Supply Contracts with U.S. Customers: Which Law Applies?
UN Sales Convention, UCC and choice of law in the U.S. contract
According to media reports, a German car manufacturer intends to build its own plant in the United States. For suppliers this often means new supply relationships with a U.S. company or their own local production. Which law then applies often only becomes apparent in a dispute. This can be avoided.
Contracting parties in Germany and the U.S.: UN Sales Convention
Germany and the United States are contracting states to the UN Convention on Contracts for the International Sale of Goods (CISG). Under Art. 1 para. 1 lit. a CISG it applies to contracts for the sale of goods between parties whose places of business are in different contracting states. What matters is therefore where the parties are based – not where the goods are delivered.
The mere agreement on “German law” does not exclude the CISG, because it is part of German law. The same applies where the law of a U.S. state is chosen. Anyone who does not want it can exclude it under Art. 6 CISG – safely only by an express clause. Whether this makes sense depends on the individual case.
Both parties in the U.S.: state law
Where the company's own U.S. subsidiary supplies a U.S. company, Article 2 of the Uniform Commercial Code (UCC) regularly applies. The UCC is not federal law but a model act that the states – with the exception of Louisiana as regards sales law – have enacted as their own law, with differences in detail. Under § 1-301 UCC the parties may choose the law of a state to which the transaction bears a reasonable relation.
Whose terms apply?
Often both sides refer to their own general terms and conditions. Under Art. 19 para. 1 and 3 CISG, an acceptance with material deviations – for example on liability or dispute resolution – is a rejection and a counter-offer. If the parties nevertheless perform the contract, it is, according to case law, concluded; conflicting clauses fall away and are replaced by the CISG (BGH, judgment of 09.01.2002 – VIII ZR 304/00). Under § 2-207 UCC a contract is likewise formed despite deviating terms; however, between merchants additional terms do not become part of the contract where, among other things, they materially alter the offer or have been objected to. A signed framework agreement is safer.
Limitation of liability under U.S. law: form matters
The UCC permits warranties and damages to be limited but imposes formal requirements. The exclusion of the implied warranty of merchantability (“merchantability”) must mention that term and, in written contracts, be conspicuous; for fitness for a particular purpose a conspicuous written exclusion is always required (§ 2-316 para. 2 UCC). Consequential damages may be excluded unless this is grossly unreasonable (§ 2-719 para. 3 UCC). Clauses drafted under German standard terms law (AGB-Recht) do not necessarily meet this.
Court or arbitral tribunal?
There is no treaty between Germany and the U.S. on the recognition of court judgments; recognition is governed by national law and is less predictable. Arbitral awards, by contrast, are recognised in both states under the New York Convention of 1958.
Practical checklist
Clarify which companies are the contracting parties.
Regulate the choice of law expressly; where U.S. law is chosen, name the state.
Opt into the CISG deliberately or exclude it expressly.
Review the customer's purchasing terms and conclude a framework agreement.
Adapt liability clauses to the UCC.
Determine dispute resolution; consider an arbitration clause.
Conclusion
Moving into the U.S. often changes the applicable contract law unnoticed. Those who clarify choice of law, terms and liability in advance avoid uncertainty in a dispute. Please contact us if you have any questions.
As of: 26.10.2026
NIETZER Rechtsanwälte · Attorneys at Law (USA) · Heilbronn · www.unternehmensrecht.com
This article is for general information purposes only and does not replace legal advice in an individual case.
