#10194 - Table Of Clauses - International Commercial Law

Clause	Summary of Clause’s Effect	Issue 1: Amend?	Issue 2: Effect of Complete Removal
Exc-Clause UCTA ’97 P.94	SEE note on Exclusion Clauses
1. Definitions and Interpretation P.7	- Defines terms and sets ground rules for how to interpret the contract. (Define terms only, do not impose any liabilities) - Refers to specific clauses if the relevant term is used only in the context of that clause	NO – The terms are neutral, and should not contain any obligations.	- Lack of certainty in interpreting the parties’ obligations and intention. Increased potential for disputes during performance. - When there is conflict/confusion between the recitals and the operative part of the contract the Operative part will take precedence. Only in the event of an ambiguity in the operative part will a clear statement in the recitals direct its meaning.
2. Sale of Goods P.24	- Defines the purpose and scope of the contract. - Sets out the general obligations of the seller to supply to buyer and of buyer to buy from seller. - Provides certainty in the event of variations to the contract.	Yes – It includes a Prevail clause p.9 & p 27 and we want to negotiate it.	- Lack of certainty in interpreting the purpose and scope of the contract and the obligations of the parties under the contract. - Removes certainty in the event of variations to the contract.
3. Price P.44	- Provides certainty as to price, calculation and validity. - Provide framework to charge VAT outside (s.19(2) Value Added Tax Act 1994) - Provide framework for change of price (price escalation clause) - Avoid (UK) ss.8(2) and (3) of SGA 1979 - Avoid (internationally) s. 55 Vienna Convention and UNIDROIT	Maybe – Clause 3.3 gives uncertainty to buyer as to price. Seller can modify the price unilaterally before delivery if the cost of raw materials increases. Good for S but bad for B – Clauses 3.2 & 3.4 state that VAT is excluded. Will B agree?	Clause 3.3 in T&C is a price escalation clause and is subject to reasonableness under s.3 UCTA UK: - ss.8(2) and (3) of SGA 1979 applies if parties fail to state the price: may cause problems as the price will be determined on the basis of reasonableness. it will be debatable whether or not there is a contract at all. may result in an “agreement to agree (p.29)” which will not be enforceable by the courts for uncertainty. - s.19(2) Value Added Tax Act 1994 applies and price will be inclusive of VAT (unless agreed otherwise) Internationally: - The Vienna Convention + UNIDROIT + have similar provisions “the price generally charged for such goods sold under comparable circumstances in the trade concerned.
4. Delivery P.48	- Clause 4. of the contract states that delivery happens when the goods are delivered to an independent carrier chosen by the supplier. This is in line with s.32(1). The B will take the risk from that point on. - S is restricting liability for late delivery, howsoever caused. - Time is not of the essence.	May Be. Does B want the goods to be delivered within strict timeframes? If so, the clause is protecting S for late delivery. Buyer wants the default Common Law Position that Time is of the Essence by specifying a delivery date: Hartley v Haymans Seller wants Time NOT to of the essence in order to avoid breaching the Contract for late delivery. It will want delivery to be within a reasonable time.	Seller’s Duties UK: - By s.27 SGA S has a duty to deliver (transfer possession) the goods to B. There is no duty to transport the goods to B. - S is to comply with ss. 12, 13, 14 and 15, failure to do so gives B the right to reject delivery. - s.29(2) Place of delivery is the S’s place of business if none, his residence - s.29(3) S is to deliver the goods to B within a reasonable time Internationally: - Similar provisions under Art 31 Vienna Convention + Art 6.16 UNIDROIT + Art 2-308 UCC + Art 7:1-1 PECL Passing of risk - s.17 Property passes when it is intended to pass. - s.20(1) risk passes with the property in the goods (i.e. with the ownership (title) of the goods) - s.20(2) risk is with the party who caused any delay - s.29(2) place of delivery is S’s place of business or residence. - s.29(3) delivery should take place within a reasonable time and at a reasonable hour s.29(5). “Reasonable Time” depends on the circumstances at the time of delivery. - s.10(1) Time of is not of the essence - s.10(2) parties can agree if time is of the essence with regards to any term of the contract (i.e. including delivery in principle) But the Common Law position is that when a delivery date has been