The United Nations Convention on Contracts for the International Sale of Goods, which took effect in the United States and ten other countries on January 1, 1988, was designed to simplify international commercial transactions and develop a uniform legal framework for resolving disputes arising out of international sales agreements. It creates, by treaty, an additional body of sales law for each country that adheres to it.

In an increasingly export- and trade-driven global economy, a uniform international law of sales is a much-desired goal. Just last month, on Aug. 12, negotiations for the North American Free Trade Agreement (NAFTA) were concluded by the United States, Canada and Mexico. If ratified, NAFTA will create the largest trading bloc in the world, surpassing the European Community in market size and worldwide trading volume and, it is expected, greatly enhance trilateral trade among the three North American countries, already valued at $200 billion annually. The U.N. Convention has been in force in the United States and Mexico since January 1, 1988, and 1989 respectively. For most of Canada it took force on May 1. Thirty-four states have now acceded to the Convention.

The Convention applies to private sales agreements between parties whose places of business are in different states, when those states have acceded to the Sales Convention. Parties are, however, free to render the Convention inapplicable by express agreement in their contracts. Thus, in the absence of an express opt-out agreement by the parties, the Convention applies to all transnational sales contracts entered into by persons or entities doing business within the NAFTA area (other than in Quebec, Saskatchewan and the Yukon) since May. The same is true for transactions between such persons or entities in NAFTA countries and parties in China (currently $16 billion a year in trading volume), and a considerable number of European Community and other European countries.

It therefore becomes an important concern for parties engaged in international business to consider how their sales contracts might be interpreted or enforced under the Convention. Concerns about the effects of applicable law on contract terms assume greater importance the longer the duration of the contract. This Chapter focuses on the impact on long term sales contracts—for purposes of this analysis, those with a term of one year or more—of the provision of the Convention that deals with changed circumstances. That provision is Article 79, which deals with exemption or excuse from liability for damages in situations where a party proves that his performance was no longer possible or practicable because of an “impediment beyond his control.”