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International Business Law - Question 1

Issue

How can James make claims against Owenton?

Rule

United Nations Convention on Contracts for the International Sale of Goods

Application

The United Nations Convention on Contracts For International Sale of Goods also known as the Vienna Convention is a multilateral treaty that sets the ground for international trade and commerce. This convention is sponsored by the United Nations Commission on International Trade Law (UNCITRAL) which came into force in the year 1988 and has been adopted by over 50 states. It was introduced to replace the 2 unsuccessful conventions at the Hague Convention in 1964which later came to be known as the United Kingdom by The Uniform Laws on International Sale Act 1967.[1]

The jurisdiction of CISG applies to international sales which are defined under Article 1 subsection 1. This means that where the buyer and seller are located in different contracting states and where the parties are located in different states not necessarily belonging to a contracting state. As per Article 10, any party who decides in more than one place of business in different states shall be said to be the resident of the state which is closely related to the contract.

The CISG definition for international sale is not similar to the international supply contract under the unfair contract terms act 1977. It has a very narrow coverage to the sale of goods act 1979 as it is not applied on all contract of sale of goods but majorly focuses on commercial sales contract as per Article 2 subsection a. Furthermore as per Article 2 subsection b, c, e and f, this convention is not applicable on the sale of ships aircraft or electricity or auction sales or any sales which shall come under the ambit of law, but is applicable on the supply of gas. There is no exhaustive definition to goods or sale and therefore it applies to individual purchases. This means that it is applicable on contracts with the seller manufactured goods as per buyers special order and can also be applicable on works and material contract as per Article 3.

As per Article 14 of the CISG, a contract is said to be formed when the proposal is addressed to one or more specific person which shall be constituted as an offer. This shall show the intention of the offeror and if accepted by the other person shall be binding on him. This proposal should indicate the goods expressly or implicitly and also which determine the quantity and the price of the goods. Apart from this if a proposal is addressed to one or more specific person then it shall be considered and only an invitation to offer unless the contrary is indicated in the proposal.

Article 15 states that an offer becomes affected only when it reaches the offeree. Such an offer can be revocable even though being irrevocable if it is withdrawn before it reaches the offeree. As per Article 18, any silence or inactivity cannot be termed as an acceptance. An acceptance of an offer becomes effective only when it reaches the offeror. An acceptance is only valid if it reaches the offeror within a reasonable time or as per the time fixed in the contract. If no time is fixed it should be reached within a reasonable time, or due amount should be given to the circumstances of the transaction.

As per Article 18, any silence or inactivity cannot be termed as an acceptance. An acceptance of an offer becomes effective only when it reaches the offeror. An acceptance is only valid if it reaches the offeror within a reasonable time or as per the time fixed in the contract. If no time is fixed it should be reached within a reasonable time, or due amount should be given to the circumstances of the transaction. As per Article 25 if any of the act is committed by one of the parties is fundamental to the contract results in any kind of determine to the other party or deprive him of any entitlement what is expected under the contract then it shall be termed to be a breach of contract. This shall not be applicable if the party did not foresee such breach or any reasonable person under the same circumstances could not have foreseen the results.

In a recent case of the attorney general of Botswana v Aussie Diamond Products Property Limited,[2] the issue was related to the sale of the rig and not the construction which was one of the parts of the decided case based on Article 3 CISG. The court held that the Western Australian law was the governing law and also held that CISG was a part of the law of Australia and hence was also applicable in this case. The court applied the CISG law just as any foreign law would be applied. It held that there is no discrepancy between the domestic and foreign law and both could be applied harmoniously. It for the health that in Playcorp v Taiyo Kogyo[3]the CISG was not adequately applied. They should have referred to Perry Engineering v Berthold.[4]The Supreme Court did not use the CISG law as the plaintiff did not plead it but used the domestic law.

Conclusion

In the given case James is the owner of the furniture store in Sydney. He decided to expand his business internationally and therefore took the help of his friend Susan who was an experienced importer.

