International Business Law - Chapter 10

7/26/2019 International Business Law - Chapter 10

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Sales of Goods


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UN Convention CISG

United Nations Convention onContracts for the International Sale ofGoods Parties to CISG

Transactions covered under CISG contracts for the international sale of

goods Both of the states must be contracting parties or

The rules of private international la! must leadto the application of a contracting state
http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.htmlhttp://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.htmlhttp://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html


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Seller" State #

Bu$er" State B

Contract entered into at State C %CISG&

Seller breaches in State C

Bu$er sues in State B

State B choice of la! clause points to State

C la! appl$ing

Since State C is CISG and contract isinternational CISG !ould appl$


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'pting In 'pting 'ut

Parties to an international contract ma$opt out of its application or modif$ its

application Need factual evidence to support opt out

see Case ()*(ASANTE TECHNOLOGIES

Parties ma$ opt in to the CISG Using a choice of la! clause to opt in+This depends on !hether the State la!allo!s the domestic la! to be e,cluded


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Sales

Sale" The e,change of goods for an amountof mone$ or its e-uivalent

CISG" does not de.ne sales but spea/s of

obligations Seller" deliver the goods hand over an$

documents relating to them and transfer thepropert$ in the goods as re-uired b$ the

contract and this Convention Bu$er" is to pa$ the price

Note" US UCC 0 passing of title from the sellerto the bu$er for a price


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Goods

Good" a movable tangible ob1ect+

CISG" goods do not includeThings bought for personal use or

2ocal shop/eepers selling to foreigners

3omestic consumer protection la!s Bought at an auction %sales on e,ecution4authorit$ of la!& or

Uni-ueness of the transaction

#uctions 0 !hen !as the contract formed5

'thers 0 forced sales 0 lac/ of negotiated terms

Stoc/s shares investment securities negotiable instruments

mone$ Special domestic la!s govern the sales

'ceangoing vessels or aircraft Special domestic la!s govern the sales


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6i,ed Sales

Goods and Services 7,ample" Sale of a Good %photocop$

machine& !ith 8 $ear Service %maintenance

and cleaning& CISG" it is a good unless the preponderance

part of the obligations of the seller is thesuppl$ of labor or other services 9eminder" preponderance !ould be more than :);

Goods manufacturing" it is goods unless the Bu$erunderta/es to suppl$ a substantial part of thematerials


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Contractual Issues 7,cluded from

CISG

CISG onl$ covers

=ormation

9emedies

7,cludes" Illegalit$ and Incompetenc$

Third Part$ Claims Personal In1ur$

Preemption 0 to ta/e precedence over

If CISG applies domestic la! is preempted

7stablishes uniform rules for internationalsales contracts


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Interpreting CISG

>ords of CISG must be interpreted

International character of CISG

Need to promote uniform application of

CISG

'bservance of good faith

Implies" plain meaning or plain

meaning rule be used 2egislative histor$

6a$ be used due to !ide use of thispractice


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Interpreting CISG %cont?d&

General PrinciplesT!o suggested principles found throughout the

CISG # part$ to a contract has the dut$ to communicate

information needed b$ the other part$

Parties have the obligation to mitigate damagesresulting from a breach

9ules of Private International 2a!T!o basic camps" statutes and case la!

#llo!ing individual states to enact PI2 0 drafters!anted to avoid states adopting ad hoc interpretiveaids


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Interpreting Sales Contracts

Statements and Conduct of Parties

meeting of the minds or commonintent Sub1ective intent approach

Courts !ill turn to this .rst if this is easil$ascertained

'b1ective intent approach

>hen not clear courts !ill loo/ to this approach


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Interpreting Sales Contracts %cont?d&

Negotiation 0 %intent& due consideration given to all relevant

circumstances Includes negotiations leading up to the contract

practices the parties have established bet!eenthemselves and parties conduct after the$ agree thecontract

this negates common la! 1urisdictions parol evidence rules

Parties ma$ opt outusing an integration clause !hich

ignores all prior or contemporaneous agreements !hich isadopting the parol evidence rule 0 ma/ing the !rittencontract the onl$ evidence

Parties ma$ also opt out to e,clude parties conduct afterthe$ agree the contract


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Practices and Usages Parties are bound b$ an$ practices !hich the$

have established bet!een themselves

Court can consider an$ usages that the partiesagreed to 7,ample" use of INC'T796S

