The Third Circuit, in Forestal Guarani S.A. v. Daros Int’l, Inc., No. 08-4488 (3d Cir. 7/21/10), addresses the question under the CISG as it applies to a dispute between two entities, one based in the U.S. and one based in Argentina. The CISG gives sovereign states the right to opt out of the provision of the Convention permitting contracts to be proved even if not in writing. Argentina opted out; the U.S. did not. The District Court applied a writing requirement. The Third Circuit disagreed, stating:
- “We conclude that where, as here, one party’s country of incorporation has made a declaration [to opt out of the provision permitting oral agreements] while the other’s has not, a court must first decide, based on the forum state’s choice-of-law rules, which forum’s law applies, and then apply the law of the forum designated by the choice-of-law analysis”.
The CISG is the law in both Argentina and the U.S. It “strives to promote certainty among contracting parties”, said the Court. It has extensive provisions declaring that contracts of sale do not have to be in writing to be enforceable (even if not, apparently, between merchants). Argentina has opted out of the no-writing provision – meaning that a writing remains required for an Argentine company (or, more precisely, the writing requirements as imposed by other Argentine law would govern). The U.S., however, did not opt out – meaning that a writing is not required for a U.S. company under the CISG.
The Circuit observed that it could find only one U.S. case prior to the District Court’s decision, which the Circuit disagreed with. The Court’s search more broadly led it to conclude that the majority of jurisdictions called for a court to conduct a choice-of-law analysis at the outset of a case based on private international law principles to determine which state’s law governs contract formation, and then apply that law to the party’s claim. The Court relied principally on the CISG itself. The CISG provides that “[q]uestions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law [i.e. choice of law].” 15 U.S.C. App. Art. 7(2).