The Ineffectiveness of the Provisions of SGA in Allocating Risks - Essay Example

 NATIONAL AND INTERNATIONAL SALE OF GOODS Table of Contents Table of Contents 1 PART ONE 2 Essay: THE INEFFECTIVENESS OF THE PROVISIONS OF SGA IN ALLOCATING RISKS 2 Introduction 2 Multiple forms of transport complicates allotment of risks 2 Damages and casualties 4 Passing and ascertainment of goods 5 Undivided share of risk 7 Conclusion 8 PART TWO 9 Essay: FAILURE OF UN CONVENTION (CISG) TO PROVIDE UNIFORM LAW 9 Introduction 9 Role of article 7 in creating challenges 10 Role of CISG 11 The problem of languages from multiple translations 12 Opting out of the convention when solving disputes 13 Selective adoption of provisions by member countries 14 Conclusion 15 REFRENCES 16 PART ONE Essay: THE INEFFECTIVENESS OF THE PROVISIONS OF SGA IN ALLOCATING RISKS Introduction The provision of risks of loss under the Act governing sale of goods is not spelt out clearly; it has several provisions that are ambiguous because of their open nature. The act does not provide a clear roadmap that guides the allotment of risks associated with parts of goods forming a part of bulky consignment. Some of the issues arising from this provision include the determination of the identity of risk bearer. Given that the distance between the seller and the buyer depends on the sage of transit, common knowledge argues that the buyer is better placed to ascertain the damages of the goods hence the need to allot the risks to the buyer based on the closeness of distance. The essay examines the gaps existing in the act, which makes it difficult to allocate risks as well the possible legislations and amendments that may rectify the gaps. Multiple forms of transport complicates allotment of risks Transportation is a challenge that affects goods on transit. In many cases, problems arises during the transportation of a bulky consignment owing to the fact that such goods are likely to change hand from one mode of transport to another. Although the act addresses the concerns of the risk bearers in the case of loss, its introduction presents a complex perspective on the form of transportation. For instance, when there is a transportation of goods, it is likely that such a container of the goods may transit through different modes of transport like ships, rails or even the use of tracks (Roth, 1979; Sutton, 1989; Honnold, 1984). The act fails to give appropriate guidance on risk allotment when bulky goods transit through one mode to another (Cohen, 2005). The issues arising from risk allotment to the various modes of transport is so complex that any amendment of the provision will require appropriate method that quantifies and allocate the level of involvement between the modes of transport before allotting the risks (Skelton, 1986; Roth, 1979). Further, the section provides the limiting factor to the scope of the act. The provision lacks a proper directive to offering direction on goods in transit. Perhaps, the best approach would involve splitting the risks and ensuring there is clear definition of the bearers based on the different goods forming the consignment. In doing so, it would limit the risks of deterioration by splitting these risks occasioned during transiting by allowing the seller to bear the so-called extraordinary risks associated with casualty and accidents (de Vries, 1982). The same approach would apportion the so-called necessary risks of deterioration, which is common to all goods undergoing transit to the buyer (Skelton, 1986). However, there is lack of proper guidance on a consignment that has many buyers. Besides, a consignment in transit is likely to undergo transportation using more than one method. For example, a bulky consignment may undergo transportation using shipment, rails, and even the track before arriving to the buyer (Cohen, 2005; Moss, 2005). During the transiting process, chances are that the consignment may be damaged or experience other forms of casualty. In such a case, the provision lacks a guidance on which mode of transportation should bear what forms of risks. The act further creates confusion on the undifferentiated goods. These re goods with several parts requiring ascertainment and splitting on deliver (Roth, 1979). The act is not clear on the occasions that allows for the passage of such goods. The essay presents the assessment of grey areas of the convention that deals with the transit of goods by examining the challenges in the provision of risk of loss. Another problem of the provision involves the problem that occurs due to undifferentiated parts of goods occurring in bulky. Such goods may contain a single consignment that would need splitting into several parts to a number of sellers. Damages and casualties The major problem arises when a consignment consisting of several parts of goods for several buyers but does not give offer guidance on risk allotment. For instance, one of these is the absence of clear guidance on the party that should take the risks in cases of damages or casualties. These challenges along with others make the act inappropriate. When a provision lacks the capacity to define the scope of its provision, it does not help the implementation of commercial justice. For instance, according to