What Is the CISG and When Does It Apply to International Sales?
Meta description: Learn what the CISG is, when it applies to international sales of goods, which transactions it excludes, and how businesses can opt out or manage its requirements.
A U.S. company buying machinery from a supplier abroad may find that the rules governing its contract are not the familiar rules of a state’s Uniform Commercial Code. Instead, an international treaty may apply: the United Nations Convention on Contracts for the International Sale of Goods, commonly called the CISG. The CISG creates shared rules for many cross-border sales of goods, including contract formation and the buyer’s and seller’s obligations. Knowing when it applies—and when it does not—can help businesses draft clearer agreements and avoid surprises in a dispute.
What Is the CISG?
The CISG is an international treaty that establishes rules for certain contracts involving the sale of goods between businesses in different countries. Its full name is the United Nations Convention on Contracts for the International Sale of Goods. It was adopted in 1980 and entered into force in the United States on January 1, 1988.
The Convention aims to make international trade more predictable by providing a common legal framework. It addresses subjects such as forming a sales contract, delivering goods, paying the price, handling nonconforming goods, and claiming damages. It does not replace every rule that might affect a transaction. Questions outside its scope may still be governed by a national or state law selected under the contract or applicable conflict-of-law rules.
In the United States, the CISG is a treaty obligation and generally applies as federal law when its requirements are met. It is not simply another name for the Uniform Commercial Code (UCC). Although the two systems share some concepts, they have different rules and interpretations. A contract governed by the CISG should be analyzed under the Convention, not automatically under the UCC.
When Does the CISG Apply?
The starting point is Article 1 of the Convention. The CISG generally applies to a contract for the sale of goods between parties whose places of business are in different countries when either of two conditions is satisfied:
- Both countries are CISG contracting states. The Convention applies directly when the parties have their relevant places of business in different countries that have adopted the CISG.
- Private international law points to the law of a contracting state. The CISG may also apply when the forum’s conflict-of-law rules select the law of a country that is a CISG contracting state, subject to applicable declarations and other rules.
The United States is a contracting state. Accordingly, a U.S. business selling goods to a business in another CISG country will often face the Convention unless the parties validly exclude it or an exception applies. A U.S. business contracting with a company in a country that has not adopted the CISG may still encounter the Convention if the relevant conflict-of-law analysis selects the law of a contracting state.
For this test, a party’s place of business—not its nationality, incorporation alone, or the location of its bank—is generally the key connection. If a party has more than one place of business, Article 10 directs attention to the one with the closest relationship to the contract and its performance, considering circumstances known to or contemplated by the parties before or at contract formation. If a party has no place of business, its habitual residence is used.
The parties’ different-country status must be apparent from the contract, prior dealings, or information disclosed before or when the contract is made. The CISG does not apply merely because goods cross a border after a domestic sale, or because a party happens to be foreign-owned.
What Counts as a Sale of Goods?
The CISG applies to sales of goods, generally meaning movable, tangible items. It can cover ordinary commercial products, raw materials, equipment, and goods manufactured to a buyer’s specifications. Article 3 says that a contract to supply goods to be manufactured or produced is generally treated as a sale, unless the buyer supplies a substantial part of the materials needed for production.
A contract that combines goods and services requires closer analysis. Under Article 3(2), the CISG does not apply when the preponderant part of the supplier’s obligations consists of labor or other services. A transaction for custom equipment plus installation, for example, may require assessing the relative importance and value of the goods and services. The contract’s wording, pricing, and commercial purpose can all matter.
The Convention’s scope is not limited to a particular industry or transaction size. It can apply to business-to-business sales of many kinds, including transactions negotiated through intermediaries. However, the precise legal result depends on the facts, the parties’ contract, and the applicable law.
Transactions the CISG Excludes
Article 2 excludes several categories of sales. The Convention does not apply to goods bought for personal, family, or household use, unless the seller neither knew nor ought to have known that the goods were purchased for that use before or at contract formation. This exclusion generally means that consumer purchases are outside the CISG.
Other exclusions include sales by auction; sales on execution or otherwise by authority of law; sales of stocks, shares, investment securities, negotiable instruments, or money; sales of ships, vessels, hovercraft, or aircraft; and sales of electricity. The Convention also does not govern every issue connected with a sale. Article 4 limits it primarily to contract formation and the rights and obligations of buyer and seller.
