The influence of the Vienna Convention over Brazil’s contracts for the international sale of goods

In Brazil, contracts for the international sale of goods are not usually established by a physical document signed for that purpose. We are used to considering the Commercial Invoice as a contract, where every information is mentioned, such as the information about the seller and the buyer, as well as the method of payment and details about the operation.

However, the parties’ obligations and the risk transferences and costs are not always described in detail, and this may make posterior litigation difficult, particularly in cases when the goods are damaged during the transport, or payment delinquency. With Brazil’s accession the convention, this lack of detail in commercial invoices can be remedied by the Convention’s dispositions.

In case there’s contractual resolution or violation of their duties and rights, the parties will be able to pursue losses and damages. It is important to highlight that, in case of resolution for contract violation foreseen in the Convention, it is possible to extend the deadline for payment, and also to take extrajudicial alternative measures. Furthermore, there’s a maximum deadline of two years in which the buyer may claim problems with the quality or the quantity of delivered goods, with a few exceptions; and the criteria for the calculation of the amount to be paid as indemnity are well defined (according to Articles 74 to 77 of the Convention), unlike the Brazil legislation.

Another interesting point that reinforces the buyer’s and seller’s legal freedom in the Convention is the permission given to the parties to opt out of the Convention’s application and regulate the deal according to their own will (according to Article 6).

One controversial point pertains to the sales in which the Convention cannot be applied. These situations. provided by Article 2, are: goods acquired for personal, family or household use, goods acquired in public auction or sold as result of lawsuits; securities, credit titles, currency, ships, vessels, hovercraft, aircraft and electricity.

Brazil is known for having legislation that is widely favorable to protecting consumers rights and, therefore, many times doubt can arise: where does the buyer protection stand as provided by the Consumer Defense Code (CDC, Law 8.078/1990)?

On this subject it is important to highlight was Moser and Pignatta (2015) clarify: item ‘a’ of article 2 provides for the exclusion of contracts established with a buyer. Different from the consumer qualification given by article 2 of the Consumer Defense Code, the Convention mentions “personal, family or household use”, restricting the buyer only to individuals, since companies cannot acquire goods for “personal, family or household use”. The expression was carefully chosen so that there would be no doubt as to the buyer characterization. Therefore, the Convention will not be applied in case where the goods have been acquired for “personal, family or household use”. The deal closed by an individual with corporate or commercial objective is subject to the Convention. Another possibility for the application of the Convention occurs when the seller is an individual who is not a merchant. Different from the Brazilian CDC, the Convention does not define the character of a supplier and therefore there’s no need for the seller be a trader so that the Convention is applied. All that is needed is that the buyer does not use the goods for “personal, family or household” purposes for the Convention to apply.

Conclusion

The Vienna Convention was conceived with the aim of standardizing the rules applicable to the contracts of international sale of goods and creating the mechanisms to ensure legal security and the predictability of trading relations between Brazilian and foreign companies, determining the seller and buyer obligations, as well as establishing measures in case of losses and damages and contract violation and other form of breaches.

Analysing the text of the Convention, it is possible to notice an attempt to give greater autonomy to the involved parties, with solid support on transparency and uniformity, neutrality and good faith (objective), avoiding at most legal disputes and foreseeing alternative ways to prevent and solve conflict between the parties.

For Brazilian companies the application of the Convention may contribute to overcoming difficulties that arise from cultural barriers between the countries of sellers and buyers, as well as reduce legal costs in light of the certainty regarding the rules applied to the contracts and the ease with which conflicts can be solved. In this way, when a businessman decides to sell his product in a country that is party to the Convention he will be able to consult the local regulations in his own language, without the worry of knowing foreign legislation, given that the Convention is translated and available in the six official languages of the UN and many other unofficial translations, including Portuguese. This will allow the fluence of deals of internationally-trading Brazilian companies to grow in a secure, foreseeable and transparent way. This international uniformity in legislation tends to reducing harmful discrepancies in arbitral reports our nacional court decisions based on subjective norms or distinct domestic legislation.

