International Sale of Goods I PDF

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Lecture 1 – International Sale of Goods I 1 Introduction to Commercial Law  1.1 An Overview  Commercial Law: International Sales International Trade Law Private International Trade, Not Public International Trade Law Individuals/Companies/Corporations, Not Sates Based on Carriage of Goods by Sea, ...

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Lecture 1 – International Sale of Goods I 1.1 Introduction to Commercial Law  1.1.4 An Overview - International Sale of Goods  Commercial Law: International Sales - Letters of Credit - International Trade Law - Carriage of Goods by Sea - Private International Trade, Not Public - Marine Insurance International Trade Law - Jurisdiction and Choice of Law - Individuals/Companies/Corporations, Not Sates - Arbitration - Based on Carriage of Goods by Sea, Not road, ail or  Complex BUT 1.2 International Sale of Goods I Contract  1.2.1 Definition -- Tort - Goods that need to go by sea to different countries. 1.2.1.5. Delivery  1.2.2 General Factors - 1.2.1.6. Price - 1.2.1.1. Sale Contract - 1.2.1.7. Payment - 1.2.1.2. Property - 1.2.1.8. Carriage - 1.2.1.3. Possession - 1.2.1.9. Insurance - 1.2.1.4. Risk - 1.2.1.10 Custom

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 1.2.1.1 Sale Contract - Oral, written, oral/written S2(1) of Sale of Goods Act 1979 (“SGA”) defines a contract of sale of goods as: “a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called a price”. Requirements: - Shipment - Seller - Quality – more detailed - Buyer - Payment - Product - Title and Risk - Quantity - Law and Jurisdiction - Price 

1.2.1.2 Property – ownership, selling most common method by which ownership transferred. – Limits on transfer of property? S16 SGA– Where contract for sale of unascertained goods no property in goods is transferred to buyer unless and until the goods are ascertained. – Ascertained - “Specific Goods” - Meaning? Sale of Goods Act 1979, s.61 – goods identified and agreed on at the time a contract of sale is made including undivided share, specified as a fraction or percentage, of goods identified and agreed on as aforesaid. – Unascertained – goods that are not specifically identified at the time a contract of sale is made. Eg. 100 pieces of chairs. – Ascertained  When does property pass? Sale of Goods Act 1979, s.17 (1) – general rule - when parties intend it  How do you ascertain intention? Sale of Goods Act 1979, ss.17 - Regard had to ‘terms of contract, conduct of parties and circumstances (want to pass when paid). In absence of agreement between parties, the passing of property is determined by looking to s18, which lays down rules covering specific situations. - Unascertained  In case of Unascertained goods? Sale of Goods Act 1979, s.18, rule 5(1) – Where unascertained goods are unconditionally appropriated to the contract.. the property in goods then passes to the buyer….  Unconditionally appropriated? Sale of Goods Act 1979, s. 18, rule 5(2) – Where ….seller delivers the goods to the buyer or to a carrier or other bailee or custodier for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is to be taken to have unconditionally appropriated the goods to the contract.  “Reserve right of disposal?” Sale of Goods Act 1979, s. 19(1) - Seller has right to retain property in the goods until certain conditions are fulfilled, according to s 19. Eg. if not paid.  What “conditions?” Sale of Goods Act 1979, s. 19(2) - Where goods are shipped, and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie to be taken to reserve the right of disposal. May not pass if seller has reserved right of disposal in goods. - Bulk Cargo

