International Business Law and Conflict of Laws - Case Study Example

The case study presents two separate cases resulting from the international sale of goods – the case between Gupta, the manager of the Indian companyHabib, and an Australian company Adelaide Computer Graphics (ACG) regarding an alleged breach of contract in the sale of ten MR5 computers; and the case involving Hardwick Stores in Oxford regarding their liability from the sale of one of the aforementioned MR5 computers. It is therefore the aim of this essay to present and analyse the complexity surrounding the aforementioned cases. With regard to the case between Gupta and ACG, Gupta after receiving an invitation from ACG to purchase 10 MR5 computers is claiming a breach of contract on the part of ACG because of the latter’s action of selling the computers to a different buyer. In this regard, the following legal issues arise: first, was a contract concluded between the two involved parties? Second, was Gupta’s acceptance valid and has it been communicated to ACG. Third, was ACG’s revocation valid? Fourth, considering the aforementioned legal issues, is Gupta correct in claiming that ACG was in breach of contract? Hence, given that the aforementioned legal issues are concerned with the formation of contracts regarding the international sale of goods, the United Nations Convention on the International Sale of Goods (Vienna Convention) or Common Law can apply. In order to determine whether a breach of contract took place, one must determine whether a contract exists. For a contract to exist, however, it must be concluded through the valid acceptance of an offer (Art 14). In this regard, it is questionable whether the acceptance sent by Gupta was valid. Article 19 § 1 of the Vienna Convention states that “A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer.” In this respect, the words “on the assumption that” in the letter sent by Gupta questions the validity of the acceptance because it can be considered as a modification of the contract since there was no indication regarding the date or manner of delivery in the initial offer sent by ACG. Thus, since there was no contract formed because there was no valid acceptance; Gupta cannot hold ACG in breach of contract. In this regard, ACG’s revocation of the offer will hold. This rule is also similar to the rules under Common Law which states that acceptance of an offer must be communicated “according to the terms in which the offer was made” such that “[a]ny qualification of, or departure from, those terms, invalidates the offer (Eliason v. Henshaw [1819] US SC). However, assuming that the acceptance sent by Gupta was valid, it is still questionable whether a breach of contract took place. This is because as stated by the Vienna Convention, an acceptance, which concludes a contract (Art 23), can only be considered as communicated, once it reaches the offeror regardless of the mode of communication used to send the acceptance (Art 24). In this case, Gupta, even though he sent the acceptance on the 1st of August cannot be considered to have accepted the offer, until the 15th of August, which was the date that ACG received his letter. Thus, ACG was free to accept the offer from Stenna, the German firm, on the 12th of August under the Vienna Convention. Furthermore, since the acceptance from Gupta was not received until the 15th of August, the revocation of the offer by ACG on the 14th of August is valid because it reached Gupta before the acceptance reached ACG (Art 16 § 1). Furthermore, as stated in the Vienna Convention (Art 16 § 2a), an offer is only irrevocable if there is reason for the offeree to rely on the offer. In this case, since the offer was made through a leaflet, which purports to be an advertisement, it is only logical to assume that the offer is not definite, such that it is made to other customers who can accept it, as well. Thus, there is no reason for Gupta to rely on the offer not to be revocable as expressed by the leaflet that ACG sent. Under Common Law, however, this analysis may not hold by virtue of the postal rule of acceptance, which states that acceptance is considered communicated once it is dispatched through the post (Henthorn v. Fraser [1892] 2 Ch. 27 [C.A. 1892]). While Gupta can hold to this provision under Common Law, the case of Grainger & Son v Gough [1896] A.C. 325, H.L, places a distinction, which invalidates his claim. As the case states, the offer sent by ACG through the leaflet cannot be considered as an offer, but instead as an invitation to treat. Thus, in this case, Gupta cannot hold ACG for breach of contract because as ACG’s leaflet is an invitation to treat, ACG can accept or deny any offers made by Gupta. Thus, in the first case, Gupta, under either the Vienna Convention or Common Law cannot claim a breach of contract on the part of ACG because no contract was formed. Under the Vienna Convention, either Gupta failed to send a valid acceptance in the first fact pattern; or because despite a valid acceptance, he still failed to send the acceptance in time in the second fact pattern. Under Common Law, on the other hand, while only the first fact pattern invalidates his acceptance, the distinction made regarding the “invitation to treat” under Common Law in the second fact pattern gives ACG the right to accept or reject Gupta’s offer regardless if he sent the acceptance or not. Hence, Gupta cannot claim a breach of contract against ACG. With regard to the second case, Hardwick Stores, an Oxford based store who acquired the ten MR5 computers from the German firm Stenna, who bought the computers from ACG, is being held liable by Harold for damages that resulted from his personal purchase of a computer from their store. In this regard, the following legal issues arise: first, is Hardwick Stores, as a distributor of the computer, liable to Harold for the explosion that resulted from the computer purchased, and if so, what are these liabilities? Second, assuming that the defective computer bought by Harold was one of the MR5s Hardwick Stores acquired from Stenna, can Hardwick Stores claim damages from Stenna or ACG regarding the defective products? First, with regard to Hardwick Stores’ and Harold, it is imperative to determine whether Hardwick Stores is liable for the explosion that took place after Harold assembled and turned on the computer. In this respect, the relevant law would be the General Product Safety Regulations 1994 (SI 1994 No 2328). According to General Product Safety Regulations 1994, “[n]o producer shall place a product on the market unless the product is a safe product” (Art 7). In this respect, producers as defined as the manufacturer of the product; or in cases where the manufacturer is not based in the UK, the producer is defined as the manufacturer’s representative, the product’s