Lastly, the tips

It is necessary to observe the finality of the acquisition of goods for, as we have seen, depending on the situation they may not be subject to the Convention. It is also important to remember to negotiate every detail of the operation, as well as costs and risks that are to be accepted for the choosing of the best incoterm, and, lastly but not less important: it is important to study the legislation of the dealing country, as in Brazil, for example, the commercial invoice must contain a series of information required by law (Article 557 of Customs Rules – Decree 6759/2009), or the importer may be liable to fines for disagreeing invoices.

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All about the Brazilian accession to the Vienna Convention

First, it is important to highlight that, when you talk about “Vienna Convention” you need to clarify specifying the topic, for there are many editions to this Convention and each one deals with a different subject. There are, for example: the Vienna Convention on Diplomatic Relations, the Vienna Convention on Consular Relations; the Vienna Convention on the Law of Treaties;; the Vienna Convention for the Protection of the Ozone Layer; the Vienna Convention on Civil Liability for Nuclear Damage; the Vienna Convention on Road Traffic, etc. Among these there is the Convention to which this article refers, the Vienna Convention on Contracts for the International Sale of Goods (CISG), and is in fact called “United Nations Convention on Contracts for the International Sale of Goods”.

This convention was drawn up in April 11th 1980 during the United Nations Convention on Contracts for the International Sale of Goods, with the support of the United Nations Commission on International Trade Law (UNCITRAL), and came into force in January 1st 1988, aiming at adopting uniform rules regarding contracts for the international sale of goods which would take into account the different social, economical and juridical systems, contributing to the elimination of juridical obstacles to international exchanges and promoting the development of international trade.

Today, around 75% of countries have adhered to the Convention. In whole it is 85 signing countries, among them Brazil’s chief trading partners like China, the United States, Mercosur members, Chile, Canada and many European nations. Brazil was the 79th country to sign the convention in march 2013, but the document only came into force in April 1st 2014, and was promulgated by Dilma Rousseff by Decree number 8.327 in October 16th 2014.

The Convention contains 101 articles divided in four parts: Part I refers to the application of the Convention and general dispositions. Part II pertains to the rules on the formation of contracts for international sale of goods, while Part III establishes the basic rights and obligations for the buyer (importer) and seller (exporter). At last, Part IV contains the final dispositions of the Convention, which relate subjects as: when and how it will come into force, accepted reservations and declarations, and the application of the Convention to international sale contracts in which both States have the same or similar laws on the same subject.

What about the Incoterms?

At this point the following question may come up: “if this convention refers to the duties of seller and buyer, how do the use of Incoterms fall in place?”

As it is known, the incoterms are sale contract articles that deal with the moment where damage risk is transferred from the seller to the buyer (this moment and place is called the “delivery” of the goods), and also which costs and from what moment on each party takes it over from the beginning to the end of the process. Today there are eleven terms, created by the International Chamber of Commerce (ICC) in Paris, which are dealt by the importing and exporting agents according to their abilities to take on responsibilities for cost and risk. These terms are periodically updated (generally, every ten years) as new socioeconomic, political and logistic situations come up, among others.

What happens is that the Vienna Convention, due to its intention of being comprehensive and juridically fair, has posted a very straightforward text and, since incoterms are subject to periodical alterations, the Convention text would risk becoming outdated and the ICC would be the most adequate forum to deal with the details of incoterms definitions in an accurate and up-to-date way. The Convention authors thus decided to adopt clearer rules on risk transfer, adapting them to the needs of each deal. Another factor that may have influenced this is the fact that the use of incoterms is defined as non-compulsory and therefore would make it difficult for this to be subject of a convention that aims at standardizing international sale contracts law. We may conclude, therefore, that the incoterms may be considered as viable and useful instruments to the regulamentation of risc transfer in international sale contracts in a more detailed and specific way than the convention, and the relation between this convention and the incoterms themselves is complementary.

Did you know all these details about the Vienna Convention? Leave your comment. In the next article we will talk about its influence in Brazilian international sale contracts.