Teaching an Old Dog New Tricks: The United Nations Convention on Contracts for The International Sale of Goods and Digital Trade

Commodore VIC-20, Marcin Wichary | Flickr

Computing back in 1980 looked more than just a little bit different to what we are used to today. Readers from the early to mid-1980s – and perhaps retro computing enthusiasts – might be familiar with Commodore’s VIC-20 home computer. This precursor to the relatively-better-known Commodore 64 launched in 1980, alongside the Sinclair ZX80, the world’s first microcomputer hard drive, and a predecessor to the world wide web.

Fast forward to 2022, and a significant proportion of our everyday lives – including our business activities – take place in digital spaces. Commentary on the metaverse (and its legal implications) is everywhere; some of us buy and stream digital music, books, and apps daily; and it’s said that even a modern washing machine has more computing power than the Apollo 11 spacecraft that took humanity to the moon.

Australia’s ordinary sale of goods laws and consumer laws have struggled to keep up with these developments. However, one international treaty dating back to 1980 and acceded to by Australia in 1988 stands ready, willing, and able to regulate modern digital trade: the United Nations Convention on Contracts for the International Sale of Goods, commonly referred to as the CISG.

Ordinary sale of goods laws across the common law world tends to regulate trade in tangible objects only. A recent Law Commission for England and Wales digital assets consultation paper suggests, for example, that the Sale of Goods Act 1979 (UK) would not govern trade in digital assets. As an international treaty currently adopted by 95 States, however, the CISG is not meant to be read in light of solutions adopted by particular national legal solutions. As a tool for merchants that is intended to promote international trade, rather than being an end in itself, the CISG is meant to be interpreted on its terms and in light of the business community’s expectations and trading practices. If the CISG’s provisions are suited to application to emerging forms of trade, including digital trade, the Convention can be applied to such trade: even if these commercial activities were not contemplated during the 1970s and 1980 when the Convention was drafted.

How, then, do the CISG’s rules stack up against modern forms of digital trade, which might include trade in media files, apps, and raw data? Despite their vintage, those rules stand up surprisingly well, suggesting that the CISG – which is part of Australian law – can be interpreted to govern international trade in these and other digital artefacts.

Let us consider a few ways how the CISG can regulate digital trade. Under article 35(1)(c) of the CISG, goods must conform to the qualities presented by sellers via samples or models. In the app market, this means that paid (‘full’) versions of apps must conform to the qualities represented via free (‘trial’) counterparts. Goods are also required by article 42 of the CISG to be sold free of undisclosed third-party intellectual property claims. Universal market practices whereby apps are only licensed to end users make the apps trade once again consistent with this requirement.

Accepting that these forms of international digital trade can be governed by the CISG, it is only a small step to then conclude that cryptocurrency and non-fungible token (‘NFT’) trade can also be captured by the Convention. As the Law Commission for England and Wales has observed, these digital assets are often traded internationally, a practical reality making the CISG’s application even more appropriate. They are also traded in a technical manner whereby the underlying blockchain token is effectively (even if not literally) transferred from the buyer to the seller, unlike other types of digital assets that are traded via reproduction: making cryptocurrency and NFT trade similar to trade in traditional, physical, goods. In this context, the CISG stands ready to regulate the rights and obligations between international parties trading cryptocurrencies and NFTs on a commercial basis and stands to complement financial and other relevant public law regulatory regimes.

While it has been suggested that the CISG is not well-understood across the Australian legal profession, the Convention’s potential to help solve supply chain issues arising out of the COVID-19 pandemic has recently brought it back into the spotlight. The CISG’s potential to also help solve legal problems arising out of digital trade now makes it an even more important part of Australian practitioners’ legal toolkits.

The prospect that NFTs might be treated as goods for legal purposes has implications for other areas of the law, too, including intellectual property laws. As the world (and trade) becomes increasingly digital, the CISG may constitute an important – and existing – puzzle piece within the law’s overall response.