chapter2 General Procedures of International Tradecase study.doc

Case 2 Dispute Cause by Improper Shipping DocumentsCase Description:A businessman from India imported some primary products and he wanted to sell the goods to abusinessman from Mexico. So the Indian businessman placed his offer with the Mexico businessman,who replied later that he could accept the offer with the requirement that the Indian businessmanshould provide original certificate. Two weeks later, the Indian businessman received the letter ofcredit opened by the Mexico businessman. While the Indian businessman was ready to ship the goodsaccording to the letter of credit, he got news from the inspection authority that the original certificatecould not be issued because the goods were not produced in his own country. The Indian businessmanhad to require the Mexico businessman to cancel the terms of original certificate. But the Mexicobusinessman refused his requirement. Therefore, disputes arose. The Indian businessman argued thathe never agreed to the terms of original certificate. So he need not provide the original certificate.Whereas the Mexico businessman insisted that the Indian businessman had the obligations to do so.Question: please make your own adjustment according to the United Nations Convention on Contracts forthe International Sales of Goods (Both the two parties are member countries).Answer:(1) Both India and Mexico are the member countries of the United Nations Convention onContracts for the International Sales of Goods. Because both the sides of the Convention did notmake to exclude the application and retention, this case should be adjusted according to regulationsof the Convention.(2) When the Indian businessman received the acceptance with additional conditions from theMexican businessman, he did not make any response to it. That's to say, the Mexican businessman'soffer was effective. So the Indian businessman had the right to provide the original certificate.(3) When the Indian businessman received the L/C opened by the Mexican businessmanaccording to the terms and conditions in the contract, he did not make any disagreement, and heprepared to perform the contract of delivering the goods. The reason why he could not deliver the goodswas that he could not provide the original certificate, which was not the Mexican businessman's fault.It was the Indian businessman that dishonored the contract.Case 3 How to Deal with Late OfferCase Description:One Chinese export enterprise made a firm offer to an Italian customer. The offer is subject tobe replied before May 10th. On May 9th the Italian customer informed the Chinese export enterprisewith express letter that the offer could be accepted. But the express was delayed by the expressdeliverer. Before the Chinese export enterprise received the express letter, they got news that themarket price for the goods was going upward.Question:What should the Chinese export enterprise do in this situation? Answer:Both China and Italy are the signatory countries of the United Nations Convention on Contractsfor the International Sales of Goods. In this case, during the negotiation both parties did not rule outor make any reservations. So these two parties should be borne by the CISG. According to the CISG,if a letter or other writing containing a late acceptance shows that it has been sent in suchcircumstances that if its transmission had been normal it would have reached the offeror in due time,the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs theofferee that he considers his offer as having lapsed or dispatches a notice to that effect. So if theChinese company does not agree on this transaction, it should let the Italian company know that theoffer becomes invalid as soon as possible. Or because of some other reasons, the Chinese company canagree to make the deal based on the former offer. Then he may enter into contract with the Italiancompany, or he can also make no any other reply but keep silent, which means he accepts the offer.Case 4 Dispute/ about Whether the Offer is EffectiveCase Description:On March 15th, 2009, Company A made an offer to Company G in Singapore: Art. No. CM034,200 dozens of children-dress angora sweater, at USD 100 CIF Singapore per dozen for Augustshipment, payable by letter of credit, subject to your reply at our end by March 25th. On March 20th,Company G replied as follows: Your offer of March 15th has been received. But it is too high. If youcan reduce your price to USD 90 per dozen, we can accept it. Then Company A replied: We aresorry that we cannot reduce our price any more because it is the lowest price we can offer. On March26th, Company G asked for an airmail sample for their reference. On March 29th, Company A sentout their samples and told Company G: The offer is subject to your reply here by April 8th. On April3rd, Company G replied that they could accept the offer. On