Court can consider common Trade Usage a usage of !hich the parties /no! or ought to have

/no!n and !hich in international trade is !idel$ /no!nto and regularl$ observed b$ parties to contracts of thet$pe involved in the particular trade concerned

See case ()*8" TREIBACHERon the de.nition of consignment


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=orm

>ritten re-uirement5 Sales contract need not be evidenced in

!riting and is not limited to !hat form 0 itma$ be proved b$ !itnesses

7mails purchase orders etc

Compromise"

States ma$ %at time of rati.cation& e,clude CISGand use domestic la! for form and !rittenre-uirements for part$ has its place of business inthat state


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=ormation of Contract

'@er # proposal b$ one person to another indicating an intention

to enter into a contract under speci.ed terms 6ust sho! intention to be bound

7,ample 0 ne!spaper advertisement

3e.neteness '@er must describe the goods !ith suAcient clarit$ that the

parties /no! !hat is o@ered for sale its -uantit$ and price Price ma$ be determined b$ price generall$ charged at the time and

circumstances involved

See e,amples of rush orders etc+

Speci.c '@erees 'ne or more speci.c persons 0 i+e+ Not a ne!spaper

advertisement Invitation to Treat


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=ormation of Contract%cont?d&

7@ectiveness of an o@er

9evocation '@ers are revocable at an$ time before the o@eree has

dispatched an acceptance UN27SS o@er is stated to be

irrevocable CISG" b$ an$ means

Common la!" b$ the same means sent

=irm '@ers '@er that o@eror promises to /eep open for a .,ed period of

time CISG" enforceable

Common la! must be supported b$ consideration

Promise does not need to be signed nor in !riting no time limitation+

7nforceable if irrevocable or o@eree can reasonabl$ rel$ on

conduct that implies that the o@er is .rm


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#cceptance Statement or conduct b$ the o@eree indicating

assent that is communicated to the o@eror #greement to enter into a contract proposed b$ an o@eror

Silence 0 obviousl$ not a statement and does not

meet the conduct re-uirement unless agreed to b$ o@eree b$ statement or conduct

this is such a good deal I assume that $ou haveaccepted unless I hear other!ise

unless $ou hear other!ise from me !ithin threeda$s of $our order I !ill ship the product to $ou at())4pc


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#cceptance %cont?d&

Time of acceptance >ithin time period speci.ed

If no time period then reasonable time If oral acceptance must be immediate

CISG adopts the receipt theor$4rule 0acceptance valid upon receipt

#s opposed to postal rule4dispatch rule4mailbo,rule 0 !here acceptance is valid upon dispatch


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#cceptance %cont?d&

#cceptance b$ conduct If o@eror as/s for performance of an act 0

acceptance is e@ective !hen act isperformed+

'@er" Ship me () !idgets at ()4pc

#cceptance" Seller ships !idgets !ithoutcon.rming order

'@er trade usage or the practice of theparties must ma/e it clear that o@eree is notre-uired to notif$ o@eror


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#cceptance %cont?d&

>ithdra!al #cceptance valid upon receipt"

'@eree ma$ !ithdra! its acceptance an$ timebefore or simultaneous !ith its receipt

#s opposed to mailbo, rule

9e1ection

9e1ection of o@er is e@ective upon receipt # re1ection and acceptance is sent b$ o@eree on

the same da$ 0 !hich one is given e@ect5


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#cceptance !ith 6odi.cations

Battle of the =orms Seller sends o@er to sell %'@er 2etter&

Bu$er sends acceptance %Purchase 'rder& CISG if inconsistencies are material the

!ould*be acceptance is a countero@er 6aterial" price pa$ment -ualit$ of goods place

and time of deliver$ e,tent of liabilit$ of partiessettlement of disputes etc+

If not material becomes part of contractunless '@eror promptl$ re1ects+


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General Standards ofPerformance

Both parties are entitled to get fromtheir contract !hat the$ e,pect If fail to perform accordingl$ D breach

If one part$ fundamentall$ breaches theother ma$ #void the contract

6a/e demand for speci.c performance

=undamental Breach =ailure to substantiall$ deliver !hat the

other part$ reasonabl$ anticipated receiving


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=undamental Breach %cont?d&

#voidance" Noti.cation b$ the part$ that he is canceling the

contract Notif$ other part$

9eturn the goods

'nl$ a@ects obligation to perform does notcancel

#n$ provision in the contract re" settlement of disputes%arbitration choice of la! choice of forum etc&

