What Small Business Owners Need to Know About International Trade and Sales

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3.  Conflicting Contract Terms

Where a purchaser and seller are exchanging documents, like purchase orders issued by the purchaser and invoices issued by the seller, it is often the case that the documents can contain conflicting terms.

While under the UCC only commonly agreed upon terms will be considered controlling, under the CISG, what is controlling are the terms contained in the final acceptance. Thus, under the UCC, if the final acceptance contains additional terms from the original terms offered that would materially alter the transaction, such additional terms may be disregarded.

Under the CISG, which requires identity between the terms of offer and acceptance, conflicting additional terms could end up rendering the agreement unenforceable on the basis that the parties never reached a meeting of the minds.

4.  Warranties

Under the UCC, there is an implied warranty of merchantability which imposes on the seller an obligation to supply product that is fit for the use for which the product is intended.

The UCC also provides that certain representations made by the seller to the purchaser can be considered warranties of the seller. For example, the seller’s description of a product creates an enforceable warranty that the product comports with the seller’s description.

For a seller to disclaim a warranty under the UCC, the seller must expressly disclaim the warranty in a writing and the disclaimer must be conspicuous.

Under the CISG, while a disclaimer requires that both the seller and purchaser agree to it, there is no requirement that the disclaimer must be in writing or that it be conspicuous. 

Take Away:

• Unless a purchaser and seller in a cross-border transaction select a governing body of law, the CISG could well end being the controlling law of the transaction by default.
• For sellers who want to be able to reduce the risks of controversy over the terms of a transaction, the UCC provides a more structured framework than the CISG, which, in being more flexible, also heightens the risk of ambiguities arising that could be extremely costly to resolve. 

Related articles:

Ramp Up Business With U.S.-Latin America Trade

Small Business International Trade: Issues to Consider Part 1

Small Business International Trade: Issues to Consider: Part II