International Commercial Law Notes PDF

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Week 2- week 5...

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Week 2  Discussion Theme CISG ‘has not ‘invented’ a new law, but forged a compromise between the civil law and the common law. The CISG is broad in its language rather than detailed because its general principles ―which are to be found within the four corners of the CISG―can be used as tools to fill the gaps. This also makes the CISG more adaptable to diverse factual situations.’ Defining international sale of contract A contract for dealing with/selling goods between buyer and seller from two different jurisdictions Sale: - ‘the exchange of goods for an amount of money or its equivalent’—August 2013  A sale is the ‘passing of title from the seller to the buyer for a price’ –the US Uniform Commercial Code -is the backbone + -stands heart of international trade 

CISG

CISG:  An international convention/treaty  Provides uniform rules to regulate sale contracts across nations  Developed by UNCITRAL  Signed in Vienna, Austria in 1980  Effective into 1988  Also referred to as the Vienna convention  Ratified by 84 states  Supersedes two earlier conventions: -Convention relating to a Uniform Law on the International Sale of Goods (1964, The Hague) -Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods(The Hague ,1964) CSG purpose ‘The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs.’-CISG Preamble What is the significance? CISG organised in four parts  When does CISG apply? CISG Applies:  to contracts for sale of goods between parties whose places of business are in different Contracting States  when the rules of private international law lead to its application  by virtue of the parties' choice regardless of whether their places of business are located in a Contracting State CISG art 7(1 ): When CISG is the governing law of the contract regard should be given :

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its international character to the need to promote uniformity + the observance of good faith

CISG Interpretation Article 7(2)  Formation of contract According to CISG: A contract need not be concluded in or evidenced by writing (art 11) However, can be avoided under art 96, ie,  a contracting state whose law requires  a contract to be written  can make a declaration at the time of ratification An offer: 

is a proposal to a specific person indicating an intention to enter into a contract

Art 14: definiteness: ‘a proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or make provision for determining the quantity and price’ However, Art 55 provides: ‘Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price….’ Hence conflicts apparent United Technologies v Malev Airlines 1992  How about an advertisement in a newspaper for the sale of goods? Is it an offer? +  Effectiveness of an offer?  Acceptance Acceptance ‘an agreement to enter into a contract proposed by an offeror’ Contract completed at the point when an offer is accepted Acceptance rule under CISG:  the receipt theory as used in civil law adopted ie, acceptance would occur when it is received by the offeror  Sharp contrast to the ‘mailbox’ theory as used - in common law countries, ie, acceptance would occur - at the time the offeree transmits it to the offeror." The difference between the two relates to the allocation of risk when an acceptance is lost or delayed‘  General standards of performance According to CISG  Both parties are entitled to get from their contract what the expect  A party that fails to perform accordingly is in breach of contract When one party breaches, the other party may avoid the contract or make a demand for specific performance  The Shoe Seller’s case West Germany and Italy 1991

The sales contract entered into for selling women’s shoe between an Italian business (seller/ plaintiff) and a German businesswomen( buyer/defendant) The legal question was whether:  under the CISG, the buyer had grounds to avoid the contract ‘The court stated that in order to use the CISG avoidance remedy, either (1) the buyer must have sent a [notice] giving the seller more time to perform or (2) the seller must have committed a fundamental breach of contract. Since neither of these two tests were met here, the court ruled in favour of the plaintiff.‘

Sale of goods (Arts 25–88) Seller’s obligation  Required to deliver the goods  Hand over any documents relating to them and  Ensure that the good conforms to the contract  Goods must conform to the quality, quantity, and description as stipulated in the contract+ Appropriately packaged and fit for purpose

Buyer’s obligation  Required to pay the price  Take delivery of the goods  Promptly inspect the goods ‘must advise the seller of any lack of conformity within ‘a reasonable time’ and no later than within two years of receipt’

Passing of risk Remedies for breach of the contract (next slides)  The passing of risk  A legal concept  Determines who is responsible for the loss  Shifting of responsibility for loss or damage from the seller to the buyer  The point in time when the buyer becomes responsible for losses of the goods Art 66 provides: … loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.  CISG risk allocation CISG risk allocation  The CISG describes when the risk passes from the seller to the buyer  Yet, in practice most contracts clearly define parties obligation via Incoterms such as Free on Board (FOB) or Cost, Insurance and Freight (CIF)  Depends on the contract and the means of delivery So allows parties to allocate risk among themselves and to specify when the risk will pass between them

Remedies

CISG provides for remedies that are:  Unique to the buyer  Unique to the seller and  Available to either party  However, both parties remedies are interrelated & depend upon the character of a breach of the contract

