and the parties’ reliance on online contract before rectification.30 Grace Li, ‘What we know and what we do not know – the legal
challenges for international commercial contract formation in a
pervasive computing environment’ (2011) Vol. 4, Issue 2 Interna-
tional Journal of Private Law, p. 257; Siegfried Eiselen, ‘Electronic
27
An email is sent by the sender and connects to a Simple Mail Commerce and the UN Convention on Contracts for the Interna-
Transfer Protocol server as configured in her email client or Mail User tional Sale of Goods (CISG) 1980’ (1999) 6 EDI L. REV. p. 21, 22,
Agent. On the SMTP server, a Mail Transfer Agent looks at the re- available at <http://www.cisg.law.pace.edu/cisg/biblio/eiselen1.html>
cipient address and looks up the domain part of the address to (last visited 10 December 2015).
32
determine its destination. After querying a Domain Name System Grace Li, p. 259; Ghazi A. Al-Weshah, ‘The role of internet banking
server for the name of the Mail exchanger for the recipient’s domain in continuous improvement area: quantitative evidence from Jor-
name. The SMTP server will send the message to that server via the danian banks’ (2013) Vol. 14, Issue 2, International Journal of Business
SMTP protocol.The receiving server will store the message and make Performance Management, p. 189; Preston Gralla, ‘How The Inter-
it available to the recipient, who can access it via his email account. net Works’ (Karen Reinisch ed., 4th ed. Que Publishing 1998) p. 205.
28 33
There are different technologies to broadcast human voice over Jean Eaglesham, ‘A Troubled Deal on the Internet’ (FIN. TIMES, Feb.
the Internet, all of them are called Voice over Internet Protocol 11, 2002). available at 2002 WL 3306015 (last visited 10 December
(“VoIP”) e.g., “Skype”, “hangout”, “WhatsApp”, “IMO” and “Viber” 2015).
34
“Facebook Messenger” etc. All kinds of teleconference technolo- Preston Gralla, p. 205, 207.
35
gies can be included in this category even those that do not use Organised information in the form of operating systems, utili-
the Internet to broadcast audio and video. ties, programs, and applications that enable computers to work.
29
Michael Johnson, ‘Industrial e-market adoption: an explor- Software consists of carefully-organised instructions and code
atory study of organisational change issues’ (2010) Vol.4, Issue 6 written by programmers in any of various special computer lan-
International Journal of Business Innovation and Research, guages. Software is divided commonly into two main categories:
p. 536. (1) System software: controls the basic (and invisible to the user)
30
Christina Hultmark Ramberg, ‘The E-commerce Directive and functions of a computer and comes usually preinstalled with the
Formation of Contract in a Comparative Perspective’ (2001), 1 machine. See also BIOS and Operating System. (2) Application soft-
GLOBAL JURIST, Iss. 2, art. 3. at <http://www.bepress.com/gj/ ware: handles multitudes of common and specialised tasks a user
advances/vol1/iss2/art3> (last visited 10 December 2015); Gertraud wants to perform, such as accounting, communicating, data pro-
Peinel, Matthias Jarke, Thomas Rose, ‘Business models for cessing, word processing. <http://www.businessdictionary.com/
eGovernment services’ (2010) Electronic Government, an Interna- definition/software.html#ixzz4AuO1WcLk> (last visited on 07 June
tional Journal, Vol. 7, Issue 4, pp. 386. 2016).

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International Journal of Technology Law and Practice (2016), doi: 10.1016/j.clsr.2016.07.012
 ARTICLE IN PRESS
computer law & security review ■■ (2016) ■■–■■ 5