#n$ other provisions re" rights and duties of the parties%trade secrets con.dentialit$ intellectual propert$ etc+&


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=undamental Breach %cont?d& Speci.c Performance

CISG allo!s speci.c performance

Courts not obligated unless allo!ed to under

domestic la!s Common la!" fairl$ narro! application disobedience has

serious conse-uences"contempt of court !ith .ne orimprisonment

Speci.c or ascertained goods %UE& goods are uni-ue or

other proper circumstances %US& Civil la!" broader application and not so serious

conse-uences" no .nes or imprisonment allo!s

Part$ is entitled to re-uire performance not limited b$the nature of the goods involved


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Seller?s obligation

3eliver the goods

Fand over an$ documents relating tothem

7nsure the goods conform !ith thecontract


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Seller?s obligation %cont?d&

Place for deliver$

#s agreed to in contract orThe .rst carrier?s place of business %if carriage of goods&

Place !here both parties /ne! the goods !ere located or

manufactured or produced

If contract re-uires seller to arrange shipping but does notspecif$ carrier transportation must be" #ppropriate in the circumstances and made according to usual terms

for such transportation

Insurance" if seller is not re-uired to arrange insurance 0 sellermust %at bu$er?s re-uest& provide bu$er !ith all availableinformation to allo! bu$er to obtain insurance+

Seller also must at time of deliver$ to carrier" Identif$ to the carrier the bu$er and the goods

Give notice to bu$er of consignment of goods to the carrier


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Time for 3eliver$ 'n the date .,ed in the contract or if no date then

reasonable time+ If a time period is speci.ed %( une 0 (: une& then seller

can deliver an$ time during that period Unless bu$er speci.es that bu$er chooses the time

Turning over of documents #t time and place for deliver seller must turn over

an$ documents relating to the goods that thecontract re-uires+ If delivered earl$ seller has the right to cure an$ missing

documents if it doesn?t cause the bu$er unreasonableinconvenience or e,pense


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Conformit$ of Goods Seller must deliver goods !hich are of the

-uantit$ -ualit$ and description re-uired b$ thecontract and !hich are contained or pac/aged inthe manner re-uired b$ the contracts 3etermining Conformit$

Third*Part$ Claims

>aiver

Time for e,amining goods Notice of 3efects

Curing 3efects


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Conformit$ of Goods %cont?d& 3etermining Conformit$

=it for the purposes that the goods ordinaril$ used

=it for an$ particular purpose e,pressl$ or impliedl$ made/no!n to the seller

7,cept !here bu$er did not rel$ or unreasonable for him to rel$ onseller?s s/ills or 1udgment

Possess the -ualities of goods that seller gave bu$er as sampleor model

Contained or pac/aged in the same manner usual for such

goods or in a manner ade-uate to preserve and protect goods+Third*Part$ Claims

Goods do not conform if sub1ect to HrdPart$ Claims 0 o!nershipintellectual propert$ rights 0 patents trademar/s cop$right


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Conformit$ of Goods %cont?d&

>aiver Parties ma$ e,pressl$ !aive conformit$

Parties ma$ impliedl$ !aive conformit$ 0

If bu$er /ne! or could not have been una!are that the goods !erenonconforming

Time for e,amining goods Bu$er obligated to inspect !ithin as short a period as is

practicable If shipped e,amination can be deferred until after goods arrive at

destination

If bu$er must redirect4redispatch goods then !hen goods arrive atdestination

Seller must have /no!n or ought to have /no!n the possibilit$ ofthe redirection


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Conformit$ of Goods %cont?d& Notice of 3efects

Bu$er must inform seller of defects !ith a reasonabletime after deliver$

If defect discovered later seller must promptl$ notif$ seller inorder to preserve his rights

9egardless Seller !ill not be responsible for a defect thatarises more than 8 $ears after deliver$

Unless" Seller /ne! or ought to have /no!n of nonconformit$and did not disclose it to bu$er or contract establishes a longer

period of guarantee

Curing 3efects If seller delivers earl$ he ma$ correct an$ defects up to

agreed upon deliver$ date


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Bu$er?s 'bligations

Pa$ment of the Price Bu$er obliged to ta/e !hatever preliminar$ steps

re-uired to ma/e pa$ment in accordance !ith thecontract and an$ relevant la!s4regulations