April 10th, when the letter sent to thehandler of Company A, he said that it was delayed and made no any response to it.On July 6th, Company A received the letter of credit given by Company G, asking for shipmentas soon as possible. But during this period of time, the raw materials were on rise. Company Aadjusted their price to USD 110 per dozen. So Company A replied on July 8th: There were no anyagreements between our two companies before. Though you once replied to our offer, we received itonly on April 10th, saying it was only a late acceptance, so no any lawful effectiveness. Sorry wecannot deliver the goods. If you agree, we make our offer at USD 110 per dozen for Septemberdelivery. Other terms unchanged.On July 12th, Company G replied: Our company accepted your offer on April 3rd. Though itreached your place on April 10th, as you said, it is beyond our control. It is because there are two orthree days before the letter could reach your end. There are mistakes during the process of the letter,but we two countries are contracting member countries of the United Nations Convention onContracts for the International Sales of Goods. According to the Item 2, Art. 21 in the Convention,when you make no any response to our late acceptance, you agreed to accept our counter-offer. Thatis to say, the contract has been set up. Please make sure to honor the contract, otherwise you shouldtake all the subsequent responsibilities.Question:Is Company G's above opinion right?Answer:The two disputing parties are contracting member countries of the Convention. So the dispute should be settled as to the relevant terms in the Convention.The Article 21 in the Convention stipulates:(1) A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs the offeree or dispatches a notice to that effect.(2) If a letter or other writing containing a late acceptance shows that it has been sent in suchcircumstances that if its transmission has been normal it would reach the offeror in due time, the lateacceptance is effective as an acceptance unless, without delay, the offeror orally informs the offereethat he considers his offer as having lapsed or dispatches a notice to that effect.The lesson we learn is that when you receive the late acceptance, the first thing you shouldconsider is the reason why it is late. If it is hard for you to just the reasons, you can handle the lateacceptance according to different situations with different measures. You may also fax the buyer ifthe offer is not effective any more or it can be accepted. No response to the coming letter will lead todisputes and getting into trouble. Sometimes it may bring about unnecessary losses.Case 5 A Case about Whether the Contract has been Set upCase Description:In 2008, at the request of a Chinese company, an Argentina company quoted the price of 200metric tons of primary products of magnesium, USD 2 150 per metric ton, a firm offer for promptshipment However, instead of counter-offer after receiving Argentina's offer, the Chinese companyBaked fbl increasing the number of products, reducing the prices, and prolonging the time of validity.Argentina company increased the number to 350 tons, USD 2 100 per metric ton CIF Shanghai,extended the time Ol validity by three times and finally extended to September 25th. The Chinesecompany accepted by fax on September 20th.When Argentina company received the fax, they learned that the world market of magnesiumprice was increasing, so they decided to reject the transaction, and faxed back, saying: As theinternational market prices of mineral magnesium change, the goods have been sold out beforereceiving your fax. However, Chinese company refused the saying as Chinese company had receivedthe offer within the validity, and insisted on the offer as contract. If Argentina didn't make animplementation of the contract, they had to compensate for China's losses, the price difference ofUSD 250 000.Question:Is the fax expressing acceptance made by the Chinese company on September 20th a firm offeror a non-firm offer? Is the contract set up at this time?Answer:Offer, also known as quote, which is called "offer" in civil law, means that a party to one ormore than one undetermined parties makes a proposal of a specific contract. A valid offer must havethe following conditions: (1) offer to one or more than one specific persons. (2) The content must bevery clear and certain. Once the person accepts, the contract shall be set up. Clear means you need tospecify the name of the goods expressly or implicitly, the quantity and price, or specify how todetermine the quantity and price. If the offer is accompanied with the offeror's reservations, then it isnot regarded as an effective offer but the invitation for offer. Even though they express theircommitment, the contract is still untenable. (3) An offer must be delivered to the contractors.Acceptance, also known as "commitment", refers