Corporate and Business law(2006)

Question 2

In the context of the UN Convention Of International Sale Of Goods explain the meaning of and the rules relating to acceptance. 10mrks

‘Acceptance’ of an offer becomes effective if it reaches the offeror within the specified time in

the contract and if no time is fixed within reasonable time. Acceptance may be made by means of

a statement or by conduct. However in some circumstances where the parties indicate that the

offeree may indicate assent by performing a certain act e.g. Payment of the price, acceptance

will be effective if this act is performed(Art 18).

Acceptance of an offer which includes modifications, additions or limitation of the offer

constitutes a counter offer and acts as a rejection of the first offer. However additions which do

not materially affect the terms of the contract will not constitute a counter offer unless the offeror

objects to the alterations either directly or shows a notice to that effect. If he does not object, the

contract will be formed with the modifications applied thereof in the contract. Additional terms

relating to the price, place or time of delivery, method of settlement of disputes are said to alter

the contract materially (Art 19).

The period of time for acceptance fixed by the offeror in a telegram or a

letter begins to run from the moment the telegram is handed in for dispatch

or from the date shown on the letter or if no such date is shown, from the

date shown on the envelope. A period of time for acceptance fixed by the

offeror by telephone, telex or other means of instantaneous communication,

begins to run from the moment that the offer reaches the offeree. (Art.20)

A late acceptance is considered effective if the offeree communicates to the offeror in due time

of the delay or he sends a notice to that effect (Art.21)

An acceptance of an offer may be withdrawn if the withdrawal reaches the offeror before or

within the same time as the acceptance would have become effective. (Art 22). A contract is

made when acceptance of the offer becomes effective according to the provisions of the

convention.(Art.23)

A declaration of acceptance or intention reaches the addressee when it is communicated orally to

him or delivered to him by any other means to him personally or to his place of business, if he

does not have a place of business his residential place (Art 24)

Question 3

In the context of the UN Convention on Contracts Of International Sale Of Goods explain

the meaning and the effect of Anticipatory breach.

Anticipatory breach of contract occurs when one party of the contract declares that he will not

perform his duties as stipulated in the contract when the time of the performance arrives , the

other party may treat the contract as discharged. The party of the contract may show his inability

to perform either explicitly or implicitly; he may declare in advance of his inability to perform or

he may be engaged in some other action that may make his future performance impossible.

The affected party may suspend the obligations of his performance of the contract, if he becomes

aware that the other party will not be able to perform a substantial part of the contract either if:

1. He shows a substantial deficiency in his credit worthiness, ability to pay.

2. Shows a deficiency in preparing to perform of performing the contract.

In the case of Sale of Goods Contract if the seller has already dispatched the goods and the buyer

shows signs of anticipatory breach, he may prevent the handing over of the goods to the buyer

even though the buyer holds a document which entitles him to obtain them. A buyer suspending

performance, whether before or after dispatch of the goods, must immediately give notice of the

suspension to the other seller and must continue with performance if the other party provides

adequate assurance of his performance.

Damages for the breach of contract include a sum equal to the loss including to the loss of profit

suffered by the injured party. Such damages will not include the loss which the injured party

should have foreseen or ought to have foreseen at the time of the contract (Art.74).

If the contract is avoided, and within a reasonable time the buyer has bought goods in

replacement or the seller has resold the goods the party claiming the damages may recover the

difference between the contract price and the selling price in addition to any other damages

according to Art.74.

If the buyer or seller is not able to purchase or resale the goods, the party under breach may

recover the difference between the contract price and the price of the goods at the time in which

the contract was avoided, as well as any other damages.

The party must take reasonable measures to mitigate the losses including loss of losses resulting

from the breach, if he fails to take such measures the party in breach may claim reduction in

damages in the amount the loss should have been mitigated.

Exemptions: A party in breach may not be held liable if his failure to perform was due to matters

beyond his control, and could not take reasonable measures to avoid e.g. natural calamities

Question 3

Explain the potential liability of the various partners in relation to the following types of

partnership.

1. Ordinary partnership

2. Limited partnership

3. Limited liability partnership

In an Ordinary partnership all the members of the partnership are jointly liable to for all the

debts and obligations of the firm. Every partner is jointly liable for the all the debts and

obligations of the firm incurred while he is a partner and after his death his estate is also liable

for such debts and obligations to the extent of his share contribution in the partnership and also

in his personal property.

Exemption: A person who is admitted as a new partner into an existing firm is not liable for the

debt or creditors of the firm or any other debts incurred before he was a partner. A retiring

partner on the other is liable for all the debts incurred while he was a partner.

Unlike ordinary partnerships limited partnerships and limited liability partnerships offer some of

their owners limited personal liability debts on business debts.

In Limited partnership atleast one of the partners is considered as a general partner and is in

charge of making the business decisions and is personal liable for the business debts. A limited

partnership also has atleast one limited partner whose liability is limited to only his share

contribution but who has little or no influence in making decisions relating to the firm.

Limited liability partnership, in this form of partnership the liabilty of all of the members is

limited, they are jointly liable to the debts and obligations of the firm but only to the extent of

their capitol contribution. An LLP protects the members from debts against the partnership

arising from professional malpractise, lawsuits against another partner. This form of partnerships

are mainly common with professionals such as accountants and lawyers.

Question 5

In the context of International business transactions explain the meaning of:

1. The bill of lading

2. Letter of credit

The bill of lading is a document issued by the actual carrier of the goods to the person whom he

has contracted to transport the goods, its important to determine whether the risk or damage has

passed to buyer.

