Legal Eye: Rules of engagement

Despite the risks, then, as now, the dreams of riches lured people beyond the comfort of the known world. Spices that were so precious in the Middle Ages have long since given way to more prosaic goods, such as textiles or electronic goods. But barriers, including those of language, culture and legal systems, remain. In response to this last concern, the 20th-century witnessed a number of efforts to create base-line legal rules for international trade. One of the most important of these is the United Nations Convention on Contracts for the International Sale of Goods, also known as the Vienna Convention.

Legal trade assurance
The Vienna Convention reads like the small print on an order form, and that's its purpose. It fills in the rules when you did not specify them on the front of the order form (or your contract). In this sense, it's almost like a traveler's trade assurance policy. If something goes wrong that you did not foresee in your contract (like what happens if the wrong number of goods is delivered), the Vienna Convention specifies the consequences.

Mind the gap
Before you attempt to sally forth into the wide world armed with the Vienna Convention, please remember that it does not apply to all contracts, all issues or even all countries. The Vienna Convention applies only to the sale of goods, not to the provision of services or even commissionaire contracts in which the buyer provides the materials used for making the goods. Also, it does not address issues of personal injury caused by product defects.

Currently, nearly 70 countries have ratified the Vienna Convention. Poland has signed up, as has the People's Republic of China, Singapore and (as of 2005) the Republic of Korea. I can not discern any particular logic as to the signatories - the US and Canada have ratified it, but the UK, Japan and Vietnam have not. Given the checkered ratification so far, you should verify whether a country has ratified the Vienna Convention before assuming that this safety valve exists. Even if your and your trading partner's home countries are signatories, however, any bilateral or regional treaties regulating the sale of goods between those countries would take precedent over the Vienna Convention.

Handshakes allowed
The Vienna Convention sets out rules for the full cycle of buying and selling goods. It regulates, among other things, when a binding contract has been formed, the obligations of buyers and sellers, when risk of loss for goods passes, damages for breach, and when you may back out of the contract.

As behooves an international convention that attempted to take into account the legal systems of many different cultures, the Vienna Convention contains much flexibility in allowing the buyer and seller to act as they wish. In fact, it is possible to waive the Vienna Convention completely. 

This flexibility is particularly evident in the rules on when the buyer and seller have entered into a binding contract. The Vienna Convention requires only that you make an offer, which indicates the goods, the price and quantity or at least the method for setting the price and quantity, to a specific person. If that person accepts your offer, you have a contract. The offer and acceptance do not even have to be in writing (in most cases, although some countries require it); a handshake would suffice.

Judith Gliniecki is the managing partner of Rymar and Partners