International Business Law - Rotorex Corp - Article Example

International Business Law xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date 1 a.) Rotorex Corp who is the defendant appeals the court decision in favor of Delchi Carrier SpA (plaintiff) for the great loss of profits and several other consequential that resulted from delivery of goods that are nonconforming by the defendants. Here, the synopsis of rule of law indicate that if there is a breach of contract, the buyer is entitled to acquire delivery of substitute goods or if not he can declare the contract as void under CISG. According to Gaskill (2000), such a breach is considered fundamental if the results obtained are detriment to the other party as considerably to deny him what one is entitled to. In this case, the defendant manufactures compressors whereas the plaintiff is an Italian corporation that purchased various compressors from the defendant to be used in the plaintiff air conditioners. In their contract, the compressors were supposed to be delivered in three shipments where the last shipment was expected before May 25, 1988. Delchi Carrier SpA discovered that during the first shipment there was no confirmation while the second shipment was en route (Gaskill 2000). The non conformity by the plaintiff resulted to obtaining compressor that were perceived to be of lower cooling capacity and one that consume more power as compared to the specification and sample model that Delchi Carrier SpA had tested. Weaver & Craigie (2003) asserts that, after some time, Delchi Carrier SpA requested Rotorex to supply other compressors that ha same specification as those in the original sample. The defendant refused claiming that the sample compressors were inadvertently communicated to Delchi Carrier SpA. The plaintiff cancelled the contract with Rotorex and filed the case under the CISG (Weaver & Craigie 2003). b) From the above facts, there result a discussion on why the dispute governed by the CISG and if whether the parties could have avoided this. According to High Court of Australia (2011), it is quite evidence that due to the energy consumption and cooling power of the compressor shipped by the defendant, these two factors are very important for determining price value. Therefore, Delchi Carrier SpA was liable for filing case on breach of contract by Rotorex Corp under CISG which is considered proper(High Court of Australia 2011). c) It is quite evident that Munson SDJ and Circuit judge Winter on the appeal differ on key legal issues of; whether Rotorex had breach the contract, if so was the said breach fundamental, how was plaintiff able to calculate lost profits, were out of pocket expenses recovered and finally was there evidence of foreseeing additional sale(Arthur 1991). Clearly, under the CISG the seller is expected to deliver goods that are of same quality and descriptions as those provided in the sample during the signing of the contract. Therefore, any goods that are delivered and do not meet specification are considered to be non conformity. Arthur (1991) asserts that, the plaintiff was able to calculate the loss in that there was no genuine issue of goods and that shipment cost was used to supply the said non conformity goods. Evidently, the amount paid by the plaintiff to advance shipment of compressors from a third party as a way of mitigating losses from orders that the plaintiff was not able to meet as a result of the defendant breach of contract (article 77 CISG; the shipment of alternate compressors was not found to be covered under article 75 CISG - procuring of replacement goods by the plaintiff - since the compressors had been ordered prior to the breach of contract and thus could not have replaced the nonconforming compressors). According to Arthur (1991), the judgment was proper since the defendant is supposed to pay for lost profits, out of pockets expenses and any other foreseen additional lost of sale. The court rejected the plaintiff claim for compensation to cover expenses relating to the projected cost of manufacture of air conditioners, arguing that the said costs were accounted for in claiming for lost profits. Pursuant to article 78 CISG, the court held that the plaintiff (Delchi Carrier Spa) was at liberty to pre-judgment interest; as the CISG does not spell out an interest rate, the court applied the rate applicable for U.S. treasury bills (Derrington 2004). 2 a) The diplomatic efforts by the Unite Nation Commission that paid emphasis on international trade drafted the Convention on Contracts for the international Sale of Goods (CISG) that attempts to reduce the gap between trading states of different law systems. The CISG creates a uniform law for the countries to trade freely despite their differences in the legal system that exist in their countries. Singapore and Australia are a re contracting states and thus they will be bound by it. This implies that the formation of the contract of the two companies will be governed by the CISG in addition to the buyer and the seller’s obligations and rights (Herbert, 2011). In this case the formation of the contract between Sing-Song Supermarkets Pte and Banjo Beef Pty Ltd will be governed by the CISG and not the Singapore or the Australian Law despite the laws of the two countries being similar as they are rooted from the common law in accordance with article 7 of the private international law (Singapore Law). b) Banjo Beef Pty is obliged under the general terms that are stated in