International commerical law revision notes PDF

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Summary

Sources of LawIncoterms The incoterms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC)  Incoterms are limited to matters relating to the rights and obligations of the parties to the contract of sae with respect to the delivery of the goods sold...

Description

Sources of Law Incoterms  

The incoterms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) Incoterms are limited to matters relating to the rights and obligations of the parties to the contract of sae with respect to the delivery of the goods sold

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Incorporation: - Incoterms do not have force of law in the UK, and there mere use of the letters CIF or FOB does not bring them into operation - Have to have a term in the contract saying you are invoking incoterms and refer to a particular term

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Which incoterm? - FOB (Free on board)  Transport obligations is on the shoulders of the buyer  Contract to carry will be between the buyer and the currier  Seller will want FOB terms as it is riskier for them to sell of CIF terms  Pyrene v Scinida – “fob contracts have become a flexible instrument” -

CIF (cost insurance freight)  Contract to carry will be between the seller and the currier  The buyer will want CIF terms  CiF contract entails the price paid by the buyer encompasses the costs of the goods alongside insurance and transport costs  Seller has to enter into a Contract of carriage and a contract of insurance  Seller fulfils his obligations by shipping the goods and tendering the documents  On presentation of the shipping documents the buyer is bound to pay for the goods  Arnold Karberg & Co – obiter dictum – “CIF is not a sale of goods, but a sale of documents relating to goods”

FOSFA and GAFTA standard terms  

Federation of Oils, Seeds and Fats Associations regards contracts in oilseeds oils and fats GAFTA = grains and feed

Making the contract of sale: Incorporation of standard terms The formation of a contract 

When was the contract concluded?

The terms of the sale contract 

Resolution of disputes often depends what was said in the contract itself

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Balmoral Group - “battle of the forms” – contract concluded with the last form which crystalizes the contract unless there was a specific obligation by one of the parties

Incorporation clauses 

It is increasingly common for deals to be closed on the barest of terms on the basis that “other terms” are incorporated into the contract

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Incorporated terms can come from: earlier correspondence, tender terms, in house standard terms and conditions

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In order for effective incorporation to take place it is necessary to prove that parties had reasonable notice of the standard terms/form to be incorporated: - BUT where the standard form has been signed by the parties there is no requirement of notice: L’Estrange - parties are bound by their own signature - Where the standard form is incorporated within the context of a course of dealing, no notice is required – proving that the form is of common use and not exceedingly onerous: Circle Freight International Ltd (parties had a long course of dealing with each other) - The more complex the terms the greater degree of notice is required: Inferfoto Picture Library Ltd – clear and reasonable efforts must be made to bring any particular onerous and unusual conditions to the attention of the other party

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Can you incorporate unusual or unreasonable clauses: - Unusual/alien terms: OK Petroleum: construction was that general words of incorporation would not normally suffice - those clauses that are alien to the nature of the incorporating contract would not generally be treated as relevant to the rights and obligations of the parties - Unreasonable clauses: The Northern Progress – if the parties clearly agree to an unreasonable clause it will be included but where the intention of the party is doubtful the court will not hold that a term to be incorporated

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Conflicts between an incorporated term and an explicitly term in the incorporating document - Arbitrator or judge will try to identify the intention of the parties at the time the contract was drawn up -

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BUT a clear hierarchy clause will be applied by the courts:  Pagnan v Tradax Ocean Transportation [1987]: special terms shall prevail if inconsistent with standard terms  This can be contracted into a contract “if there’s a conflict between X and Y, X will prevail” Special terms: Indian Oil Corporation v Vanol Inc: Special terms prevailed.  Standard terms are FOSFA 54, INCOTERMS  Special terms: are the smaller contracts drawn up between the parties  Look at the party’s intention – more likely to show intention in the documents they have drawn up themselves BUT: The Leonidas – it was held that although tailor made clauses would normally prevail over typed clauses the courts would however seek to construe a contract as a

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whole – If a reasonable commercial construction of the whole could reconcile the two provision this should be done Investors Compensation Scheme: place great weight on the commercial purpose of the agreement, which may even take priority over the literal meaning of the words used

Transport obligations of the seller 

Contracts concluded on shipment terms provide for the obligation of the seller to ship the goods for transport in accordance with what was originally established in the sale contract

Transport arrangements 

CIF = the buyer has no control over the transport conditions and has no impact on the contract of carriage and therefore the seller’s obligations are very important

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FOB contracts = obligations normally on the buyer “straight fob”, sometimes can be the seller, in his own name or as an agent of the buyer “classic”

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Finska v Westfield: (CIF) - No obligation for the seller to send to the buyer the contract of carriage - The buyer will receive the bill of lading which will often contain the contract of carriage BUT sometimes it will just say “as per charter party” so there will be very little detail of the conditions of carriage. There is still no obligation of the seller to give the buyer the contract of carriage - Can contract in that the buyer should send you a bill of lading that will reflect the conditions of carriage – freedom of contract

