International Trade Law PDF

Preview

Summary

This work contains notes from lectures. The majority of the document is supplemented with notes from textbooks. At times there is a reference to a book or article, but there may also be sections that remain unreferenced, . Where this is the case, I do not claim that work to be solely mine. The mai...

Description

International Trade Law notes 2019. 1. What are the characteristics of Commercial Law? H.W.Disney describes commercial law as being the law of England most concerned with commerce, trade and business. This is taken further by H.C.Gutteridge who indicates that it governs the special rules applying to contacts of the sale of goods. One of the leading academics in this field, Goode, comments that commercial law is the branch of law concerned with the rights and duties arising from the supply of goods and services in the way of trade. Due to the nature of commercial law it must be designed in a way that is pragmatic and responsive in order to facilitate the trade practices of the business community. As such, Goode identifies four characteristics of commercial law as being: (a) a law based on transactions, not institutions; (b) concerned primarily with dealings between merchants, not consumers; (c) centred on contract and market usage; and (d) dealing with large masses of transactions that often lead to an idea of standardised practice. A key point to note is that commercial law has two approaches in terms of identification – this can lead to a major change in the principles governing the rights of a party – which are the following: (a) a status approach; and (b) a transactional approach. A major case in understanding the function of commercial law is that of Kim v Wah Tat Bank Ltd 1971 which provided that the function of commercial law is being able to allow, so far as possible, commercials men to do business in a way they want to do it and not require them to stick to forms they may think to be outmoded. This is coupled with a statement from Professor Schmitthoff, 1966, providing the “basis of commercial law is the contractual principle of autonomy of parties’ will. Subject to the ultimate reservation of public policy, the parties are free to arrange their affairs as they like” – this implies reference to freedom and sanctity of contract. In reference to point b of Goode’s four characteristics of commercial law it should be noted that Cavendish Square holdings BV v El Makdessi, 2015, considers the laws respect for party autonomy is stronger between parties of equal bargaining powers than it is for consumer transactions – consumer transactions are often balanced by the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015. 2. 3. 4. 5.

What makes a domestic sales contract international? How would you describe the nature of international trade regulation? Why is the use of standard contract terms prevalent in international trade? What do businesses want and expect from the law regulating international trade?

Lecture 2 Property and Risk Goode – The Sale of Good’s Act 1979 provides that the passing of property depends on intention; risk of loss or damage goes with the passing of property. Crowley Vaines defines property as consisting of both tangibles (chattels) or intangibles. It relates to the land or chattel itself, or the rights in respect to that thing. As such, property is a set of legal relations existing between persons in respect of things. Jeremy Bentham considers that “in common speech in the phrase the object of mans property”. Thus constituting a dynamic relationship of rights instead of a ‘thing’. Goode – “It has long be established that, as a matter of contractual obligation, the seller’s transfer of an indefeasible title is fundamental to the agreement.” Until property has passed to the buyer, or physical delivery has been made, his rights rest solely in contract and he has not yet acquired an interest of any kind in the goods (Re Wait and see also Goldcorp). Unless otherwise agreed, the risk of loss or damage to the goods is transferred with the property in them as found under Section 20(1) SGA 1979 (under subsection (4) risk does not pass until delivery in a consumer context). The

Need

to

identify

Goode proposes there are 5 reasons why it may be material to identify the subject matter of a contract: 1. The buyer will want to know what he is purchasing (see also Section 16 SGA 1979) 2. Just as ownership depends on identification, so does possession 3. Identification is relevant to the availability of specific performance (see also Section 52(1) SGA 1979) 4. Buyer cannot maintain an action for conversion without reference to the goods contained in the contract 5. If a party wants to claim frustration of contract through destruction of subject matter, he must be able to prove the goods destroyed were the contract goods. There are three types of good to consider as listed under Section 5(1) SGA 1979: 1. Specific a. Section 61(1) SGA 1979 provides that specific goods are goods identified and agreed on at the time a contract of sale is made. The courts will look at how substitutable the goods are as seen in Aercap Partners v Avia Asset [2010] where it was held that as the contract clearly envisages the possibility of the goods being replaced by an engine of the same type, model, thrust rating and same or better ages, the goods could not be said to be specific goods. Benjamin’s Sale of Goods proposes that the sale of the entire future crop of a piece of land could be classed as a specific good. Re Wait [1927] provided that a contract for a specified quantity of goods from a particular mass was not a contract for specific goods. 2. Unascertained