article 30 of the CISG. It has the obligations to have the contract insured so that it is protected from the change in currency that may occur over time and hinder the company from performing the agreed duty. Under the article 30 of the CISG, Banjo is obliged to deliver the goods and cannot claim excuse to avoid the contract on the basis of the rise in the dollar rates. The company is also liable to hand over any document that is related to the sell of the beef products without charging any extra fee to the Sing-Song Supermarket as the contract dictates so Charles (Lim Aeng Cheng, 1995). The insurance of the goods that is to be the duty of the seller in this case Banjo Beef properties is contained in article 32 which dictates on the terms of trade and contract to be adhered to. Banjo as per the article 32 is to deliver the goods on the agreed date and period or within the reasonable time if the date is not available and avoid contravening the article 33 of the CISG (Graffi, 2003). The avoidance of the contract on the basis of the rise in the Australian dollar will be paramount to the breach of the contract under the 49 and 65 (1) of the CISG. This is at times referred to as an anticipatory to the fundamental breach under article 72 and in articles 49 (1) (b) and 64 (1) (b). Article 81 and 84 gives the effects of avoidance of a contract as per the penalties and the legal forms through which the matter can be arbitrated (Victoria, 1998). The article 74 0f the CISG provides the guidelines through which damages can be sought through the provision of the sum of money that is liable for pay by the seller in the cases where he has avoided or jumped the regulations provided by the contract (Graffi, 2003). c) Additional fee from SSP to cover the extra costs as a result of the flooding in Queensland thus making the shipping of commodities impossible can only be reached in another contract agreement that will dictate and stipulate the terms and conditions of the new contract. The new contract reached has to cancel the earlier contract but this is always not the case (Ziegel, 2000). The CISG has provisions that are able to permit for the seller in this case Banjo to be given more extra time in addition to the period given. Either of the parties may upon request fix an additional time of reasonable length in accordance to the article 47 (1) and 63 (1) (Giaretta, 2010). This will be liable as seller has not in a way tried to avoid remitting the goods in accordance to the contract but the circumstances have made it impossible for him to deliver the goods in the stipulated time according to the contract (Sharma,2005). Additional fee in this case are not viable if at all this fixing of additional time is not possible as the law requires under article 32 and article 36 to be able to insure the goods to foresee the costs that might make the contract hard to be complied with (Jayesh & Keller, 2010. The insuring of the goods will give the seller a chance to have the goods delivered to the buyer at the stipulated time through the use of other means other than those that have been affected by the flooding. The obligations of Banjo to perform this in accordance to the binding contract are further stipulated under articles 33, 34, 39 and 43 of the CISG (Andersen, 2008). d) SSP has the obligation under article 53, 57 and 59 to pay for the price for the goods that are being purchased as per the agreement on the contract. These sections also determine the payment notes that are due without the request of the seller. This implies that SSP will have to pay for the costs incurred by Banjo in marketing the goods and other transportation costs as this is termed as avoidance of the contract in the part of the buyer. Article 74 stipulates that the damages on either side as a result of avoiding the contract will be equal to the sum that amounts the loss. This will also include the loss of the profits that would have been made by the seller in this case Banjo after selling of the goods in compliance with the contract (Ferrari, 2005). This will be part of the compensation that will have been incurred by the seller after the breaching of the contract and thus not being able for the buyer to fulfill the obligation of paying the last installment as agreed in the contract. The binding document which is the contract is final as the infringement of it will have to face the penalties as stipulated in the CISG which is the overall legal system which creates a uniform law between the parties. SSP will have to pay for the $1,000,000 and the $ 1,0000 costs that have been incurred by the firm (Bonell & Liguori, 1997). 3 a) The requirements in setting up a business in Singapore require either to choose from for categories which include sole proprietorship, partnership, incorporated companies and/or foreign companies. Banjo in this case wants to conduct businesses through an established firm Four Square chain of stores (Kanuga & Desai, 2011). In this case, Banjo will be conducting its foreign business through the firm but still maintain its logo and intellectual property brand. To begin with, the licensing of the partnership has to be done in accordance with the Business Registration Act. The two companies have to apply for registration to ensure that the patent name rights and use of the Four Square store name is binding and acceptable buy all the parties (Godwins law). The registration of the firm’s partnership has to be followed up at the trade representative office since