Law Notes Commercial Law Notes
A collection of the best Commercial Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". Although this set of notes did not earn its author a 1st in exams, the notes are at a high standard and it seems the author just got unlucky.
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TYPES OF INTERNATIONAL CONTRACTS
Ex words contract
Buyer takes delivery at the store
Property and risk
Pass according to the rules in the SGA
FOB Contract
How does it work?
Seller’s duty is to place the goods free on board a ship named by the buyer,
After loading, S is given a mate’s receipt which he received and the price is payable by B in return for the mate’s receipt.
Port names is the port where the goods are to be loaded
Contract of carriage is made between the seller and shipowners
Seller’s duty
Ensure that goods conforming to the contract are put on board the ship nominated by the buyer
S.14(2) goods must be of a satisfactory quality
S.14(2B)e Durability – in a FOB contract you don’t know where the goods are going so you can’t use the actual length of the journey to assess durability so you look at a reasonable time KG Bominflot v Petroplus (2009)
Buyer’s duty
Procure space on the vessel and nominate it. If not nominated in time, seller can treat the contract as repudiated Bunge v Tradax (1975)
Passing of property
Property passes on shipment unless the seller has reserved a right of disposal
If unascertained
Loading of the goods may be an unconditional appropriation, under s.18 Rule 5
Or s.20A may apply if the buyer has paid
But usually there will be a reservation of aright of disposal – the seller will name himself as consignee on the bill of lading
So s.19(1) or s.19(2) applies and the seller is taking to be a reservation of right of disposal and so property does not pass.
Passing of risk
Risk passes on shipment – as soon as the goods cross the ships rails even if the goods are not specific, per Sterns v Vickers (1923) e.g. 1000 tonnes of which 500 tonnes are for this buyer
Literally when the goods cross the ship’s rail Pyrene v Scindia (1954)
When they are safely loaded on board, per INCOTERMS and American UCC
Contract of carriage problems
If B is party to the contract of carriage ab initio
there may be no privity of contract between S and shipowners, and this may cause difficulties when the goods are damaged in the course of lading by shipowners
Pyrene v Scindia (1954) Devlin J said that this could be solved in two ways
S had participated in the contract of carriage sufficiently for them to be bound by the Hague Rules. S takes those benefits of the contract which appertain to his interest therein
There was a collateral contract between S and shipowners
By delivering the goods alongside, S impliedly invited shipowner to load them, and S by lifting the goods implied his acceptance. This implied contract incorporated the shipowner’s usual terms
Devlin J preferred the participation situation. The collateral contract would stretch creditability if there is nothing that carrier did to seller, and it is artificial doubtful that S intended there to be a separate contract
If S is party to the contract of carriage ab initio
S has to sue, and any surplus is held on trust for B, The Winkfield (1902)
CIF Contract
How does it work?
The port is the anticipated port of destination and the price the seller pays includes cost of goods + insurance + freight
Seller’s duties
Duty to ship goods conforming to the contract of sale
Stipulations as to the time and place of shipment are conditions Bunge v Tradax (1981)
Duty to tender shipping documents conforming to the contract
Bill of lading
Document must be clean The Galatia (1980) recorded damage but that was AFTER shipment events and so did not prevent the bill being clean
Seller’s invoice
Insurance policy convering goods
Passing of property
Property is transferred when payment occurred, as an application of s.19(2) because S will have named himself as the consignee on the bill of lading
But when the bill of lading is in B’s name the prima facie rule is that delivery to carrier is deemed to be an unconditional appropriation – but this is rebutted by the very nature of the CIF contracts, and property passes with documents (which is the same as aon payment)
But always subject to the intention of the parties The Albazero (1977) related companies and so the documents were not used for security, and property passed as soon as the BL was presented to the buyer.
Passing of risk
Happens at the moment of shipment (if seller was original shipper) or appropriation (if B1 selling to B2)
Therefore S must be paid if he delivers documents even if he knows the goods have been already lost, because risk is with B
Manbre Saccarine (1919)
Overview – in a standard seller is shipping situation
Contract shipment/appropriation (risk passes) documents/payment (property passes)
But what if you are selling goods afloat
Presumably appropriation happens with the payment of documents? So risk and property pass together
If goods destroyed before the contract
Specific goods
S.6 SGA 1979 applies – if it is specific goods and the goods have perished at the time that the contract was made. It is void
If unascertained – seller just has to get more goods
If goods are destroyed after the contract is made but before they are shipped
Goode Buyer does not have to pay, because risk cannot pass before the goods have been appropriated to the contract
If goods are destroyed before they are appropriated when shipped, these are not the contrat goods anyway and so S should fetch some more
Buyer has to pay
In a string sale, the most important things are the documents. The buyer can still sue on the documents because this is the allocation of rights
It is hard to distinguish between goods being completely lost and detrioriated. If you can appropriate damaged goods what is the difference with lost goods
BUT this gives the seller a choice – he can sue himself or pass the documents to S to sue.
If goods are destroyed after shipment but before documents
Mambre Saccharine (1919) the buyer has to pay because the risk has already passed to him at shipment
Buy the full version of these notes or essay plans and more in our Commercial Law Notes.
A collection of the best Commercial Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". Although this set of notes did not earn its author a 1st in exams, the notes are at a high standard and it seems the author just got unlucky.
As an added...
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