The Court of Appeal decision of Smallmon v Transport Sales Limited [2011] NZCA 340 looked at the responsibility placed on an international seller to be aware of regulations applicable in the buyer's country. In line with international authority, the case confirms that where the United Nations Convention on the International Sale of Goods (CISG) applies, sellers are generally not responsible for compliance with the regulatory provisions or standards of the importing country.

In Smallmon, the Australian plaintiff had purchased trucks from the New Zealand based defendant company. When the trucks arrived in Australia, the Queensland authorities refused to register them. At first instance, the High Court found that CISG applied, and the plaintiff was precluded from suing under the domestic Sale of Goods Act 1908. The judge found that there were no special circumstances or other reasons why the seller should have been expected to be aware of the domestic regulations, and so the plaintiff's claim failed.

The Court of Appeal agreed with the High Court's reasoning, and also placed particular weight on the seller having recommended to the buyers expert Australian contractors to assist with the importation, and the buyers' own knowledge and experience as transport operators.

The Court of Appeal also held that, if it had been necessary for it to do so, it would have accepted the sellers' alternative argument that the fitness for purpose provision of CISG did not apply because the parties had agreed otherwise.

The case will provide some comfort for New Zealand businesses dealing with counterparties in a country which is also a party to CISG, such as Australia. While it does not contain a definitive statement as to what are likely to constitute the "special circumstances" in which a seller will be deemed to know of foreign regulations, it indicates that the mere fact that a party has previously sold goods of the same type to buyers in that country will not be sufficient.