Buyer’s Remedies:  Specific performance  Avoid the contract for fundamental breach or non-delivery  Reduce the price  Refuse early delivery and  Refuse excess quantities  Application of CISG Civil vs common law systems Sharp contrast exist between the legal system in relation to important aspects of a contract, eg,  Formation of contract  Irrevocability of an offer  Cont.. Several research reveal: ‘the civil law countries have dealt with the CISG more frequently than common law countries. Furthermore it can also be observed that the common law countries in general have not applied the CISG as consistently as civil law countries.’ ‘Out of the more than 600 CISG court cases documented in the CISG database (excluding International Chamber of Commerce (ICC) arbitrations and the Iran-U.S. Claims Tribunal), only twenty-one are from common law jurisdictions’ CISG application in Australia  CISG became part of the law of all states and territories in April 1989  Incorporated through their sales of goods (Vienna Convention) Act  CISG will prevail over domestic laws in cases of international sales as described in the CISG Yet, practice exhibits a clear lack of applying Since adoption of CISG on April 1, 1989 only 22 cases were reported which is not an abundant use of the CISG. ‘- Bruno Zeller 2012 What are the fundamental causes?  Controversial aspects of CISG Arguably CISG  Promoted vague standards  Attempts to compromise between the two major legal systems without -solving the matter itself, eg, in regards to the role of good faith  Given the important contrasting aspects between the two traditions-it does not possess a coherent background for interpretation

A way forward!

HOW CISG works to meet the global challenges! See for details, ‘Global Challenge of International Sales Law’ via:  https://www.youtube.com/watch?v=4AUHX7Xqunw  Critical thinking! ‘It is the misconception as expressed by many courts that the CISG and domestic law are either the same or similar that a careful treatment has not been felt to be warranted. The homeward trend in other words has not been overcome. On the contrary it appears to be entrenched in the principle of precedent.’ ---- evaluate this statement  MCQ Which one of the following is Not correct? A. CISG requires a positive action for acceptance B. Mail-box rule has been developed by the civil law tradition C. Under the receipt theory an acceptance takes effectas soon as it is received by the offeror D. A contract can be avoided in case of fundamental breach Problem Questions: 1. On or about 10 January (delivery) – John delivered on 19th – would the time period stretch to 19. 20,000 appeared before 20 (2nd part of ordered) Hearing through the trade that the seller is going insolvent – gossip and should not be paid attention to and he cannot get out of the contract. He might be able to cancel the contract for rest of the orders. Always include the terms – force majure (tried to avoid but was beyond the reach) – is the party able to rescind the contract? If force majure then the party can avoid the contract. 2.

Week 3 Discussion Theme As harmonization projects move from the purely domestic or local arena toward a unified system that conjoins the domestic with the international, success not only will be an important consideration, paradoxically, also more difficult to attain given the multiplication of issues that occurs in international harmonization projects

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Defining E-commerce

E-commerce ‘An e-commerce transaction is the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders’--OECD 2009

E-commerce –significance - Emerged in the 1960s

Significance     -

Technological innovation Free flow/global circulation of information Globalisation Internet:-provides a ready platform for commerce to flow revolutionizes retailing Enables selling and buying products across the world

OECD: ‘Internet and other e-commerce sales transactions averaged 13% of total turnover ...on average, over 35% of all businesses (with ten or more employees) use the Internet for purchasing and about 18% for selling goods or services’ However, it ‘estimated a two hundred per cent growth ....[which] inevitably leads to problems on a global scale with legislation and regulation’ (discussed shortly) What are pros and cons?  Policy considerations    

Development of an information society -leads economic growth and productivity,new economic activities as well as jobs increased globalisation of economies Movement of technologies in a borderless environment Economic, moral and social impact of technology

What are important concerns? 

Regulation rationale and debate

E-commerce is difficult to regulate Reasons: -the scope of e-commerce and rapid growth of technology involved -its transnational nature, ie, which legal system has jurisdiction over e-transactions -required new laws to meet the challenges Regulation of e-commerce -hotly debated topic State/self regulation vs Global governance (next slide) Whether govt. extensive regulation  Inhibits business & efficiency ‘Governments can have a profound effect on the growth of commerce on the Internet. By their actions, they can facilitate electronic trade or inhibit it’

Regulation

Those who oppose regulation placed emphasis on: self-regulation imposed by internet users -the market which is the key player to solve the regulatory problems Those who propose government intervention claim: ‘ the Internet cannot be seen as a totally decentralized system since there are many corporations with enough power to impose their own private regulations on the Internet community.’ Gov intervention, will improve the system by:  levelling the playing field  empowering consumers  taking some power away from these economic groups Yet, not practicable for the govt alone to regulate given its borderless operation Therefore,  Global cooperation at public and private levels required Why regulation? 

International Initiatives -UNCITRAL Model The United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce (Model Law)  adopted in 1996 &  amended in 1998 Seeks to address :  international harmonization of int. E-transactions  the first step toward a uniform law/framework Also Model Law provides flexibility to enacting states to:  tailor the Model Law  Accommodate local concerns,  seeks to provide consistent rules for acknowledging receipt of data messages and for determining the time of dispatch and receipt of data messages Under this model, the law is: ‘neither intended to be a comprehensive, "code-like" articulation of the rules and regulations for electronic information transmission, nor intended to govern every aspect of e-commerce.’ So the Model law ‘applies to information in the form of a data message" that is used in the context of commercial activities.’  ICC International Chamber of commerce developed important guidelines for e-commerce An extract from ICC Guide for e-contracting The following are a number of terms which one would normally expect to find in most well-drafted electronic contracts, whether on a web site or through a series of electronic messages:  the identity (legal name) and applicable geographic location of the business,  relevant registration or identification numbers, etc.

