Reflections on usages in international trade

I have been covering practical issues related to contract formation in international trade for some years with the backdrop of the Vienna Convention (CISG) as applicable law. In prior articles I dealt with binding deals and with the effects of acceptance and rejection of offers. However opportune, this perspective is only a snapshot of the reality of a commercial transaction.

Seen from the outside, commercial operations are a rather chaotic and fragmented bundle of information, punctuated by phone calls, verbal agreements, interim negotiations etc. all joined by “paperwork” and documentation.

Over the years, I gradually learned to identify behavioural patterns, predictable and repetitive steps that logically compose the invisible process. These may apply to parties in continue exchange, or be common to sectors and industries, or are often the expected behaviour within communities or nations. International law refers to these patterns as usages.

I would go beyond legal formalities to say that usages are perhaps the pinnacle of legal development in what trade is concerned. Usage was the basis of a system that for long endured without much legislated material, mainly because commerce was by definition international, mostly city-based, and relatively free from state interference.

Its importance in international trade is still remarkable, and such in our days that CISG formally adopts usage as binding on the parties to the contract at hand if: a) it is of current knowledge of the parties, or b) it is usage the parties should have knowledge of, or c) it is regularly observed practice by other parties in similar contracts and trade.

The notion of usage is therefore closely related to that of good faith in CISG, to the point that one confirms the other. Usage is effectively included in the commercial contract, and enforceable together with the contract’s agreed terms. This position triggers multiple questions: without the parties’ knowledge or expectation, certain usages may conflict with the parties’ literal agreement, or with a party’s interpretation of the agreement, or with both parties’ non-declared intent to abide to that usage, to name a few.

My take: the parties in an international transaction governed by CISG must be aware that usages will also be part of their commercial relationship. One must be able to ponder the effect of usages upon its own trade practice and that of a future transaction. The potential of usage to apply across the board to a trade relationship must be carefully considered in the perspective of the client’s best interest, as it may favour or collide with the client’s preferred practice and risk assumption levels when trading overseas.

(The author has not used any AI machine to write this essay. This essay is protected by copyright and any use, such as processing, analysis or copy of any of its content by an AI machine is strictly prohibited.)