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#10198 - Consolidation Rights Remedies Rot - International Commercial Law

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Task 1:

The first thing we did was to determine whether there had been a breach of the contract and therefore whether the S had not been paid and could bring actions against the B:

The Seller has not been paid. Applying formula above:

Step 1 Relevant Terms in the Contract

Clause 5.2 of the contract states that payment is within 30 days

Step 2 Are the terms incorporated?

Incorporation happened when the contract was signed and therefore the term has been properly incorporated in the contract.

Step 3 Breach of Contract

Clause 5.2 was breached as payment did not occur within 30 days of delivery and invoice in accordance with said clause.

Step 4 Relevant remedy of the Seller or buyer

  • The Sellers main remedy is an Action for the price under clause 5.2 of the contract; and

  • Under s.49 of the SGA (the most important remedy for the seller) the seller can bring an action for the price.

  • It may not be worth pursuing the buyer as he is insolvent
Step 5 Is there a ROT CLAUSE? If none then s.18 will apply (see default provisions p.58 & p.59)Yes, clause 6 in the contract is ROT clause. The effect of a ROT clause is that, in the last resort, the S can recover its own goods and prevent a liquidator/administrator or trustee in b’ruptcy disposing of the goods.

Then, we applied the ROT clause to all the questions about the products that the B still had in its possession. We applied the ROT clause because the seller is not in possession of the goods. It makes sense, if the S was in possession of the goods then it would not need the ROT clause and could use any of the remedies to the unpaid seller (p.52):

  1. an action for the price,

  2. seller’s lien,

  3. a right of resale, or

  4. even stopping the goods in transit

Thus, we only need to use the ROT clause when the Seller is NOT in possession of the goods. In such case, Step 5 is there a ROT CLAUSE? kicks in and you will need to answer the questions by analysing the ROT clause and applying it to the facts in order to determine whether the S can recover its goods (i.e. apply the elements of step 5). That is the whole purpose of that clause. You will need to go to chapter 6 and determine which elements of the clause will be available for the S to recover its goods.

The answers are handwritten and attached to the folder. Review them just to see how we answered these questions.

Task 2

The answer to Task 2 is on page 68, international considerations. The ROT Note has specific international considerations for specific countries

REMEDIES of UNPAID SELLER + RoT

Always do both: the Seller’s Claim and, if any, the Buyer’s Defence

Step 1 Relevant Terms in the Contract

  • Express:

  • Implied:

Implied UK:

- by s.27 SGA B has a duty to pay the price, B can’t claim ownership of goods until B has paid the price in full.

- By s.28 SGA = time for payment is when the goods are delivered + B is to pay in cash

- By s.10(1) = time is not of the essence (Seller wants time to be of the essence for payment)

Implied Internationally:

- B has obligation to pay the price under: Art. 54 Vienna Convention + Art. 2-301 UCC + Art. 5.1.2 UNIDROIT.

- B must pay price when goods are made available to him Art. 58 Vienna Con + Art 2-310 UCC + Art 6.1.4 UNIDROIT

- Directive 2011/7/EU sets an absolute cap on late payment permitted in commercial contracts at 60 days. Interests are calculated at 7 % points above European Central Bank Rate.

Step 2 ¿Are the terms incorporated? Either by:

  • Signature

  • Notice

  • Previous Course of dealings

Step 3 Breach of Contract

Say which relevant terms of the contract (condition or warranty) have been breached and remedy:

  • Breach of Condition: Repudiate Cont + Recover Price + Damages (Hadley v Baxendale)

  • Breach of Warranty : Damages but NO right to repudiate Contract

  • ¿What does the Client actually want?

Breach - Damages may be awarded + interests under: Law Reform Act + Late Payment of Commercial Debts Act + Late Payment of Commercial Debts Regulations. (S wants own i rate to avoid having to rely on these)(incentivise B to pay quickly by giving an early payment discount)

  • If breach of an express term, say that it goes to the heart of the contract, so will be a condition. Therefore, can (e.g. reject the goods) terminate the contract and seek damages.

Step 4 Relevant remedy of the Seller:

  1. Say what the primary remedy is,

  2. Say whether it is worth pursuing (the buyer may be insolvent)

  3. What arguments/defence might the B raise (e.g. breach by seller of the terms of the Contract for late delivery when time was of the essence)

  • Contractual damages (Hadley v Baxendale)

  • If S retains possession/control of the goods:

    • Lien (right to retain possession; title must have passed to B: s41) or right to withhold delivery (where S retains title AND possession: s39(2))

    • Stoppage in transit (only if B = insolvent; goods in possession of S or carrier (not B’s agent): ss44-46

    • Re-sale (S must give B notice unless goods are perishable: s48)

    • Action for the price (if title has passed to B OR if price payable on a day certain irrespective of delivery: s49)(Useless if B is Insolvent)

  • If B has possession of goods:

    • RoT clause…

Step 5 ¿Is there a RoT Clause? If none then s.18 applies (see default provisions p.58 & p.59)

If there is one, then use it. The effect of a RoT Clause is that, in the last resort, the S can recover its own goods and prevent a liquidator/administrator or trustee in b’ruptcy disposing of the goods.

  1. ¿Who owns the item and why? P.62

  1. ¿Reserving title clause?

  2. ¿Right of entry, seizure and sale?

  3. ¿All moneys clause? (Armour v Thysen E = RoT are legally effective)

  4. ¿Sales to sub-buyer? (Acknowledges s.25 SGA (3rd P innocent gets good title)). e.g. if goods sold to 3rd P, can S take an assignment of the debt or trace the payment into the B’s bank account

  5. ¿Separate Storage? (if bulk storage Glencore v MTI = goods must be of same type and specification)

  6. ¿Detachable goods? (Hendy Lenox v Graham = if goods are OK after detached)

  7. ¿Mixed Goods? (Goods belong to B = Clough Mill Ltd v Martin)

  8. ¿Manufactured goods? (Re Peachdart and Chaigley Farms) Gods belong to B

  1. Are the seller’s rights under the RoT clause enforceable? Does the RoT cover the Breach?

  2. Is RoT Clause UCTA Compliant see P.82 table + Exclusion Clauses...
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