specified time is of the essence for delivery (Hartley v Haymans) and a condition of the contract giving B the right to repudiate the contract + damages. This may be rebutted. P.52 +P.52 Independent carrier - s.32(1) transfer of possession to the carrier constitutes delivery to B and the goods are at B’s risk from that point at which they are in the carrier’s possession. B should ensure the goods. Costs - s.29(6) in the absence of contrary agreement, S is responsible for the costs of putting the goods into deliverable state. There is no default position on costs of delivery but it’s usually B. Quantity - s.30 If S delivers less quantity B may reject goods. Rejection of delivery - s.35(2) B has a reasonable time to inspect the goods and confirm that they comply with the contract. Acceptance will not occur until that time has lapsed. - s.35(4) B is deemed to have accepted to have accepted the goods if it fails to notify the seller within a reasonable time that it wishes to reject the goods. - s.36 if B rightfully rejects the goods after delivery, B is not obliged to return goods to S. S will want a non-rejection clause (which is subject to reasonableness under s.3 or s.6 UCTA). - s.37 B is liable for costs incurred by S due to B’s neglect or wrongful refusal of delivery. Attempts to limit B’s liability for breach of the implied duty to accept delivery is subject to s.3 or s.6 UCTA
5. Payment P.46	It is giving B a potential 30 day credit period (if S simultaneously delivers goods to carrier and sends B the invoice, B will have 30 days to pay).	Yes – The buyer does not want to make time of the essence. This contrasts with the S’s view who will time to be of the essence - S wants payment on delivery	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) - By s.48(3) S has right to resell the goods. - By s.49 unpaid S has right to sue B for price Breach - Damages may be awarded + interests under: Law Reform Act + Late Payment of Commercial Debts Act + Late Payment of Commercial Debts Regulations. (you will want your own interest rate to avoid having to rely on these)(incentivise buyer to pay quickly by giving an early payment discount) 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 the price when the goods are made available to him Art. 58 Vienna Convention + Art. 2-310 UCC + Art. 6.1.4 UNIDROIT - Directive 2011/7/EU sets an absolut cap on late payment permitted in commercial contracts at 60 days. Interest are calculated at 7 % points above European Central Bank Rate.
6. Property and Risk (AKA ROT) P.59 (see clause drafting check-list p.63)	- For Seller: clause gives the seller the right to reserve title to the goods. The effect is that, the seller can recover its own goods and prevent a liquidator/administrator or trustee in bankruptcy of the buyer disposing of the goods. - For Buyer: the buyer is free to sell or deal with the goods as it wishes up until the seller might need to rely upon its ROT clause	NO – Clause 6 is standard. It allows B to sell and deal with the goods. - Although ROT clauses do not generally create registrable charges over B’s assets, the S may want to register the clause. But this may be impractical if S & B are dealing on a regular basis (p.60).	- s. 12(1) SGA (S has a duty to pass good title, any breach will give B the right to reject the goods & terminate the contract without need for B to prove that S is at fault) and by s. 20 SGA prima facie risk passes with ownership, so where the parties have not made specific provisions for the passing of risk, and the goods are damaged or destroyed, ownership determines who assumes the risk. Thus the default provisions under s. 18SGA will apply to determine ownership (see rules on p.59)
7. Quality P.70		Clause 7.5 Excludes SGA s.13 and s.14 by turning them into warranties. Seller wants this because breach of these terms in the form of warranties offer B lower standard of remedy for breach.	- ss.13, 14(2), 14(3) and 15 are all implied into all commercial contracts (parties may expressly exclude them) as strict conditions. Any breach will give B the right to reject the goods & terminate the contract without need for B to prove that S is at fault: s.13(1) Description s.14(2) Satisfactory quality (objective test) s.14(3) Fitness for purpose s.15(1) Sample
8. Limitation of Liability P.102	- Limitation of liability clauses are more likely to pass the reasonableness test than clauses which exclude liability altogether. - 8.2 (a) is a loss of profits/consequential loss clause. It tries to limit liability to “direct” loss and exclude liability for all or any “loss of...

