Problem-Solving of International Commercial Law - Case Study Example

Name Course Unit Professor Date Task 1 – Word Count 1338 International Commercial Law CISG is an acronym for the United Nations Convention on Contracts for the International Sale of Goods (1980). According to the Pace Law School Institute of International Commercial Law (PLSICL) (2007), the CISG is a legal convention that governs international trade especially between two different states, with the objectives of promoting international trade and removing legal barriers that hinder the same for mutual benefit, equality, and friendly relationships between nations. Uniformity, honesty, and good faith are the key drivers of this convention. The CISG aims to promote cohesion between states through fair international trade practises by upholding the original negotiations, agreements, and practises of the trading parties as espoused in Article 8(3) (PLSICL 2007) and Article 9(1). In this matter between Bruno and Sebastien Farms, clearly there exists a breach of contract, the perfect forum for the application of the CISG. According to Article 25, a breach of contract occurs when the contract yields results that are detrimental to one party or deprives one party of their fair expectations. A breach invokes some form of compensation to the aggrieved party by the offending party. This is an attempt by the CISG to discourage unfair trade practises and criminal acts such as fraud. Sebastian Farms already fails to exercise the spirit of good faith in international business espoused by the CISG in Article 7(i) (PLSICL 2007). This is evident in the date that Sebastien Farms indicated dishonestly on the bill of landing. The contract held that Sebastien Farms were to ship the goods between 15th March 2009 and 20th March 2009, something which they did after 30th March 2009 yet the bill of landing indicated 15th March 2009. Again, Article 33 stipulates that the seller must deliver the goods by the date indicated on the contract or by a date generated reasonably by the terms of the contact. The CISG aims to protect the buyer from adverse effects of late delivery that could lead to loss of revenue, expiry of products, and so on. So, in terms of date, Sebastian Farms clearly breached the contract. Article 30 of the CISG exposes another breach of contract by Sebastian Farms. It requires the seller to deliver the goods and all accompanying documentation to the buyer according to the terms of the contract and the CISG. The worst breach of contract is evidenced by the contravention of Article 35 (PLSICL 2007). The contract specified that Sebastien Farm provides the first 500kgs of tomato paste in easy-squeeze tubes of 250g each. Article 35 (1) demands that the packaging conforms to the packaging described in the contract. Sebastian Farms ignored the specifications in the contract and packed the tomato paste into 250g brittle tubes that broke easily and were not easy to squeeze. Again, Article 35 (1) demands that the goods must meet the quantity and the quality envisaged by the buyer in the contract. Bruno had ordered the remaining 500kgs of tomato paste packaged into plastic jars of 500g each with screw tops. However, the seller, Sebastian Farms, despite express instructions in the contract, decided to pack them in the wrong quantity (750g), wrong packaging (glass jars) and faulty screw tops. The faulty screw tops caused the contravention of the Article 35(1) (PLSICL 2007) because they allowed fungus to penetrate and begin to grow on the tomato paste thus seriously downgrading the quality of the product. Furthermore, this contravened Article 35 (2, (a)) that demands that goods must be fit for the purpose that they would be ordinarily used for. Again, Article 35 (2, (d)) (PLSICL 2007) demands that the packing used is adequate enough to preserve and protect the products. To make matters worse, the report presented by the surveyor exposed a lack of due care and diligence on the part of the seller, arguing that the seller probably used poor quality tomatoes to make the paste and that the product was exposed to the heavy rains before shipment. Evidently, this lack of care and due diligence was occasioned by the fact that Sebastien Farms was acting dishonestly during the execution of the whole process. Sebastian Farms were obviously avoiding supervision by the licensed government or industry regulators such as the Sicilian Organic Soil Association (SOSA). During delivery of the tomato paste through SS Olivetti, Sebastien Farms presented a certificate of authenticity from the Sebastien Corporative Organic Soil Association (SCOSA). Sebastian firms misinformed Bruno that the issuing authority had changed to SCOSA, yet they knew very well that this was not true. The name already suggests a friendly association to Sebastian Farms, meaning the quality of the goods was never checked. The authenticity of the product according to SOSA standards was also not checked. We can confirm this further because Sebastian Farms also provided a certificate of quality of packaging, instead of a certificate of Condition and Quality of Packaging. As discussed above, the CISG has gone to great lengths to define all the situations that may lead to a breach of contract and thus invoke litigation. This has played a major role in encouraging businesses to conduct international business transactions in a fair and transparent manner. At the same time, the CISG attempts to weed out unscrupulous international business people and provide a level playing ground for all businesses by imposing harsh penalties on organisation whose activities depict dishonest and fraudulent practises. The CISG provides protection for business that wish to venture into the international market, both sellers and buyers. The CISG imposes some measures to deter dishonest and fraudulent international trade