Sources of International Contract Law – Domestic Law, International Conventions (CISG, UNIDROIT Principles), Lex Mercatoria, and Trade Usages

Introduction

The Sources of International Contract Law provide the essential foundation for understanding how cross-border agreements are created, interpreted, and enforced. Unlike purely domestic contracts, international agreements must rely on a combination of legal systems, conventions, customary practices, and commercial principles. Without identifying and applying these sources correctly, global trade would face uncertainty, unenforceability, and unnecessary disputes.

1. Domestic Law

Domestic law continues to be a primary source of international contract law, particularly where no convention or uniform rule applies. National legal systems—such as English common law, Turkish Code of Obligations, or Swiss law—set default rules on contract validity, interpretation, and enforcement. Even when parties choose a foreign law, mandatory rules of public policy may still apply.


2. International Conventions

a) CISG (United Nations Convention on Contracts for the International Sale of Goods)

  • Governs international sales of goods between businesses.
  • Provides harmonized rules for formation, obligations, and remedies.
  • Ratified by more than 95 states, making it one of the most influential sources of international contract law.

b) UNIDROIT Principles of International Commercial Contracts

  • A set of non-binding but widely respected principles.
  • Often applied by arbitral tribunals as “soft law.”
  • Fill contractual gaps and promote uniformity in international practice.

3. Lex Mercatoria (The Law Merchant)

Lex mercatoria—literally “the law of merchants”—is a historical and modern set of commercial practices recognized by traders worldwide. Today, arbitral tribunals frequently invoke lex mercatoria as a transnational body of rules that ensures fairness, efficiency, and predictability in business dealings.


4. Trade Usages and Customs

Customary business practices also function as recognized sources of international contract law. For instance, INCOTERMS in shipping and GAFTA rules in commodities trading are globally acknowledged standards. Under CISG Article 9, these usages bind the parties if they are widely known in the relevant trade sector.


Conclusion

In conclusion, the Sources of International Contract Law—domestic law, international conventions such as CISG and UNIDROIT, lex mercatoria, and trade usages—form a comprehensive and flexible framework. Together, they ensure that global contracts are enforceable, predictable, and adapted to the realities of international commerce. Mastering these sources is indispensable for businesses, investors, and lawyers engaged in cross-border trade.

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