the collaboration/partnership is between a local and a foreign based company. The approval for the partnership has to be approved by the Trade development Board of Singapore. Secondly, the partnership has to comply with the incorporating regulations and obtain a clearance from the use of the proposed company name which in this case is Four square (Locknie, 1996). The two firms will have to comply with the laid down regulations as stipulated in the Company Act. The applicants must however claim ownership to the trademark or the patent name to avoid instances where the trademark or patent name being claimed to be an original of another company (Setting up business in Singapore). The unconditional consent of the use of the trademark by Four Square from Banjo has to be given and signed by all the parties in view of their respective legal representatives. The trademark will not be approved if it is similar or resembles one of another company in the country as this will have to be validated to identify the true original owner of the trademark. Before the licensing of the company, there are five activities that have to be performed which are necessary. This include; copies of the memorandum and the articles of association which set out the bye laws of the proposed partnership company, the statuary declaration which identifies their compliance, identity certificates, the notice of situation of office registration including the office incorporation hours and the consent that will act as statement and director for non disqualification to act as the director (Godwins Law). In addition to this, the foreign company needs to have identification for the products it intends to trade through the Four Square to be accepted to trade in the country. The firm needs to have a certified copy of the foreign company certificate of incorporation, a certified foreign company’s chatter copy and statute that defines the constitution, the memorandum of appointment from the attorney and a statutory declaration from the company’s agent. The firms are to have meetings within 18 months and have their accounts audited. It is paramount for the parties to note that the firms will have to pay importation duty since the products that will be traded are not from their original company. To have a legal agreement on the terms and conditions of the partnership in respect to the amount due to Four square as a percentage for being an agency through which the products from Banjo are to be supplied and marketed in Singapore (Godwins Law). The merger needs to identify the rules and regulations that govern the use of the patent logo to avoid it being misused. Singapore is known to be one of the best countries that protect intellectual property. The trade mark logo and other patent information included in the intellectual property will be governed under the World Intellectual Property Organizations, Agreement on Trade-related aspect of Intellectual Property rights or the Patent Corporation Treaty which the two countries involved are members to. The patent will have to further be registered and its terms made known to the Patent Application Fund Plus scheme which is mainly administered by the economic Development Board of Singapore (Setting Up Business in Singapore). 4 a) The appeal case between NEAT, an Australian Grain Exporter, and Royal which is an Indian grain importing company. The case involves BNP which a bank in Sydney that financed NEAT in the transaction. The case is based on 2 legal issues. To begin with, the construction of the indemnity letters that were given in favor of the carrier that was in relation to the discharging process for the cargo without the lading bills and ,,the affirmation of the letters as to whether they were signed by an authorized officer from the bank were binding to the bank (Bar news). The cargo was initially supposed to be carried by MV Nelson a ship that was hired under a time charter by the Pacific company. The initial bills had been switched and split and a serious delay in the discharge of goods was also reported. This implied that the carrier who in this case was the pacific carriers, needed endorsement letters from the bank for indemnity before it would have the cargo released. Two indemnity letters were then addressed to PCL and had been signed by NEAT and BNP which was NEAT’s bank. A stamp was affixed by the documentary/trade finance department’s manger by the name Ms Dhiri next to her signature. Losses were sustained by PCL and had them claimed against BNP, NEAT which later became insolvent (High Court in Australia). b) The letter for indemnity was sort by NEAT to be able to based on the fact that the process witnessed the delay of discharge of goods. Based on this, NEAT sort Royal for the indemnity letters which originated from the latter’s bank and were aimed at persuading the carrier to be able to deliver the goods and have the lading charges not to be produced. The problem arose as the bank to which Royal drafted the letter for declined to act or be the indemnifier (Australian Legal Institute). c) It was held that the actions of Ms Dhiri as to what the believed and subjectively intended for the letters to do and convey to be irrelevant. The construction of the letter was believed to carry the interests of which according to the PCL’s position to be a clear representation of the real case at hand. the real situation at hand according to PCL was what was represented in the letter. The letter was to act in a way to rectify