practices. Article 77 encourages parties to take immediate measures to mitigate the loss occasioned by a breach of contract by the other party. The loss of profits is also a valid claim. Evidently, Bruno has suffered as a result of the dishonest actions of Sebastien Farms. Bruno suffered loss of business because his clients were unhappy with the tubes that broke so easily, which in turn resulted to a huge loss of profits. Worse still Bruno had invested a lot of time and resources, including full payment on the fraudulent order. According to Article 84 (1) (PLSICL 2007), there are some occasions where the CISG may require the seller to pay the full refund to the seller. Better still the seller must pay an interest determined by the court on the same, calculated from the day the payment was made by the buyer. Bruno was therefore entitled to a full refund, interest on the payment, and compensation (damages) for his time, resources and loss of business. Another aspect of this case between Bruno and Sebastien Farms is that the contract was bound by the Australian law. This is an important aspect of the case because it means the CISG will put its weight behind Australian law should the buyer present the case in an Australian Court. It also means the case would be determined using Australian Law, a factor that the CISG accommodates in Article 7. The CISG is an important convention because it controls international trade that would otherwise remain unregulated, much to the detriment of traders. The United Nations Commission on International Trade Law (UNCITRAL 2014) asserts that some important achievements of the CISG include the reduction of transaction costs on international trade, and providing the players with an assuring environment of commercial exchange. The CISG has managed to serve both the buyer and the seller by striking a balance between their diverse interests. UNCITRAL (2014) argues that the CISG has managed to improve national laws by inspiring reform at national level on contract law. It also provides huge legal advice to small and micro enterprises that would otherwise have no access to it. Finally, Sicily is an autonomous Island of Italy, meaning it runs its own political system. Although Italy is a member state of the CISG, Sicily is not. For this reason then, the CISG may not apply in resolving the trade dispute between the two parties, unless Sicily is compelled by Italy in case Italy has constitutional mandate to do so. Task 2 – Word Count 1399 The Vienna Convention on Contracts for the International Sale of Goods 1980 Some of the most desirable qualities of the Vienna Convention of 1980 include simplicity, uniformity achievable through its ability to provide agreeable content on rules of application between opposing sides, and simple language that lawyers from diverse legal systems are able to interpret and agree upon. However there are some challenges to achieving these goals, language being the first. Kee and Munoz (2014, p.105) expose ambiguities and inconsistencies in the interpretation of the CISG from one language to the other. Already there are over five translations of the CISG which include Spanish, French, English, and so on. This presents challenges in the uniform understanding of the convention across a diversity of languages and legal environments. Interpretation from one language to another will definitely result in slight distortions of the original meaning, a fact that may result in serious legal ramifications. Sheaffer (2007) argues that the effect of having six official interpretations of the CISG may result in the loss of the original meaning envisaged by the creators of the convention. That aside, a diversity of translations may also result to other detrimental issues. According to Sheaffer (2007), the original Argentinean translation of the CISG had typographical errors that allowed the application of the CISG on the sale of consumer goods, an area beyond the jurisdiction of the CISG. Suppose the country adopted the CISG in that form and then a matter arose in court in respect to consumer sales, with a hawk-eyed lawyer using the CISG as a basis for his argument. It would have resulted to a protracted legal tussle of international magnitude pitting the two parties, the nation, and the United Nations (UN) against each other; perhaps even a constitutional crisis in the country. Again, Sheaffer (2007) alleges that in a meeting between German and Swiss technocrats aimed at establishing the true interpretation of the CISG from the French language into German, there were four discrepancies that would have had serious consequences had they been ignored. Worse still, tracing the errors backwards revealed that the errors originated from discrepancies created during the translation of the original English version into French. Furthermore, Kee and Munoz (2014, p.105) assert that language interpretation may lead to even worse problems of correctly interpreting the legal concepts. This is a serious problem that makes it extremely difficult to interpret legal concepts because it is not just a cross-language challenge but also a challenge experienced even within the same language. Kee and Munoz (2014, p.106) cite the example of Article 16 of the CISG where the two English terms “revoked” and “be withdrawn” are used interchangeably. When the CISG is applied in England in the context of sales offer, “withdrawal” is only possible if it applies to the process up to the acceptance of the offer, unlike “revocation” which applies only after the offer has been accepted. These two English words already pose a challenge in the interpretation of the legal concept in specific countries in the English language. If this challenge exists within the same language, then evidently cross-language interpretation will result to more serious complexities that may also be very hard to