In particular, the CISG generally does not decide whether a contract or a particular term is valid under domestic law, or what effect the contract has on ownership of the goods. Article 5 also excludes the seller’s liability for death or personal injury caused by the goods. Applicable domestic law may address these matters. The Convention does not provide a general limitation period for lawsuits, either; limitation periods are addressed by other law, including a separate treaty for some countries.
What the CISG Regulates
Contract Formation
Part II of the CISG covers offer and acceptance. It sets rules for when a proposal qualifies as an offer, when an acceptance becomes effective, and how changes to an acceptance are treated. Under Article 19, a purported acceptance that materially changes the offer may be a rejection and counteroffer. A response with nonmaterial changes may have a different result if the offeror does not object without undue delay.
Article 11 generally provides that a CISG contract need not be made in, or evidenced by, writing and is not subject to another formal requirement. The United States has not made the Article 96 reservation that would require writing in certain circumstances. Nevertheless, parties should use a signed, clear written agreement to document price, specifications, delivery, payment, and dispute terms.
Buyer and Seller Obligations
The seller’s core duties include delivering the goods, handing over relevant documents, and transferring the goods as required by the contract and Convention. The buyer’s core duties include paying the price and taking delivery. The CISG includes rules on the place and time of delivery or payment when the contract does not specify them.
Goods generally must match the contract in quantity, quality, description, and packaging. A buyer who discovers a lack of conformity must examine the goods within as short a period as practicable in the circumstances and notify the seller within a reasonable time, describing the problem. Article 39 also sets an outside limit: notice generally must be given no later than two years after the goods were actually handed over, unless that limit conflicts with a contractual guarantee period.
Breach, Remedies, and Damages
The Convention provides remedies for breach, including requiring performance in qualifying cases, avoiding the contract for a fundamental breach, reducing the price, and recovering damages. A fundamental breach is one that substantially deprives the other party of what it was entitled to expect under the contract, subject to the Convention’s standards.
Article 74 measures damages by the loss, including lost profit, suffered as a consequence of the breach, but limits recovery to losses the breaching party foresaw or ought to have foreseen when the contract was made. Article 77 requires the injured party to take reasonable steps to mitigate loss. The CISG does not set a fixed interest rate for overdue sums, so the applicable rate can require further legal analysis.
Can the Parties Opt Out?
Yes. Article 6 allows parties to exclude the CISG or, subject to the Convention’s limits, vary the effect of its provisions. An effective exclusion can make another body of law govern the sales issues instead. A contract might state, for example, that the CISG is excluded and that the law of a specified U.S. state governs, without regard to conflict-of-law principles.
A choice of “the law of New York” or another U.S. state does not necessarily exclude the CISG. Because the Convention is part of the law applicable in the United States, courts have commonly treated a bare choice of a state’s law as insufficient to displace it. Clear language expressly excluding the CISG is safer when exclusion is intended. Conversely, parties who want the CISG can say so directly.
Standard terms, purchase orders, and sales confirmations can create complications if each side uses inconsistent law-selection or dispute clauses. Businesses should check whether contract documents incorporate the CISG, exclude it, or conflict on governing law. A choice-of-law clause is not a substitute for reviewing the contract as a whole.
Common CISG Misunderstandings
- “The UCC always applies to a U.S. sale.” Not necessarily. The CISG may govern an international sale that meets Article 1’s requirements.
- “Naming a U.S. state’s law opts out.” A general state-law clause may not be enough. Express exclusion is clearer.
- “The CISG applies to every international transaction.” It concerns qualifying sales of goods, not all services, consumer purchases, or every issue arising from a transaction.
- “A contract must be in writing under the CISG.” Article 11 generally imposes no writing requirement, though written records remain important for evidence and business certainty.
- “Incoterms replace the CISG.” Incoterms can define delivery-related responsibilities, costs, and risk allocation when incorporated, but they do not by themselves displace the Convention’s broader rules.
How to Check Whether the CISG Applies
A practical review should begin with the parties’ places of business and the countries involved. The next steps are to confirm that the transaction is a sale of goods, check for an exclusion under Article 2 or Article 3, and read the governing-law and dispute-resolution clauses for an express CISG choice or opt-out.
Businesses should also verify the countries’ treaty status and any relevant declarations as of the contract date. The United Nations Commission on International Trade Law (UNCITRAL) maintains the official CISG text and status information. When the analysis is uncertain—particularly for mixed goods-and-services contracts, multiple places of business, or conflicting standard terms—qualified legal advice can help identify the applicable rules before a dispute arises.