The Sales Convention (continued)

October 05, 2010, 02:08 PM

For companies located in the United States, the U.N. Sales Convention applies only to transactions with business counterparts located in other “contracting states.” Accordingly, a sale occurring strictly within the borders of the United States between companies of disparate nationalities would not be governed by the Sales Convention. However, unless the parties otherwise agree, a purchase and sale occurring between a U.S.-located company and a counterpart located in any of the other 75 contracting states would be governed by the Sales Convention. Therefore, if a U.S.-based company desired to avoid application of the Sales Convention, it would be necessary for the buyer and seller to expressly agree on its exclusion. In this regard, a clause merely stating that the contract will be “governed by the laws of the State of ___________” will, ironically and perhaps surprisingly, result in the application of the Sales Convention. This is so because the “supremacy clause” found in Article VI of the U.S. Constitution requires the states to recognize U.S. treaties as the supreme law of the land: i.e., the Sales Convention is the law of each state. Consequently, parties seeking to escape from the Sales Convention must expressly exclude its application when stipulating a preferred jurisdiction in the contract’s choice of law clause. —Charles V. McPhillips