section 33 of the act, the seller agrees to delivering the goods at own risk while the buyer takes the risks associated with deterioration of goods that occurs during transiting (Skelton, 1986). The provision will prevail unless there is a prior agreement between the two parties specifying the risks and the allotment of the same (DiMatto et al., 1992). However, there is no clear scope for the rule. The lack of scope opens a debate to how such a provision may be implemented when both parties (seller and the buyer) lacks a clear roadmap on the eventuality of any risks. These are some of the challenges of the provision, which need amendment to ensure the scope of several provisions, are well addressed by making them clear to avoid the ambiguity (Honnold, 1984; Berman and Kaufman, 1978). Passing and ascertainment of goods The problem occurs because of the rule governing the passing of goods, which does not put into measure the appropriate legislative guidance the passing of goods. For instance, it acknowledges the fact that goods would not pass unless it is possible for their ascertainment (Skelton, 1986; de Vries, 1982). These rules are very detrimental when dealing with situations that require one to deliver several parts of a larger part of the consignment that may not be split up pending the arrival of the consignment despite the likelihood of deterioration (Berman and Kaufman, 1978). In such a cases, the buyers are in the receiving end because they lack the mandate to control situations regarding the passing of the consignment. Therefore, a seller of the undifferentiated bulky shipment may decide to tender a delivery order but such attempts may not enable the goods sold to pass owing to the fact that such goods remain unascertained (Skelton, 1986), unless the seller tenders the bill of landing, the efforts would not be fruitful. The provision lacks the capacity to provide a roadmap on how such cases may be resolved. There is lack of a section that allows the treatment of the delivering order as the title of the document (Bainbridge, 1984). The rational is to allow the goods to remain unascertained hence making the situation and the section inconsistent to each other, further complicating the situation in the provision. Therefore, the provision needs to come out very clearly, through an amendment on how to deal with undifferentiated parts of goods that targets several buyers to allow appropriate pass to such goods without creating confusion. There are two assumptions that guide the ascertainment of goods. These are the fact that the right of receiving a bulky goods with several parts destined to a place remains vested to the individual consignees upon arriving to their locations (Bridge, 2003). The other assumption relates to supporting the premise, which suggests the need to transfer the casualty risk allotment to a party that happens to be better placed in caring for the goods in transit. The party must also be in a better position to access the risk cover from the insurer (Skelton, 1986; Berman and Kaufman, 1978). The provision does not provide appropriate way of dealing with ascertainment because using the distances between the two parties to make assumptions on the risk bearer lacks fundamental basis of the law. For instance, when determining the bearer of risks, it should be able to identify the specific personnel to bear the risk (Berman and Kaufman, 1978). The main question arises when there is a need to identify who bears risks that occur because of loss, whether the seller or the buyer should bear the consequence. The common knowledge using distance has its challenges, for instance, how close one of the two parties to the damage determines their likelihood of taking the risk (Kabik, 1992). The likelihood that the seller is more distanced than the buyer, therefore better place to assessing the damages in order to determine where to institute claims of damage from either the insurer or the carrier has become universal. The problem of identifying goods before passing the risk is another challenge presented by the act, although the act offer the supremacy that clearly guides on the identification of goods as lying solely between the buyer and the seller (Roth, 1979). However, these assertions are too general and do not specify on what occasions should either bear a risk of loss. In fact, a lack of explicit agreement in terms of contracts agreed upon by the seller and the buyer may complicate the identification process (DiMatto et al., 1992). However, the act says that in such a scenario, the identification process occurs when making the contract when the goods exist or when one of the parties is able to identify the goods. In a situation where there is absence of breach, the general knowledge assumes that risks of losses for good on transit are passed to the buyer from the seller, if it is possible to identify the same using the contracts. In the absence of a contract that specifies the agreement, the identification of goods can happen upon making the contract for the goods (Sutton, 1989). The problem of identifying and allotment of risks from losses for a part of good from the bulky goods forms a challenge when the consignment is in many parts (Kabik, 1992). Such a scenario is common when