Commercial law - Exam notes PDF

Preview

Summary

Exam notes...

Description

FOB$ ! American UCC Article 2 free on board at a named place of shipment. No satisfactory definition of the contract Devlin Pyrene v Scindia It is a delivery term under which the seller must at the named place ship the goods; he bears the expense and risk of putting the goods into the possession of the carrier and on board the ship. (Once on board passes to the buyer) Key Features of FOB sales: Seller 1. Package: and transport to named port. Surviving voyage 2. Place the goods: on board the ship. Arrive in good condition 3. Pay all charges: involved in loading (different from freight) 4. Obtain export license Key Features of FOB: Buyer 1. Pay any cost incurred in subsequent to completion of loading: freight, unloading of the goods at port of destination and import or custom duty 2. Nominate a ship for carriage 3. Notify the seller of expected date of vessel arrival in good time 4. Inform seller of readiness of vessel to load (as in contract) 5. Present a suitable ship for the carriage of cargo Types of FOB contracts 1. Classic FOB ◦ buyer nominates suitable ship ◦ seller puts goods on board under contract of sea carriage which the seller has made with carrier for the account of the buyer ◦ Seller takes the bill of lading in his own name as consignor (shipper) (bill of lading says deliverable to order (order of the seller who he may specify) ◦ Marine insurance normally arranged by the buyer ◦ Seller endorses the bill of lading (goods delivered to person specified) and transfers it with the shipping documents to the buyer 2. FOB with additional services ◦ Shipping and insurance agreements, and nomination of the ship are made by the seller for the buyers account NV Handel 3. Simple FOB ◦ Large shipment such as oil ◦ Buyer takes charge of everything relating to carriage ◦ Seller will not see bill of lading ◦ Seller places the cargo on board the vessel ◦ Hiring a whole chip charter party charter whole ship FOB CASES given slides. Typical clauses in FOB

Buyer shall give notice at least 15 days to readiness to load Shipment during April 30 to May 5 at Buyer’s call (buyer orders seller to load) Failure to comply is breach of condition Cases Charles v ALEX and PEC ltd v Thai Contracts will be subject to these statutes according to type of goods Grain and Feed Trade Association form no 119 (general fob sales contract for feeding stuffs in bags or bulk) other versions are GAFTA form 120 and 49 (Thai rice and goods from central and eastern Europe in bulk or bags) Effect of GAFTA in FOB The provisions of GAFTA become part of the terms of the FOB contract. Has to say contract is subject to GAFTA form. Anglo Saxon v Adamastos 1958 What buyer has to do when buyer nominated vessel which has a technical fault. Or what buyer is entitled to do when vessel nominated by him is to be replaced. Will normally inform seller and nominate substitute vessel. Buyer’s four tier obligation 1. Nominate a vessel for the loading 2. Provide notice of ship’s expected date of arrival for loading at designated port 3. Present a suitable ship for the carriage of the goods 4. Give notice of readiness of vessel to load All 4 are implied in FOB contracts and must be fulfilled. Notice of readiness : treated as a condition of the contract. Entitles seller to consider contract at end and claim damages if suffered loss. Bunge v Tradax Exports Short notice of vessel’s expected time of arrival: Thai Maparn Trading v Dreyfus 2011. Where notice is shorter than period stipulated in contract, seller can simply ignore it. The seller in this case having waived the non conformity. The seller replied by saying we wish to inform you goods are not ready for loading. Not objecting to validity of notice. Judge considered Seller’s notice as waiver. If notice is short, seller can ignore it or argue notice was short and invalid but have to act and complain about notice. Notice must be adequate and unambiguous Requirements of notice nominating a vessel: communicated timely. Untimely notice entitles seller to declare the buyer in repudiatory breach of the FOB contract and claim damages for the repudiation Bunge Corpe Notice reaches to seller after deadline: 4 situations 1. Failure of notice to get to the seller was due to buyer’s fault. (Seller has rights available for breach) 2. Neither party’s fault. (don’t know ASK)