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contact details for a designated representative of the business (including mail, e-mail, telephone and fax details), ….applicable law and jurisdiction, alternative dispute resolution

The US: The Framework for Global Electronic Commerce Self regulation, market place ideas dominated ---one in which competition and consumer choice will shape the marketplace Principles 1. Private sector’ leadership 2. Avoidance of undue restrictions on e-commerce by govts 3. Recognition of the unique qualities of e-transactions by govts 5. Facilitation of e-commerce over on a global basis

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Cont..

The framework put emphasis on nine areas where international agreements are needed: Financial Issues  customs and taxation  electronic payments Legal Issues  'Uniform Commercial Code' for electronic commerce  intellectual property protection  privacy  security Market Access Issues  telecommunications infrastructure and information technology  content  technical standards EU Directive The Electronic Commerce Directive adopted in 2000 Features  Development of an Internal Market framework for e-commerce  Providing legal certainty for business and consumers  Promoting harmonised rules  Enhancing administrative cooperation between the Member States and the role of selfregulation  Challenges for unification and harmonization of e-commerce standards  Tec innovation-information  Tech revolution has enormous impact on the means of conducting int., commerce The nature of the Internet and the globalisation of the world economy mean that developments in electronic commerce create legal problems concerning security of transactions and legal jurisdiction of transactions. The growth of electronic commerce has made current and future legal requirements

difficult to assess. In order for electronic commerce to develop these issues have to be addressed on an international level .’ How does e-commerce work? https://www.youtube.com/watch?v=OvqonVoK-nE MCQ Which one of the following is Not correct? A. The US framework put emphasis on self regulation B. The UNCITRAL model law attempts to equalise e-data messages with the paper-based contracts C. The EU Directive applies solely to service providers D. E-commerce transactions/contracts do not have enforceability

The last words! Despite massive growth in e-transactions ‘[many] businesses and consumers are still wary of conducting extensive business over the Internet because of the lack of a predictable legal environment governing transactions’ ---- Analyse this statement

Week 4 Main issues:  Understanding transport of goods in international sale transactions  Basic concepts of shipping and legal issues  Parties’ liabilities and immunities  Standards required for seaworthy ship and the scope of safe port Judicial decisions:  President of India v West Coast Steamship Co  Kodros McFadden v Blue Star Line  Shipping Corp v Empresa Cubana Discussion Theme The bill of lading is an integral part of the carriage of goods, and it is essential that traders and their legal representatives understand the role it plays in international trade as well as the legal issues it can raise. [Also]… it is useful to understand the nature and type of charterparty before examining the bill of lading. Such knowledge will assist traders to understand who in effect is the carrier or the owner of the ship, as well as giving the exporter the possibility of chartering a ship in its own right.’  

Charterparty is a written document b/w shipper (charterer/cargo owner/seller) & carrier (owner of the ship) Bill of lading is a written document b/w carrier (owner of the ship) and consigner. Regarded as a receipt of goods. Goods have been received

 Understanding carriage/transport of goods Carriage of goods:  The transportation of goods by land, sea, or air  An integral par of int. trade Accomplished via contract (next slide) Needs orderly governance/regulation A contract of carriage: ‘is a contract in which a carrier, against the payment of freight, undertakes to carry goods from place to another.’--- Rotterdam Rules 2008   

Involves intermediaries (carrier, insurer etc) Contains trade terms -describing the time and place where the buyer is to take delivery Time and placement of payment

 Carriage of goods by sea Shipping is the most common mode of int. transports Reasons:  Low cost relative to other modes  Ability to carry large and bulky items  Having no land borders 

Important considerations – see slide for graph

 Int. carriage of goods: two central aspects Central Aspects:  Charter party (b/w seller & carrier) (concerned only with the Freight details)  Bill of lading (b/w seller & carrier & buyer can also be involved) (concerned about Quantity, Freight, ports for destination, Voyage etc) A charter party is a formal, written contract between the owner of a vessel and a person/company (the charterer) desiring to hire either the entire vessel or parts thereof Which will:  Set forth the terms of the arrangement: (rate of freight, ports of call etc)  Whether the hiring is for a specific voyage or a particular time  Voyage charter party Shipowners Duty  Provide a seaworthy ship (what is the standard of seaworthiness? – Hague rules etc defines it is not absolute) which complies with the charter party description – strict/absolute liability – carrier will be liable and his personal obligation  Transport the goods to the ports specific in the contract  Provide the specified cargo  Due care in loading, handling/carrying, keeping goods  Discharge and deliver the cargo to the agreed destination without deviation  A seaworthy ship At common law the obligation: to provide a seaworthy ship is absolute and in the event of breach, the shipowner will be liable irrespective of fault

Standard required ‘.… the obligation, although absolute, means nothing more or less than the duty to furnish a ship and equipment reasonably suitable for the intended use or service.’ President of India v West Coast Steamship Co [1963] Objective test ‘the vessel must have that degree of fitness which an ordinary careful and prudent owner would require his vessel to have at the commencement of her voyage having regard...