PART I: RESEARCH ASSIGNMENT (CASE STUDY)
THIS RESEARCH ASSIGNMENT (CASE STUDY) QUESTION IS COMPULSORY.
Students are required to select four (4) judgments rendered by Australian and/or foreign courts dealing with letters of credits. These judgments should deal with the principle of autonomy and/or the principle of (strict) compliance. Students should describe the facts and analyse the reasoning of the courts. It is also necessary to provide some critical comments on the importance (or lack of it) of the courts' judgments. Marks will be allocated for accurately describing the facts and for imaginatively analysing the judgments. Most marks may be earned by providing a quality comment on the cases studied.
The answer should contain a minimum of 1600 words and a maximum of 2000 words (excluding footnotes and bibliography).
PART II: ANSWER ANY TWO (2) QUESTIONS
Question One -
A Seller in Perth, Australia grows and collects various roots and herbs. A major source of her income is the sale of ginseng. The Seller is contacted by a Buyer whose place of business is located in South Bend, Indiana, United States. Buyer wants to purchase a large quantity of ginseng from the Seller. Seller sends the American Buyer a pro-forma invoice indicating the price of ginseng and the conditions under which the Seller is willing to do business. The pro-forma invoice reveals that Seller offers to sell 1000 kilograms of ginseng at US$150 per kilogram CIF Incoterms 2010 New York. The Buyer, after having studied the pro-forma invoice, sent an order form to the Seller for the purchase of 1000 kilograms of ginseng.
The Seller's forwarding division prepares the shipment of ginseng. The ginseng is packaged and taken to Perth Harbour for loading on the HMS Howard bound for New York. At that time, Seller receives a "received-for-shipment bill of lading" from the Carrier. The Buyer has requested delivery of a "clean shipped bill of lading". Also, before the cargo was shipped or the "received-for-shipment bill of lading" issued, the ship's captain promised the Seller orally that the cargo would arrive in New York on or before August 28, 2017.
On the way to New York, the ship called in at a number of ports as the carrier found cargo for the ship; the ship did not arrive in New York until September 15, 2017. Due to recent amendments to the relevant American Customs law, an increased import duty had become payable on ginseng (and other roots listed in the law) and the market for ginseng had deteriorated substantially. Also, while in transit to the United States, the shipment of ginseng is rendered useless because a heavy storm soaked 50% of the ginseng cargo with salt water. Upon arrival in New York, the shipment is rejected by the Buyer stating: "The Seller has the risk of loss of or damage to the goods until the goods arrive in the United States". Hence, Buyer refuses to pay for the shipment. The Seller claims that the carrier is liable because the ship was not "seaworthy".
Answer the following questions:
1. What are the purposes of a "bill of lading"?
2. What obligations are imposed on the Seller under a CIF Incoterms 2017 contract? Who has the risk of loss?
3. What will be Seller do, if anything at all, with the "received-for-shipment bill of lading"?
In addition, give advice to the Buyer about the increased customs duties payable. Would the Buyer be able to recuperate any increased duties from the Carrier?
Question Two -
Rhonda Cartridge (SELLER) is a prominent law professor who teaches at the University of Sydney, Australia. After spending some 15 years at that law school, Rhonda (realising that she does not know any law), resigns and uses her savings to buy a mango farm in northern NSW.
Oliver Murray (BUYER) is an entrepreneurial law professor at the University of Chicago, United States. He dislikes the meager financial rewards offered by the University. Oliver decides to tune-out of faculty politics and to channel his considerable energies into 'constructive' entrepreneurial pursuits.
Oliver decides to supplement his law teaching income by selling Australian mangoes to his law students. To that effect, Oliver enters into a contract of sale with Rhonda to purchase ten standard shipping containers of 'Rhonda's Best Mangoes', which in 2016 won a major prize (best fruit prize) at the Brisbane EKKA Exhibition. The contract provided for the shipment of the mangoes from the port of Brisbane to New York followed by rail travel to Chicago.