3. Seller’s fault, but buyer was aware before the expiry of time for giving notice that the notice he had served never reached the seller. 4. Failed due to seller’s fault but buyer reasonably believed the seller had received the notice prior to expiry of the time for delivering notice. Notice must be at a time that seller is able to complete loading at the given time. Notice invalid if at the time it got to seller’s hand there is little time left to complete loading of the vessel. Cases given. Seller can cancel contract. GAFTA can help with this. Start loading anyway, goes to buyer cost. J & J Cunningham and Ampro. If first vessel has technical fault and is not able to come. Suitable vessel for loading: Soufflet v Bunge seller has no right to complain about suitability of the vessel, it is up to the buyer. Delivery of a vessel: 1. has arrived at the agreed port 2. gets to the port timely 3. moored at a suitable berth for loading 4. No legal or physical restrictions preventing the seller from obeying the buyers order to put the goods on board the vessel. (Govt import quota, or port is closed) Failure to provide proper vessel: Seller may treat contract as repudiated seller can claim damages for failure to nominate a suitable ship or delay in doing however purchase price cannot be claimed as the seller will still have goods The Osterbek and The Azur Gaz Unavailable goods following arrival of vessel and buyer’s call: If seller has no goods to load, buyer can treat it as repudiatory breach and then claim damages for the non delivery of the goods The Naxos Failure to complete loading within time: The Naxos 1990 Duty to complete loading is not a condition of the contract; rather, it operates merely as a warranty, with the result that its breach could only attract a remedy in damages in favour of the buyers. If seller has failed to complete loading within time, depend on how much days, if completed loaded according to GAFTA (notice given and started loading, money pay to ship owner for detaining) normally damages buyer can recover will be the money paid to ship owner for detaining.

If seller has failed to load. Proper notice given but failure to complete loading is the fault of the seller. Any loss incurred by buyer will have to be paid by the seller. Cases. Seller has to procure export license Czarnikow ltd v Rolimpex 1978

It is implied in contract. because of convenience, seller in same county. Under FOB seller has to take goods to port if goods require export license he has to get it because if he doesnt its unlawful. Exception to rule Brandt v Morris . Obligation lay on buyer. Both seller and buyer were in England, buyer could not argue he himself was not familiar with procuring export license in England. Buyer will get it if in the same country. If both not in country of export, Seller will do it as he will take goods there from warehouse. Use reasonable diligence to procure the license. Best endeavour. Not an absolute obligation. Seller liable if he cannot show that he used bets endeavour to get license. May be absolute Peter Cassidy Seed Communication suggested seller undertook the obligation. Buyer’s obligation to cooperate with seller Seller will need certain info from buyer so he must asset. Best endeavour Kyprianou. Cannot sit on info and wait till it gets frustrated. GAFTA Export prohibition clause 17 Form 119 same in other forms Cases given Bunge SA, Pancommerce, Public Company rise Seller will be excused from obligation. No case to answer, discharged. Judge concluded no conflict between express clause in contract and clause 17. Clause 17 covered both total and partial prohibition exports whereas clause 13. Pancommerce v veechema (used quota to perform other contract as time hadn’t come for this one, have to honour contract which was made first) Bunge v Nidera (Seller cnacelled contract as of temporary export ban, time for performance had not yet arrived, anticipatory breach of contract. When party to contract makes it clear that they will not this before time arrives. The time for performance still in future, but it is always possible for prohibition to be lifted. What the seller did was he acted pre maturely. Advice here is to even if prohibition is in force allow it to remain when it is clear even if it is lifted there is nothing you can do. GAFTA 13 AND 49. Can extend shipping periods. Wait once that day passes and then send note. Measure of Damages GAFTA clause 23 of 119 and SGA 51 property passes or not depends on intention of parties. ! ! ! ! ! ! ! ! ! ! !

BILL$OF$LADING$ ! ! Carriage of Goods by Sea Act 1971 (HVR put in) Carriage of Goods by Sea Act 1992 (incorporating The Hague Visby Rules) Whoever has the bill of lading what they must do to establish claim against carrier. 5. The purchase order 6. Assurance of payment 7. Procurement of goods 8. Export License 9. Arranging transport 10. Booking cargo space 11. Packaging, marking and dispatch 12. Preparation of bill of lading 13. Pre Shipment inspection 14. Loading (stamp that shipped or loaded) 15. Customs 16. Arrival and unloading

