Many Ontario businesses buy and sell goods from foreign companies. However, few Ontario businesses are aware that different laws apply to international purchases and sales of goods.
For purchases and sales of goods between Ontario companies, the Ontario Sale of Goods Act will typically apply. However, for purchases and sales of goods between Ontario and foreign companies, the United Nations Convention on Contracts for the International Sale of Goods (the “CISG”) will typically apply.
The CISG is “Ontario law”. It is enacted in Ontario by the International Sales Conventions Act.
There are a number of key differences between the Ontario Sale of Goods Act and the CISG. One of the most notable is the obligation on the buyer to inspect goods (article 38) and give notice of any non-conformity (article 39). The inspection obligation imposed by article 38 can have significant consequences: if the buyer fails to detect a lack of conformity because it did not conduct a proper and timely inspection, and as a result fails to give notice of the non-conformity as required by article 39, the buyer may lose valuable remedies (including the right to claim for damages).
Parties may exclude the application of the CISG. This is may be done by expressly excluding the application of the CISG in the parties’ contract.
The parties’ ignorance of the CISG will not prevent the Ontario court from applying the CISG. It will be to the advantage of Ontario businesses to understand the CISG and structure their business appropriately.