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Pyrene v Scandia [1954] (FOB) - Established 3 types of fob contract: 1. Straight where the buyer nominates a vessel and makes the contract of carriage (most common) – buyer can sue the carrier under. The carrier will issue a bill of lading to the buyer which will allow him to claim the goods from the seller as a document title 2. Fob contracts with additional duties – seller nominates a vessel and makes the contract of carriage as an agent of the buyer (rare) – sale contract will contain specific transport obligations. Seller will issue the bill of lading to the buyer 3. “classic” – seller makes the contract of carriage, but the buyer nominates the vessel

Identification of transport obligations 

No obligation for the seller to tender the original charter party contract with the bill of lading, unless the parties has agreed to this in the contract: Finska v Westfield, Ireland v Livingston: no mention of the charter part as one of the necessary documents to complete delivery

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Parties to the contract of carriage:

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CIF: The seller is initially part to the contract of carriage, but upon the bill of lading being issued the buyer is then the party to the contract FOB: Pyrene 1. Straight FOB: signatories to the charter part = carrier and the buyer (who can sue) 2. FOB with additional duties: normal agency law applies – buyer is the signatory 3. Classic FOB: buyer only becomes party to contract of carriage when the bills of lading are endorsed to him

The sales contracted and the performance of the seller’s transport obligations 

The buyer is entitled to the contract of carriage stipulated for in the sales contract (if a buyer under CIF wants specific transport conditions it will have to be concluded in the sales contract)

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The seller will be in breach is the transport arrangement which are contractual obligations, if they are not fulfilled: - The Intan 6 – the seller must give the buyer a bill of lading which complies with the contract of sale (buyer can reject if the express terms do not conform or if they contain false information) - SIAT – seller fails to provide documents containing/evidence a contract of carriage – not enough for the seller to come to the arrangements with the carrier outside of the bill of lading – bill of lading must provide the agreed destination – or buyer can reject. Buyer should not have to speculate or investigate outside the bill of lading

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Buyer can reject if the contract expressly stipulated direct delivery, rather than stopping at multiple ports: Bergerco USA

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The test is whether the documents contain a statement or statements which without further investigation, demonstrate that the transport obligations enshrined in the sales contract have not been honoured: - Ashmore & Son – should be shipped on a steamship rather than sailer – in order for the buyer to reject the shipping documents the shortfalls of the seller’s transport obligations must be apparent from the terms of the contract

The Sellers obligation to tender a reasonable contract of carriage 

Whether or not there are specific transport arrangement, the buyer has to tender a “reasonable contract or carriage”: implies duty – s32 of SOGA 1979 - “Reasonable regards to the nature of the goods”

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Incoterms, rule cif A3 (a): duty is to procure a contract for the carriage of the goods from the agreed point of delivery, if any, at the place of delivery to the names port of destination or, if agreed any point at that port. The contract must be made on usual terms at the seller’s expense and provide for carriage by the usual route in a vessel of the type normally used for the transport of the type of goods sold

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The obligations are based on the facts of the case

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Burstall v Grimsdale: - Bill of lading tendered by the seller gave the carrier the liberty to deviate and the buyer rejected as it was inconsistent with the contract of sale - Kennedy J: The shipping documents were not inconsistent with the sale contract – the liberty to deviate was a usual contract of carriage term BUT a bill of lading containing an extensive liberty to deviate would not under normal circumstances be considered to be “reasonable” or “usual”: Shipton, Anderson & Co (bill of lading was given a wide deviation clause = was held to be unusual and therefore not a good tender) – contract of contract said it could stop at 1 port, but it stopped at 2 BUT bills of lading containing wide discretionary liberties are not always considered unusual or unreasonable: - Finska: a widely discretional war risk clause did not affect the validity of the bill of lading - Depends on freight market availability: Plaimar Ltd Continuous documentary cover: - Particularly important regarding the transfer of risk - The duty means that the seller must provide the buyer with continuous documentary cover against the carrier from the port of loading to the port of discharge - Hansson v Hamel and Horley: the bill of lading endorsed by the seller did not impose contractual obligations on the carrier in relation to the first leg of the transit – invalid tender - Fishel & Co v Spencer: was not valid tender as it did not cover all the transit of the goods (only when there were on steamer or steamers) but they were in fact put on a variety of boats - buyers did not have continuous documentary cover - Continuous documentary over entails the obligation of the seller to provide for bill of lading which covers all the transit of the goods, from the port of origin to the destination: SIAT: The destination shown on the bill of lading did not comply with what was in the sale contract.