Carriage Period 6. Period of time where the goods are considered under carriage, and subject to the Hague-Visby Rules. Starts at loading ends at unloading. 7. Defined as beginning at the end of the loading period, and terminates at the start of the unloading period. Indorsee is the person who has received the bill of lading and indorser is the one who transfers it. No liability on bill of lading to profit made by buyer Forwarding agent. Loading broker: arrange shipments, supervises loading and signs the bill of lading and issues it to the shipper. Transferable Carriage of goods act by sea 1992 S1 (2) After shipper receives bill of lading FOB AND CIF Shipper will get from freight forwarder and will send full sets to consignee or the shipper’s bank Lecture 10 Article 10 of Hague Visby, if bill of lading issued in those states it applies. Tells when these apply? Check Article 3 (8) if relieving liability that has no effect, cannot exclude. Article 3 (3) shipper can demand this to show condition of goods and quantity , appearance

not quality Sale may require clean bill not a claused bill. consignee can reduce price if goods damaged. The Galatia Carrier has to do a reasonable inspection, said to contain or not possible to inspect, so can cross out the condition this is not a breach. Not obliged to provide a clean bill. David Shipper v Carrier (if goods that were in good condition are bad when arrived, carrier can be liable, bill of lading is prima facie evidence) HVR Art 3 (4) If transferred to consignee v carrier (proof to the contrary shall not be admissible when the bill of lading has been transferred to a third party acting in good faith. If not happy with goods condition, need to know if the problem arises from condition of delivering in apparent condition so can defeat carrier in claim. Goods shipped in apparent good order means no evidence of external injury and fit for safe carriage. Cases This does not form part of contract of bill of lading, but operates as estoppel. so damage is during carriage. Bill of lading acts as an estoppel, so carrier is estopped from claiming they were in different condition before. If shipper tells buyer before bill of lading arrives that goods condition has changed, buyer cannot sue carrier in good faith and he will have defence. Shipper and carrier conspiring together to make goods good condition. Consignee has claim. Indemnity. Brown Jenkinson indemnity in unforceable HVR ART 3 (5) The carrier is forgiven, however does not limit carriers liability to consignee. Consignee sues carrier and they bring in third party If bill of lading is the actual contract anything agreed orally cannot be presented as terms of the contract. But if its merely evidence to contract then it can be used. Bill is evidence of contract and not necessarily the contract. Crooks v Allan. (acceptance of document doesnt mean terms accepted) cogsa 1992 s 5 Evidence for charter and consignee Parol evidence rule may not apply. So terms on bill of lading dont reflect what is in the contract can be presented as evidence Arden. Ship was to go straight to London but didnt go directly, so others reached London first. Buyer suffered losses. Carrier defended it saying doesnt say direct transport to london. Consignee succeeded against shipper that it was not direct and shipper can claim against carrier. CGSA S2 lawful holder of bill S 5 indorsee rights of suit transferred. East West Corp (goods lost carriers customer agent released without bill, appealed proprietary rights may not pass so could be shipper can sue carrier on proprietary claim) Scottish and Newcastle international (acknowledged in this case ^)

So buyer can sue on bill for carriers failure. Can the shipper still sue on bill? Seller’s rights and duties 4. THE SELLER’S DUTIES AS TO THE NATURE OF THE BILL OF

LADING The seller must make sure that the bill of lading: 5. Is a shipped bill of lading (ie it must show the goods were received by

the carrier on board the vessel, and not just placed on the dock). 6. Is a clean bill 7. Is not issued under a charterparty (due to potential conflict with the duties under that relationship) – see further S.I.A.T. Di Del Ferro v Tradax Overseas SA [1978] 2 Lloyd’s Rep 470 8. Records the date and place of shipment, which complies with the contract of sale – see further Hansson v Hamel & Horley Ltd [1922] 2 AC 36 9. Covers the whole voyage, though transhipment (where there are multiple sea voyages) is acceptable provided the bill covers the whole voyage 10. Sufficiently identifies the goods 11. Covers only the buyer’s goods and none other – see further Re Keighley Maxted & Co and Bryan, Duran & Co (No 2) (1894) 70 LT 155 12. Is signed on shipment or within a reasonable time Fraud Motis Exports v Dam

Lecture 12

American Accord[4] case, in which the English House of Lords held that the deliberately wrong dating of a b/l by the loading broker of the carrier is no reason to release the issuing bank from paying out under the letter of credit. Backdating of a b/l may seem very harmless, yet in trade a difference of one day can make a big difference as prices may go up and down heavily on a daily basis. Anyhow, this aspect apparently did not play a role and the bank was ordered to pay out under the letter of credit to the beneficiary who had no knowledge of this “fraud”. The fraud therefore had no consequence for the position of the beneficiary under the LC.