video conference, fax and telex.36 These methods of elec- in today’s information economy.45 However, online transac-
tronic communication in business and sale of intangible goods tions in international sales generate uncertainty in international
are considered to be a wider part of electronic commerce37 legal and business environments because the law is slow to
which contributes to the improvement of international sales. respond to new technologically advanced electronic contracts.46
Under this process goods can be displayed in wider markets,38 Most of the domestic Sales of Goods Acts include regulation
consequently, transaction costs can be reduced.39 Concur- about paper-based contracts.47 Domestic laws are inadequate
rently, international sales comprise challenges in relation to to cover all the legal requirements of e-commerce related
transactions which fall under unfriendly jurisdictions involv- issues.48 Domestic contract law can be a solution in interna-
ing complex legal scrutiny where parties have no intention of tional sales agreements because it provides certainty for the
doing business.40 However, businessmen and women prefer to interpretation of promises, agreements, and their enforcement.49
enter into online contract to avoid traditional methods which Therefore, a uniform law such as CISG bridges the gap between
may cause delay and involve legal obstacles in countries where online transactions and traditional contract formation in re-
the business showroom needs to be established, while the In- gional and global markets as a whole.50 However, the only
ternet allows business to be conducted freely across the border.41 indication about recognition of online contracts can be found
Ecommerce is a relatively new method of international trade, in the CISG under Articles 11 and 13 of the Convention which
but it does not exist in lawless cyberspace.42 There are many provides the foundation to explain the Convention’s intent of
new technologies used to facilitate international sales which gap filling in relation to electronic contracts.
are not covered by traditional legislation dealing with trans-
actions. In the course of time most nations have enacted
domestic cyber laws which deal with matters related to elec-
tronic contracts. Furthermore, legislators are challenged to 4. Scope of application
develop a flexible framework to protect traditional contract law
while recognising and expanding it to include technology’s The sphere of application of the CISG in contracts of interna-
borderless capabilities and maintain integrity for all legal players tional sales of goods is governed by Part I of the Convention
such as legal academics, judges, lawyers, legislators, and busi- which explains its scope and general provisions. The Conven-
ness folk.43 The very first initiative toward establishing a legal tion provides reasonable certainty to the parties in international
foundation for electronic commerce is to remove the barriers sales contracts as to their respective legal rights and obliga-
for international parties entering into contract using elec- tions. The CISG clearly excludes sale of consumer goods and
tronic communication technologies. Among the barriers the sale of goods by auction; on execution or otherwise by author-
most apparent one is found in laws that require paper-based ity of law; of securities; ships and aircraft; and of electricity.51
contracts.44 Article 6 provides a choice to the parties under the principle
Paper-based contracts in modern business are still very of party autonomy to exclude the application of the CISG or
popular, which poses a challenge to the conduct of business to derogate some of its provisions with the exception stated
in Article 12, which can be considered as defining the scope
of application of the CISG. On the other hand, Articles 4 and
36 5, by excluding some issues from the scope of application of
See Siegfried Eiselen, p. 21; Daniel K. Winters, ‘Courts Struggle
with the Application of Contract Law to Internet Transactions: When the CISG, deal with the extent to which it is applicable.52 The
Software is Purchased Online, and No One is There to See It, Did scope of application of the CISG depends on the fundamen-
the Parties Enter a Contract?’, (2002) N.J.L.J. p. 1. tals related to the parties and their connection to a Contracting
37
See Siegfried Eiselen, p. 21. State of the CISG in the first place and to the international sales
38
See generally Preston Gralla, p. 2. See also Siegfried Eiselen, contracts performed by the parties. For the application of the
p. 22.
39
Jeffrey B. Ritter & Judith Y. Gliniecki, ‘International Electronic
45
Commerce and Administrative Law: The Need for Harmonized Na- See generally Nichols, p. 1390–91.
46
tional Reforms’ (1993) 6 Harv. J.L. & Tech. p. 263; Alejandro Cadenas, Randy V. Sabett, International Harmonization in Electronic Com-
Carlos Baladron, Javier M. Aguiar, ‘Intelligent context retrieval and merce and Electronic Data Interchange: A Proposed First Step Toward
management for services in the internet of Things’ (2013) Vol. 13, Signing on the Digital Dotted Line, (1996) 46 AM. U. L. REV. p. 511,
Issue 3–4, International Journal of Ad Hoc and Ubiquitous Com- 513.
47
puting, p. 221. English Sale of Goods Act 1979; Indian sale of Goods Act 1930;
40
Christopher T. Poggi, ‘Electronic Commerce Legislation: An Analy- Malaysian Sale of Goods Act 1957.
48
sis of European and American Approaches to Contract Formation’ See Daniel K. Winters, p. 3.
49
(2000) 41 VA. J. INT.L L. p. 225. Philip M. Nichols, p. 1393.
41 50
Preston Gralla, p. 244. Zheng Sophia Tang, ‘Non-state law in party autonomy – a Eu-
42
Philip M. Nichols, ‘Electronic Uncertainty within the Interna- ropean perspective’ (2012) Vol. 5, Issue 1 International Journal
tional Trade Regime’ (2000) 15 AM. U. INT.L L. REV. p.1379, 1393. See of Private Law, p. 35; James J. Callaghan, ‘U.N. Convention on
also Michael Joachim Bonell, ‘Do We Need a Global Commercial Contracts for the International Sale of Goods: Examining the
Code?’ (2001)106 DICK. L. REV. p.87, 94. Gap-Filling Role of CISG in Two French Decisions’ (1995) 14 J.L. &
43
See generally Christopher T. Poggi, p. 226. COM. P. 183.
44 51
Patricia Brumfield Fry, ‘Introduction to the Uniform Electronic Article 2 of the CISG.
52
Transactions Act: Principles, Policies and Provisions’ (2001) 37 Idaho Franco Ferrari, ‘Scope of Application: Articles 45, in Draft
L. Rev. p. 237, 242; Haoyu Wen, Kai S. Koong, Lai C. Liu, ‘Some ob- UNCITRAL Digest and Beyond: cases, analysis and unresolved issues
servations on the US e-commerce trade statistics’ (2015) Vol. 10, in the U.N. Sales convention 96’ (2004 Franco Ferrari et al. eds.,
Issue 3, International Journal of Services and Standards, p. 156. Munich, Sellier).

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6 computer law & security review ■■ (2016) ■■–■■

