The UN CISG Convention to apply to oral contracts in Latvia
On 9 October 2012 an amendment to the Act ‘On the United Nations Convention on Contracts for the International Sale of Goods’ (hereinafter – CISG Convention) came into force, which excluded from the Act its 2nd Article. This Article contained a declaration that the CISG Convention does not apply to the contracts of Latvian commercial entities if the sales contract, its modification or termination, any offer or acceptance was not made in writing but in any other form (hereinafter – Declaration). Thus Latvia had limited freedom of contract form in relation to the contracts on the international sale of goods if one of the parties was Latvian entity.
Reasons behind the Amendment
The Secretariat of the United Nations Commission on International Trade Law (UNCITRAL) had initiated discussions with the European Union (hereinafter – EU) Member States which had made Declarations about the written form of the contract, i.e. Latvia, Lithuania and Hungary. UNCITRAL’s intent was for these states to withdraw the Declaration, so that no Declaration is applied to the contracts of any EU Member State. UNCITRAL considered that there is sufficient legal security and certainty in the EU therefore the parties of a transaction do not need to be limited with a certain form requirement for a contract.
Its also worth noting that the Latvia’s late Declaration was inaccurate and did not meet the requirements of the CISG Convention regarding the Latvian legislation, because Article 96 of the CISG Convention provides for the right to make a Declaration only to states whose national law requires contracts of sale to be concluded in or evidenced by writing, but in Latvia there is no such mandatory requirement. For example, the Latvian Commercial Code does not require a commercial purchase contract to be concluded in or evidenced by writing, i.e., if the commercial purchase agreement is concluded by two Latvian entities there is no specific requirements regarding the form of the contract.
Adoption of the CISG Convention
CISG Convention was adopted in Vienna on 11 April 1980 to lay down the uniform rules which govern contracts for the international sale of goods. CISG Convention applies to contracts of sale of goods between parties whose places of business are in different states. CISG Convention was adopted with the aim of removing legal barriers in international trade, as well as to promote the development of international trade.
Latvia adopted the CISG Convention on 3 July 1997 by enacting a new law ‘On the United Nations Convention on Contracts for the International Sale of Goods’ and this law contained Declaration which is now omitted.
CISG Convention has 76 contracting states and the Declaration under the Article 96 regarding the contract form was submitted by 11 countries, i.e. Argentina, Armenia, Belarus, Chile, People’s Republic of China, Russia, Paraguay, Ukraine and three EU Member States – Hungary, Lithuania and Latvia. Initially Estonia had submitted a Declaration as well, but it was withdrawn on 9 March 2004.
Benefits from the Amendment
We believe that the amendment will facilitate the application of the CISG Convention and it will be easier to determine rights and obligations of the contracting parties on international basis when there is no formal written agreement in place.