a. Under Clarke and Holley, these fall into three categories; (a) generic goods sold by description; (b) goods not yet in existence; or (c) a part to be ascertained or identified from a specific mass or bulk 3. Ascertained a. Re Wait [1927] Lord Justice Atkin believed that ascertained goods “probably means identified in accordance with the agreement after the time a contract of sale is made.” Another noteworthy case is Re Goldcorp Exchange Ltd [1995] where a gold dealer agreed to steel various customers allocated quantities of bullion which, pending physical delivery upon notice, would be stored in a vault with each customer having a certificate of ownership. It was seen that estoppel could not conjure into existence goods that were not there. The process of identification At the moment the contract is made, the parties must agree upon the characteristics by which the goods supplied are to be identified. This means at least some verbal description in writing or by word of mouth. It is important to note that not all descriptive statement will form part of the contract description. An example is a statement of opinion, such as found in Chalmers v Harding (1868) whereby it was held that the statement by the seller that he is selling a “very good second hand reaper” should not be made binding because it was clear that it was not so intended. Appropriation to the contract Requiring appropriation is simply the corollary of the rule in Section 16 SGA 1979 stating that property cannot pass in goods so long as they remain unascertained. There are two types of appropriation according to Goode; conditional; or, unconditional, with the latter being irrevocable. This was illustrated in Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] whereby cycles were set aside and labelled with the customers name in the sellers works. Here we saw an appropriation of goods, however, property didn’t pass to the buyer because the appropriation was not irrevocable. It is seen in Grain Union v Larsen (1933) that upon issuing a notice of appropriation under a CIF contract, the seller is thereafter bound to deliver the specific goods nominated and the seller will be able to reject and other goods. How the property interest arises The effect of the SGA 1979, as interpreted by the courts, is that contracts for the sale of goods are governed by rules fundamentally different from those regulating other types of dealings in personal property. As per Goode, the following points merit particular attention: 1. The principle of equity by which the agreement of the owner of an asset to transfer for property to another is not merely contractural but immediately vests an equitable interest in the intended transferee has no place in the sale of goods as there are no real rights to the goods until property has passed. 2. Property passes at law when it is intended to pass, by virtue of the contract itself. 3. The buyer of unidentified goods forming part of a bulk does not acquire equitable coownership of the bulk (Re Wait). Since the Sale of Goods (Amendment) Act 1995 there are special rules conferring on the prepaying buyer of goods to be supplied from an identified bulk a co-ownership interest in the bulk pending delivery of his contract entitlement under Sections 20A and 20B Sale of Goods Act 1979 (as amended).