CISG, parties to the contract must be from different contract- the sale of goods, between parties who are located in differ-
ing States to the CISG. The Convention may also be applied if ent contracting States to the Convention or in a transaction
a State has adopted CISG into its domestic law.53 where the respective countries are not State parties to the Con-
The Convention allows parties to enter into contracts based vention and where the rules of private international law
on CISG’s default rules by selecting domestic law, rules of private governing the contract lead to the application of the law of a
international law, or specific sections therein.54 This can be ex- Convention State. In most cases the third criterion is the one
pressly accepted or rejected if it is permitted by the domestic most litigated in practice which is going to be a crucial point
law.55 Parties are allowed to opt-in to the CISG when their trans- to examine in e-commerce transactions.
action falls outside the Convention’s scope.56 Additionally, the The term ‘goods’ is not defined in the CISG; however, it is
CISG can also be applied in their transactions according to the usually equated with ‘things’ or ‘objects’ and it would seem
rules of lex mercatoria, based on the principles of commercial that the subject of an international sale must be a moveable
law developed throughout time immemorial by merchants.57 tangible thing, i.e., a thing which can be transferred from one
However, if parties would like to opt-out of the application of place to another by a carrier or other medium, although not
the CISG to their contract, it has to be expressly mentioned necessarily by a ‘physical’ medium.60 The criterion of tangi-
in their international sales contract, favouring a choice bility is crucial for determining whether the object in question
of law provision instead of or in place of the CISG.58 The fol- is ‘goods’. This notion has played a significant role in the current
lowing section will examine whether the scope of application ongoing debate as to whether software is considered as ‘goods’
of the CISG can be extended to the large-scale online sales and it has even been stated that tangibility is the “stumbling
contract. block” to the classification of goods.61 Traditional Sale of Goods
legislation in most of the established jurisdictions including
4.1. Subject-matter, territorial and personal sphere of the CISG was drafted long before e-commerce was devel-
application and e-commerce oped, which has led to conceptual difficulties.62 Whether
software can be categorised as ‘goods’ under the Sale of Goods
According to Article 1 the application of the CISG depends on Act is a question the Supreme Court of New South Wales
the international character of the transaction, and does not decided positively in a case where computer hardware and
apply to domestic transactions. Thus, the Convention applies software were delivered together.63 However, in considering
to transactions that meet three main requirements namely, (i) whether pure software would be considered ‘goods’, Sir Iain
contracts for the sales of goods, (ii) international contracts and Glidewell has held that where the software was provided on
(iii) their relationship to the Convention. The essential crite- a physical medium such as a CD the provisions of English
rion for the territorial and personal applicability is the place Sale of Goods Act would apply, but without the disc they would
of business of the contracting parties. The nationality of the not.64
seller or buyer is irrelevant in determining the application of There are different opinions regarding ‘goods’ under the CISG
the CISG.59 The transaction has an international character where by the courts and the commentators as to the tangibility and
the parties have their places of business in different States at intangibility dichotomy. Some commentators are of the opinion
the time of the conclusion of the contract. These States may that CISG only governs tangible goods.65 The Koln Court of
not necessarily be Contracting States to the CISG. Therefore, Appeal ruled that custom-made software was not tangible and,
it must be shown that the transaction involves a contract for on that basis, implied that it was not goods within the meaning
of the CISG.66 This decision seems to be giving priority to the
53
B. Zeller, ‘Uniformity of laws: a reality or just a myth?’ (2009) “form over substance, effectively making the package more
Vol. 2, Issue 1 International Journal of Private Law p. 11; Thomas
J. Drago and Alan F. Zoccolillo, ‘Be Explicit: Drafting Choice of Law
Clauses in International Sale of Goods’ (2002) metro. Corp. Couns.
60
9 (col. 1), WL 5/02 METCC 9 (col. 1). Hiroo Sono, The Applicability and Non-Applicability of the CISG to
54
Article 6, 12, 96 of the CISG. Software Transactions (Wildy, Simmonds & Hill Publishing 2009) 512;
55
Goril Hannas, Otto Andersen, Arnt Buvik, ‘Electronic com- Lookofsky, J, Kob, Commentary on the UN Convention on the Interna-
merce and governance forms: a transaction cost approach’ (2010) tional Sale of Goods (CISG), (Oxford 1998), p. 23.
61
Vol. 3, Issue 4, International Journal of Procurement Management Sarah Green & Djakhongir Saidov, ‘Software as Goods’ (2007)
p. 412; See Jan Ramberg, International Commercial Transactions (2nd Sweet & Maxwell Limited Contributors 161; L. Longdin, ‘Liability
ed., Kluwer Law International 2000); See also P. Schlechtriem, p. 34. for Defects in Bespoke Software’ (2000) 8 Int’l J L Information Tech-
56
Zheng Sophia Tang, p. 38; Marcus G. Larson, ‘Comment, Apply- nology. p. 11.
62
ing Uniform Sales Law to International Software Transactions: The Eden, P. (2000). ‘Electronic Commerce – Law and Policy’, (Walker, C.
Use of the CISG, Its Shortcomings, and a Comparative Look at How Wall, D. & Akdeniz, Y. eds, The Internet Law and Society Harlow,
the Proposed UCC Article 2B Would Remedy Them’ (1997) 5 Tul. J. Pearson Education), p. 352.
63
Int. L & Comp. L. p. 466. Joseph Lookofsky, Understanding the CISG (Wolters Kluwer 2008)
57
Louis F. Del Duca & Patrick Del Duca, ‘Selected Topics under the 19; Toby Construction Products Pty Ltd v Computa Bar (Sales) Pty [1983]
Convention on International Sale of Goods’ (2001) 106 Dick. L. Rev. 2 NSWLR 49.
64
p. 207; Zeeshan Mansoor, ‘Principles of European contract law: an St Albans City and District Council v International Computers Limited
autonomous lex mercatoria or part of a universal lex mercatoria?’ [1996]4 All ER 481 (CA).
65
(2013) Vol. 6, Issue 1 International Journal of Private Law p. 33. Joseph Lookofsky, p. 20; F. Ferrari, ‘How to Create One Uniform
58
Thomas J. Drago and Alan F. Zoccolillo, ‘Be Explicit: Drafting Contract Law’ (2001) 5 Vindobona J Int’l Commercial L Arbitration
Choice of Law Clauses in International Sale of Goods’ (2002) Metro. 3 at p. 1819.
Corp. Couns. P. 9. 66
Appellate Court Köln, August 26, 1994 (Germany) at <http://cisgw3
59
Article 1 (3) of the CISG. .law.pace.edu/cases/940826g1.html>.

