Competent Ontario commercial lawyers should know about the CISG

I am always surprised to meet lawyers who specialize in commercial law but who do not know about a valuable tool: the CISG. My concern is that their lack of familiarity with the United Nations Convention on the International Sale of Goods likely breaches their professional responsibilities.

As someone who has taught both common law contracts and international sales law for over a decade, I’m familiar with both systems’ intricacies. And having worked with both the Ontario Sale of Goods Act and the CISG, I know the various distinctions between their rules. Knowing these distinctions allows lawyers to advise their clients competently on commercial transactions. After all, a buyer’s needs differ from a seller’s and assessing whether the SGA or CISG better meet a client’s needs requires understanding both the CISG and the SGA, since they benefit and disadvantage buyers and sellers differently.

As an arbitrator, I’ve seen these differences play out. I am therefore always surprised when I meet lawyers who tell me that they regularly advise their clients to opt out from applying the CISG to their transactions. But I’m even more surprised to learn why: their own unfamiliarity with the CISG. And yet the CISG offers some important advantages both to buyers and sellers, when compared to Ontario domestic law. Nevertheless, it seems that many lawyers remain unconvinced.

Let me explain why I think my colleagues should pay closer attention to the CISG.

The Law Society of Upper Canada Rules on Professional Responsibility include aspirational rules and rules which seek to mandate conduct. Spotting the difference usually comes down to noticing when a particular rule uses words like “shall” or “must.” When used, these words signal that the rule intends to mandate conduct.

Chapter 3 of LSUC’s “rules” addresses the lawyer and client relationship and includes commentary to better explain relevant practice aspects of the client and lawyer relationship.

Rules 3.1 and 3.2 speak directly to a lawyer’s competence by stating: “a lawyer shall perform any legal services undertaken on a client’s behalf to the standard of a competent lawyer.” This lone sentence is hardly helpful beyond signaling, by using “shall,” that it intends to mandate conduct. In a nutshell, Rules 3. 1 and 3.2 inform licensees that they must discharge their work competently fixing this standard (rather circuitously) to that of a competent lawyer.

The commentary for this rule, in contrast to the rule itself, is more helpful. Rules 3.1 and 3.2 do not set the standard to perfection. Rather, they explain that a lawyer is not competent when that lawyer lacks knowledge about the law. For example, the commentary suggests that when a lawyer is unfamiliar with an area of the law that applies to a client’s matter, the lawyer should decline to take the case, seek another lawyer’s assistance or learn the area. Implicit in this third suggestion is that lawyers should not charge their clients to get up to speed on the CISG or if they do, they should inform their clients. This brings me to the CISG.

The CISG is in force throughout Canada and it applies directly – superseding the common law and the SGA – to any sale of goods (within the CISG’s scope and sphere) between a Canadian party and a party from another CISG country. At the time of writing, nearly 90 countries, including the U.S. and most of Europe, are party to the CISG. Consequently, the CISG ensnares many contracts for goods bought and sold between Canadians and non-Canadians.

Many CISG rules differ significantly from analogous rules found in the SGA and the common law. These differences, which may benefit a buyer or seller, range from rules on contract formation, buyers and sellers performance obligations and remedies for breach of contract. For example, the CISG allows parties to make irrevocable offers, and draws no distinction between warranties and conditions. In doing so, the CISG rejects the so-called “perfect tender” rule. What’s more, the foreseeability test linked to damages is not the same test many common law lawyers know from landmark cases like Hadley v Baxendale and Victoria Laundry. The foreseeability test under the CISG makes a defendant liable for “possible” consequences of the breach in contrast to the common law rule that speaks to “probable” consequences. The difference between these two standards is quite consequential!

Finally, the CISG orders specific performance as a “primary” remedy, with rare exceptions. Under the common law, specific performance is a remedy of “last resort” available only if damages are inappropriate, which is rare.

These examples are hardly an exhaustive list of the differences and missing out on them should make you lose sleep.

Despite these important differences, some Canadian lawyers believe that neither they nor their clients should have to pay the costs of getting up to speed on the CISG (a quick internet search leads to firm bulletins saying as much). Consequently, these lawyers often opt for domestic laws over the CISG and that’s a problem. While the CISG allows parties to opt out from its application (in whole or in part), in relation to the competence rule, lawyers who advise their clients to opt out without thoroughly examining and considering how the CISG’s different rules may benefit their clients, breach Rule 3.2 and 3.1. In short, these lawyers are not performing their legal services to the standard of a competent lawyer.

If the Law Society of Upper Canada decides to get serious about its rules, in particular its rules seeking to mandate competence, lawyers licensed in Ontario may wish to get up to speed with the CISG if they insist on holding themselves out as competent commercial lawyers.

Anthony Daimsis is a professor at the University of Ottawa, Faculty of Law, where he teaches Contracts, International Sales law, and International Arbitration. He is a member of the Law Society of Upper Canada and an Associate Door Tenant at Littleton Chambers in London, England.

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