Over four decades ago, Ghana signed the United Nations Convention on Contracts
for the International Sale of Goods (CISG), a pivotal treaty that provides a
standardized legal framework for cross-border transactions between parties from
different nations. The treaty is yet to be ratified by Ghana’s Parliament.
More recently, the African Continental Free Trade Area (AfCFTA) – a trade pact
involving 54 of the 55 African Union (AU) member states which aims to bolster
economic integration and invigorate intra-African commerce was entered into by
Ghana. This regional trade arrangement can be instrumental in strengthening
Ghana’s position in the global marketplace and attracting entrepreneurs who wish to establish their principal place of business within the country.
However, the AfCFTA’s full potential cannot be harnessed without an encompassing international sales of goods instrument like the CISG. The postponement of Ghana’s ratification of the CISG presents a considerable obstacle for participants in the sales of goods value chain.
What is the CISG and why is important?
The CISG is an important treaty that endeavors to establish a uniform legal
framework for international transactions involving the sale of goods between parties from different nations. Adopted in 1980 in Vienna, Austria, the CISG went into effect on January 1, 1988. A contract for the sale of goods is usually one that involves a legal agreement between a buyer and a seller and specifies the terms and conditions of the transfer of ownership of goods from the seller to the buyer in exchange for a specified sum of money or other agreed-upon consideration.
Examples of goods that can be the subject of a sale of goods contract include movable property of any description such as vehicles, raw materials, clothing, electronic appliances etc.
In the growing system of international trade, parties in different jurisdictions may have need to engage in a contract of sale. A tomato farmer in Ghana may need to sell his produce to an interested buyer in Canada. What law should govern the
transaction? When a dispute arises between the parties, which court may exercise
jurisdiction over the dispute? What remedies are available to either party when a breach has occurred? These are often questions that may arise in an international sale of goods contract negotiation.
Sometimes, parties in exercise of their freedom of contract, may have an express choice of law clause that dictates the particular jurisdiction that should superintend over the contract. The parties may also fail to make an express choice of law in which instance the rules of private international law
may be activated to determine ‘the proper law of the contract’.
In such contracts, the absence of an express choice of law can be problematic, as it can lead to uncertainty and disputes over which law should regulate the transaction. It may thus be necessary to apply the rules of private international law to determine the applicable law of the contract. Nonetheless, this procedure can be difficult and time-consuming, as it frequently entails analyzing various connecting factors, such as the domicile of the parties, the place of performance, or the location of the goods.
In addition, the application of various national laws can result in inconsistent interpretation and application, impeding the efficient resolution of disputes and creating an unpredictable legal environment for businesses engaged in cross-border trade.
Further, even in the presence of an express choice of law clause, the parties to the sale of goods contract may still face challenges in dealing with the complexities and uncertainties associated with resolving disputes, determining jurisdiction, and identifying available remedies. Despite agreeing upon a governing law, other factors can still complicate the transaction, such as differing interpretations of the chosen law, public policy exceptions, mandatory rules, and conflicting provisions.
The CISG helps to mitigate these challenges by providing a uniform legal framework specifically designed for international sale of goods contracts. By adopting the CISG, parties can reduce the uncertainties associated with choosing and applying different national laws, and instead rely on a consistent and harmonized set of regulations to govern their contractual relationship. In addition, the CISG outlines the rights and responsibilities of both buyers and sellers and the remedies available to parties in case of a breach.
The treaty also offers several other benefits that make it an attractive choice for parties involved in international sales of goods contracts. A few
are analyzed herein.
It is apparent that a uniform legal framework that reduces uncertainties and
inconsistencies resulting from the application of various national laws will invariably promote predictability and the smooth facilitation of dispute resolution. Second, the CISG is intended to accommodate the various legal traditions and customs of its Contracting States, establishing a balance between common law and civil law systems. This assures a more practical and equitable approach to international transactions.
Lastly, the widespread adoption of the CISG improves legal certainty and promotes international commerce, as parties from different jurisdictions can rely on a common set of rules when entering into and performing contracts for the sale of goods.
Why Ghana must take the important step of ratification
You may recall that at the beginning of this article, it was noted that Ghana had signed the CISG treaty. Signing does not conclude the process of treaty execution however. Ratification is a crucial step in making a treaty legally binding for a country.