the situation at hand. The letters of indemnity which had the signature of Ms Dhiri were not binding as they lacked the authority issue. The requisite representation of the bank that was to accompany the letter was noticeably absent. The way the letter was written was a correct statement according to law but had an over simplification in the way it was applied (Dawson, 2004). It was however to be emphasized and determined as to whether the respondent had been persuaded into believing that the representation was made by the bank. The appearance of the stamp on the letter that had been drafted by Ms Dhiri is termed to have been pivotal. The signature and the banks official stamp persuaded Pacific in to believing that the officer in question had indeed had the authority to bind the bank. A ruling that although the letters of indemnity did purport to indemnify the carrier for delivering up goods without seeking production of the bills of lading, the bank was not bound by the unauthorized acts of its officer. The officer had no sole authority to make the decision that would have the bank solely responsible as it is believed the decision was personal and thus not legally binding and had no authority to issue a letter of indemnity (chauh, 2004). 5 a) Derrington (2004) asserts that, this case draws concern in the shipment of peas from an Australia to India by New England Agricultural Traders Pty Ltd (NEAT) to Royal Trading Company which is an India grain trader. The respondent involves BNP Paribas which is NEAT banker that is financing all exportation transaction. Pacific Carriers Limited (PLC) is the operator of MV Nelson the vessel that was carrying the said cargo. The cargo was said to have been delivered without the relevant bills of lading. Consequently, the vessel was arrested which resulted to significant loss to PCL (Derrington 2004). The main case here is the giving rise to the appeal to the High Court concerning the two letters of indemnity which are perceived to have been signed by both BNP and NEAT and addressed to be delivered to PLC. PLC claims that pursuant of the said two letters of indemnity to be entitled and indemnified by BNP as a respect of correcting the losses suffered (John 1988). BNP defense mechanism was that it argues for a true construction of indemnity letters where only NEAT is bound to indemnify PLC. It further argues that its role was only to verify and authenticate NEAT documentation. b) Derrington (2004) asserts that, in this case, issuing of indemnity was to bound bank transaction forming the main part of the ordinary business by providing documentary in connection with various international sales of goods. Here, the letter of indemnity is questionable in that it was sought, provided by the bank whom further it is described as the manager of its documentary credit department (John 1988). The purpose of the LOI was to highly address to the carriers with the agreement to indemnify them in case of any liability, damage or loss. Further, LOI was designed to provide those who want their cargo delivered but they do not have any documentation that indicates bill of landing. The LOI provides protection for the PLC up to a certain designed figure and is was meant to be backed by BNP (Derrington 2004). The reason why PLC seeks such indemnity is due to the numerous circumstances where arrivals of ordered goods are sought without production of bills of lading. In such an event, PLC is supposed to seek for indemnity before delivering goods. Since the agreed indemnifying party is considered an entity that is not known to PLC, PLC may require BNP bank to join in identifying. a.) Clearly, it is evident that there are various circumstances in this case BNP Paribas employee Mrs. Dhiri impress the Bank ‘chop’ stamp on the letter of indemnity. The unusual features of the case is that Mrs. Dhiri had all the authority to sign all documents in one given capacity whereas other documents had no given express reference to the exact capacity in which they were widely signed. BNP indicate that all the necessary representation to one made to PCL by BNP. This point is regarded as decisive when inside a court of appeal. The only evidence to be obtained by BNP to PLC is that Mrs. Dhiri signature was found on the NEAT letter of indemnity. In a more deeper argument is that Mrs. Dhiri signing of the document represent the idea that she had the authority to bind BNP to the identify contract to indemnity(Will & Bonell 1987). The other major circumstance was signing of the second letter of indemnity where Mrs. Dhiri was clearly made aware of the purpose with which NEAT expected BNP execution especially in the second signing of LOI that was to be forwarded to Pacific Carriers once it has been signed by BNP so as the discharging process to take place. It is clear that Mrs. Dhiri was appropriate and natural person to whom Pacific Carriers Limited requested for the major signature for BNP directed (Derrington 2004). References Andersen, C, & Schroeter, G, 2008, Sharing International Commercial Law across National Boundaries: Festschrift for Albert H. Kritzer on the Occasion of his Eightieth Birthday, London: Wildy, Simmonds & Hill. Arthur, G, 1991, Consequential Damages in Contracts for the International Sale of Goods and the Legacy of Hadley, 23 Geo. Wash. J. Int'l. L. and Econ. 415 (1989) (analyzing the differences between Article 74 of the Convention and Hadley v. Baxendale); Jacob S. 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