Bu$er must pa$ price at the time and place incontract If no time speci.ed at the time !hen the goods or the

documents are delivered Unli/e Civil la! countries no re-uest4formalit$ re-uired b$ Seller

to re-uire pa$ment sub1ect to inspection of goods

If no pa$ment place speci.ed If deliver$ place 0 then pa$ment at deliver$ place

If no deliver$ place then pa$ment at seller?s place


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Bu$er?s 'bligations

Ta/ing 3eliver$ Bu$er obligated to cooperate !ith seller to facilitate

transfer and actuall$ ta/e over the goods Bu$er !ho fails to cooperate !ill be responsible for an$

resulting costs Bu$er failing to ta/e deliver$ assumes ris/ for an$

damage to the goods after that time carpet deliver$ e,ample" Seller delivered carpet to Bu$er at

speci.ed time and place bu$er?s shop !as closed seller leftcarpet at Seller?s shop+ 9ain ruined the carpets+ Court found

bu$er responsible for loss

ha$ purchase e,ample" Seller sold bale of ha$ to bu$er bu$er

to pic/ up ha$ bale ha$ bale destro$ed b$ .re+ Bu$erresponsible for loss as didn?t pic/ up ha$ in a reasonable time


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Passing of 9is/

Passage of 9is/ determines !ho isresponsible for the loss 0 prior todeliver$ during transit or inspection

or after deliver$ #greement of the Parties

CISG allo!s parties to allocate ris/

among themselves CISG does not de.ne an$ terms ma$

use domestic terms or internationalterms Commonl used INC'T796S %='B CI=&


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Passing of 9is/ %cont?d&

6eans of 3eliver$* b$ carrier or b$ seller Goods transported b$ carrier 0 CISG

distinguishes t$pe of carrier contract Shipment contracts

Transshipment contracts

In*Transit contracts

3estination contracts

9egardless of contract used ris/ of loss !illnot pass until the goods are clearl$identi.ed b$ mar/ings shipping documentsnotice given to the bu$er or other!ise


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6eans of 3eliver$ * Goodstransported b$ carrier %cont?d&

Shipment contracts Seller re-uired to deliver the goods to a

carrier for shipment and does not re-uirethe seller to deliver them to a particularplace the ris/ of loss passes !hen the

goods are handed over to the .rst carrier =C# Paris e,ample


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6eans of 3eliver$ * Goodstransported b$ carrier %cont?d&

Transshipment contracts Seller re-uired to deliver the goods to a

carrier at a named place carrier !ill thencarr$ the goods to the bu$er ris/ of losspasses to the bu$er !hen the goods are

handed over to carrier at the .rst place 7,ample =#S 64< 'cean Trader


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6eans of 3eliver$ * Goods transported b$carrier %cont?d& In*Transit contracts

If goods are sold in*transit ris/ of loss passes to thebu$er at the time the contract is concluded Contaminated oil e,ample if seller /no!s ris/ doesn?t

pass

3estination contracts

Seller re-uired to arrange transport to nameddestination ris/ of loss passes to bu$er !hen thegoods are handed over to bu$er or at that place

7,ample 33P Seattle >ashington


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6eans of 3eliver$ %cont?d& Goods delivered !ithout being transported

>hen goods are not transported ris/ of loss passes!hen the goods are handed over to the seller or

other!ise put at the bu$er?s disposal %ha$bale& 7,ample 7> Seller?s Cit$

Breach of Contract CISG rules on ris/ of loss are not concerned

!ith breach of contract %e,cept tainted in*transit contracts& 0 ris/ of loss passes to bu$erat agreed upon time and place


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9emedies

Uni-ue to bu$er

Uni-ue to seller

#vailable to either part$


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9emedies %cont?d&

Bu$er?s 9emedies * cumulative

Speci.c performance

#voidance

9educe price

9efuse earl$ deliver$

9efuse e,cess -uantities


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9emedies %cont?d&

Bu$er?s 9emedies 0 %cont?d&

Speci.c performance 0 see discussionbefore

3eliver substitute goods 6a/e repairs


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9emedies %cont?d&


#voidance Provide Nachfrist Notice

Generall$ re-uired for bu$er to provide areasonable time period before avoiding thecontract