there are several owners ordering the container. There is high likelihood of undermining the amount because of the fact that it exists in one mass. However, it is possible to determine the portion of each owner by the measurement of the entire mass. The risks for such good must be shared equally among the buyers. The problem is that the buyer will assume the liabilities from these risks even if they lack the knowledge to comprehend the condition of the goods (Skelton, 1986). In fact, when there are cases of hidden damages, the buyer is disadvantaged because of the damages. There should be legislation to guide the buyers against these consequences. For instance, a legislation that guides the buyer so that they have the capacity to reject losses until a seller cures or the goods conform to the buyers’ contractual agreement would suite such a scenario. Undivided share of risk Another challenge of the provision is the undivided share of risks in case there is lack of agreement. Providing a provision that allows the buyer to reject the goods when found not conforming to the contractual agreement, besides, the buyers may accept part or whole or accept several units or a unit and consequently reject the remaining units. Such an act gives the buyer the leeway of deducing part or the entire damaged goods that result from the seller breaching the contractual agreement. The need for the rules that applies to goods destroyed without either the buyer of the seller having the knowledge on the same would help strengthen the provision of risk allotment (Roth, 1979). Such sections should consider the scenario where the passage of the risks to the buyer is withheld until they confirm that goods conform to the required standards. Confusion arises when determining whether in the event of a casualty, the risk passes to the buyer (Waybills, 1984). Therefore, there is a challenge of not comprehending the occurrence of damages, which could either be after the passing of the risk or before the occurrence of the goods’ damage (Cohen, 2005). These challenges make it difficult to allot risks of loss. Conclusion Cases of hidden damages unravel unresolved issues of the act, which needs clearer sections to address the impending challenges. Problems arising when a consignment of undifferentiated parts meant for several buyers has several parts destroyed or deteriorated. The act does not provide the appropriation that may assist in the allotment of the risks from the destroyed parts to a given buyer. Reaching a similar solution by either involving the various buyers through a pro rata contract or without the express provision would help in formulating a section that guides the resolution to the challenge (Sutton, 1989). Perhaps in cases of partial damages, such goods would need distribution based on a rational basis. To avoid reduces the chances of dragging others by the debtor. Buyers having the option to rejecting goods that do not conform to the standards required. The seller may not be in a position to knowing what damages happen during the transit hence the need to address these issues as well. PART TWO Essay: FAILURE OF UN CONVENTION (CISG) TO PROVIDE UNIFORM LAW Introduction The convention aimed at finding unity for the parties involved in commercial international trade. Besides, the convention aimed to ensure there is uniform law that guides efforts for international sale of goods (CISG, 1980; Kilian, 2001). To achieve these functions, the convention was to emphasis the act by focussing on contractual agreement between the parties (Lando, 2005). However, there are many challenges from the acts, especially article seven, which has the provision that allow members and parties to ratify some provisions and leave out other provisions. These creates problems during implementation of the convention in cases of disputes. Therefore, this essay will assess how article 7 of the act has made it impossible to obtain uniformity when solving disputes of international commercial laws. The convention aimed to ensure the terms of contracts prevails (Felemegas, 2002; CISG, 1980). However, the provisions provided for by the convention only focuses on terms that parties could agree on after the contract (Murray, 1998). Parties may opt to disregarding the provisions of the convention. The international perspective requires that the convention provide a guidance on commercial law for such a perspective. Under the Uniform Commercial Code, the convention allows for a contractual agreement between the parties from different member states (Kilian, 2001). The fact that parties taking part in the international trade are international, there is a need to have separate regulations that harmonises the various substantive laws governing their contracts (Stephan, 1999; CISG, 1980). In so doing, the UN convention has failed to provide a uniform law governing the sale of goods for the international perspective (Lando,2005). The failure in this aspect relates to the fact that individual nations would still apply their national laws when addressing matters of international trade thereby creating complexities on how to attain uniformity in the application of the law at the international level. The main challenge to this concept is the absence of clear guideline on