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 Meaning? Sale of Goods Act 1979, s.61- a mass or collection of goods of the same kind which—(a) is contained in a defined space or area; and (b) is such that any goods in the bulk are interchangeable with any other goods therein of the same number or quantity;  Transfer of property? Sale of Goods Act 1979, s. 18, rule 5(3) Where there is a contract for the sale of a specified quantity of unascertained goods in a deliverable state forming part of a bulk which is identified either in the contract or by subsequent agreement between the parties and the bulk is reduced to (or to less than) that quantity, then, if the buyer under that contract is the only buyer to whom goods are then due out of the bulk— (a) the remaining goods are to be taken as appropriated to that contract at the time when the bulk is so reduced; and (b) the property in those goods then passes. Goods can be appropriated unconditionally in different ways.  Separation – appropriation can occur when buyer’s portion is physically isolated from the bulk.  Exhaustion – appropriation may occur through withdrawal of remaining portions owned by other buyers ascertainment by process of exhaustion. Singe buyer would own whole of bulk if it were reduced to or below the quantity purchased.  Consolidation - only wanted 2 grains, so buy rest of cargo. It is ascertained as it is all cargo on ship and therefore it can pass property.  Section 20  Conditions for transfer? Sale of Goods Act 1979, s. S20A a) goods or some of them form part of a bulk which is identified either in contract or by subsequent agreement between parties; and (b) buyer has paid price for some or all of goods which are subject of contract & form part of bulk.  Effect? Sale of Goods Act 1979, s.20A – When conditions are fulfilled, a) property in an undivided share in bulk is transferred to the buyer, and b) buyer becomes an owner in common of bulk.  “Owner in common?” Sale of Goods Act 1979, s.20B – An owner in common shall be deemed to have consented to delivery from the bulk to any other owner in common, b) any dealing with or removal, delivery or disposal of goods in the bulk by any other person who is an owner in common of the bulk… It should not affect the rights or obligations of any other owner in common. 1.2.1.3 Possession Meaning? Occupation and control of an asset with intention to assert such control. What is possession?  Actual – give to carrier, have actual possession of bottle  Constructive – buyer/seller has right to demand it from carrier if you have BOL doc Documents? A person can lose possession by issuing a bill of lading. Delivery of document puts the buyer in constructive possession. Importance? Possession will affect the remedies available and whether you can sue someone. 1.2.1.4 Risk Meaning? The loss a party bears resulting from the damage or destruction of goods. Importance? Higher risk in international sale contracts. Need to determine who will suffer the loss. Where goods are at: A) Seller’s risk - if they suffer a mishap, the seller, being unable to tender delivery in accordance with the contract, cannot recover the price from the buyer and must repay any part of the price paid in advance. B) Buyer’s risk - must pay the price despite the fact that the goods have been lost or damaged before the buyer has taken possession, or after he has taken possession but before the property has passed to him. As risk is on the buyer, the destruction of the goods absolves the seller from his duty to deliver the goods or transfer the property in them to the buyer and if the goods are merely damaged, the seller is entitled to tender, and the buyer is obliged to accepted, delivery of them as if they were in conformity with the contract, while the buyer remains liable for payment of the price in full. When does risk pass?  Sale of Goods Act 1979, s. 20 – risk passes along with property. Not true in CIF contracts where risk passes along with shipment. Exceptions: 1. Displaced by contrary agreement between the parties, 2. Even where risk is prima facie on one party, it may be shifted ad the result of fault by the other, 3. Where seller is authorised to send the goods, s32(2,3), 33 provides special rules for risks of transit.  Sale of Goods Act 1979, s.33 - Risk passes before property. Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer must nevertheless (unless otherwise agreed) take any risk of deterioration in the goods necessarily incident to the course of transit.

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1.2.1.5 Delivery Meaning? Sale of Goods Act 1979, s. 61 – voluntary transfer of possession from one person to another. Delivery of what? Possession of goods to carrier s27. Rules about delivery? Sale of Goods Act 1979, s. 29.  (2)… the place of delivery is the seller’s place of business if he has one, and if not, his residence; except that, if the contract is for the sale of specific goods, which to the knowledge of the parties when the contract is made are in some other place, then that place is the place of delivery.  (3)Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.  (4)Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that he holds the goods on his behalf…  (5)Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour; and what is a reasonable hour is a question of fact.  (6)Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. Delivery to carrier? Sale of Goods Act 1979, s32 – delivery of goods to a carrier (whether named by buyer or not) for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer. 1.2.1.6 Price Dependant on type of contract.

1.2.1.7 Payment Sale of Goods Act 1979, s.27 - Duty of seller to deliver the goods, and of the buyer to accept and pay for them in accordance with the terms of the contract for sale. - Method? Is it by cash or some other payment? Payment must prima facie be in legal ender but - Timing? Don’t release property until payment. Sale of Goods Act 1979, s.28 - Delivery of the goods and payment of the price are concurrent conditions, … the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer must be ready and willing to pay the price in exchange for possession of the goods.