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important than the contents”.67 In contrast, the Koblenz Court Nevertheless, determining the applicability of the Conven-
of Appeal took a much more liberal approach by stating that tion, proof of internationality itself is not adequate. The sphere
the notion of ‘goods’ under the CISG includes all tangibles and of application is either the requirement under Article 1 (1) (a)
intangibles that might be the subject of an international sales or Article 1(1) (b) that shall be complied with. Article 1(1) (a)
contract.68 Looking beyond these inherent restrictions, however, provides that the Convention can be directly applied where the
there is good reason to understand the CISG notion as broadly parties have their places of business in different contracting
as possible, so as to cover all moveable and not just ‘corpo- States to the Convention without any regard to the conflict of
real’ things.69 For this and other reasons, most commentators laws’ rules of the forum.74 In other words, the Convention must
argue that the Convention should at least apply to sales of stan- be in force in the jurisdictions where the parties have their
dard computer programs such as software, even though the places of business. Certainly, the Convention, as a uniform law
intangible content of a tangible compact disk is protected by of international sales, trumps the conflict of laws rules of the
an intangible property right.70 My primary submission on Forum State and therefore, once its applicability require-
this point is that the legal notion of tangibility be extended ments are met, it will govern the issue directly.
in order to recognise software as ‘goods’ under the meaning Besides the requirement of apparent internationality of the
of the CISG. parties, there are two concepts that trigger difficulties in the
The international character of the transaction is not suf- sphere of application of the CISG in international online sales
ficient to trigger the automatic application of the CISG. The contracts. These are the ‘place of business’ and ‘parties’. De-
subject matter of the contract must also have a sufficient con- velopment of electronic means of communication enabled the
nection to a Contracting State. This connection can be fulfilled parties to engage with anyone in any part of the globe without
in two ways: (a) sufficient connection is given when the places knowing the exact location of the parties. This may therefore
of business of the parties are each located in different Con- raise concerns regarding the sphere of application of the CISG.
tracting States.71 If both parties have their places of business Questions may be raised as to: (a) the location of the man-
in different Contracting States, the CISG is applicable without agement office of the seller who operates their business through
reference to any further requirements; (b) application is ex- a fully working interactive website on the internet or (b) where
tended in Article 1(1) (b) of the CISG, which provides that a an interactive website accepts orders and sends replies without
contract with international character is governed by the CISG human collaboration, will that be considered as a party to the
when the rules of private international law of the Forum State contract under CISG? And (c) there is the question of the ap-
lead to the application of the law of a Contracting State. As men- parent ‘internationality’ of the parties to the contract since they
tioned above, Singapore, the USA, Slovakia, the Czech Republic, cannot be sure as to whether the other party is someone living
and China have excluded the application of Article 1(1) (b) of next-door or in a different country.
the CISG by the declaration allowed in Article 95. If the location of the management office of the online seller
When a CISG related case is brought to the court of a con- is found to be in a non-Contracting State and the buyer is from
tracting State to the Convention, the court will first look at the a contracting State the CISG is indirectly applicable to the con-
internationality of the contract for the application of the tract of international sale of goods by virtue of conflict of laws
Convention.72 Under the CISG definition, internationality is de- rules provided by Article 1 (1) (b) of the Convention. However,
termined solely based on the parties’ places of business which there is no issue in relation to this provision regarding con-
has to be in a different contracting State. It is required under tracts for international sales of goods concluded by electronic
the Convention that the transaction is international at the time means of communication. In most cases it depends on the con-
of the conclusion of the contract.73 In the CISG there is no necting factors used by the principle of private international
express definition of “place of business”. However, the only pro- law of the forum States. Contracts concluded by using elec-
vision that provides guidance to determine the parties’ places tronic means of communication might impose numerous
of business is Article 10, but it is only applicable to the situ- complications,75 but those connecting factors are determined
ations where one of parties has multiple places of business. and qualified according to the criteria of national laws76 and,
According to the provision if a party has more than one therefore, application of the CISG will depend on domestic
place of business the pertinent place of business is that laws.77
which has the closest connections to the contract and its
performance. 4.2. Application of the CISG in e-commerce contracts

The CISG does not have any form requirements; therefore, in-
ternational sales contracts need not to be concluded in writing.
67
Bradgate, ‘R. Consumer Rights in Digital Products’, BIS Report
74
p. 41. F. Ferrari, Contracts for International Sale of Goods (2012 Nijhoff Pub.)
68
Appellate Court Koblenz, September 17, 1993 (Germany) at 40; Peter Winship, ‘Private International Law and the U.N. Sales Con-
<http://cisgw3.law.pace.edu/cases/930917g1.html>. vention’ (1988) 21 Cornell Int’l L.J. p. 520.
69 75
F. Ferrari, Contracts for International Sale of Goods (2012 Nijhoff Pub.) Matthew Burnstein, ‘Note, Conflicts on the Net: Choice of Law
p. 126. in Transnational Cyberspace’ (1996) 29 Vand. J. Transnat’l l. p. 75.
70 76
RXX Industries, Inc. v. TEKA, 722 F.2d 543 (9th Cir. 1985); Advent See Franco Ferrari, p. 293.
77
Systems Ltd. v. Unisys Corp., 925 F.2d 543 (3rd Cir. 1991). Hamburg Chamber of Commerce Court of Arbitration, March 21, 1996,
71
Article 1(1) (a) of the CISG. MDR 1996, 778 = RIW 1996, 766; OLG Cologne, RIW 1994, 972; OLG
72
Article 1(1) of the CISG. Düsseldorf, RIW 1993, 325; ICC Arbitration Case No. 6653/1993, JDI 1993,
73
Article 1(2) of the CISG. 1040.

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 ARTICLE IN PRESS
8 computer law & security review ■■ (2016) ■■–■■

Article 13 of the Convention defines writing, but does not con- 13 are thus complemented by Article 20, which expounds assent
strue statements made by the parties to the contract either methods to accommodate new forms of communication. Fur-
expressly or impliedly.78 International sales contracts under the thermore, the UNCITRAL thesaurus provides that the terms of
CISG can be either in writing, orally or evidenced by conduct Article 13 of the CISG comply with the requirement of writing
as long as it can be established by any means such as docu- in Article 21(2) and 29(2) as instantaneous means of commu-
mentary evidence including witnesses and video footage.79 nication recognised as writing.87
Drafters of the Convention intentionally excluded ‘form re- Today’s software-based programme of standard forms fa-
quirements’ so as to provide greater flexibility to the parties cilitating international sale transaction also falls under the
in international sales contracts to facilitate the use of modern ambit of Article 13 of the CISG. At the initial stage parties de-
communication technology and engaging in oral agreements.80 termine what kinds of documents they need to exchange
This Article also helps parties to international sales con- electronically for their transaction. These pre-agreement ne-
tracts to avoid rigid requirements under domestic laws, which gotiations witness that the parties would like to enter into a
are often stricter.81 contract.88 These communications can be stored and be printed
Draft history does not provide an explanation about form if needed by the parties in the future.89 The scope of applica-
requirements in the CISG; nonetheless Article 13 of the CISG tion of electronic communication technology under Article 13
was inserted to support two other Articles on acceptance. These is also supported by the Principles of European Contract Law
are Article 21(2) and Article 29(2) and both the Articles indi- (PECL).90 A similar provision to Article 13 can be found in the
cate diverse forms of writing.82 Although the CISG does not have Principles of European Contract Law91 which are silent about
any form requirement, Article 13 was introduced to empha- electronic means of communication but provide for the pro-
sise that telex and telegram are acceptable methods of writing83 duction of readable records from both parties. 92 Today’s
because they are recognised in Article 11 of the CISG. These electronic communication technology, used in international
two means of electronic communication technology (telex and sales contracts, is more reliable than telegram and telex. There-
telegram) were included in the Convention in the late 1970s fore, it should be covered by the ambit of Article 13 of the CISG.93
because they were the only existing faster communication Consequently, electronic mail creates no difference in terms
methods at the time to facilitate international sales contract.84 of printed documentation compared to fax because it can be
Subsequent quicker forms of communication often needed re-printed when needed.94 Sometimes there are attachments
more rapid decisions in international contracts and telex and in the email which are stored by both parties’ system, i.e., by
telegram were the only technologies to serve that purpose at the sender and recipient. Thus, e-mail fulfils the Article 13 stan-
that time. dard for writing as a standard format and for Article 21(2) and
Article 13 of the Convention establishes the foundation of 29(2) modifications. Agreements which are formed online are
acceptance of an offer which is laid down in Article 20. Thus, known as ‘Clickwrap agreements’, and also fall under the ambit
the reference to telex and telegram stated in Article 13 con- of Article 13 because such agreements enable parties to the
tributes two striking points in Article 20. The telegram is contract to communicate by clicking a mouse to affirm the con-
considered to be the equivalent to the postal rule in which the tract of sale. In this process parties have similar capabilities
time of acceptance starts from the time of dispatch85 and the of referring back to the documents or printing the record of
telex is considered to be the equivalent to instantaneous means their transactions.95
of communication such as telephone.86 Specific inclusion of
these two writing media such as telex and telegram in Article