to the offeree's willing to offer people under theconditions set out in the contract. An effective commitment must be met: (1) Promise to be made bythe offeree before their effectiveness. (2) Consistent with the conditions of the offer. (3) Thecommitment should be made within the validity period of the offer. (4) Undertake to notify the offerto be effective professionals. Therefore, if a party makes an offer to the other party, the other side ofthe offer should reach an agreement between the parties unconditionally, so that they create a legalbinding contract in both partiesAn offer can be divided into firm offer and non-firm offer. Firm Offer is a definite meaningoffer. Firm offer has two main characteristics: fl) must give complete, clear and positive terms oftrade; (2) must limit on validity date. The so-called non-firm offer refers to the offer without a clearmeaning, that is, an offer people with reservations would be happy to certain conditions, anexpression of a deal. Firm offer from an offeror has legal binding, if the person within the time limitsent by the acceptance, the contract shall be set up. Non-firm offer has not been issued, and does nothave law effect. An offeror can withdraw or modify the contents of the virtual offer at any time.Even if the offeree accepted the non-firm offer, they also should require undergoing a finalconfirmation in order to set up a mutually binding contract. Non-firm offer's characteristics are: (1)with a reservation in the offer; (2) no validity in the offer.In this case, the seller in the offer extended the validity period for three times after making theoffer, the substantive provisions of the contract is complete, certain and clear. It also provides avalidity period of September 25th, which means that the seller has a definite meaning of the offer.Therefore, it is a firm offer, not a non-firm offer.According to the principles of the arrangement, issued by the Argentina side of the firm offer,offeree in an acceptance within the meaning of validity, after making a commitment then the two sidescame into the establishment of contractual relations, they should fulfill their respective rights andobligations. In this case, the validity offered by the offeror to the offeree is September 25th, but theofferee accepted the offer on September 20th, and the offeror received the correspondence. Therefore,on September 20th, the contract of sale of goods has been established between the two parties, in whichthe rights and obligations for the two parties are set up. If a party violates the terms of the contract, hewill constitute a breach of contract, which should bear the responsibilities of breaching contracts.Therefore, the present case of sales contract has been established on September 20th.International Sale of Goods agreed between the parties mean that the result is an offer by oneparty and the other party expressed its commitment. Then the offer is established. Once an offer isaccepted by the offeree, the contract is set up and both parties should fulfill their respective rightsand obligations.Case 6 Does the Contract have been Set upCase Description:Company C of China received an offer from Company D in Paris, France on date July 16th,2009: "500 metric tones of tinplate, USD 545 per metric ton CFR China port, shipment in August,with sight letter of credit, the offer's opening day is within 20 days."Company C replied on date 17th :"If the unit price is USD 500 CFR Chinese port, then we canaccept 500 metric tones of tinplate, arbitration will be claimed in China in case of a contractdispute." Company D replied: "The market is strong so the price can not be reduced, arbitrationconditions is acceptable and reply ASAP." At that time tinplate prices did trend up. On 19th CompanyC replied : "We've accepted the offer you sent on 16th and the L/C has opened by the Bank of China,please confirm it." But the French Company had not identify it and return the L/C.Questions:(1) Whether the contract was established, and why?(2) Whether was it Company C's misplay?Answer:(1) The contract hasn't been established. The reason is : Company D's offer sent on 16th hadfailed by Company C's counter-offer on 17th.(2) Company C had made two errors: ® Company C should not have accepted Company D'soffer on 16th, but should accept the offer on 17th. (2) The words or terms of "confirmation"shouldn't have been applied to the case of making an "acceptance".PART 21. One Chinese Company A made an offer to a Japanese Company B, saying: Our company can sell you 50 sets of H-type machine at USD 3 500 per set CIF Tokyo. Shipment is to be made withintwo months after the contract is concluded. Payment is to be made by L/C at sight. Please reply assoon as possible. Company B replied to the offer at the time when it received the offer: Your offerhas been accepted by our company. But the delivery should be made within one month a