importer, any other person included in the product supply chain and other persons who may have an effect on the product’s safety properties (Art 2 § 1a). Thus, as individuals liable for the product’s safety, it is their responsibility to ensure that the product is safe, such that it is free from defects and that it would operate in accordance to its intended use. Distributors, on the other hand, defined as “professional in the supply chain whose activity does not affect the safety properties of a product” (Art 2 § 1), have the responsibility to ensure that they do “not supply products to any person which he knows, or should have presumed, on the basis of the information in his possession and as a professional, are dangerous products” (Art 9 § a). In the event that a producer or distributor was found to have violated these provisions, the consumer can claim damages by virtue of a breach of contract, breach of statutory duty, or tort of negligence. In this respect, as either an importer, representative of its manufacturer or as a distributor of the computer, Hardwick Stores can be held liable for the defective computer, purchased by Harold, because it exploded when it is not meant to do so. However, Hardwick Stores can be relieved of this responsibility under the Article 14 of the General Product Safety Regulations 1994 if they can prove that they “took all reasonable steps and exercised all due diligence to avoid committing the offence” (Art 14 § 1), or that the offence was due to the fault of another party (Art 14 § 2). In this case, there is not enough information to ascertain whether Hardwick Stores conducted the necessary inspection of the computer. Assuming that they did take the necessary assessment and can be certain that the product is safe and free from defects at the time of purchase, Hardwick Stores can defend against Harold’s claim by arguing that since the computer was bought from their place unassembled, and Harold could have assembled it incorrectly, causing the explosion. In this respect, Hardwick Stores and all other individuals included in the supply chain can be relieved of the liability due to explosion. However, if Hardwick Stores cannot show that they inspected the product prior to selling it to Harold, the store can be held liable for tort of negligence and pay damages both for the injury Harold and the damaged coat, provided that the coat costs at least £275, as a result of the explosion; or be imprisoned for no more than three months, if convicted (General Product Safety Regulations 1994, Art 17). On the other hand, assuming that the defective computer was one of the ten MR5s produced by ACG, which Hardwick Stores acquired from Stenna, Hardwick Stores, even if they cannot illustrate that they conducted the proper assessment of the computer, can argue that the lack of assessment was due to an implied condition of the quality of computers (Daniels and Daniels v. R White and Sons and Tarbard [1938] 4 All ER 258). As illustrated by the case of Daniels and Daniels v. R White and Sons and Tarbard [1938], an implied condition exists by virtue of the quality associated with the defective soda brand in the case, relieving the retailer of liability. Hence, since the MR5 computer is a brand produced by ACG, it logical that Hardwick Stores assumed its quality by virtue of the brand’s existing reputation. However if the implied condition cannot be applied to the case, assuming that the defective computer is one of the MR5s, Hardwick Stores lessen their liability for the explosion by involving either Stenna or ACG, or both in the dispute. This is because while product liability is initially a domestic problem, it also contains an international element (Fawcett 1993, pp. 108-109), as illustrated by the manner that the computer came to the possession of Hardwick Stores. In this respect, Hardwick Stores assumes the role of ‘consumer’ against the ‘distributor’ Stenna and the producer ‘ACG’ who hold substantial liability for the defective product. As illustrated by Dicey & Morris, an importer being sued for negligence due to a defective product can rely on the necessary or proper parties head to issue a third party notice to a foreign manufacturer claiming their contribution to the negligent act, provided that the importer is not presenting a counter-claim on the plaintiff regarding their innocence but is simply seeking contribution of the foreign manufacturer’s fault (Collins, 1993, p. 327). However, since the computers were shipped initially to Germany from Australia, before reaching the United Kingdom, the cause for defect may not necessarily stem from the manufacturer in Australia itself, but from a problem in handling on the part of Stenna. In this case, it is imperative to determine which company is at fault, and where the substantial cause of action lies (Distillers Co. v. Thompson [1971] A.C. 458 [P.C.]). Thus, regardless of whether the substantial cause came from ACG or Stenna, Hardwick Stores can indemnify either of them in the tort case with regard to Harold, to share in the damages that Hardwick Stores may have to suffer as a result. Thus, with regard to the second case, Hardwick Stores can only relieve itself of liability from Harold’s suit if they can illustrate that they conducted all the necessary assessment of the product, such that the product was in good condition at the time it was sold to Harold; blaming Harold for the improper assembly of the computer. Inability to do so will result to damage claims that can on the part of Hardwick. On the other hand if Hardwick Stores cannot illustrate that proper assessment of the product was conducted, they can lessen the damages that they will have to suffer by bringing in either Stenna or ACG, depending on where the substantial cause of the negligent act originated from by virtue of necessary of proper parties head. To do so, however, Hardwick must first accept that there was negligence, only that they were not the only ones responsible and accountable for it. References Collins, L. (1993). ed. Dicey and Morris on The Conflict of Laws, 12th ed., Sweet & Maxwell, p. 270. Daniels and Daniels v. R White and Sons and Tarbard [1938] 4 All ER 258 Distillers Co. v. Thompson [1971] A.C. 458 [P.C.] Eliason v. Henshaw [1819] US SC Fawcett, J.J. (1993). “Products Liability In Private International Law: A European Perspective” I Recueil des Cours 13, pp. 26. General Product Safety Regulations 1994 (SI 1994 No 2328). Grainger & Son v Gough [1896] A.C. 325, H.L Henthorn v. Fraser [1892] 2 Ch. 27 [C.A. 1892] UNCITRAL Digest of Case Law on the United Nations Convention on the International Sale of Goods. 16 October 2005 . United Nations Convention on Contracts for the International Sale of Goods. Apr. 11, 1980, U.N. Doc A/CONF. 97/18, Annex I, reprinted in 19 I.L.M. 671 (1980). 16 October 2005 . Read More