how to apply the two sets of law given that different countries have different laws that may complicate uniform interpretation in cases of disputes between parties from different nations (Felemegas, 2002). Role of article 7 in creating challenges The article 7 of the convention has received variant judicial interpretation that has created problems. The article provides ambiguous methods on how to apply the provision (Felemegas, 2002). There was purposeful and deliberate step in leaving the CISG incomplete to provide a flexible code that would receive agreement and therefore attract adoption by the member states. In fact, article 7 of the convention was included as a way of filling in the gaps that were not addressed adequately. It sought to include and allows the inclusion of the domestic laws in promoting uniformity for its application. However, the traditions and domestic laws differ across different jurisdictions (Cook, 1998). The convention does not provide stringent codes for commercial law; hence, it lacks the means of offering a predictable and secure international litigation (Ferrari,1994) that may guide the parties in reaching a common ground. However, other critics argue that when regulations are flexible, they offer avenues for maintaining international sovereignty because of the fact that most nations depend entirely on their domestic laws (Bailey, 1999). When jurisdictions are not called to take part in the adjudication of the international commercial disputes, they are likely to misinterpret the commercial laws irrespective of reforms. There are evidence that many states that previously adopted the CISG opted out because of the realisation that certain provisions creates mini codes, which denies the need to have a uniform rule that can be applied as a single item (Cook, 1998). Creation of suspicion among the member states through these min codes played essential factor in determining the exit strategies of the nations that opted out of the convention. Role of CISG The CISG was meant to substitute the diversity that existed in the world’s judicial system by creating a system of uniform implementation of the laws governing international trade. Although during the drafting and adoption, many parties took part, the CISG became a thin legislative framework owing to the numerous gaps that the convention failed to address (ULISG, 2015). One of the challenges of this CISG is the limited theoretical guidance on the interpretation of the convention by the adopting member states hence inconsistencies (Bailey, 1999; Koneru, 1997). These inconsistencies drive the commercial parties to opt out of the act owing to the problems arising from these inconsistencies that governs the contractual law (Balovich, 2005). Many scholars argue that CISG has the potential of increasing legal risks. Therefore, it fails to achieve its objectives because it mainly harms the main intention it was suppose to achieve, that of unification. Article 7 is the main tenet of the convention, such that some scholars believe that for CISG to be successful, the article forms the main basis (Ferrari, 1994). However, this article has ambiguous provisions characterised by lack of clear and sequential methods for its interpretation. In fact, this article is the centre of many challenges that affect the uniformity of the convention (Koneru, 1997). One of the issues prone to misinterpretation is how to define good faith (Sim, 2004). Although historical legislative included the principle of good faith in the article, they believe that the representatives used it to stuck a compromise by insisting the need by the parties to respect fair dealings and good faith of the contract. However, these terms were considered ambiguous because they lacked well definition hence leading to interpretations that may not be consistent. A well definition would involve applying the tem in cases where the parties act in an improper manner. The problem of languages from multiple translations The six official languages of the CISG exhibit variations. Enactment of the official versions would ensure the initial intention remains intact during the translation. Despite the growing attempt by the scholarly world to interpret the uniformity of CISG, most scholars argue that the CISG failed to create a level of uniformity (Balovich, 2005). In the past, the UN convention experienced many disputes arising from inconsistencies of the linguistics used by the multiple drafts of the convention, conflicts of the judicial interpretation and the existing contradictions of its provisions (CISG) (Felemegas, 2006; Balovich, 2005). The language of the convention determines the understanding and the interpretation of the provisions in that article. However, when there are problems owing to contradictions and inconsistencies when translating the convention from one language to another it creates a scenario that complicates the attempt to achieve uniformity. Although the main objective of the CISG was to increase the rate of adoption, the strategy to take the convention through publication in six languages (Spanish, Arabic, Rusian, Chinese, French, and English) may have hurt these efforts. Translation between two languages may not achieve the required efficiency; therefore the multiple