resolve. Sheaffer (2007) suggests the use of one common language as the official language of the CISG, so that uniformity is achieved through all the member states. However, this does not offer a practical solution according to Kee and Munoz (2014, p.108) because it is unrealistic to expect a particular language such as English to become the global language and receive adoption in all member states, and especially so just for the purposes of international trade dispute resolution. These language issues therefore challenge any notion that the CISG has achieved clarity of language and simplicity. The process of translation is quite hard and rigorous. Ensuring that there exists complete consistency between two or more translations is an almost impossible task. The most difficult part is interpretation of the legal concepts. All these factors would definitely work against uniformity. The other factor that challenges uniformity and simplicity in the CISG is the homeward trend. According to Sheaffer (2007), some member nations such as the United States have unfortunately become notorious for ignoring the CISG and instead opting to apply their national law when faced with major complexities in disputes pertaining to international business, for example the case of Beijing Metals and Minerals vs. The American Business Centre Inc. This cross-border trade dispute required the application of a CISG rule that permits the oral modification of a contract. However, the American court ignored this rule and applied the local UCC rules instead, thereby denying the Chinese company justice. Perhaps this is evidence that local or national courts and lawyers are unable to interpret the CISG, or they are unable to apply CISG rules in the national context. In fact, Sheaffer (2007) alleges that the application of the CISG has resulted in divergent and unpredictable outcomes. When this happens then the CISG is unable to meet its objective of uniformity. Subsequently, many parties and lawyers may have the attitude that the CISG may not serve their best interests and as such they may overlook the CISG, and instead apply the more seasoned, and definite legal standards. This is therefore a pointer that the CISG is not easy to interpret and implement, and therefore it does not qualify in the aspect of simplicity and practicability. Article 25 of the CISG has also generated a lot of heat in an attempt to interpret this convention, asserts Salinger (2011, p.8). She argues that the rule of foreseeability espoused by article 25 is both ambiguous and controversial. This rule exempts the party who executes a breach of contract if they can proof that they were not in a position to foresee or anticipate the events that led to the breach. Salinger (2011, p.8) argues that the aspect of foreseeability is ambiguous because it does not expressly indicate whether it applies on at the conclusion of the contract, or from the time of the offer. This ambiguity breeds the controversy. This again makes the CISG fail the test of simplicity and practicability. Passing of Risk (UNCITRAL 2010) 1) Article 66: This rule seems fair to both parties because it stipulates that in the event that the risk already passed over to the buyer, the buyer must pay the price to the seller even if the goods are damaged or suffer loss. The buyer must take full responsibility because they accepted to take the risk in the terms of the contract. 2) Article 67: This rule also seems fair because it places the risk on the party that accepts to take responsibility for the goods on transit according to the terms of the contract. However, this rule insulates the buyer because the risk remains with seller for as long as he or she does not identify the goods as per the contract through marking them, shipping documents, and so on. 3) Article 68: This rule places the risk on the buyer automatically at the end of the contract as soon as the goods are put on transit. However, the responsibility remains with the seller if there is proof that the seller was privy to the loss or damage of the goods prior to the conclusion of the contract. This rule fails to protect the buyer from the seller irresponsibility of handing over the goods to an unreliable courier. As soon as the goods land in the hands of the courier, the seller receives instant relief from responsibility and remains assured of pay whether the goods arrive safely or not. 4) Article 69: This rule favors the seller. The buyer assumes complete responsibility when he or she collects the goods, or the goods are sent to him or her by the seller, or if he or she fails to pick up the goods. In all these instances, the buyer becomes heavily exposed to the risk while the buyer is fully exonerated from the risk. However, if the delivery was to take place in another location other than the seller’s headquarters, then risk remains with the seller until he or she hands over the goods to the buyer. Article 69 (3) attempts to insulate the buyer from loss of goods or counterfeit goods by requiring proper identification by the seller, without which the risk remains with the seller. Task 3 – Word count 925 CISG – Patrick Monet vs. Books R Us Hungary and France, the mother countries of the two traders, are both member states of the CISG so definitely the CISG rules would apply in this case. This case primarily deals with three aspects of this international contract; breach of contract, contract cancellation and passing of risk. Breach of Contract According to Pace Law School Institute of International Commercial Law (PLSICL) (2007), Article 25 stipulates that a party is in breach of contract if the contract results in denying one party their reasonable expectation according to the contract. Although Monet had not yet received the book cases from Books R Us, he already had information with him that the products he had ordered did not