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1.2.1.8 Carriage Who has to arrange it? Seller or buyer? Depends on type of contract  Carrier – person/company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport; ship owner  Shipper/consignor – person or company who is usually the supplier or owner of commodities shipped; enters into a contract with carrier. - What type of carriage?  Bill of Lading – document issued by the carrier to the shipper, providing details of the goods being shipped. Functions – 1) receipt for goods being shipped on board vessel, 2) evidence of contract of carriage, 3) contract of carriage, document of title.  Charterparty – contract by which the owner of a ship lets it to others for use in transporting a cargo. The shipowner continues to control the navigation and management of the vessel, but its carrying capacity is engaged by the charterer. An agreement between a charterer and a vessel owner issued by the charterer of the vessel to the shipper for the goods being shipped on board the vessel. It is a receipt for goods shipped on board, and an evidence of contract of carriage. - Who can claim under it? The owner. - Bills of lading are issued by the Carrier, who are usually owners of the vessels themselves. - Charter Party BLs are issued by charterers who have chartered the vessel under a Charter Party for either a specific voyage (voyage charter), or for a certain period (time/demise charter - including bareboat charters). -

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1.2.1.9 Insurance Who has to arrange it? – Depends on type of contract

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What risks need to be covered? Where no express stipulations, the seller must obtain insurance on terms current in the trade. Q of fact determined by taking into account the kind of cargo, route of voyage, and practices accepted as usual in that particular trade. If it is usual to obtain ‘all risks’ cover in the trade, the seller would be in breach for not obtaining such cover and the buyer would be able to reject the documents when tendered by the seller. Who can claim under it? 1.2.1.10 Custom Hutton v Warren (1836) – Custom was by implication imported into the lease. Where a commercial contract is silent, extrinsic evidence of customary practice and usage is admissible and can be incorporated into the agreement.

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1.2.3 CISG - Vienna Convention on Contracts for the International Sale of Goods 1980 (CISG) – multilateral treaty that est. a uniform framework for international commerce. Applies to contracts whose places of business are in different states. - Does it apply in the UK? Why not? Ministers do not see the ratification of the Convention as a legislative priority as there is relatively little interest in ratifying the convention.

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1.2.4 Incoterms - What are they? International Commercial Terms (INCOTERMS 2020) are terms of trade for the sale of goods that define obligations of buyer/seller. Incoterms 2020 apply. - When do they apply?  Opt-in basis – only where parties agree to be governed by their provisions. - What do they provide? Rules ranging from providing goods in conformity with sale contract, obtaining licences, authorisations, contract of carriage, contract of insurance, delivery, passing of risk, checking, packaging and marking, division of costs, giving notice to buyer.  Obligations:  Delivery, Carriage, Insurance  Do not cover:  Price, Method of payment, Ownership, Remedies for breach  Arranges trade terms in four groups (by level of risk on Seller):  E terms – minimum risk to Seller  F terms  C terms  D terms – maximum risk to Seller Each group reflects the level of risk undertaken by the seller. The level of risk is at its minimum in an E term and its highest in a D term. An increase in the seller’s level of risk results in a corresponding decrease in the level of risk assumed by the buyer. (a) E terms This group consisted of one term – ex works (ExW). The level of risk is at its lowest, as far as the seller is concerned. His obligation to deliver under the contract is fulfilled as soon as he makes the goods available at his premises for collection by the buyer. (b) F terms This group consisted of three terms:  free carrier (FCA)  free alongside ship (FAS)  free on board (FOB).  FCA is recommended for use where rail, road, air or multimodal transport is envisaged.  FCA can also be used for sea or inland waterway transport where the ship’s rail is not the convenient point for passing of risk, as, for instance, in ro-ro (roll on, roll off) traffic,  i.e.where trucks or trailers are driven straight on and straight off a ship. 

FOB and FAS are to be used for inland waterway or sea transport.

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In an F term, the seller agrees to deliver the goods to the carrier (FCA), alongside the ship (FAS), or on board the vessel (FOB), and also undertakes to obtain the export licence or other official authorisation.