The contract also provided for a documentary sale of goods with payment by irrevocable letter of credit. The letter of credit was issued by the Chicago First Bank (CFB) in favour of Rhonda as the beneficiary. The letter of credit, which was confirmed by the Australian Commonwealth Bank (ACB), provided for payment of Rhonda's sight draft upon the presentment of a clean negotiable bill of lading. The contract also called for the shipment of goods under an arrival contract. The mangoes were delivered by Rhonda to the shipping company, which issued a claused shipped bill of lading for the mangoes.
When the shipment of mangoes arrived in New York, it was quarantined and later destroyed by the customs authorities. The mangoes were destroyed because three days after they were shipped, it had been widely reported in the Australian and American press that "Rhonda's Best Mangoes" suffered from a fungal disease caused by colletorichum gloeosporioides, or Anthracnose disease. As payment had not yet been made by the confirming bank (Australian Commonwealth Bank), Oliver requested the Bank to stop payment. The confirming bank decides to accede to Oliver's request and does not honour the letter of credit
A week later, an investigative journalist discovered that in 2016 Rhonda received the prestigious prize at the EKKA exhibition after she paid AU$2000 to one of the judges.
Answer the following questions:
1. What is a 'claused' bill of lading?
2. What is an arrival contract?
3. From Oliver's point of view, which Incoterm 2010 should ideally have been incorporated into the contract? Discuss the carriage of goods obligations of the SELLER under this relevant Incoterm.
4. What is "sight payment"? In your answer, refer to the relevant Article in the UCP600.
5. What is the role of a confirming bank? Discuss relevant Articles of the UCP600.
6. Was the bank correct in denying payment on this letter of credit? Discuss the scope of the principle of autonomy. Refer to and discuss relevant case law.
7. Does Rhonda's payment of AU$2000 to a judge constitute bribery under Australian legislation and the OECD Anti-Bribery Convention?
Question Three -
A load of chicken feed was shipped from Sydney, Australia to New York, CIF Incoterms 2010 New York afloat. Before the cargo was shipped or the bill of lading issued, the ship's agent promised the shipper (seller) orally that the cargo would arrive in New York by June 30, 2017 at the latest. On shipment, the carrier issued a bill of lading, incorporating the Amended Hague Rules, to the shipper.
Scenario one: A few weeks before the vessel arrived in New York, the American government had prohibited the importation of chicken feet due to the outbreak of a disease affecting the bones of chicken feet. Hence, upon arrival in New York, the chicken feet were confiscated and destroyed by the American customs authorities. Consequently, the American buyer refused to pay for the chicken feet. The Buyer (who is also the holder of the bill of lading) insisted that he has the right to inspect the goods before paying the purchase price of the chicken feet.
Advise the Buyer. In particular, explain the obligations that, under these circumstances, are imposed upon the Buyer under a CIF Incoterms 2010 contract.
Scenario two: En route to New York the vessel called in at a number of ports as the carrier found cargo for the vessel; the vessel did not arrive in New York until August 15, 2017.
Due to a recent amendment to the relevant American customs law, an increased import duty had become payable on chicken feet from July 1, 2017 and the market for chicken feet had deteriorated substantially.
Analyse this scenario and advise the Shipper, the Buyer and the Carrier.
Question Four -
Mr Alistair Romney (BUYER), an American businessperson whose place of business is in South Bend, Indiana enters into negotiations with Mr Florimont Maryan (SELLER), an Australian citizen and businessperson whose place of business is in Sydney.
Alistair (BUYER) writes to Florimont (SELLER) to seek a quote for a printing machine, model XBR45. This machine is well-known in the trade as being able to print 200 copies per minute on standard-sized paper. There are several manufacturers producing a similar machine under different trade marks.
Florimont quoted US$55,000 for the machine. At the bottom of the quote was a line indicating that the technical data for the machine are to be found on Florimont's website.
Alistair subsequently ordered 6 machines and attached his terms and conditions. This order was sent by email. One clause of these conditions indicated that all disputes arising out of, or in connection with, the contract are to be arbitrated by the American Arbitration Association (AAA).