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9emedies %cont?d&

Bu$er?s 9emedies 0 %cont?d& 9educe price

If bu$er not entitle to damages !hen a seller

delivers nonconforming goods the bu$er !ill beentitled to a reduction in price+ Bu$er must have accepted non*conforming goods and

Sell must not be responsible for non*conforming goods

7,ample force ma1eure

9efuse earl$ deliver$ or e,cess -uantities Bu$er is under no obligation to ta/e earl$

deliver$ or e,cess -uantities


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9emedies %cont?d&


7@ect of Partial Non*conformit$ ())) bags of Jo!er

3eliver$ ()) bags vermin infested unusable Bu$er ma$ see/ speci.c performance price

reduction or avoid that part of contract 0 inaccordance !ith the CISG rules for each

#voiding entire contract %refuse entiredeliver$& 0 'N2K if the partialnonconformance is a fundamental breach


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9emedies %cont?d&

Seller?s 9emedies 0 cumulative and immediate Speci.c performance

Ta/e deliver$ and pa$ contract price

Perform an$ other obligations re-uired b$ the contract

#void contract for fundamental breach or failure tocure a defect Same as bu$ers failure to cure after Nachfrist Notice

'btain missing speci.cations

If bu$er doesn?t suppl$ speci.cations b$ the giventime4date seller can ascertain speci.cations and notif$bu$er of them if bu$er does not respond the$ becomebinding on the bu$er


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9emedies %cont?d&

Bu$er?s and Seller?s 9emedies

Suspension of performance

#voidance in anticipation of

fundamental breach #voidance of an installment contract

3amages


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9emedies %cont?d&

Bu$er?s and Seller?s 9emedies %cont?d& Suspension of performance %cont?d&

6a$ suspend if there is a threat of

nonperformance 6a$ prevent the handover of goods if threat

of nonpa$ment is found after goods are in*transit

6ust give immediate notice and mustcontinue performance if ade-uate assuranceof performance is made


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9emedies %cont?d&

Bu$er?s and Seller?s 9emedies %cont?d& #voidance in anticipation of fundamental

breach

Before a breach if Speci.c goods promised to bu$er are !rongfull$ sold

to a third part$

Seller?s onl$ emplo$ee capable of producing goodsdies or is .red

Seller?s manufacturing plant is sold Should provide immediate notice and allo! for

assurances


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9emedies %cont?d&

Bu$er?s and Seller?s 9emedies%cont?d&

#voidance of an installment contract 6a$ avoid a particular installment If avoidance of one installment creates good

grounds that further installments !ill be atris/ further installments ma$ be avoided

If subse-uent installments areinterdependent a breach of one installment!ill allo! a part$ to avoid the entire contract


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9emedies %cont?d&

Bu$er?s and Seller?s 9emedies %cont?d& 3amages

# sum e-ual to the loss including loss of pro.t

su@ered b$ the other part$ as a conse-uenceof the breach+

6ust be reasonabl$ foreseeable Fadle$ v Ba,endale

Substitute transaction price 3i@erence in bu$4sell price in transaction

Substitute purchase price

Parties must mitigate their loss

7 cuses for


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7,cuses forNonperformance

=orce ma1eure

Not liable for damages if failure toperform is

3ue to an impediment be$ond its control Impediment !as not reasonabl$ foreseen

during contracting

9emains unable to overcome the

impediment or its conse-uences 'ther remedies ma$ appl$ 0 suspension

of performance or avoidance Note" force ma1eure clauses 0 can save the

contract

f f


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7,cuses for Nonperformance

%cont?d&

=orce ma1eure %cont?d&

Part$ must promptl$ notif$ the otherpart$ of impediment and its e@ect on

performance If claim involves third part$ performance

%supplier& then third part$ must be ableto claim impediment

7,cuse is onl$ good for as long asimpediment continues to e,ist

3oes N'T appl$ to commercial

impracticabilit$

7 f N f


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7,cuses for Nonperformance

%cont?d&

3irt$ Fands

# part$ ma$ not rel$ on a failure of theother part$ to perform to the e,tent

that such failure !as caused b$ the .rstpart$?s act or omission

Documents

International Business Law - Chapter 10