James had been in conversation with Mr Owenton who is his cousin living in Kamaria. He showed his intention of purchasing and number of wooden elephant statues for which Owenton had offered to sell 100 elephant statues worth $ 1000 each, FOB. Susan advises James that the price of the statue should be e $1000 each but Owenton should sell them at DDP and not FOB. James replies to Owenton on the same basis as suggested by Susan. Additional to that he shall pay 40% deposit to Owento's bank account and the remaining 60% as soon as the order is delivered.

James did not hear any reply from Owenton. After 3 weeks he receives a call from the officer of Australian border force advising him that a consignment had arrived for him at Sydney port botany shipping terminal. The officer asks James to pay an import duty of $1500 and also told him that the consignment shall not be available for another week as there is a risk of termites infecting the woods. He also told that many of the statues have been damaged as table not adequately packed.

Going by the explanation under Article 14 a contract is said to be formed when both of the contracting parties have the same consensus of mind. In this case, when James approached Owenton for the supplier statues he offered a certain amount of price for the statues at FOB basis. Jean's counteroffer this original offer that he wants it at DDP basis and not FOB. This counteroffer when reached Owenton, he did not give his consent or rejection. Silence cannot be termed as acceptance and therefore James did not even follow up from Owenton. After 3 weeks officer at intimated him that his consignment had arrived at Sydney port and that he had to pay $1,500 as import duty and also was told that many of the statues were damaged.

Therefore as per Article 49, a buyer may declare a contract avoided if the seller did not perform any of the obligations under the contract or which shall be considered to be a breach of contract under this convention. According to Article 52 if a seller delivers the goods before the date fixed the bi has the leverage to accept or refuse the delivery. In this case, James and Owenton did not decide any prospective date or whether Owenton had accepted the terms of delivery as quoted by James. This contract was never completed as there was no acceptance on part of Owenton and neither did James showed any e for the interest in his counteroffer. 

Hence to conclude, James is liable to refuse the delivery and whatever the damages happen should be borne by Owenton as he is the defaulter in this case.

International Business Law - Question 2

Issue

Advise Fletcher as he does not want to be bound by the arbitration law

Rule

UNCITRAL Model Law

Application

Arbitration is a process in which any dispute amongst the parties is heard by any person or a panel as chosen or decided by the parties or assigned by the statute. Commercial arbitration is the same in the jurisdiction of Australia even though it is a state enacted legislation. New South Wales the commercial arbitration act 2010 in which section 1C of the act States the objective that the enactment of the act is to facilitate the fair and final resolution of commercial disputes by an impartial arbitral tribunal and its objective is to provide a speedy trial.

There are many advantages and disadvantages of arbitration. Advantages include the privacy and confidentiality of the parties in the arbitration proceedings, an appeal right is available to the parties. Disadvantages of arbitration are that it is very expensive, not all disputes are covered under arbitration and it depends on the arbitrator to manage the court list and it is up to them whether they want to comply that the time table or not.

One of the disadvantages which are very crucial for every party before signing the contract should see whether the nature of the contract comes within the ambit of the arbitration law. In such cases where the arbitration law is not applicable even though an arbitration clause is mentioned in the contract none of the parties is legally binding and by it. Sum of such contract is-[5]

  1. Whether contractual nature of the contract is against an individual which means that the individual refuses to consent to sign the arbitration contract, contending that the real party to the contract is the company and not the director then the fundamental question that arises is who is the contracting party. In such a case this question is to be dealt with in a court.
  2. Another form is there any e dispute arises in a trade practice where there are chances of joining director for aiding or abetting any clause of Australian consumer law. in such a situation even if the company has signed a contract which would bind them by the arbitration clause but if you wish to join the director personally they will have to abide by the arbitration which is very unlikely to happen.
  3. Small matters which includes a small amount of money do not come under the ambit of arbitration. In a local court where the matter is less than $100000, such matter is not suited for arbitration.

