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#15490 - International Sale Of Goods - International Commercial Law

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Intro

  • International sale contract has all the familiar elements of normal sale contract, however, international aspect may mean:

  1. Difference in governing law & jurisdiction

  2. Increased distance (more risk of damage, higher cost of transport)

  3. Payment problems (because of increased distance).

  • S likes payment in advance to help cash flow;

  • B will want a credit period delaying payment.

  • Issue of trust (S won’t want to part with goods until it has been paid etc)

  • Domestic solution retention of title

  • International sales ownership of goods governed by law of country where situated

  • UCTA 1977: s26 Act doesn’t apply to international contracts (S can exclude liability)
Terminology

  • Shipper: person who arranges for goods to be sent by ship (usually S / S agent)

  • Shipment: act of putting the goods on the ship. Note that you ‘ship’ a ‘consignment’.

  • Carrier: company on whose ship the goods are transported

  • Consignor: person delivering goods to their destination (usually S / S agent)

  • Consignee: person collecting goods at their destination (usually B / B agent)

  • Freight: cost of carriage (not goods)
Jurisdiction & choice of law

  • Choice of law (what is the law that will apply to the contract) (Subject to Rome I)

  • Choice of jurisdiction (courts that will hear dispute) (Subject to Brussels I)

  • Not uncommon for courts to have to apply foreign law in such a situation, expert evidence will be obtained on foreign law from foreign lawyers.

  1. Choice of jurisdiction: (Brussels I)

Apply when EU Member States fail to make express choice of jurisdiction

  • Advantages & disadvantages of suing party in their own jurisdiction (may be easier to enforce judgement there);

  • Brussels Regulations: generally allows parties to choose jurisdiction.

  1. Choice of law: (Rome I)

Apply when EU Member States fail to make express choice of law

  • Rome 1 regulation: allow parties to choose their own law.

  • Best to choose same jurisdiction & law as avoids situation where court has to apply foreign law

  • Done by including a clause in contract (clarifying what law & jurisdiction will govern contract)

Key Documents

Documents required for transaction
Shipping Document Bill of Lading

  • Serves 3 purposes:

  1. Receipt for the goods and evidence of good condition at loading

  2. Contains terms of the contract of carriage

  3. Evidence of title to the goods and the right to possess them

  • Holder has title to the goods; enables B to sell goods to TP while still in transit; however, problematic if falls into wrong hands

  • Given by carrier to consignor, when goods shipped; at destination, goods handed over to person w/ bill of lading (sent by airmail)

  • If late, carrier may hand over goods in return for indemnity

  • Must be original BoL; fax or email will not do
Waybill

  • If BoL too slow, can use sea waybills and freight forwarders (can be sent electronically; more convenient but not as secure)

  • Specifies deliveree; original does not have to be physically sent to B

  • Serves 2 purposes:

  1. Receipt for the goods and evidence of good condition at loading

  2. Contains terms of the contract of carriage

  • However, does not give title so B cannot sell goods before received

  • Electronic BOLERO system in development

  • Road and rail transport: use combined transport document (whole transport chain); air transport: air waybill
Commercial Invoice

  • Identifies all contract goods, including quantity and price

  • Also constitutes demand for payment
Export Licence

  • If the goods are being transported outside the EU, an export licence will also be required (usually at S expense, but check terms)
Marine or air insurance policy

  • Should be worded to cover good specified in commercial invoice

  • Should be a transferable policy that can be transferred with BoL

  • Not relevant in every transaction; will depend on whether B or S responsible under terms
Additional documentation

  • Consider terms of transaction; may require, e.g.

  • Inspection certificate

  • Packing list, etc.
Effect of transfer of documents

  • Under Carriage of Goods by Sea Act 1992: anyone who holds BoL is entitled to sue carrier on contract of carriage; holder also has rights in tort (e.g. for negligent damage)

  • B in possession of shipping docs can enforce her:

a) contractual rights against person who sold goods to her, under contract of sale;

b) contractual rights against carrier under contract of carriage; and

c) rights against insurer under terms of policy of which she is the assignee

Transport arrangements

Intro

  • Goods have to be transported further (thus, more expensive & greater risk of damage)

  • Parties will have to think about who bears the cost of transport & risk of damage

  • Parties need to agree who is obliged to insure goods

  • Always a chance they will get these terms wrong; very common to use standard T&Cs

  • INCOTERMS most common; published by ICC in 30 languages

  • All parties must state in contract that particular set INCOTERMS apply – latest terms 2010
Multimodal