The idea of risk Sealey proposes that risk is that the goods may be partly or wholly destroyed or damaged. It is clear that we are concerned with only the events that are not attributable to the act or fault of either party, or which are not dealt with by express terms of the contract such as a force majeure clause. Kwei Tek Chao v British Traders and Shippers Ltd [1954] shows Lord Justice Devlin’s view that “what the buyer obtains, when the title under the documents is given to him, is the property in the goods, subject to the condition that they revert if upon examination he finds them to be not in accordance to the contract.” The general statement of law is found in Section 20 Sale of Goods Act 1979: 1. Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not. 2. But where delivery has been delayed through fault of either the buyer or seller the goods are at the risk of the party at fault with regards and loses which might not has occurred but for such fault. Under an FOB contract, risk passes on shipment, however this is only a coincidence that this is also when property generally passes. Where the passing of property has been postponed as a result of the seller reserving his right of disposal (for example, by issuing a bill of lading in the sellers name), risk will pass on shipment. In Stock v Inglis (1885) sugar was sold as part of a bulk FOB Hamburg and had yet to be ascertained. This meant that property in the goods did not pass to the buyer when goods were shipped. The sugar was subsequently lost. The buyers claimed under the insurance policy, however, the insurers defended the claim on the ground that the buyers had not suffered any loss because they were not the owners of the goods. The court rejected this argument and stated that although property had not passed, the risk in the goods had. The passing of risk in a CIF contract is not governed by Section 20. The passing of risk takes place upon shipment, however, the passing of property happens at a later stage – once the documents are transferred for the cost. This is best explained by Kennedy LJ in Biddel Bros v E Clemens Horst Co [1911] in that “ the goods are at the risk of the purchaser [at time of shipment], against which he has protected himself by the stipulation in his CIF contract that the vendor shall, at his own cost, provide him with a proper policy of marine insurance intended to protect the buyer’s interest, and available for his use if the goods should be lost in transit.” Section 32(2) SGA 1979 appears to impose an obligation of the seller to give notification of any change of risk so as to enable the buyer to insure the goods during sea transit – it states further that if the seller fails to notify the buyer there the goods will be at his risk during sea transit. This, however, does not appear to to have much relevance to CIF contract as shown by the approach of Hamilton LJ in Wimble v Rosenberg [1913] as there is always an express arrangement as to the insurance of the goods. Clauses often used in international sale agreements may lay down their own arrangement for the allocation of risk. Common clauses include landed/out-turn quantity clauses: 1.

An out-turn quantity clause stipulates that where there is a difference between the weight or quantity of goods at the time of shipment and the tie of arrival, the difference would not be paid by the buyer. a. The buyer nonetheless continues to bear the risk of total loss or deterioration of the goods as the clause does not relate to quality.

2. A landed quality clause provides that the buyer will pay a lower price if there is a difference in the quality of the goods between the time of shipment and time of arrival. a. The buyer here would not be covered if there was a total loss of the goods or where part of the goods have disappeared. A CIF out-turn contract is not necessarily a contradiction in terms. According to Phillips J in CEP Interagra SA v Select Energy Trading (1990) a CIF out-turn may not be contradictory although the passing of risk may be varied. This is especially so in the bulk goods and oil trade. A commercial justification may be that the goods often reach their destination before the seller can tender the bill of loading. The ship may then give delivery to the buyer in exchange for an indemnity and the buyer may pay the seller against a letter of indemnity – payment may therefore precede delivery. The outturn clause would permit such variations to the classic CIF transaction. In light of Law & Bonar it is uncertain if such a liberal reading of a CIF contract can be justified as it held that a clause stating risk remained with the seller until actual delivery was repugnant to a CIF contract. Sellers Duties There are three types of terms which will result in differing forms of obligations on behalf of the seller. These are: 1. Conditions a. Defined by Lord Diplock in Photo Production Ltd v Securicor Transport Ltd [1980] as being ‘a promise in respect of which the parties have agreed by express words or by implication that any failure of performance by one party, irrespective of gravity of the event that has resulted in the breach, shall entitle the other party to treat the contract as discharged.’ 2. Warranties a. Defined in Section 61(1) SGA 1979 as “an agreement with reference to goods which are the subject of the contract of sale, but collateral to the main purpose of such contract, the breach of which gives rise to a claim for damages, but not the right to reject the goods or treat the contract as repudiated.” In consideration of conditions and warranties, Section 11(3) SGA 1979 becomes relevant providing that “whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a right to treat the contract as repudiated, or a warranty, the breach of which may give rise to a claim in damages but not a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the contract; and a stipulation may be a condition, though called a warranty in the contract.”