Importance of the bill of lading:

i. Provides evidence that the goods have been received by the carrier.

ii. Provides evidence that the goods have been shipped

iii. Provides evidence of the contract of carriage.

iv. It can act as a document of the title of the goods being shipped.

v. It specifies the recipient of the goods.

The seller is responsible for ensuring that the bill of lading is delivered to the buyer with the

goods.

Types of bill of lading; inland bill of lading, ocean bill of lading, through bill of lading, airway

bill of lading, negotiable bill of lading, non-negotiable bill of lading.

Letter of credit: this is a letter which gives the seller security, he is assured of immediate

payment, the seller receives immediate payment instead of waiting for the credit period to end.

The buyer gets a period of credit before he can pay for the goods.

Procedure

The buyer requests a bank in his country to issue the letter of credit to the seller ie the issuing

bank. This letter guarantees payment to the seller. The issuing bank then approaches a bank in

the seller’s country to advice the seller on the credit i.e the advicing bank. If the advicing bank

agrees to handle the credit it may also be required to add its own guarantee of payment to the

letter of credit. The seller can then ship the goods to the buyer. The buyer then presents the

relevant documentation to the advicing bank for the bank to institute payment if the documents

are in order the advicing bank can then pay the seller. The advicing bank then offers the

documentation to the issuing bank which then pays the advicing bank if the documents are in

order. The issuing bank can then give back the documents to the buyer who can the retrieve the

goods from the first carrier.

Letters of credit are used when there may be risk of none payment e.g when dealing with a buyer

for the first time.

Question 9

i. In the context of UN Convention of International Sale of Goods explain what is

meant by ‘passage of risk’ and the provisions contained in the CISG relating to it.

Risk passes to the buyer when he takes over the goods after the goods have been placed at his

disposal, if the buyer is bound to take over the goods at a particular place other than the place of

the seller, the risk passes when the buyer is informed of the delivery of the goods at that

particular place, loss or damage that may occur to the goods after the risk has passed to the buyer

does not discharge him from the responsibility of paying the price, unless the damage or loss is

due to the omission by the seller( Art.66)

In the contract involving the carriage of goods and the buyer doesn’t specify a particular place to

dispatch of the goods, the risk passes to the buyer once the goods are dispatched off at the first

carrirer, but if the buyer specifies a particular place where the goods should be dispatched the

risk passes to the buyer once the the goods are dispatched at that particular place.

Also the risk does not pass to the buyer until the goods are identified according to the contract,

either by markings or by shipping documentation(Art.67)

In the contract of the goods in transit the risk passes to the buyer once the contract is made but if

at the time of the contract the seller the seller knows or ought to have known of the loss or the

damage of the goods and did not disclose this to the buyer the risk of loss or damage will rest

upon the seller(Art.68).

If the contract involves goods not yet identified the goods are considered not to be placed at the

disposal of the buyer until they are particularly identified(Art.69).

ii. Al is an international food wholesaler who conducts a lot of businesses in the UK. He entered into a contract with a UK customer Bas, to provide one tonne of dried mushrooms at a price of $ 1000. He also entered a contract to provide another UK customer Col, with one tonne of permesian cheese. As he had to hire a large container to transport the goods to Bas and Col, Al decided that he should get the value for his money by including more goods in the container, in the expectation that he should sell him later in the UK. Thus when the container was delivered to the carrier Dino, it contained:

a) Bas’s one tonne of mushrooms.b) Two tonnes of cheese from which Al intended to allocate Col’s order

when it arrived at his warehouse.c) One tonne of dried pasta.

Unfortunately Dino’s lorry was involved in an accident on its journey to the UK and all of the goods in the container were destroyed. Whilst the goods were in transit and before the accident Al has entered into a contract with Ed for the sale of the pasta in the container.None of the contracts made any specific provision as to the passage of risk and it can be assumed that the provisions of UN Convention on Contracts for the International Sale of Goods apply.

Required;Advise Al, Bas, Col and Ed as to their rights and obligations under CISG in relation to the destroyed goods. 10mrks

Art.67 of the Convention involving goods on carriage the risk passes to buyer once the goods are

given to the first carrier. In the contract between Al and Bas the risk or loss or damage of the

goods passed to Bas once the goods were delivered to Dino, therefore damage to the goods from

the accident will be borne by Bas according to the Convention.

In the case of the contract between Al and Col, Col had ordered one tonne of permesian cheese

but Al altered the contract by including another tonne of cheese making them two tones of

cheese, this is a normal breach of the contract according to Art.49 of the convention, Col can

either accept all the goods at the contractual rate or reject them. In this contract the risk had not

passed to Col since Al had altered the terms of the contract by making a counter-offer, and Col

can either accept or reject the offer, we are not told whether Col accepted or rejected the goods.

Therefore loss or damage caused to the goods due to the accident will primarily be borne by Al.

In the case involving goods in transit, according to Art.68 of the Convention risk passes to the

buyer once the contract has been concluded. Therefore the contract involving Ed and Al the risk

had passed to Ed once the contract was made and Al could not have known that Dino, the carrier

will be involved in an accident, therefore risk, loss or damage to the goods will be borne

primarily by Ed.

NAME: SHAMIA RUTH KHASOA

REG NO: 067904

TITLE: CORPORATE & BUSINESS LAW ASSIGN 1

DATE: 28th FEB 2012