  • Single contract of carriage covering all stages of journey (air, sea, road, rail etc)

  • Most common form of transport arrangement

  • Usually one carrier who arranges transport (contractual carrier) and sub-carriers cover different aspects of the journey (actual carriers)
INCOTERMS

  • Not a complete contract

  • Determine:

  1. Who will arrange and pay for main legs of journey; 3 main stages to transport of goods:

  1. From S’s premises to port

  2. Loaded on ship, then transported to port in B’s country (FRATE contract)

  3. Transported from port to Buyer

  1. Which party bears the risk of damages for each leg of journey

  2. Which party arranges and pays for insurance for each leg

  3. Which party must obtain import and export clearance (non-EU sales)

  4. What documents S must provide to B (e.g. doc to take delivery from shipping company, insurance policy etc)

  5. But NOT passing of ownership (parties are to agree this expressly)

INCOTERMS

How do INCOTERMS work?

  • INCOTERMS are Categorised into two groups:

  1. INCOTERMS group 1:

Rules for any mode of transport (incl. multimodal):

  1. Ex works (EXW);

  2. Free Carrier (FCA)

  3. Carriage paid to (CPT)

  4. Carriage and insurance paid to (CIP)

  5. Delivery at terminal (DAT)

  6. Delivery at place (DAP)

  7. Delivery duty paid (DDP)

  1. INCOTERMS group 2:

Rules for maritime transport only (e.g. by sea or inland waterway, not suitable for containerised transport):

  1. Cost, insurance & freight (CIF)

  2. Cost & freight (CFR)

  3. Free on board (FOB)

  4. Free alongside ship (FAS)

  • INCOTERMS E imposes least burden on S; INCOTERMS F and C care contracts where S fulfils obligations in country of shipment; INCOTERM D – S responsible for goods arriving at destination
INCORPORATION

  • INCOTERMS only valid when expressly incorporated; intention of parties is irrelevant
RISK

  • Need to work out ‘cut-off’ point for liability in each case (normally point of legal delivery)

  • With both C and F terms, cut-off point is always in S’s country; D terms are only category where cut-off point is B’s country
INCOTERM E – “EXW / EX Works”

Group E: EXW or “EX Works”.

  • Arrangement which imposes greatest burden on B & least on S; price may be lower

  • S basically same as domestic sale (at least re: transport arrangements)

  • S delivers goods when placed at B’s disposal on S’s premises; risk passes to B who is then responsible for all transport arrangements)

  • Purchase price due on delivery, unless otherwise agreed

  • Obligations are as follows:

  • S must:

i) supply goods conforming to contract, measured and packed

ii) supply invoice and any other documents

iii) deliver goods (in legal sense of transfer of possession) by placing at B’s disposal

iv) pay for any costs incidental to placing goods at the B’s disposal

v) provide further assistance to B for B to obtain necessary licences or insurance

vi) S does NOT arrange for export clearance

  • B must:

i) accept delivery of goods and pay for them

ii) obtain appropriate licences and customs clearances

iii) pay any costs incidental to the export of goods

INCOTERM F –

“Main Carriage Unpaid”

Group F: Main Carriage Unpaid:

  • Greater burden on S than for EXW

  • S delivers goods for main carriage; B arranges + pays for main carriage + insurance

  • Risk passes with delivery; several options for handover point:

  • FCA = Free CArrier (named place)

  • Suitable for all modes of transport (usually by container, air freight)

  • Cut-off point: agreed place of delivery (e.g. S premises, carrier depot)

  • Export clearance part of seller’s responsibility

  • FAS = Free Alongside Ship:

  • Cut-off point quayside

  • S has to make goods available for loading on quayside

  • B will have arranged for ship and will pay for loading, sea carriage + insurance

  • Anything that happens after this cut off point is B’s responsibility

  • FOB = Free On Board:

  • S undertakes to place goods on specified ship in specified port; B must organise shipping and insurance arrangements

  • Cut-off point = “on board ship” (“over ship rail”); risk passes on delivery

  • S responsible for all charges up to and including loading goods onto ship; B must pay subsequent charges (sea freight, marine insurance, uploading charges, duties)

  • Obligations under SOB are as follows:

  • S must:

i) supply goods conforming to sale of goods contract

ii) deliver goods to B by placing them on board ship

iii) place them on board in the position required

iv) pay any costs incidental to delivery of the goods

v) obtain an export licence

vi) provide to B proof of delivery to ship

  • B must:

  1. contract with carrier for sea journey + insured goods from port

  2. give sufficient notice to S of time +...
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