87
UNCITRAL Outline of the CISG [The UNCITRAL Thesaurus] (A/
CN.9/SER.C/GUIDE/1 English 12 September 1995), Available at
78
Ulrich G. Schroeter, p. 17. <http://www.cisg.law.pace.edu/cisg/text/cisgthes.html#13> (last
79
Article 11 of the CISG. visited 02 October 2015).
80 88
Charles H. Martin, ‘The Electronic Contracts Convention, the CISG, Ulrich G. Schroeter, p. 17.
89
and New Sources of E-Commerce Law’ (2008) Vol. 16, No. 2, Tulane Vision Design Group, ‘How Does email works? A sample (illus-
Journal of International & Comparative Law 37; see Jacob S. Zeigel, trated) Explanation’, (2015), Available at <https://www.visiondesign
‘Report to the Uniform Law Conference of Canada on Convention .com/how-does-email-work-a-simple-illustrated-explanation/> (last
on Contracts for the International Sale of Goods’ (1981 Pace Law visited 02 June 2016); Phyllis k. Sokol, From EDI to Electronic Com-
School Institute of International Commercial Law Jul.), available at merce: A Business Initiative (Marjorie Spencer ed., 1995).
<http://www.cisg.law.pace.edu/cisg/text/ziegel11.html> (last visited 90
Commission on European Contract Law, Principles of Euro-
01 September 2015). pean Contract Law (PECL).
81 91
Peter Schlechtriem, p. 17. Article 1:301(6) of the Principles of European Contract Law.
82 92
Article 21(2), 29(2); See also Honnold, p. 109. Ulrich G. Schroeter, p. 18; Article 1:301(6) of the Principles of Eu-
83
Article 11; Honnold, p. 109. ropean Contract Law is often comparable to CISG Article 13 because
84
Legislative History of 1980 Vienna Diplomatic Conference, avail- it provides similar terms for writing and does not include docu-
able at <http://www.cisg.law.pace.edu/cisg/chronology/chrono13 ment interpretation.
93
.html> (last updated 01 September 2015). Ulrich G. Schroeter, p. 19; Telegram and telex were probably ac-
85
McDermott, P. Contract Law (2001 Butterworths/LexisNexis) p. 49; cepted as methods to fulfil the writing requirement without further
M. P. Furmston. Cheshire, Fifoot & Furmston’s Law of Contract (14th debate because it was drafted from the UNCITRAL Convention on
ed., Butterworths Ltd, Dublin, 2001) p. 58. the Limitation Period of 1974 (Article (1)(g)(3)).
86 94
Wolfgang Hahnkamper, ‘acceptance of an offer in light of elec- Preston Gralla, p. 205.
95
tronic communications’ (2005–2006) vol. 25 journal of law and See Jan Ramberg, International Commercial Transactions (2nd ed.,
commerce p. 147. Kluwer Law International 2000).

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CISG has particular relevance. Article 10(a) covers situations

