International Contract Law - Choice-Of-Law Analysis Applies When Signatory Nations Adopt Opposing Oral Contract Provisions Under The CISG - Forestal Guarani S.A. V. Daros Int'l., Inc (United Nations Convention On Contracts For The International Sale of Goods‪)‬

The United Nations Convention on Contracts for the International Sale of Goods (CISG) governs contract formation between parties of signatory nations and grants a right of action for breach of contract. (1) Article 11 of the CISG allows signatory nations to create enforceable oral contracts. (2) Signatory nations may opt out of Article 11 obligations by making an Article 96 reservation or declaration. (3) In Forestal Guarani S.A. v. Daros Int'l., Inc., (4) the United States Court of Appeals for the Third Circuit considered the enforceability of an oral contract created by parties of signatory nations with divergent implementation of the CISG. (5) The Third Circuit held that when one party's country of incorporation has made an Article 96 reservation and the other party's state has not, and neither the text nor principles of the CISG apply, the court must undertake a choice-of-law analysis to determine which forum's law applies. (6) Only after such analysis would the court apply that forum's law to adjudicate issues of contract formation and breach. (7) In 1999, Daros International, Inc., an export-import company based in New Jersey, entered into a verbal contract with the Argentinean manufacturing company Forestal Guarani S.A. for wooden finger-joints. (8) Daros paid Forestal $1,458,212.35 for finger-joints which, according to Forestal, were valued at $1,857,766.06.9 Forestal filed a breach of contract claim in the Superior Court of New Jersey in April 2002 for the remaining balance due because it believed the oral contract specified the greater amount. (10) Daros subsequently removed to federal court, naming the CISG as the international treaty on which the subject matter jurisdiction of the federal court was based. (11)