CISG vs German law: which law for your B2B sales contract?
I advise companies on cross-border contracts. Below I explain, in plain language, when the UN Sales Convention (CISG) makes sense and when German domestic sales law is the better fit.
The short answer
- Pick CISG if you want a neutral, international set of rules for sale of goods between companies in different countries.
- Pick German law (BGB/HGB) and exclude CISG if you need familiar German concepts, strong control of warranties and limitation periods, or your deal goes far beyond a simple sale of goods.
What the CISG is (in one minute)
The CISG is an international treaty for B2B sales of goods. Many countries have joined. If both parties have their places of business in CISG countries, the CISG can apply by default unless you exclude it in the contract.
When CISG applies by default
- Seller and buyer are in different countries that are CISG states; or
- Conflict-of-laws rules lead to the law of a CISG state.
You can opt out with a clear clause. Example: “This contract is governed by German law. The UN Convention on Contracts for the International Sale of Goods (CISG) does not apply.”
When CISG does not apply
- Consumer sales, auctions, and certain financial instruments (shares, etc.).
- Ships, vessels and aircraft; electricity.
- It also does not govern property transfer, product liability, or the validity of clauses. Local law covers these points.
Core ideas under CISG (practical view)
- Conformity & notice: the buyer must examine the goods and notify lack of conformity within a reasonable time. There is a long-stop of up to two years from delivery (unless a longer period was agreed).
- Remedies: repair or replacement; price reduction; damages; and, in serious cases, avoidance (termination).
- Fundamental breach: only a serious breach allows avoidance.
- Damages: cover foreseeable loss; the other side must mitigate loss.
- Interest: interest is due on late payments, but the rate is not fixed by the CISG—your contract should say which rate applies.
- Force majeure: non-performance may be excused if an impediment beyond control exists and you notify the other party.
German domestic sales law (very short)
German contracts outside the CISG follow the Civil Code (BGB) and, for merchants, the Commercial Code (HGB).
- Warranty logic: cure (repair/replace) first, then price reduction or rescission, plus damages if conditions are met.
- Limitation periods: standard periods can be adjusted by contract in B2B deals. State them clearly.
- Commercial inspection duty: if both parties are merchants, the buyer must promptly inspect and notify defects. Otherwise, the goods may be deemed approved (hidden defects excepted).
- Retention of title & property transfer: handled by national law (not by the CISG). Draft these clauses under German law if delivery is in Germany.
CISG or German law? A simple chooser
- Mostly “boxes of goods”, recurring trade, neutral venue? CISG can be efficient and predictable across borders.
- Complex specs, services and IP mixed in? German law (excluding CISG) often gives finer control.
- You want to keep standard German warranty and limitation practice? Choose German law and say the CISG is excluded.
- Counterparty wants neutrality? Keep German law for property/retention of title but apply CISG to the sales part. Spell this out.
How Incoterms and choice of law work together
Incoterms define delivery, risk and cost points (e.g., FCA, FOB, CIF, DDP). Choice of law covers warranties, remedies and many defaults. Use both, but do not duplicate or contradict them. Example: if you use CIF, do not add a conflicting risk-transfer rule.
Battle of forms (keep it boring and clear)
- Say which document wins: “This contract prevails over all purchase orders or general terms.”
- Confirm acceptance in writing. Avoid silent “surprises”.
- Attach the final version of the terms and refer to the date or version number.
Checklist: clauses I usually add
- Governing law: “German law applies. The CISG does/does not apply.”
- Jurisdiction or arbitration: court seat or arbitral rules and seat.
- Incoterm + place of delivery: one line. No duplicates.
- Inspection & notice: time frame and method (email address, who receives notices).
- Warranties & limitation periods: periods and scope adapted to B2B.
- Retention of title: simple, with cooperation duty for registrations abroad if needed.
- Force majeure: short clause aligned with CISG logic or German law—pick one wording and keep it consistent.
- Language & currency: state both. Add a rule for translations if a dispute arises.
FAQs
Does CISG apply automatically?
Often yes, if both parties are in CISG countries. To avoid doubt, write your choice of law and say whether CISG applies.
Can I exclude CISG and still use Incoterms?
Yes. Incoterms work with or without CISG. They are about delivery, risk and costs. Choice of law is about remedies and other rules.
Is CISG only for big companies?
No. It is used by many SMEs. The key is to draft notices, limitation and risk rules clearly.
We sell machines with installation and training. CISG or German law?
Mixed contracts can be tricky. If services dominate, German law (without CISG) can be cleaner. If it is mostly goods, CISG may still fit. Decide case by case.
Call to action
Schedule a personal consultation. I will review your draft, pick the right law, align Incoterms and warranties, and give you a clean, enforceable contract.
Further reading (official)
- UNCITRAL — CISG text and resources
- German Civil Code (BGB) — English translation
- German Commercial Code (HGB) — English translation
- ICC — Incoterms® 2020 overview
Disclaimer: This article provides general information and does not replace individual legal advice.