Exc-Clause

UCTA ’97 P.94

SEE note on Exclusion Clauses

1. Definitions and Interpretation

P.7

- Defines terms and sets ground rules for how to interpret the contract. (Define terms only, do not impose any liabilities)

- Refers to specific clauses if the relevant term is used only in the context of that clause

NO – The terms are neutral, and should not contain any obligations.

- Lack of certainty in interpreting the parties’ obligations and intention. Increased potential for disputes during performance.

- When there is conflict/confusion between the recitals and the operative part of the contract the Operative part will take precedence. Only in the event of an ambiguity in the operative part will a clear statement in the recitals direct its meaning.

2. Sale of Goods

P.24

- Defines the purpose and scope of the contract.

- Sets out the general obligations of the seller to supply to buyer and of buyer to buy from seller.

- Provides certainty in the event of variations to the contract.

Yes – It includes a Prevail clause p.9 & p 27 and we want to negotiate it.

- Lack of certainty in interpreting the purpose and scope of the contract and the obligations of the parties under the contract.

- Removes certainty in the event of variations to the contract.

3. Price

P.44

- Provides certainty as to price, calculation and validity.

- Provide framework to charge VAT outside (s.19(2) Value Added Tax Act 1994)

- Provide framework for change of price (price escalation clause)

- Avoid (UK) ss.8(2) and (3) of SGA 1979

- Avoid (internationally) s. 55 Vienna Convention and UNIDROIT

Maybe – Clause 3.3 gives uncertainty to buyer as to price. Seller can modify the price unilaterally before delivery if the cost of raw materials increases. Good for S but bad for B

– Clauses 3.2 & 3.4 state that VAT is excluded. Will B agree?

Clause 3.3 in T&C is a price escalation clause and is subject to reasonableness under s.3 UCTA

UK:

- ss.8(2) and (3) of SGA 1979 applies if parties fail to state the price:

may cause problems as the price will be determined on the basis of reasonableness.
it will be debatable whether or not there is a contract at all.
may result in an “agreement to agree (p.29)” which will not be enforceable by the courts for uncertainty.

- s.19(2) Value Added Tax Act 1994 applies and price will be inclusive of VAT (unless agreed otherwise)

Internationally:

- The Vienna Convention + UNIDROIT + have similar provisions “the price generally charged for such goods sold under comparable circumstances in the trade concerned.

4. Delivery

P.48

- Clause 4. of the contract states that delivery happens when the goods are delivered to an independent carrier chosen by the supplier. This is in line with s.32(1). The B will take the risk from that point on.

- S is restricting liability for late delivery, howsoever caused.

- Time is not of the essence.

May Be. Does B want the goods to be delivered within strict timeframes? If so, the clause is protecting S for late delivery.

Buyer wants the default Common Law Position that Time is of the Essence by specifying a delivery date: Hartley v Haymans

Seller wants Time NOT to of the essence in order to avoid breaching the Contract for late delivery. It will want delivery to be within a reasonable time.

Seller’s Duties

UK:

- By s.27 SGA S has a duty to deliver (transfer possession) the goods to B. There is no duty to transport the goods to B.

- S is to comply with ss. 12, 13, 14 and 15, failure to do so gives B the right to reject delivery.

- s.29(2) Place of delivery is the S’s place of business if none, his residence

- s.29(3) S is to deliver the goods to B within a reasonable time

Internationally:

- Similar provisions under Art 31 Vienna Convention + Art 6.16 UNIDROIT + Art 2-308 UCC + Art 7:1-1 PECL

Passing of risk

- s.17 Property passes when it is intended to pass.

- s.20(1) risk passes with the property in the goods (i.e. with the ownership (title) of the goods)

- s.20(2) risk is with the party who caused any delay

- s.29(2) place of delivery is S’s place of business or residence.

- s.29(3) delivery should take place within a reasonable time and at a reasonable hour s.29(5). “Reasonable Time” depends on the circumstances at the time of delivery.