LETTER$OF$CREDIT$ ! ! ! PART 1 Problem: failure of buyer to pay and hard to chase them in foreign jurisdiction. Buyer’s means of self-protection Performance guarantee (seller’s bank will issue guarantee to buyer that the bank undertakes to pay the specified sum of money upon receipt from the buyer a certificate stating that the seller has failed to perform the contract) 17. on demand guarantee 18. performance bond 19. demand guarantee Stand by letter of credit International standby Practice 98 Uniform Rules for Demand Guarantees, ICC pub 758 Letter of credit (documentary credit) Secure and convenient method of assuring the seller of payment. Buyer’s interest is protected by means of document stipulated under the credit (documents the seller is to tender e.g certificate of quality?) A documentary letter of credit is an irrevocable undertaking of the issuing bank to honour a complying presentation of required documents . Art 2 Uniform Customs and Practice for Documentary Credits (UCP 600) LC is subject to UCP. Goode , A documentary credit is in essence a bankers assurance of payment against presentment of specified documents. substitute the bank’s as paymaster for the buyer. Assure beneficiary that he will be paid against a complying presentation Engagement clause in LC UCP 600 Macoroni v PT Bank 2007 Ineradicable risks 8. Buyer (non delivery of goods, forgery of documents) 9. Seller (inability to receive documents owing to non complying presentation of documents 10. Issuing bank 11. Nominated bank (failure to obtain reimbursement form the issuing bank due to its

presentation of non complying documents Bill of lading Certificate of quality These are not prepared by Seller. Complying presentation Article 2 UCP 600 5. a presentation that is in accordance with the terms and conditions of the credit 6. the applicable provisions of the UCP 7. and international standard banking practice Contractual relationships 13. buyer and seller 14. buyer and issuing bank 15. issuing bank and nominating bank 16. issuing bank and beneficiary 17. nominated bank and beneficiary Issuance of LC Buyer can include documents according to his trust on buyer (extra or less certificates) Bank has to pay regardless of what is saying. enables seller to obtain credit facility for purpose of arranging shipment of goods from his supplier. Because LC promises payment so other banks are more willing to lend. Seller Buyer contract clause in the sakes contract between the seller and the buyer stipulates for a LC as the means of payment requirements of that contractual stipulation condition of the contract to open a LC. cases Performance of that is a condition precedent to performance of the sellers obligation under the contract Trans Trust Obligation of buyer to the seller Complies strictly with the terms of the sales contract conforming LC opened timely (date specified or open by the dat when shipment is to take place, in a period first day of the period) Ian Stach very type stipulated for in the contract agreed currency opened and available (seller notified and must be no condition in the credit requiring seller to do some other thing before credit becomes available other than document)

Sellers inability to operate credit He cannot blame anyone for the inability but himself Shamsher Jute Mills v Sethia seller does not get paid if he has been unable to fulfil requirement of the credit by making a tender of conforming documents. exceptions Buyer has to pay when issuing bank is insolvent 5. Shipping date 6. Plasicmoda Societa per Azioni v Davidsons (Manchester) Ltd [1952] 1

Lloyd’s Rep 527, 538 (Denning LJ) 5. Shipping period 6. Pavia & Co SPA v Thurmann-Nielsen [1952] 2 QB 84 7. Ian Stach, Ltd v Baker Bosly, Ltd [1958] 2 QB 130 8. Waiver 9. Panoutsos v Raymond Hadley Corp of New York [1917] 2 KB 473

Buyer and Issuing bank When does it come into existence? Buyer collects application form Completes form and returns it with required documents Bank scrutinises the form and do credit check Bank accepts application and opens desired LC notifying seller through sellers bank Buyer’s obligation ensure the sum you have is sufficient which can enable bank to make payment on credit at least a day before payment Obligation of the bank Banker customer relationship Buyer’s requirements in an application form are his instructions to the bank 1. Basic duty to act with reasonable care, skill and diligence : Midland Bank Lee Feng Steel Pte 3. obligation not to pay out on a credit opened by a forged or fraudulent application form 4. obligation to accept only a complying presentation under a credit Issuing Bank’s duty of care duty to use reasonable care, skill and diligence in processing the buyers instructions for the opening of a letter of credit

Equitable Trust Co of New York v Dawson banks respondent in other country. Notify terms to correspondent operating in the seller’s jurisdiction. The means of communication was by cable at that time. Today Telex or Swift The LC was sent by cable, Instruction of the buyer was document required certificate of quality of Vanilla beans, what was shipped was something bricks and stones with beans. A certificate sworn by brokers was also recognised. Cable converted plural of brokers into broker. Brokers was ambiguity ( but at least more than 1) So no compliance. But he would not be protected ei...