5. Concept of cyberspace as place of business in which parties have more than one place of business. However,
in e-commerce in relation to the CISG the place of business is the one which
is most closely related to the formation of contract and its
In today’s competitive business world most successful mul- performance.102 Where the parties know that the contract is
tinational corporations sell their products through interactive to be performed at a place of business different from the place
websites in cyberspace to facilitate international customers. of conclusion of the contract, the text of Article 10(a) sug-
In online sales the purchasers are not really concerned about gests that the relevant place of business is the one where
the location of the administration of the website, but they are performance of the contract takes place. In relation to this
concerned about receiving the goods. In relation to the sphere context Article 10(a) is particularly relevant to international sales
of application of the CISG to determine the location of busi- contracts entered into by means of electronic communica-
ness website for online sales, this would be the location of tion where the party has more than one place of business and
business premises for ordinary business contracts under the the determination of the place of business is controversial.
CISG. However, there is no express definition of places of busi- Therefore, even if one finds that the elements of the defini-
ness in the Convention regarding the corporations that are tion of place of business are met for all the possible places of
involved in online sales. Nevertheless, an autonomous defi- business, Article 10(a) will be applicable to determine the rel-
nition of place of business can be derived from the CISG without evant place of business.
referring to domestic law, as an approach that will enhance Based on the Article 10(a) of the Convention, the circum-
the CISG’s unification effort in international sale contracts. stances pertinent to determining whether the place of business
The approach of determining the places of business for each accomplishes the requirements of the provision depends on
party is to be done on an individual basis. Nonetheless, there the situations contemplated by the parties at any time before
are some indications found in the CISG.96 These indications or at the conclusion of the contract. It can be inferred that the
can be referred to in the purposive approach of Article 197 of relationship with the formation of contract and particularly
the Convention, as well as in its context in the Convention, with its performance in Article 10(a) depends on the substan-
specifically in relation to what Article 10(a) delivers. It is almost tial real connection of the contract instead of its formality and
established by precedent that place of negotiation and the place abstract. Therefore, determination of place of business in online
where the contract is concluded are not significant for that defi- sales contracts under the meaning of Article 1 and 10 of the
nition. Court practice shows that the location should be a CISG is the actual place of business, the place where the func-
permanent business operations office of the corporation and tion of the business is conducted. What matters is not the head
not the place where only preparations for the conclusion of office, but the place from which the transaction is to be
the single contract have been made.98 Beside the concept of performed.103
permanent place of business, the independent character of the
places of business is essential.99 For example, independent place
of business means the place where the functions of the busi- 5.1. Identifying the place of business in ecommerce
ness are carried out, such as concluding contracts with other
parties. 100 It was held by a German court in the case of Ecommerce transactions are not fundamentally different from
Oberlandesgericht101 that a place is to be considered to be a place regular traditional business transactions. Both have some es-
of business where the party conducts its business, i.e., it shall sential requirements. When a business corporation has some
not be a temporary place of business and it has to be autono- product and services to offer it should identify a place from
mous.The court ruled in this case that a Spanish representative where the business is to be conducted. In the traditional method
of a German seller “did not possess an independent authority of business conduct this can be a physical store or, in a more
to act in the form of power to decide upon and close a deal”, rhetorical sense, a catalogue containing the description of prod-
since “negotiations concerning the formation of a contract, prices, ucts or services and the address of the business corporation.
delivery periods and remedies had to be held with the seller”. Similarly, in e-commerce business practice the official website
In relation to contracts performed by electronic means of of the corporation displaying goods and services is consid-
communication, the principle laid down in Article 10(a) of the ered to be the place of business. This website needs to be
registered in a country where the company is incorporated,
sometimes called domain name registration.104 Most estab-
96
See Franco Ferrari (2016), p. 21, 27. lished business corporations operating within present
97
See Schlechtriem & Schwenzer, (2016) p. 36. Erik Jayme, Article international trade practice have their official website beside
1, in Biancabonell Commentary on the International Sales Law (Cesare their traditional places of business.
Massimo Bianca ed., Milan, Giuffrè, 1987) p. 27, 30.
98
Oberlandesgericht [Provincial Court of Appeal] Stuttgart, Germany,
102
28 Feb. 2000, Case No. 5U118/99, English translation available at See Franco Ferrari (2016), p. 30.
<http://cisgw3.law.pace.edu/cases/000228g1.html> (last visited Apr. 103
See Amtsgericht Duisburg, Germany, 13 April 2000, available at
16, 2015). <http://cisgw3.law.pace.edu/cases/000413g1.html> (last visited Apr.
99
See Franco Ferrari, p. 69. 9, 2015).
100 104
ICC Court of Arbitration, Paris (France), Case Number 7531, 6 The Domain name is an instrument used to make easier to find a
ICC International Court Of Arbitration Bulletin 67, n.2 (1995), case resource in the Internet; instead of typing the IP Address (a number
abstract available at <http://cisgw3.law.pace.edu/cases/947531i1.html> such as “192.168.100.100”) of the server where the desired re-
(last visited Apr. 16, 2015). source is located, a user can simply use the domain name (such
101
See Oberlandesgericht, 28 Feb. 2000, Case No. 5U118/99. as “www.nyu.edu”), which is more friendly.

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 ARTICLE IN PRESS
10 computer law & security review ■■ (2016) ■■–■■

There are some business entities which conduct their busi- parties’ places of business lie within the same States or even
ness solely within cyberspace. Their website is the only ‘place’ within no State at all. These difficulties particularly arise where
whereby they can be located. They may even outsource their the contract is formed using software and without human in-
telephone communications. However, some national legisla- teraction where parties are not aware of the territorial
tion requires that most business websites supply the connections of the places of business. As a result, parties’ trans-
information about their business name, company registra- actions do not implicitly have any relation to a particular
tion number, place of registration and registered office address. jurisdiction. In such circumstances places of business can be
In the case of sole traders and partnerships who carry on a defined as virtual, not connected to the territory of any State,
business under a business name, they must also make certain as for instance, the seller’s place of business would be his
website disclosures such as in the case of a sole trader, the in- website. Therefore, to accommodate the new development of
dividual’s name; in the case of a partnership, the name of each the electronic advancement in the business communication,
member of the partnership; in either case, in relation to each special rules should be developed.109 Due to that situation, such
person named, an address at which service of any document rules can be used only for de lege ferenda purposes and would
relating to the business will be effective.105 Furthermore, all com- certainly be incompatible with the text of the CISG.
mercial online sellers are “information society service An alternative approach to the ‘virtual place of business’
providers”,106 and so are required to make certain disclosures.107 would be to determine the real place of business of the parties
In relation to the conduct of business using electronic means in international sales transactions. However, it is difficult to
of communications such as email, video-conference, text chat identify the real place of business in a situation where the party
or internet-phone, the notion of ‘place of business’ does not uses electronic means of communication tool for the forma-
carry any additional difficulties compared to traditional busi- tion of the contract. The place of business would be the place
ness practices using instantaneous or non-instantaneous means where the support machineries such as the server are located.
of communication tools, e.g., sales contracts concluded by letter, Normally the server contains the detailed information of the
telegram, telex, or phone.108 These technologies help to connect products, their availability, price and other terms and condi-
parties to the contract to negotiate their contractual obliga- tions which can be similar to a real showroom of a business.
tions. In international sales contracts, where parties use Usually it is the seller who maintains the website for the busi-
instantaneous or non-instantaneous means of communica- ness which is accessible by anyone from any part of the world.
tion, most of the time they are not aware of the possible virtual The buyer can browse all the products virtually made avail-
place of business. This is due to the fact that it is not a face- able by the seller. This method of displaying product information
to-face contract negotiation so parties are often not aware of through web communication is known to be the virtual place
each other’s place of business. Furthermore, there are no of business.
uniform rules that require the disclosure of business ad- According to traditional business practice the buyer has the
dresses within the website of companies. Thus, use of electronic right to inspect the goods and the seller has to make these avail-
means of communication may trigger some problems in respect able to the buyer. In relation to the virtual place of business
to the requirement of apparent internationality in interna- the website is to be considered to be the seller’s place of busi-
tional sales contracts. Consequently, in international sales ness and the place from where the buyer accessed it. This has
contracts entered into by using electronic means of commu- never been practiced in the context of the CISG and has not
nication, determining the place of business is crucial to the been adopted by the courts of major trading blocks such as the
establishment of the personal sphere of application of the CISG. US Supreme Court within the context of the CISG. In another
field, however, the US court has accepted this principle to es-
tablish a virtual place of business.110 This direction led to the
5.2. Virtual places of business is a challenge for
exclusion of majority decisions from the scope of application
application of the CISG
of the CISG because the seller’s virtual place of business could
be in the same country as the buyers’ and therefore, there would
International sales contracts entered into by means of elec-
be no internationality under Article 1(1).
tronic communication are different from traditional contract
formation rules, since it can lead to assumptions that the
5.3. Sphere of application and the virtual place of
105
business
UK Companies Act 2006; UK Business Name Act 1985; Stephen
Burgess, Carmine Sellitto and Andrew Wenn, ‘Maturity in the web-
sites of Australian wineries: a study of varying website content’ According to the strict literal approach of the Convention, the
(2015) Vol. 3 Issue 5 International Journal of Electronic Business 473; virtual place of business is incompatible and does not apply
Anna Morgan and Thomas, ‘Rethinking technology in the SME to a contract concluded by using a website, because the virtual
context: Affordances, practices and ICTs’ (2015) International Small place of business could be in the same country of the buyer
Business Journal 11. and the seller. The main reason is that, in accordance with
106
It is a term generally known as a free service funded by adver-
tising will constitute an “information society service”.
107 109
The Electronic Commerce (EC Directive) Regulations 2002; Also Barbara Ciaramitaro, Virtual Worlds and E-Commerce: Technolo-
the Provision of Services Regulations 2009 largely repeats the dis- gies and Applications for Building Customer Relations Ship (Business
closure obligations in the Ecommerce Regulations. Science Reference 2011) p. 122; I. Trottter Hardy, ‘The Proper Legal
108
On the distinction between contracts inter absentes and inter Regime for Cyberspace’ (1994) 55 U. Pitt. L. Rev. p. 993.
110
praesentes, see generally Ricardo L. Lorenzetti, Lorenzetti, Comercio See Barbara Ciaramitaro, (2011) p. 122; In Helicopteros Nacionales
Electrónico 7 (Buenos Aires, AbeledoPerrot, 2001) p. 193. de Colombia, S.A v. Hall, 466 U.S. 408, 416 (1984).

