Business Law and Convention on International Sale of Goods - Essay Example

? BUSINESS LAW By Due Q b) Convention on International Sale of Goods (CISG) (Article 35(2)) states that, "Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgment." In the given case, Kingsley Ltd purchased bricks from Brick-for-All. Kingsley Ltd was doing construction on an exposed sea front side. During the transaction, Kingsley Ltd’s manager, Paul, just mentioned that he required the bricks for external use and said nothing about the site being on an exposed sea front. According to the facts, the bricks that came in contact with sea salt had a reaction and pores were formed as a result. The rest of the bricks were absolutely fine. It means that the bricks were fit to be used for ordinary purposes and also for the purpose that Paul mentioned to Brick-for-All. However, they were not fit for the purpose of construction on exposed sea fronts. In this case, the seller is acting in the course of business. It is common knowledge that bricks are made of clay. According to facts, ‘Sparkling Bricks’ were made of compressed paper. CISG (Article 38(1)) states that, ‘The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.” If the courts are convinced that it could have been revealed that the bricks were not made of clay upon reasonable examination, Brick-for-All would not be held liable. Paul can easily be expected to have known that what kind of material was used in making those bricks. Kingsley Ltd is a construction company and the purchasing of bricks is a very important factor for them. They must have chosen Paul to purchase the bricks because he must have had sufficient knowledge about bricks. In the given case, ‘Sparkling Bricks” were normally used externally which is their ordinary use. The facts clearly evince that the bricks that did not came into contact with sea salt did not allow damp into the house. They were fit for the purpose of external usage. The only purpose that was mentioned by Paul to the seller was external use. He never said anything about the location of the site where they were to be used. Paul chose the ‘Sparkling Bricks’ himself. On the other hand, if ‘Sparkling Bricks’ are such that it cannot be found out upon reasonable examination that they were made of compressed paper instead of clay, it is a duty of Brick-for-All to tell the buyer about that fact. If it is further assumed that the knowledge about the bricks being made of compressed paper was crucial for Paul’s decision, Brick-for-All would be held liable. Article 36(1) of CISG states that, “The seller is liable in accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time.” Still assuming that reasonable examination by Paul could not have revealed the composition of the bricks, it would have been immaterial if Brick-for-All would have mentioned that fact to him. If the courts hold Brick-for-All liable, there is a question of restitution. Kingsley Ltd would be unable to return the bricks in their original form. Article 82(1) of CISG states that, “The buyer loses the right to declare the contract avoided or to require the seller to deliver substitute goods if it is impossible for him to make restitution of the goods substantially in the condition in which he received them.” Kingsley Ltd, on the other hand, would not lose their right to declare the contract as avoided because CISG has also made an exception to this rule in Article 82(2) by stating that, “(The buyer would not lose his right to rescind the contract): (a) if the impossibility of making restitution of the goods or of making restitution of the goods substantially in the condition in which the buyer received them is not due to his act or omission; … (c) if the goods or part of the goods have been sold in the normal course of business or have been consumed or transformed by the buyer in the course of normal use before he discovered or ought to have discovered the lack of conformity.” Kingsley Ltd consumed the bricks in constructing a house and as they are a construction company, they converted the bricks in the normal course of business. Therefore, they would not lose their right to rescind the contract. Brick-for-All would be required to compensate Kingsley Ltd by paying back the price of bricks and some interest. Another very important factor is that of usage in the context of CISG. It states in Paragraph 14 of the Introduction that, “Usages agreed to by the parties, practices they have established between themselves and usages of which the parties knew or ought to have known and which are widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned may all be binding on the parties to the contract of sale.” Bricks are normally made of clay. Kingsley Ltd are a construction company and Brick-for-All are professional dealers of bricks. Being in the business, Kingsley Ltd can be expected to know that what kind of reaction might take place if the sea salt is brought into contact with bricks made of compressed paper. If ‘Sparkling Bricks’ were not made of clay, that was something out of the ordinary and despite the fact that were suitable for external use, they were out of the normal usage of business. The intimation of the fact about their real composition might have influenced Paul’s decision and he might have purchased bricks made of clay. The aforementioned statement of CISG is applicable on both the parties in question. In the given case, the bricks were clearly not fit for the purpose of construction on exposed sea fronts. They were not fit for that when the risk in those bricks was Brick-for-All and even after the risk passed to the buyer, Kingsley Ltd. The lack of conformity was discovered after the construction was completed and the sea salt had a reaction with the material of the bricks. According to the aforementioned provision, Brick-for-All would be held liable. The only way that their liability could be excluded in this case is if they had told Paul about the composition of the bricks. In that case, they would have been guarded by Sale of Goods Act, 1979, (Section 14(2)). It states that, “Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality, except that there is no such condition- (a) as regards defects specifically drawn to the buyer's attention before the contract is made ; or (b) if the buyer examines the goods before the contract is made, as regards defects which that examination ought to reveal.” The aforementioned adjudication would be obtained if it is assumed that Paul could not have discovered upon reasonable examination that the bricks were not made of clay. But the courts would also consider the fact that if Paul just mentioned that he required the bricks for external use, Brick-for-All may not be obligated to disclose the fact about the composition of bricks because they were absolutely fine for external use. As far as the description of usage that was given by Paul is concerned, the bricks suited to that description. The pivotal point in this case is clearly that of usage. Both the parties are in the business of construction and there are some implied terms which are not required to be mentioned explicitly. Section 14(4) of SOGA annexes an implied condition as to fitness of purpose by usage which should not be breached. It states that, “An implied condition or warranty about quality or fitness for a particular purpose may be annexed to a contract of sale by usage.” In Godley v Perry (1960), a defected catapult was sold to the plaintiff and it hurt him when he used it. The seller was held liable to refund the plaintiff and compensate him for his injury. In the given case, the bricks breached the conditioned of fitness by usage and Kingsley Ltd had to suffer a loss as a result. Therefore, by the provisions of SOGA and CISG, Kingsley Ltd would be entitled to treat the contract as repudiated and receive compensation from Brick-for-All as directed by the courts. References 1. Godley v Perry [1960] 1 WLR 9. 2. Sale of Goods Act, 1979. (UK) s 14 (2). 3. Sale of Goods Act, 1979. (UK) s 14 (4). 4. United Nations Convention on Contracts for the International Sale of Goods, 1980. (Int) A 35 (2). 5. United Nations Convention on Contracts for the International Sale of Goods, 1980. (Int) A 36 (1). 6. United Nations Convention on Contracts for the International Sale of Goods, 1980. (Int) A 38 (1). 7. United Nations Convention on Contracts for the International Sale of Goods, 1980. (Int) A 82 (1). 8. United Nations Convention on Contracts for the International Sale of Goods, 1980. (Int) A 82 (2). 9. United Nations Convention on Contracts for the International Sale of Goods, 1980. (Int) Intro Para 14. Read More