The United Nations Convention on Contracts for the International Sale of Goods (CISG) is designed to facilitate international trade and to remove legal barriers among Contracting States by providing substantive rules that regulate the duties and obligations of parties to a commercial transaction, such as the delivery of goods, contract formation, and remedies for breach of contract (See Preamble of the CISG). The CISG applies to contracts of sale of goods between parties whose places of business are in different Contracting States (See Art. 1 (1) (a) of CISG). As of October 2020, 94 states have ratified the CISG (See Updates on CISG). The USA is a signatory of CISG, which has been in effect there since 1986. Canada acceded to the CISG in 1992, and Quebec incorporated it into domestic law through An Act respecting the United Nations Convention on Contracts for the International Sale of Goods, which has been taken into effect since May 1, 1992. In April 2011, the Quebec Court of Appeal ruled on the disputes between a Quebec frozen lobster seller, Dégust-Mer, and an American company, Mazzeta, the buyer who had failed to pay for the sale and delivery fees of frozen lobsters (Mazzetta Company, l.l.c. c. Dégust-Mer inc., 2011 QCCA 717). This court decision reminds us that the governing law of this international sales of goods contract should be the CISG.
Key Facts
Mazzeta is an American company without any establishments in Quebec.
Dégust-Mer is a Quebec company operating a seafood processing factory in Gaspésie.
In 2008, after a phone call with the representative of Mazzeta, Dégust-Mer delivered its frozen lobsters from Gaspésie, Quebec to New Hampshire, USA. There is no written contract between the two parties. But Dégust-Mer kept the invoices for the transactions.
Having failed to receive payment, Dégust-Mer sued Mazzeta in Quebec. Mazzeta disputed the Quebec court’s jurisdiction over this international dispute. Both parties agreed that the issue would be determined according to Art. 3148 of the Civil Code of Québec. As the place of payment was considered to be the Gaspésie region, the Superior Court of Quebec dismissed Mazzeta’s motion for declinatory exception concerning the lack of jurisdiction of the Quebec courts in December 2010.
Mazzeta appealed this decision. While the parties did not raise the application of CISG, the Quebec Court of Appeal reminds us that the CISG is actually the governing law of this frozen lobster sales contract. The Quebec Court of Appeal dismissed the appeal in April 2011.
Applicable Laws
Art. 3148 C.c.Q. indicates that in personal actions of a patrimonial nature, a Québec authority has jurisdiction where one of the obligations arising from a contract was to be performed in Quebec.
Art. 1 (1) (a) CISG indicates that the CISG applies to contracts of sale of goods between parties whose places of business are in different Contracting States.
Art. 8 (3) CISG indicates that in determining the intent of the contracting parties, the tribunal should consider all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.
Art. 57 (1) (a) CISG stipulates that if the buyer is not bound to pay the price at any other particular place, he must pay it to the seller at the seller’s place of business.
Analysis of the Court
1. What law governs the Sales Contract of the Frozen Lobsters?
In the present case, both parties agreed that the issue would be determined according to Art. 3148 of the Civil Code of Quebec. More specifically, the issue in this case is whether one of the obligations arising from the contract was to be performed in Quebec as Mazzeta has no establishment in Quebec. The Court considered this analysis as “an entirely understandable civilian reflex”.
However, the Court pointed out that the parties have forgotten to consider a preliminary issue: what law governs this contract. The Court emphasized that the CISG should be automatically applicable pursuant to Art. 1 (1) (a) CISG for the fact that this frozen lobsters sales contract was entered into by two CISG member states (See also Alain Prujiner, Les conflits de clauses types et la jurisprudence québécoise, in Générosa Bras Miranda & Benoît Moore, Mélanges Adrian Popovici : Les couleurs du droit, Montreal: Thémis, 2010, 527-550 at 547).
Therefore, the Court continues its analysis of the issue according to the rules of the CISG.
2. Where is the place of payment according to the applicable law, namely, the CISG?
First, it is noteworthy that the sales contract between the parties was verbal. The two invoices are the only written documents received by the Court.
Second, in order to determine the place of payment agreed by the parties at the time of the conclusion of the contract, the Court had to interpret the parties’ intention according to the rule of contractual interpretation stipulated in the CISG. Pursuant to Art. 8 (3) CISG, the Court should consider “all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties”. In the present case, as Mazzeta has made payment in Gaspésie in the past sales, the Court considered that the parties had established a “practice” between themselves, which allowed the Court to determine that the place of payment agreed by the parties is Gaspé region.
Third, Art. 57 (1) (a) CISG stipulated that the buyer must pay the price to the seller at the seller’s place of business if the buyer is not bound to pay the price at any other particular place. In the present case, as no written contract had specified the place of payment, one must conclude that under the CISG, payment was due at Dégust-Mer’s place of business, in the Gaspé region.
Therefore, Quebec courts have jurisdiction on this matter because one of the buyer’s obligations was to be performed in Quebec (Art. 3148 (3) C.c.Q.).
Reflection
In this case, the Court applied the rules of CISG on the international sales of goods contracts while the parties did not raise the application of CISG during the proceedings. In the international sales of goods transactions, if the parties are willing to exclude the application of CISG, the parties could consider to insert a clause in their contract stating that the contract will be governed by substantive Quebec law to the exclusion of the Vienna Convention on the International Sale of Goods (Emmanuel S Darankoum, Droit du commerce international – Vente internationale de marchandises : la Convention de Vienne au Québec vingt ans après son adoption, 2012 46-1 Revue juridique Thémis de l’Université de Montréal 133, 2012).
It is also worth to mention that arbitration could be the preferred mechanism for the resolution of international disputes as the respect of party autonomy, the ability to customize the process, proceed efficiently and maintain confidentiality – hallmark advantages of arbitration proceeding – can be especially advantageous as businesses navigate the impacts of the COVID-19 pandemic.
(Reminder: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention. ?)