In Ghana, the process of ratification involves the President executing a treaty,
agreement, or convention in the name of the country, after which it must be ratified by an Act of Parliament or a parliamentary resolution supported by a majority of members, as stipulated in Article 75 of the 1992 Constitution.
Ratification is important because it signals a country’s commitment to uphold the provisions of a treaty and incorporate it into its domestic legal system. Ghana’s ratification of the CISG treaty would bring numerous benefits to the country. A few of them are examined herein.
To begin with, the domestic law on the sale of goods, the Sale of Goods Act (1962) Act 137, is insufficient to govern contracts involving international sales. The Act’s primary emphasis on domestic transactions and its inadequacy in addressing the complexities of cross-border trade has a significant effect: many contracts involving international sales, including those concluded by Ghanaians or those with a principal place of business in Ghana, do not select Ghanaian law as the governing law of their contract.
This preference for other legal systems originates from the fact that, parties
involved in international sales frequently seek a more predictable and unified legal framework that addresses the unique challenges of international trade. The CISG, with its comprehensive and specialized rules, provides such a framework and is globally recognized and acknowledged by businesses and legal practitioners.
By ratifying the CISG, Ghana would provide its businesses with a uniform legal
framework that is more suitable for international sales transactions. This could
encourage more parties, including Ghanaians, to select Ghanaian law as the
governing law in international contracts for the sale of goods. The ratification of the CISG would therefore not only improve the legal environment for international trade in Ghana, but also promote the country’s legal system as a more desirable option for regulating cross-border transactions.
In addition, Ghana played an important role in the creation and adoption of the CISG. Ambassador Emmanuel Kodjoe Dadzie and Justice S.K. Date-Bah formerly of the Supreme Court of Ghana, were instrumental in its establishment. Ghana’s
commitment to the harmonisation and consolidation of international trade law would be strengthened by ratification of the treaty, which would recognise Ghana’s historical commitment.
With the headquarters of the AfCFTA located in Accra, it is crucial for Ghana to set an example for other African nations, the majority of which have yet to ratify the CISG. Establishing a uniform trade law is essential for maximizing the benefits of a regional free trade area, as it facilitates a more streamlined and efficient approach to cross-border transactions.
A consistent legal framework, such as that provided by the CISG, reduces the complexities and uncertainties frequently encountered in international commerce, especially when the parties involved are subject to different legal systems. By adopting a harmonized set of rules, countries within the AfCFTA will be able to circumvent these obstacles more effectively, resulting in improved trade relationships and a more trustworthy legal environment.
In addition, a uniform trade law promotes economic integration among AfCFTA member states by streamlining the legal landscape and facilitating cross-border business transactions.
This not only promotes regional trade, but also investment, innovation, and economic growth among member nations. Ghana’s ratification of the CISG would not only improve its own legal environment but also encourage other African nations to do the same. This collective ratification of a uniform trade law is essential for maximizing the benefits of the AfCFTA and advancing continental economic integration.
Finally, the ratification of the CISG would considerably enhance Ghana’s reputation for ease of doing business, as it would demonstrate the country’s commitment to establishing a more stable and predictable legal environment for international trade.
As a result, Ghanaian investors and businesses will be in a more advantageous
position when engaging in cross-border transactions, as they will be operating within a legal framework that is widely recognized and acknowledged. The CISG with all of its attendant benefits, would enable businesses to approach the global market with greater confidence.
Further, foreign and domestic investors would feel more confident conducting business in Ghana. This increased confidence attracts foreign investments, which are essential for Ghana’s economic growth and innovation. The enhanced ease of doing business would encourage local businesses to expand into international markets, thereby contributing to the economic growth of the nation.
Concluding reflections
In light of the numerous benefits discussed, it is essential for Ghana to embrace the wisdom of ratifying the CISG without delay. Such a decision would align Ghana with its key trading partners, creating a harmonious environment for businesses engaged in international trade, and fostering stronger bonds and economic growth.
Furthermore, as the home of the AfCFTA headquarters, Ghana bears the
responsibility to serve as a beacon for other African nations, inspiring the adoption of a uniform trade law to unlock the full potential of regional free trade. Considering the persuasive arguments and the positive ramifications for Ghana’s economy and international trade relations, it is vital for all stakeholders, especially the Ghanaian Parliament, to act with deliberate speed on this matter.
Priority must be accorded to the ratification of the CISG treaty, allowing Ghana to fully reap the benefits and strengthen its position as a vanguard in international trade and regional economic integration.
Source: Ghana Web