3. Innominate terms a. As exemplified by Cehave NV v Bremer Handelsgesellshaft mbH, The Hansa Nord [1976] where it was held that the term ‘shipment to be made in good condition’ was not a condition, therefore, the buyer was unable to reject the goods and buy them for a fraction of their price after a distress sale. Outside of the three types of term above, commercial sales of goods are governed by Sections 13-15 SGA 1979 which imply various terms. It is important to note that these terms can be excluded or varied under Section 55(1) SGA 1979, however, this is restricted by the Unfair Contract Terms Act 2015. Section 12 SGA 1979

Under Section 12(1) SGA 1979 there is an implied condition that the seller has the right to sell the goods and will therefore have such property in the goods to pass good title to the buyer. The importance of this condition can be extracted from Niblett v Confectioner’s Materials Co Ltd [1921] where the seller was held to have no right to sell because his right could lawfully be restrained by a third party who held the trademark to the goods – this represented a breach of Section 12(1). It has also been illustrated that the buyer doesn’t necessarily require ownership of the goods at any time, just that he has the power to vest the rights of ownership on the buyer at the agreed time of the contract – this was seen in Karlshamns Oliefabriker v Eastport Navigation Corp (The Elafi) [1986]. The consequences of such breach on Section 12(1) can be seen in Rowland v Duvall [1923] where the claimant had purchases a car for £334. He later resold it to A for £400, who then went on to use the car for four months. It soon became know that the defendant had bought the car from someone without good title when the original owner sought return of the car. The claimant refunded A the full purchase price (£400) and requested the return of £334 from the defendant. It was held that there had been a total failure of consideration resulting from the breach of Section 12(1) which meant that the defendant was unable to set off any depreciation in value against the claim. Section 12(2) implies a warranty that the goods are sold free from any charge or encumbrance not disclosed to the buyer before the contract is made, and that the buyer is to enjoy quiet possession of the goods. Where there has been a breach of subsection 1 it often goes without saying that subsection 2 has also been breached. This can be illustrated by Microbeads AC v Vinhurst Roadmarkings [1975] where the seller sold road marking machines pursuant to a contract entered before May 1970. Unbeknownst to them, another company, involved in the making of the machines, had patented their design, taking effect November 1970. In 1972 the company brought a patent action against the buyer. The court held that the seller was not in breach of the implied warranty as to title because at the time of the contract, they had every right to sell. Despite this, it was also held that the sellers were in breach of the warranty as to quiet possession because there was implied an undertaking as to the future. Section 13 SGA 1979 Section 13(1) provides that there is an implied condition that the goods shall correspond with the description. It is important to note that this is distinguished from sales of specific goods where they have been inspected by the buyer under the principle of caveat emptor. Despite this, it was held in Grant v Australian Knitting Mills Ltd [1936] that specific goods can be sold by description under certain circumstances. These were stipulated by Lord Wright who provided that there can be a sale by description even where the buyer is purchasing something displayed before him on the counter. A thing is sold by description, even though it is specific, so long as it is sold not merely as the specific thing, but as a thing corresponding to a description. It was considered in Reardon Smith v Hansen Tangen that a particular item in a description would only be treated as a condition if it constitutes a substantial ingredient of the “identity” of the thing sold. Here A Japanese tanker was chartered in order to finance building before work started. The charterparty referred to the vessel as one to be built at Osaka, hull number 354. Because of its size it was eventually built at Oshima, hull number 004. Its physical attributes conformed with those required under the charter. Then due to the oil crisis the market collapsed. The charterers rejected the vessel on the ground that, by analogy with contracts for the sale of goods, the vessel did not comply with its contractual description. Held, some of the cases on description in sale of goods were excessively technical; they should not be extended and were due for fresh examination. The hull and yard number had no special significance and could not be treated as a condition. In any event, the words were never part of the description, they were there merely to identify the vessel, which was the one contracted for. The need for certainty in international transactions is often taken into account and can be seen in Argos v Ronaasen [1933] where the contract was for the sale of barrel staves at a thickness of half

and inch. The House of Lords allowed the buyer to reject the goods on the ground that a large proportion were slightly thicker...