translation may have created many problems. These problems were associated with the multiple drafts that complicated its objective of attaining uniformity (Balovich, 2005). For instance, the drafts that were translated to French and Spanish were not consistent. Lack of consistency during translation may affect interpretation of the articles when making judgement and therefore lead to misapplication of the convention. Besides, there was a lack of precise correspondence of the translated versions to one another. It is difficult to replicate items in six languages and attain efficient replication (Felemegas, 2006; Bailey, 1999). When translation of terms happens, the different terms will possess different meaning; this is common phenomenon because of the variation between the languages. However, the level of significance of these terms after translation may differ hence complicating the interpretation of the concepts leading to misapplication. It is quite difficult to retain the concepts when translating items and ideas from one language to another. These are the sources of errors that affects uniformity because different versions will have varying concepts that are inconsistent with other versions. It creates a scenario that one country operates a different convention from another country using a different language owing to the inconsistent interpretation and translation. Opting out of the convention when solving disputes The clause that allows the participants and parties to opt out of CISG further increases the absence of uniformity. When parties governed by the convention decides to utilise the clause that gives them the opportunity of opting out of the convention, there is high chances that the implementation of the convention may not attain the required attention leading to it being irrelevant. However, there even more factors that complicates the efforts that aims to bring uniformity. For instance, the opting clauses of the CISG allow parties to decide when to enforce the convention (Felemegas, 2006). When parties have to choose when to enforce the convention, it creates an environment that is uncertain about its importance and whether it is should be ratified in the first place (Bailey, 1999; Koneru, 1997). These create a loophole on its relevance. Such exclusion complicates uniform adoption of the convention because parties have the leeway of choosing when to adopt and how to apply the governing laws. Article 6 of the convention state that parties is at liberty of excluding when to apply the convention (Felemegas, 2006; Balovich, 2005). For instance, if one party depends on the convention to give guidance on the disputes occurring from the international, such a party may not be in an advantage position because the other party may decide otherwise. These provisions does not create a conducive environment for the parties hence increasing the chances of creating rifts between nations and parties involved in international trade. Besides, in article 12, parties have the leeway of derogating from the provisions or varying the provisions. When one of the party utilises the provisions it puts the other party at crossroad when disputes arises thereby increasing the lack of uniformity in its application. These provisions create a scenario that allows parties to exclude article 7, or shy from applying the good faith hence complicating the objective of attaining uniformity. Selective adoption of provisions by member countries The act also complicates the efforts of uniformity by providing the leeway that allows countries or parties to select the adoption of its provision (Hackney, 2001). A country may adopt part of the convention and avoid the ratification of provision it is not comfortable with, thereby creating a lacunae. For instance, Article 96 provides the leeway for the signatories to have reservations of excluding some parts of the convention when adopting (Felemegas, 2006; Balovich, 2005). These provisions complicate the efforts of attaining uniformity because a country may adopt a few provisions hence ending up with a different version of the convention that would be different from other copies from other countries that adopted provisions different from others. These scenarios create multiple versions of the CISG for the individual countries (Felemegas, 2006). When disputes arise between parties from these different versions of the convention, it becomes quite difficult to interpret the provisions and achieve a uniform platform that suites the parties because each of them will be arguing from different perspectives. Such scenarios complicate uniformity owing to the variation in interpretation. Conclusion The courts are likely to misapply and misinterpret the CISG because of the different versions from the different parties. The deficiencies and ambiguity of the provisions of the CISG are the main concerns in the uniformity. 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A/Conf. 97/18, Annex I, at 215 (1981) United Nations Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9, 1489 U.N.T.S. 3 U.N. Doc. A/ Conf. 97/18 [hereinafter CISG]. Waybills, W.T. (1984) The Modern Contract of Carriage of Goods by Sea, Journal of Maritime Law and Commerce, Part II;15 J. Mar. L. & Com. 82-83 Read More