- s.10(1) Time of is not of the essence

- s.10(2) parties can agree if time is of the essence with regards to any term of the contract (i.e. including delivery in principle) But the Common Law position is that when a delivery date has been specified time is of the essence for delivery (Hartley v Haymans) and a condition of the contract giving B the right to repudiate the contract + damages. This may be rebutted. P.52 +P.52

Independent carrier

- s.32(1) transfer of possession to the carrier constitutes delivery to B and the goods are at B’s risk from that point at which they are in the carrier’s possession. B should ensure the goods.

Costs

- s.29(6) in the absence of contrary agreement, S is responsible for the costs of putting the goods into deliverable state. There is no default position on costs of delivery but it’s usually B.

Quantity

- s.30 If S delivers less quantity B may reject goods.

Rejection of delivery

- s.35(2) B has a reasonable time to inspect the goods and confirm that they comply with the contract. Acceptance will not occur until that time has lapsed.

- s.35(4) B is deemed to have accepted to have accepted the goods if it fails to notify the seller within a reasonable time that it wishes to reject the goods.

- s.36 if B rightfully rejects the goods after delivery, B is not obliged to return goods to S. S will want a non-rejection clause (which is subject to reasonableness under s.3 or s.6 UCTA).

- s.37 B is liable for costs incurred by S due to B’s neglect or wrongful refusal of delivery. Attempts to limit B’s liability for breach of the implied duty to accept delivery is subject to s.3 or s.6 UCTA

5. Payment

P.46

It is giving B a potential 30 day credit period (if S simultaneously delivers goods to carrier and sends B the invoice, B will have 30 days to pay).

Yes – The buyer does not want to make time of the essence. This contrasts with the S’s view who will time to be of the essence

- S wants payment on delivery

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)

- By s.48(3) S has right to resell the goods.

- By s.49 unpaid S has right to sue B for price

Breach - Damages may be awarded + interests under: Law Reform Act + Late Payment of Commercial Debts Act + Late Payment of Commercial Debts Regulations. (you will want your own interest rate to avoid having to rely on these)(incentivise buyer to pay quickly by giving an early payment discount)

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 the price when the goods are made available to him Art. 58 Vienna Convention + Art. 2-310 UCC + Art. 6.1.4 UNIDROIT

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

6. Property and Risk

(AKA ROT)

P.59

(see clause drafting check-list p.63)

- For Seller: clause gives the seller the right to reserve title to the goods. The effect is that, the seller can recover its own goods and prevent a liquidator/administrator or trustee in bankruptcy of the buyer disposing of the goods.

- For Buyer: the buyer is free to sell or deal with the goods as it wishes up until the seller might need to rely upon its ROT clause

NO – Clause 6 is standard. It allows B to sell and deal with the goods.

- Although ROT clauses do not generally create registrable charges over B’s assets, the S may want to register the clause. But this may be impractical if S & B are dealing on a regular basis (p.60).

- s. 12(1) SGA (S has a duty to pass good title, any breach will give B the right to reject the goods & terminate the contract without need for B to prove that S is at fault) and by s. 20 SGA prima facie risk passes with ownership, so where the parties have not made specific provisions for the passing of risk, and the goods are damaged or destroyed, ownership determines who assumes the risk. Thus the default provisions under s. 18SGA will apply to determine ownership (see rules on p.59)

7. Quality

P.70

Clause 7.5 Excludes SGA s.13 and s.14 by turning them into warranties.

Seller wants this because breach of these terms in the form of warranties offer B lower standard of remedy for breach.

- ss.13, 14(2), 14(3) and 15 are all implied into all commercial contracts (parties may expressly exclude them) as strict conditions. Any breach will give B the right to reject the goods & terminate the contract without need for B to prove that S is at fault:

s.13(1) Description

s.14(2) Satisfactory quality (objective test)

s.14(3) Fitness for purpose

s.15(1) Sample

8. Limitation of Liability

P.102

- Limitation of liability clauses are more likely to pass the reasonableness test than clauses which exclude liability altogether.

- 8.2 (a) is a loss of profits/consequential loss clause. It tries to limit liability to “direct” loss and exclude liability for all or any “loss of...

#10194 - Table Of Clauses - International Commercial Law

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