Florimont replies by return email that he is not familiar with arbitration, but prefers negotiation to resolve disputes. He adds: "If arbitration were to be the dispute resolution method, I would prefer to use the Arbitration Rules of the Australian Centre for International Commercial Arbitration (ACICA)." However, he also indicates that, in any event, there will not be any disputes between him and Alistair. Florimont, when accepting the order, also requested the opening of a letter of credit (UCP600) by Alistair by July 10, 2014.
Alistair, in his reply, indicates that his bank, the Notre Dame Bank (NDB) had advised him that the letter of credit will be issued on July 12, 2014. Alistair also indicated in his reply that the INCOTERMS 2010 are to apply to the deal, in particular the DDP South Bend term.
Florimont agreed, but noted that South Bend (as the named place of destination) was not easy for him, and that he would send the goods to Chicago instead. As the goods were on stock he sent them immediately to Chicago, United States.
Florimont notified Alistair of the dispatch of the machines and inquired about the opening of the letter of credit. However, Alistair replied by email that there was no contract as he never agreed to Chicago as the named place of destination. Furthermore, he discovered by reading the technical data on the website that the machines produced by Florimont can only print 160 copies per minute.
Answer the following questions:
1. Has a contract for the international sale of goods been formed? If a contract for the international sale of goods has been formed, what substantive law will be applicable to the contract?
2. Under what circumstances can an international commercial contract be formed by an exchange of emails? What law would you apply in order to answer this question?
3. Is the disagreement about the appropriate method of dispute resolution a relevant issue?
4. Discuss the principle of competence-competence in arbitration law. How is this principle linked to the principle of the separability of the arbitration agreement?
5. If a valid contract for the international sale of goods has been formed, under what circumstances would Alistair (BUYER) be able to avoid the contract? [2½ marks]
6. What are the consequences of avoidance of contract under the CISG?
7. What obligations are imposed on Florimont (SELLER) under the DDP South Bend term (Incoterms 2010) with regard to the transportation of the goods? Who has the risk of loss? What needs to be done to ensure the applicability of the UCP600 to this international commercial contract?
Each answer should contain a minimum of 1500 words and a maximum of 2000 words (excluding footnotes and bibliography)
There are a variety of assessment objectives. Underpinning all of these is the measure of a student's ability to interact critically with both the unit material and related information - this means that analysis will score significantly higher than simple collation of information.
The examination will be designed to test knowledge and recall of relevant rules, principles, cases and legislation and the ability to apply them to given sets of facts.
Marks will be allocated for the identification and treatment of each issue relevant to the solution of the problem. With respect to each issue, the highest mark will be awarded to students who:
- Identify the issue and its connections to other issues;
- Identify, and relate to the issues, the relevant facts and/or factual assumptions;
- Identify the rules and/or principles relevant to answering the question;
- Accurately apply rules/principles to the factual situations; and
Demonstrate the ability to organise the treatment of the several issues and conclusions clearly and coherently.
Required BOOKS -
Gabriël Moens & Peter Gillies, International Trade and Business: Law, Policy and Ethics (2nd ed.), London, Routledge-Cavendish, 2006
Note: students should read and study Chapter 1 (International Commercial Contracts), Chapter 3 (An Assessment of Incoterms 2000) and Chapter 6 (Financing of Exports: Letters of Credit). These chapters will be made available to students.
Or
Robin Burnett & Vivienne Bath, Law of International Business in Australasia, Sydney, The Federation Press, 2009
Or
Bryan Mercurio, Leon Trakman, Meredith Kolsky Lewis and Bruno Zeller, International Business Law, Oxford University Press, 2010
The Text "International Business Law" provides thorough coverage of the major legal issues affecting Australian businesses involved in international trade, enabling students to understand both the law itself and its applications. The authors have combined a range of case extracts and other materials with incisive commentary to create a student-friendly textbook that is Australia-specific, but with international applications.