As per Article 7 of of the UNCITRAL Model Law, which defines an arbitration agreement, according to which any agreement under which parties surrender the disputes which have a rising or which may arise to the arbitration is said to be bound by such agreement. There could any legal relationship meaning it could be contractual or not. Such an agreement must have an arbitration clause in the contract to form a separate agreement.

Article 11 of the model law or state appointment of arbitrators under which the parties are free to agree on a procedure of appointing an arbitrator or arbitrators. As per Article 10, the parties are free to determine the number of arbitrators they want in any proceeding. Hence under Article 11 clause 3, each party e is obliged to choose one arbitrator and the appointed to the arbitrator shall appoint the third arbitrator. If the parties other to appointed arbitrators fail to appoint the 3rd arbitrator within 30 days of their appointment then the court or other authorised authority shall appoint under Article 6. Under Article 12 if any of the parties found that there has been some impartiality done in appointing the arbitrators, then he is authorised to challenge it under the said section. A party can only challenge the appointment of arbitrators if we could prove that there has been some impartiality or independence done.

Under chapter 5 which states the conduct of arbitral proceedings, Article 18 entails that the arbitral tribunal shall treat each party with equality e and it shall be given for the opportunity to present his case. Under Article 19 the parties are free to give their consent on the rules of procedure for a while the arbitral proceedings.

Under Article 26, where there is any specific issue for which the arbitral tribunal needs to appoint an expert then they are eligible to appoint one or more expert in such cases. Search experts are required to give their expert opinion on matters related to documents and other things which are of expertise in that case. If the tribunal and the parties so request, such experts are authorised to be a part of the hearing after submitting their written oral report. Such an expert would be put to questions are we asked to present expert witnesses to testify on any point of importance or any fact that is relevant to the case.

Chapter 6 talks about the rules the tribunal shall be adhering to making an award and terminating the proceedings. The rule of law which is applicable to the given case shall be made known to the parties under Article 28. If the parties feel that the decided award was not as per the rule of law it could always be set aside by the court under Article 34. Such play has to be in accordance with Article 6 which means a party making an application should prove that the arbitration agreement as per Article 7 was under some incapacity or is not valid as per law; the proceedings of the arbitral tribunal; the composition of the arbitral tribunal of the proceeding was not as per the agreement signed by the parties and conflicted with the law. If the court finds any of the reasons valid enough to set aside the award, it could do that.

Conclusion

In the given case Fletcher, however, can exempt himself from the arbitration proceedings as he falls under the exceptions where the arbitration clauses are not applicable. However, his major concern is that he fears that he might not get any fair hearing or that the panel may not understand the science of agriculture, so that will not be an issue in the arbitration proceeding. Reason being under the above-mentioned Article, if there is any area of expertise for which the tribunal feels that an expert has to be appointed for his expert knowledge, then with the consent of the parties only the expert is appointed and further if the parties consent the expert is allowed to testify in the proceedings. The procedure followed by the arbitral tribunal has to adhere to the rules of law and also so the concerned parties are made aware of the used law. There is no doubt that the tribunal could contradict the parties while deciding any case. However, if any of the party does not contend with the decision of the arbitral tribunal, there is always an option for him to appeal to the court where the decided award could be set aside.

Hence I would suggest Fletcher participate in this arbitral proceeding and not be concerned about his issues as all of them are being addressed by the UNCITRAL model law.

References for UNCITRAL Model Law

Norton Rose Fulbright, ‘UK: The Vienna Convention On The International Sale Of Goods 1980.’ (1998) <https://www.mondaq.com/uk/privacy-protection/4868/the-vienna-convention-on-the-international-sale-of-goods-1980  >

Clement Lo, James Hamilton & Peter English, ‘Australia: Arbitration clauses: positive and pitfalls.’ (2018) < https://www.mondaq.com/australia/arbitration-dispute-resolution/672018/arbitration-clauses-positive-and-pitfalls >

Botswana v Aussie Diamond Products Property Limited (No 3) (2010) WASC 141 (23 June 2010)

Playcorp v Taiyo Kogyo (No 6056) (2003)

Perry Engineering v Berthold (2001) SASC 15.

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