In 1988, the United States ratified the “United Nations Convention on Contracts for the International Sale of Goods” (the “International UCC”) and virtually all leading trading nations have adopted that law. The International UCC preempts the Uniform Commercial Code used by all states in the United States (“U.S. UCC”) unless parties to the contract clearly opt out of the International UCC. Without that opt out, every sale of goods between a U.S. company and non-U.S. company is governed by the International UCC.
There are significant differences between the two laws. Under the U.S. UCC a contract for the sale of goods for the price of $500 or more is not enforceable unless there is sufficient writing to prove such a contract. The International UCC does not require a writing.
The U.S. UCC has a parole evidence rule which provides that if the parties have a final and complete contract, evidence of prior agreements or negotiations are not admissible to contradict the writing. The International UCC does not ban that evidence.
The International UCC looks at the “subjective intent” of the party to the contract- what is in the party’s mind when entering into the contract. In contrast, the U.S. UCC determines the intent of the parties based on statements and acts that are communicated to the other party- internal thoughts are not considered.
If the International UCC governs a contract, a U.S. business person will have to deal with rules that are different from the rules and may be contrary to their business instincts. Their attorney may not be educated on the International UCC.
If it has the negotiating power, a United States company when entering into a sales contract with a company outside of the U.S., should include in the contract a clause that negates the application of the International UCC. That clause should first select the state law that applies and follow that with:
The United Nations Convention on Contracts for the International Sale of Goods does not and will not apply to this contract.
That clause may go a long way if a U.S. company has a dispute over a sales contract with an international company. The courts have held that a contract that simply says that a particular state law applies does NOT negate the International UCC. Instead, the language must specifically state that the International UCC does not apply.