Abstract
Over the last four decades, producers of durable goods recognized the role of services as a tool to increase their competitiveness and achieve long-term growth. Consequently, the producers began to integrate services into their products to satisfy their customers’ needs, a process known as servitization. Since its introduction in the late 1980s, servitization received practical affirmations and focused on diverse and interdisciplinary research. Nevertheless, legal aspects and considerations, particularly those concerning contracts, are remarkably scarce. This is surprising since challenges in the transition to product-service integration call for a framework that ensures predictability and certainty on the one hand while enabling proactive contract design and management on the other. We aim to fill this gap by examining the application of the UN Convention on Contracts for the International Sale of Goods (the “CISG”) on servitized business-to-business (“B2B”) contracts.
The added element of services blurs the lines of classifying a relationship as a sale, service, or mixed agreement. It is reasonable to expect that selling productsservices as an integrated unit will lead to issues concerning the qualification of the commercial relationship between producers and its customers and, as a result, increase the legal challenges in an already challenging business environment. That is where the CISG comes into play. The CISG recognizes the dichotomy between the sale of goods and the provision of services in its Art. 3(2). Since the purpose of the CISG is to enable the development of international trade, we offer an interpretation of Art. 3(2) that would enable the CISG to govern contracts arising out of or connected with a servitized business model. The CISG is appropriate to govern these relationships, allowing for a sufficient level of flexibility that parties need to adapt to their specific contracts.
The added element of services blurs the lines of classifying a relationship as a sale, service, or mixed agreement. It is reasonable to expect that selling productsservices as an integrated unit will lead to issues concerning the qualification of the commercial relationship between producers and its customers and, as a result, increase the legal challenges in an already challenging business environment. That is where the CISG comes into play. The CISG recognizes the dichotomy between the sale of goods and the provision of services in its Art. 3(2). Since the purpose of the CISG is to enable the development of international trade, we offer an interpretation of Art. 3(2) that would enable the CISG to govern contracts arising out of or connected with a servitized business model. The CISG is appropriate to govern these relationships, allowing for a sufficient level of flexibility that parties need to adapt to their specific contracts.
Original language | English |
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Pages (from-to) | 87-136 |
Number of pages | 51 |
Journal | University of Pittsburgh Law Review |
Volume | 83 |
Issue number | 1 |
Early online date | 6 Oct 2021 |
DOIs | |
Publication status | Published - 12 Oct 2021 |
Bibliographical note
The author would like to thank the Governance and Policy Design Research Lab (GPDRL) and the Research andInitiatives Center (RIC) of Prince Sultan University for providing publication funding and incentives.