The Vienna Convention and electronic contracts for the international sale of goods

06 Mar 2017

The global market for goods bought and sold on the web has led to increased possibilities of cross-jurisdictional commercial conflict. Well before the invention of the internet, the United Nations had already established the United Nations Commission on International Trade Law (UNCITRAL) to harmonize and unify the laws of international trade. UNCITRAL initiates, drafts and adopts conventions, model laws and other instruments dealing with the substantive law governing international trade.

The principal convention relevant to the international sale of goods by electronic means may be the United Nations Convention on Contracts for the International Sale of Goods (the Vienna Convention), which has been adopted by all states and territories in Australia. The Vienna Convention has been described as a legal code designed to overcome differences between laws of the member states of the United Nations. The Vienna Convention governs contracts for the international sale of goods between parties whose places of business are in different signatory states. The Vienna Convention may apply to a contract for the international sale of goods when the rules of private international law point to the law of a signatory state as the applicable law. It may also apply by the choice of contracting parties even if their places of business are not located in a signatory state. However, parties that may otherwise fall within the Vienna Convention may contract out of it.

The Vienna Convention came into force before modern means of electronic communication came into existence. The Vienna Convention expressly recognizes that contracts by telegram or telex may be contracts in writing for its purposes. However, it is silent on contracts made by email, text message or webpage. The question arises whether these additional modes of electronic contracting fall within the Vienna Convention. In “The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods”, Northwestern Journal of Technology and Intellectual Property (2003) 2(1), J Hill has cogently argued that they do. Of the many reasons she gives, the most persuasive is that an explanatory note to the Vienna Convention cites the Convention on the Use of Electronic Communications in International Contracts as a complementary text promoting the construction of the Vienna Convention as permitting electronic agreements.

The only decision of an Australian superior court coming near the point is that of Olivaylle v Flottweg AG (No 4) (2009) 255 ALR 632. The parties negotiated a contract for the supply by Flottweg, based in Germany, of an olive oil production line to Olivaylle, based in Australia. The contract was made when Flottweg communicated its acceptance of Olivaylle’s counter-offer to Olivaylle by email. It was common ground that the contract was consequently made in Australia, where Flottweg’s acceptance email had been received by Olivaylle. The contract provided: “Australian law applicable under exclusion of UNCITRAL law”. Flottweg argued that this sentence was a permissible exclusion of the Vienna Convention. Olivaylle disagreed. In considering the issue, Logan J stated:

Given the nature of the contract, the fact that a party to it, Flottweg, was and was known by Olivaylle to be a company which sold its wares internationally, and the reference to the exclusion of “UNCITRAL law” appearing at its conclusion … the more likely construction of UNCITRAL law is that it was intended to be a reference to the particular UNCITRAL convention that governed the international sale of goods, that is the Vienna Convention.

Olivaylle v Flottweg never considered whether the Vienna Convention extended to electronic contracts for the international sale of goods. However, the parties and the court appear to have proceeded on the assumption that, but for the exclusion clause, it would have applied. That assumption must be right.