Limits of the seller’s obligation to provide a reasonable contract of carriage   

The requirement does not mean that the seller guarantees to the buyer that litigation on such a cause of action will be successful The Galatia: shipping documents tendered by the seller ought simply to be enforceable against the carrier, not successful in the enforcement s The obligation of the seller to provide for a reasonable contract of carriage does not mean that the seller undertakes to top up the buyer for any loss beyond the limitation of the carrier liability provided for in the contract of carriage

Consequences Failure to establish a reasonable contract of carriage will leave the seller in breach of contract and exposed to liability by the buyer Transfer of Property: special problems with

bulks goods

*won’t be directly assessed* Where property is significant   

Might be important is insolvency, for the seller’s liquidators to establish where the goods were sold were the property to the seller at the time of insolvency Where the buyer is insolvent, it will be the buyer’s creditors who will try to establish that the goods belonged to the buyer on insolvency Who owns the property will be in conjunction with the SGA 1979 which distinguishes between where goods are ascertained and when they’re not

Ascertained goods  Transfer does not happen until the goods are ascertained  Ascertainment: - The starting point here is section 16, which requires ascertainment. However, having

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stated the requirement of ascertainment, the section then falls into the background because, on this hypothesis, the goods will have been ascertained on shipment. Goods that are separated from the other goods – 3- bikes in their own container

 Intention of the parties - Property does not, however, pass on ascertainment, i.e. shipment. The court must still look for evidence of the intention of the parties, which may have been explicitly stated in the contract. If the contract contains a term stating when property is to pass, then property will pass when the contract says it will.  Unconditional Appropriation - If the contract contains no guidance about the moment at which the parties wish property to pass, the courts are assisted by section 18 of the Act, the most relevant part of which is to be found in Rule 5, which passes property from seller to buyer on the unconditional appropriation of the goods.  "Appropriation" is different from "ascertainment", although they can both occur at the same time. - "Appropriation" = the act by which the seller identifies to a particular buyer a parcel of goods which are no longer unascertained. -

To "ascertain" goods is to separate them from a bulk; to "appropriate" them is to

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allocate them to a particular contract. This in contract concluded on shipment terms happens with shipment.

Unascertained goods 

Section 16 is now subject to section 20A such that, in certain situations, B will have an ownership right over the equivalent of the goods he has paid for, such that his goods are protected from the general claims against the insolvent seller's estate.

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When is the need for ascertainment dispensed with? - "20A (1) This section applies to a contract for the sale of a specified quantity of -

unascertained goods if the following conditions are met --(a) the goods or some of them form part of a bulk which is identified either in the contract or by subsequent agreement between the parties; and (b) the buyer has paid the price for some or all of the goods which are the subject of the contract and which form part of the bulk."

 In the context of commodity sales, section 20A applies - where the vessel has been declared [the bulk identified] and - payment has been made [which is likely to mean that the documents have been tendered and paid for]. 

If the contract of carriage is not reasonable, a more serious legal consequence will arise – seller will retain the rusk for the goods whilst in transit with the seller ultimately responsible for transit loss and damage to the goods

Transfer of risk – apply if goods are lost Shipment and arrival sales 

The difference between shipment contract and arrival contract distinguishes how a seller performs his duty to deliver under the contract of sale

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Shipment contract = the seller performs his duty of delivery at the load port Arrival contracts = the seller performs by delivery at the agreed point of destination

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CIF (sale on shipment terms) – the seller promises the goods will be shipped on a vessel bound for a particular destination FOB – Promises the goods will be shipped on a particular vessel at a particular loading port

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Shipment terms: -

The seller promises only to ship the goods, not that they will arrive The seller does not take the risk of loss or damage to the goods during transit

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The risk is passed on the buyer at the early stage (point of shipment) and therefore the buyers remedies are against the carrier/insurer – the rights against third parties are expressed and contained in certain shipping documents (bill of lading, policy of insurance)

The transfer of risk in shipment sales 

In CIF/FOB contracts, risk is divorced from property - Property passing when the contract says it is too - Risk passing from the moment of shipment

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If the goods were shipped on board, in conformity with the sale contract, then the risk goes onto the last buyer as soon as the goods are shipped (Manbre Saccharine) - Not harming the buyer as although he has no physical control he has legal control over the goods because of the documents of title to the goods and by inheriting the contract of carriage he can sue the carrier and sue insurer from inheriting the contract of insurance (insurance company will sue on behalf of the buyer)

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The Olympia Oil: the seller concluded the sale to B4 knowing the goods were lost. The buyer will need to prove: when the ship sank and whether the seller knew the goods were lost (very high burden of proof) – This decision has been revered in the CofA as it would have allowed people to get away with fraud

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Shipment before selling: - The rule that the risk in goods passes on “or as from” shipment as the seller might have shipped the goods under a contract of carriage before he has concluded negotiations on the trading contract - Therefore, if the goods are damaged in transit proper to the contract of sale, the buyer still bears the risk and must still pay the seller against conforming documents (documents will give the buyer remedies against the carrier and insurer) - Also covers when goods are damaged during shipping: Pyrene – as the goods are passed over the “ships rail” the risk of loss is transferred from the seller to buyer

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String sales: risk passing back to shipment - Risk is retroactively shifted from the seller to the last buyer upon shipment - End buyer should sue the carrier, not the previous buyer because risk passes on or as from shipment. The previous buyer had already performed his obligation under the trading contract by shipping or procuring the shipment of contractual terms and by tendering documents conforming to the contract

BUT what if the seller knows at the time of the contract that the goods they are selling are damaged or lost? Does the rule that risk passes on or as from shipment extended to this situation? 

The retroactivity of the transfer of risk has been stretched as far as governing times when the cargo has been lost in transit and the se...