Please cite this article in press as: Assaduzzaman, Legal issues in the application of CISG in online sale (e-commence) contracts, Computer Law & Security Review: The
International Journal of Technology Law and Practice (2016), doi: 10.1016/j.clsr.2016.07.012
 ARTICLE IN PRESS
computer law & security review ■■ (2016) ■■–■■ 11

Article 1 (1)(a) of the Convention, the parties must be from dif- the Convention does not apply. The reason for this insertion
ferent Contracting States. Article 1 (1)(a) applies to the situation is to prevent the surprising application of the Convention to
where it is clear that the parties are from two different Con- their contract. This was discussed in the UN Conference while
tracting States. Therefore, a virtual place of business is not adopting the final text of the CISG: according to the summary
linked to any particular Country and could never be the basis record of the plenary sessions, the sphere of application of the
for direct applicability. The concept of the virtual place of busi- CISG will not be extended under Article 1(2) “where the parties
ness would lead to the conclusion that the direct application appeared to have their places of business in the same State
of the CISG is not possible to international sales contracts but one of the parties was acting as the agent for an undis-
entered into by means of electronic communication. closed foreign principal”.116
Although the CISG does not define goods in any of its pro- If the CISG applies unconditionally to online sale con-
visions, the drafting history of the Convention suggests that tracts, then the parties could probably be able to completely
the goods are tangible movables.111 However, businesses that disregard each other’s place of business regardless of the in-
conduct their operations solely based on the website still need ternationality requirement. Since the sphere of application of
a place for the delivery of goods or a location from where the the CISG covers transactions for tangible movables that are to
activities are conducted. In a situation where the business is be transported from one country to another it is important that
being conducted by the help of third-parties, such as buying the parties to international sales contracts meet internation-
cars, to deliver goods to the buyer,112 there will definitely be a ality requirements. For example, in an international sales
workstation from where the seller will formulate the con- contract where the tangible movables are to be transported by
tract and give instructions. Nevertheless, in the current ship from one country to another, the buyer would be con-
electronic business tradition there could be some form of busi- cerned about where the goods will be transported from.
ness operations that allow a business to carry on without hiring Similarly, in order to fulfil the obligations, the seller would be
staff or having a physical workstation. In such a situation Article concerned about the place of delivery of goods.117 Hence,
10(b) provides the solution which states that if a party does it is important that the parties to international sales con-
not have a place of business, reference is to be made to his tracts, irrespective of whether the contract is to be performed
habitual residence and thus CISG can still be applicable. Ha- electronically or by traditional means, comply with the inter-
bitual residence of a corporation can be determined by nationality requirements under Article 1(2) for the application
identifying the country where it is incorporated and in the case of CISG.
of solely online-business the country where the domain name Some suggest the internationality of the parties can be iden-
of the website is registered. tified based on the domain name registration used in electronic
business transactions, which can be a tool to identify the parties’
place of business. Where a party uses an address linked to a
domain name connected to a specific country, such as ad-
6. The requirement of internationality under dresses ending with ‘.my’ for Malaysia ‘.at’ for Austria, ‘.nz’ for
the CISG New Zealand, etc., it can be argued that the place of business
should be located in that country.118 Nevertheless, it is uncer-
In e-commerce transactions it is difficult to distinguish between tain that the domain name as such will definitively determine
the nature of transactions, i.e., whether it is international or the place of business. It may only be one of the determining
domestic,113 because of the fact that the location of the parties factors which cannot be used solely as a criterion for deter-
to the transaction are sometimes unknown to each other.114 mining internationality under the Article 1(2) of the
Article 1(2) of the Convention provides that the different na- Convention.119 This is because in the cyber world the domain
tionality of the parties is to be disregarded whenever this fact name is used by organisations, without necessarily residing in
is not apparent either from the contract or from any dealings the territory referred to in the suffix.
between or from information disclosed by the parties. This The above situation can be better understood looking at the
applies at any time before or at the conclusion of the con- following example, where a Malaysian buyer negotiates a con-
tract. The parties to the contract must therefore be aware that tract of sale by email with a Malaysian subsidiary of a
their transaction is indeed international according to the re-
quirements of the Convention. If, for any reason, any one of
116
the parties to the contract is covered by the domestic law,115 See Secretariat Commentary [on Article 1 of the 1978 Draft], United
Nations Conference on Contracts for the International Sale of Goods, Of-
ficial Records: Documents of the Conference and Summary Records
111
<http://www.cisg.law.pace.edu/cisg/text/e-text-01.html> (last of the Plenary Meetings and of the Meetings of the Main Commit-
visited on 29th May 2016). tees (Vienna, 10 March–11 April 1980) 14, 15 (1981), available at
112
Oberster Gerichtshof [Supreme Court], Austria, 20 March 1997, Case <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm01.html> (last
Number 2 Ob 58/97m, case abstract, available at <http://cisgw3.law visited Apr. 2, 2015).
117
.pace.edu/cases/970320a3.html> (last visited Apr. 12, 2015); See also Article 31(a) (b) & (c) of the CISG.
118
Franco Ferrari, p. 25, 26; See UNCITRAL e-Commerce WkG: Secretariat Note on e-Contracting
113
Renaud Sorieul, ‘The United Nations Convention on Contracts and CISG, at 4 (p. 10); See also Franco Ferrari, at 290.
119
for the International Sale of Goods (CISG) as a Set of Uniform Rules Report of the Working Group on Electronic Commerce on the work of
for Electronic Commerce’ (2000) 4 Bus. L. Int’l p.380, 381. its forty-fourth session (Vienna, 1122 October 2004), UNCITRAL, 44th
114
See John D. Gregory, ‘The Proposed UNCITRAL Convention on Sess. at 47 (p 113), U.N. Doc. A/CN.9/571 (2004), also available at
Electronic Contracts’ (2003) 59 Bus. Law. P.313, 319. <http://www.uncitral.org/english/workinggroups/wg_ec/index.htm>
115
See Franco Ferrari, p. 31. (last visited Mar. 31, 2015).