(c) C terms This group contained four terms: N - cost and freight (CFR) N - cost, insurance, freight (CIF) N - carriage paid to (CPT) N - carriage and insurance paid to (CIP). N N CFR and CIF are to be used for sea or inland waterway transport, whereas CPT and CIP are to be used where rail, road, air, or multimodal transport is envisaged. CPT and CIP can also be used for sea and inland waterway transport where the ship’s rail is not the point at which risk is to pass from the seller to the buyer (see above, ‘F terms’). N Under C terms, the seller is obliged to not only to hand over the goods to the carrier and obtain export licences but also has to obtain the contract of carriage (CFR and CPT) and insurance (CIF and CIP). N (d) D terms N This group consisted of: N - delivered at place (DAP) N - delivered at place unloaded (DPU) N - delivered duty paid (DDP). N NThe seller’s obligations are at their maximum in D terms. The Seller undertakes to make the goods available for collection at a named place. -

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Incoterms 2020  Terms for any Mode(s) of Transport:  EXW - Ex Works (named place of delivery)  FCA - Free Carrier (named place of delivery)  CPT - Carriage Paid To (named place of destination)  CIP - Carriage and Insurance Paid To (named place of destination)  DAP - Delivered at Place (named place of destination)  DPU - Delivered at Place Unloaded (named place of destination)  DDP - Delivered Duty Paid (named place of destination)  Terms for Sea and Inland Transport:  FAS - Free Alongside Ship (named port of shipment) – don’t have to pay cost of getting on board ship.  FOB - Free on Board (named port of shipment)  CFR - Cost and Freight (named port of destination)  CIF - Cost, Insurance and Freight (named port of destination) 1.2.5 Types of Contract - 1.2.5.1 Ex Works – Buyer collects from seller’s place of business or agent. Often used in sale of motor vehicles, ships, aircraft. Contract likely stipulates the seller is to pack the goods for export at the buyer’s expense Commercial Fibres (Ireland) Ltd v Zabaida [1975]. Not good for buyer. - Price - Cost of goods, production costs, materials and profit. - Risk – they need to cover - Payment – Seller wants payment in bank before they collect - Property – property passes when parties intend it, probably once paid. -

1.2.5.2 Delivered at Place/Place Unloaded – Seller ensures goods delivered at a named place. All burden on seller. - Price - Obtain at own expense export licence, customs formalities for exportation and transition thorough countries en route. - Risk – Obtain at own risk

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Payment – payment due at very latest before buyer gets goods. Property – property passes when parties intend.

NOften used for supplies to supermarkets and motor manufacturers, where buyer has economic advantage. Buyer holds least stock and remains more solvent. The just in time practice in manufacturing. Previously “Ex Ship.” -

1.2.5.3 FOB – Free On Board (min risk to seller) – contract for sale of goods where the seller agrees to deliver the goods over the ship’s rail, and the buyer agrees to convey it overseas. He undertakes to place the goods on board a ship that has been named to him by the buyer and that is berthed at the agreed port of shipment. All charges incurred up to and including the delivery of the goods on board ship have to be borne by the seller while the buyer has to pay all subsequent charges, such as the stowage of the goods in or on board ship,36 freight and marine insurance, as well as unloading charges, import duties, consular fees and other incidental charges due on arrival of the consignment in the port of destination.  Three Types in Pyrene v Scindia Navigation summarised in The El Amria and the El Minia:  Classic - seller puts the goods on board on a ship nominated by the buyer. Seller becomes a party to the contract of carriage until he takes out the bill of lading in the name of the buyer.  Strict – buyer enters into contract of carriage. Shipping arrangements are made by the buyer or his/her forwarding agent, who books space on the particular ship. The buyer nominates the ship and the seller does not play any role in the making of the contract of carriage. Here, the buyer himself enters into a contract of carriage by sea directly or through an agent, e.g. a forwarder. Naturally, the buyer has nominated the ship, and when it calls at the port of shipment, the seller puts the goods on board. The bill of lading goes directly to the buyer, usually through an agent of the buyer in the port of shipment, such as a freight forwarder, and does not pass through the seller’s hands.  Extended – Under this arrangement the shipping and insurance arrangements are made by the seller, but this is done for the account of the buyer. Seller nominates ship, shipping and insurances arrangements made by seller, seller enters into contract with carrier by sea, places the goods on board ship and transfers the bill of lading to the buyer. Seller makes the necessary arrangem...