meet the specifications of the contract. The wood used to make the book cases did not come from managed forests. The seller had evidently ignored the buyer’s specifications and made products that fell short of the contract. This was a blatant breach of contract. The CISG gives the buyer the power to act in pursuit of justice in case the seller fails to perform their obligation according to Article 45. In this case, since there already exists a breach of contract, Patrick Monet may initiate legal proceedings to lay claim over any payments he may have made, and Part 1 (b) stipulates that the buyer may claim damages. Article 74 and 77 encourage the buyer to demand damages which include an amount equivalent to the losses the buyer may have suffered as a result of the failed delivery. This compensation also includes the loss of the profit that the buyer expected to make from the failed delivery. Article 77 cautions Monet that in case he fails to claim damages first within a reasonable period, the seller may apply to reduce the amount payable on the damages, meaning if the buyer stakes a claim later, the court will be obliged to award a much lower compensation to Monet. The CISG insulates Monet further should he proceed with litigation in response to a breach of contract. According to Article 45 (3), the court cannot award the seller any grace period to remedy the situation if Monet resorts to litigation. Since the seller did not deliver the goods, he will have no option of replacing the goods even in the future. Monet should take this option because the seller had already acted dishonestly by providing products that did not meet the Monet’s specifications and expectations. He should not attempt to do business again with this trader and as such should not allow any grace period. Contract Cancellation Article 49 (1(b)) (PLSICL 2007), stipulates that the buyer may cancel the contract if the seller fails to deliver the goods within the contracted period or any other agreed extension. In this case, the book cases were to be delivered by 12th December. The book cases were burnt within the premises of the seller on the 11th December meaning that the seller was not able to make the delivery by the contract date. Under the CISG, Monet could cancel the contract because of failure by the seller to deliver by the contract date. That would constitute a breach of contract by the seller, and therefore Monet would be free from any obligations. Passing of Risk Part (d) of the sales contract between Patrick Monet and Book Cases R Us clearly indicated that Book Cases R Us would be responsible for the delivery of the goods by ensuring that he handed over the goods in good order and condition to a reputable and experienced furniture courier at the Book Cases R Us warehouse. However, Book Cases R Us resorted to two actions that compromised the delivery of the goods to Monet; 1) Book Cases R Us changed the usual courier and instead instructed a different courier, Cyril, to make the delivery. 2) Book Cases R Us did not inform Patrick Monet of this change. It is reasonable to assume that at the time the two parties were drawing up the contract, the issue of delivery came up and Monet was aware that Book Cases R Us would use the services of a particular courier. The other very important legal fact was that the goods were not really handed over to the courier and the delivery was not really made. Actually, the delivery did not even begin. Although Book Cases R Us labelled the goods as stipulated by the CISG, they were not picked up by the courier because the fire struck as the seller and courier were debating the process of delivery. The cases had not been packed into the courier’s vehicle. The courier had not signed any papers such as delivery notes. The courier’s vehicle never left the seller’s premises. Although the seller may argue on the aspect of foreseeability, alleging that Book Cases R Us could not have foreseen the damage caused by the fire, this argument may not hold water because the fire happened within the seller’s premises and the consignment did not leave the seller’s premises. The buyer has no responsibility to the seller’s premises. Article 33 and 34 (PLSICL 2007) stipulates that the seller must deliver the goods to the buyer by the contract date, and deliver them (hand them over to the buyer or courier) and the accompanying documents at the place and time indicated in the contract. Article 67 stipulates that the risk remains with seller until the seller hands the goods over to the buyer or appointed courier at the agreed location. Reference List Kee, Christopher, Munoz, Edgardo, 2014. In Defence of the CISG. Deakin Law Review. [online]. Available at: [Accessed 20 April 2014]. Pace Law School Institute of International Commercial Law (PLSICL), 2007, May 22. United Nations Convention On Contracts For The International Sale Of Goods (1980) [CISG]. [online] Available at [Accessed 19 April 2014]. Salinger, Alysha, 2011 Autumn. The United Nations Convention on contracts for the International Sale of Goods (CISG): What is the Relevant Time of Foreseeability in Article 25? [online] Available at: [Accessed 23 April 2014 Sheaffer, Christopher, 2007, Fall. The Failure of the United Nations Convention on Contracts for the International Sale of Goods and a Proposal for a New Uniform Global Code in International Sales Law. [online] Available at: http://www.cisg.law.pace.edu/cisg/biblio/sheaffer.html> [Accessed 19 April 2014]. The United Nations Commission on International Trade Law (UNCITRAL), 2014. The United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG). [online] Available at: [Accessed 20 April 2014] United Nations Commission On International Trade Law (UNCITRAL), 2010. United Nations Convention on Contracts for the International Sale of Goods. [online] Available at: [Accessed 20 April 2014] Read More