Please cite this article in press as: Assaduzzaman, Legal issues in the application of CISG in online sale (e-commence) contracts, Computer Law & Security Review: The
International Journal of Technology Law and Practice (2016), doi: 10.1016/j.clsr.2016.07.012
 ARTICLE IN PRESS
12 computer law & security review ■■ (2016) ■■–■■

Singaporean company. The contract is concluded and fully per- The CISG is silent as regards its application to international
formed by the Malaysian subsidiary, without any involvement sales contracts entered into by electronic means, referring to
of the parent company, except that the seller uses the email Article 13 of the Convention. However, the CISG should not
system of its parent company. In this case the Singaporean be considered as rigid piece of legislation that it cannot be
domain name (“.sg”) does not fulfil the internationality re- applied to new developments in the business world. Al-
quirements of the Convention simply because of Malaysian though Article 13 of the Convention expressly mentions
subsidiary has used the Singaporean domain name. It is some- telegram and telex, instead of taking a literal approach we
times difficult to identify the location of the place of business should look at the wider scope of Article 13 which embraces
just by following the suffixes because in the web most often technological developments that can be extended to today’s
you are being forwarded to a different page while dealing with ecommerce contracts.
multinational corporations. There could also be a situation Although there are some problems posed by the ecommerce
where one of the parties to the international sales transac- technologies in the contract formation, the sphere of appli-
tion is not aware of what the suffix of the domain name stands cation of the CISG basically depends on two principles which
for. Furthermore, internationality requirements will not be met are sale of goods and internationality of the parties. There-
dealing with organisations that use top level domain names fore, to fulfil the requirements of the CISG, goods must be
such as “.org” “.com” and “.net”, which do not have geographi- transported from one country to another by any means and
cal suffixes at all.120 Therefore, the best solution for determining internationality of the parties requires proving that the place
place of business and internationality of the parties is to iden- of business is located in two different jurisdictions in elec-
tify the country where the business is incorporated and the tronic commerce. However, this requirement is not met by
domain name where the website is registered under the re- providing that a multinational corporation has registered the
quirement of domestic law. domain name of its subsidiaries in various countries and doing
business with one of them using a website. Under the inter-
nationality requirement of the parties to international sales,
7. Conclusion it has to be proven that parties are literally coming from dif-
ferent Contracting States.
In online sale agreements sometimes it is difficult to de-
Considering the legislative history of the CISG it is conceiv-
termine the parties’ places of business since it is mostly
able that the drafters of the Convention considered only the
operated through websites which may not be in the parties’
existing instantaneous means of communication technolo-
country of origin. Even if those means are used, it is still pos-
gies incorporated in 1970s. As mentioned earlier, the drafters
sible to determine the parties’ places of business by looking
of the Convention could not have foreseen the sharp devel-
at the places from where the business is operated. If the busi-
opment of electronic communication technologies in
ness is fully operated through an official website displaying
international sales contracts which are not included in the CISG.
goods and services it is considered to be the place of busi-
The absence of e-commerce contracts in the Convention may
ness based on its registration to determine the internationality
leave a significant legal gap in international sales agree-
of the contract as well as whether it falls under the personal
ments and an ongoing academic debate, but it does not make
sphere of application of the CISG. Hence, the CISG remains a
the CISG inapplicable. E-commerce helps to facilitate interna-
continuing code, flexibly adapting to new trade customs, while
tional sales in a faster and easier manner to conduct business.
retaining uniform principles to assist international sales, that
has earned its adoption by two-thirds of nations engaged in
120
Franco Ferrari, at p. 209. global trade.

Please cite this article in press as: Assaduzzaman, Legal issues in the application of CISG in online sale (e-commence) contracts, Computer Law & Security Review: The
International Journal of Technology Law and Practice (2016), doi: 10.1016/j.clsr.2016.07.012