#10185 - Sale Of Goods Terms Internationally

Part 1 (Report on the Case)

This part of the question asks for a report. The purpose was simply to state that in an exam question, there may be a dispute of terms and Choice of Jurisdiction and I may be asked to determine where Delivery took place where an INCOTERM was incorporated into the contract. The answer should therefore incorporate the case law in Electrosteel with reference to Brussels I Article 5(1)(b) is that:

Under Electrosteel Europe sa v Edil Centro SpA the place of deliver under Brussels I Article 5(1)(b) is:

As expressly stated in the contract (including any incoterm to which the contract refers); or
If this is not clear from the contract itself, place of delivery shall be the place of physical delivery into the buyer’s hands.

Part 2

Jursidiction:

Thus, this part of the question puts into practical context the Case of Electrosteel with reference to Jurisdiction:

Electrosteel states that Jurisdiction is determined as expressly stated in the contract including any INCOTERMS, the INCOTERM here is CIF and legal delivery of the goods passes to the buyer on physical delivery on board of the ship, on the facts this is Scheldemond UK. Therefore, the jurisdiction under Brussels I Article 5(1)(b) the contract is UK.

Options:

Allow proceedings to start in Holland and then contest the Jurisdiction under Article 5(1)(b) which states that jurisdiction is where delivery happened. Under the CIF INCOTERM incorporated into the contract delivery took place in the UK and thus, Jurisdiction is the UK. Moreover, under Brussels I, Article 2 the defendant is to be sued in his home country. In this case the UK.
Issue proceedings in the UK in an “Action for the Price” either under the contract or under s.49 SGA.
Negotiate with the client by offering them a discount or waive the payment.

Consolidation:

Rome I and Brussels I (Including relevant case law i.e. Electrosteel (For the purposes of Brussels Art 5(1)(b): the place of delivery is that stated in the contract including any INCOTERMS that the contract may contain. If the contract is silent or unclear as to place of deliver, delivery will be the place of physical delivery)

could you apply them to a given fact pattern?

Vienna Convention (CISG), UCC, PECL and UNIDROIT principles:

When do they apply:

e.g. is it where parties have businesses base in relevant states?
Express inclusion/exclusion? Etc…

Effect of the main provisions (as outlined in i-tutorial)

e.g. quality, description, exclusions, good faith

SALE OF GOODS INTERNATIONAL TERMS

Vienna Convention (CISG)

Worldwide agreement covering sales of goods contracts.
Covers 80 signatory countries (at present, UK not a signatory or member state);
The CISG Will be incorporated into a contract if:

The parties are from signatory countries; or
The parties have chosen a law for the contract which is of a signatory country & have chosen not to opt out of its provisions.
When the rules of private international law lead to application of a contracting state

Effect:

Sets out rules and obligations of B and S
Supplies “gap filling” rules governing the formation of the contract.

Under CISG Article 35;
“the goods supplied bust be of the quantity, quality & description required by contract”.
Except where the P’s have agreed otherwise the Goods do not conform with contract unless they are:

Fit for purpose for which goods of same description would ordinarily be used;
Fit for any purpose expressly/ impliedly made known to seller at the time of conclusion of the contract;
Possess the qualities of goods which seller has held out to buyer as a sample.

Greater emphasis for goods to be fit for purpose and compliance with samples. (In E-Law is s14(3) and s.15 of SGA respectively)
The parties may agree different terms to those in Art 35 of the CISG and exclude sections.

Under CISG Article 6 parties may:
“exclude the application of this convention, or derogate from or vary the effect of any of its provisions”.
Parties therefore free to exclude liability for breach of express promises; and
The implied promises relating to fitness for purpose or compliance with sample.

UNIDROIT principles

These principles do not have the status of a convention but they are rather a loose set of recommendations as to how parties should construct their contract or how countries can draft their sales laws (i.e. an attempt to harmonise the rules)
Non-binding, but more comprehensive set commercial contract rules than the ICSG.
UNIDROIT Article 5.1.6 “where quality of performance is neither fixed by, nor determinable from, the contract a party is bound to render a performance of a quality that is reasonable and not less than average in the circumstances”.
Thus, these provisions won’t apply where parties set their own standard for performance (e.g. the parties introduced warranties in the contract as to the quality of the goods or their fitness for purpose)
UNIDROIT leave a lot of freedom for parties to make own arrangements on performance/ exclusion clauses, however, if UNIDROIT is adopted a P may be subject to the duties of Good Faith & Fair Dealing which may affect the S’s ability to avoid liability for underperformance.
A Court will apply them if parties have incorporated the UNIDROIT or where they have agreed that the contract will be governed by general principles of law.

Where particular purpose is made known to seller, court is likely to find that, for performance of the seller to be reasonable, the goods must be fit for that purpose.
Sale of sample likely to be construed as goods supplied must comply with the sample.
Article 1.7 ‘Each party must act in accordance with good faith and fair dealing in international trade’. (Parties cannot exclude/ limit this duty).

Cannot exclude duty to act in duty of good faith and fair dealing under Art 1.7.
Article 7.1.6 exclusion clauses will not be effective in avoiding liability if it would be grossly unfair to allow them to apply (similar to UCTA-unreasonableness test of exclusion clauses).
However, Article 7.1.6- may be varied by parties or not included at all. So if P’s want to have exclusion clauses, they can

The PECL

(these are the principles of EU Law)

Apply to all commercial contracts and have to be incorporated expressly
PECL are Intended to bring greater degree of harmonisation throughout EU in way contracts are interpreted. They have not been incorporated as a piece of EU law but
The PECL can be incorporated by parties (but not yet a formal piece of law).
Apply to contracts generally (rather than just SOG) so broader in application, however, less targeted and more general in the way they are worded.
If adopted by parties, and a dispute arises, the court/ tribunal may apply the PECL rather than national rules of law (or if parties have agreed to let contract be governed by ‘general principles law’.

No express provisions dealing specifically with description or quality.
BUT;
Article 1:201 (1) each party must act with good faith & fair dealing.
(2)- cannot exclude or limit this duty.
Article 1:202 each party owes to the other a duty to co-operate in order to give full effect to the contract.
Therefore, these two Articles Contain General provisions which may affect performance of the seller under the contract (e.g. how they deal with a Force Majeure event) and the Parties should cooperate to give full effect to the contract.

Article 4:110 if any term causes a significant imbalance in parties’ rights & obligations, the term can be avoided.
Thus, an exclusion clause may be avoided by B if it is too strong.
Article 4:109 a person lacking in experience or bargaining skill can avoid contract if other party took advantage of them or took excessive benefit.
Article 8:109 (most relevant article for exclusion clauses) it allows remedies for non-performance may be excluded or restricted unless it would be contrary to good faith & fair dealing for them to stand. (e.g. very one sided clauses will be affected by this)

UCC

(Uniform Commercial Code)

This is not an international agreement but it is internationally relevant as US law is used in many international contracts.
Agreement between 50 US states as to how their contract law is to be drafted.
Very common for international contracts to adopt US law.
Relevant if parties incorporate it, or choose the law of the US as law of the contract.

Article 2-313:
1. Must correspond with comments;
2. Must correspond with any sample given in advance of contract being formed.
Article 2-314: “goods must be Merchantable”, and in order to be Merchantable the goods must:

Pass without objection in Trade under the contract...

#10185 - Sale Of Goods Terms Internationally - International Commercial Law

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