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NATIONAL LAW SCHOOL OF INDIA UNIVERSITY, BANGALORE MBL PART II ANNUAL EXAMINATION (JUNE) 2012 Law Relating To Foreign

Trade Answer Keys


1. a) Critically examine the concept of seaworthiness under the Carriage of Goods by Sea Act, 1925.

1. b) In the course of the voyage on the High Seas, the mechanic in charge of the ballast tank forgot to close the water lid of the tank. As a result, there was overflow of water into the goods chamber and the goods were damaged. The consignee of the goods filed a suit against thecarrier.DecidethecasebyreferencetothehagueRulesandtheHamburgRules.

The concept of seaworthiness generally refers to the state of the vessel in such a condition, with such equipment and manned by such a master and crew, that normally the cargo will be loaded, carried, cared for and discharged properly and safely on the contemplated voyage (under given contract of carriage). The ship owner/carrier is under an obligation to provide a seaworthy vessel as well as cargoworthy vessel. This obligation is nondelegable (personal) and the nous of proving that the vessel in question was sea worthy/cargo worthy is on the carrier. To escape from liability under anyoftheexculpatedprovisionsofArticleIV(2),proofoftheaboveisamust.

2. a) Discuss the scope of right of disposition available to the consigner under the Warsaw ConventionandundertheamendedWarsawConvention.

Theissueinthepresentproblemiswhetherthecarriercansuccessfullyargue(anddeny his liability) nautical fault defense. In Gosse Millard case, the court was of the opinion that the carrier will succeed in his defence if the alleged act of his agent/servants that caused damage to the goods was an act primarily done for taking care of the vessel. In other words, if the act/neglect of agents/servants is one relating to taking care of the cargo,thenauticalfaultdefenceisnotavailable. Thus, under the Hague Rules the carrier will fail in his argument. Under the Hamburg Rules,howeverthenauticalfaultdefenceisnotavailableatall.

2. b) A took an Indian flight from Bangalore to Delhi to attend an interview. The flight was to reach Delhi by 10am and the interview was fixed at 3pm. But the flight was cancelled in the last minute and A was accommodated in the next Indian Flight which reached Delhi at 3.30pm. As a result, A could not appear for the interview which could have changed his future.AfiledasuitagainstIndian.Decidethecase.

Right of disposition is a right available to the consignors of carriage by air under both the conventions and the provisions applicable thereunder are virtually the same. The consigner has the right to dispose of the goods by withdrawing them at the aerodrome ofdepartureordestinationorbystoppingtheminthecourseofjourney.However,this right has to be exercised without prejudice to the interest of the carrier and the right doesnotexistoncetheconsignersrighttotakedeliverybegins.

The suit by A will fail because the air carrier was not informed about the special circumstance. Moreover, in the absence of any special condition agreed upon by the parties the case is not covered under the doctrine of foreseeability, a doctrine espousedinRaylandv.FletherCase.

3. Discuss the concept of right to cure under the Vienna Convention on International Sale of Goods,1980.

4. A from India entered into a contract with B from England where under A was to supply certain consignments of cardamom over a period of five years at certain price. The contract was performed satisfactorily for 3yrs. Thereafter, cardamom crop failed in India, and as a result, the price went up by three times in the domestic market of India. A found it financially impossible to carry out the contract. Decide the case by references to (a) Indian Lawand(b)ViennaConventiononInternationalSaleofGoods,1980.

As per the concept of right to cure a seller under a sale contract can cure any defect in the performance of his contractual obligations. So, with respect to documents relating to the purchase of goods, if documents are handed over before they are due, the seller may cure nonconformities in the documents until the due date, provided the buyer is notputtounreasonableinconvenienceorexpense(Article34ofCISG). With respect to goods the seller can cure the defective delivery by delivering substitute goods ortakinguprepairs.Buthisrightissubjecttocertainrestrictionsthathemaynot take an unreasonable time to do so or cause the buyer unreasonable inconvenience or uncertainty about the reimbursement of expenses advanced by the buyer. The buyer in boththecasesretainsanyrighttoclaimdamagesundertheCISG.

5. a) Define a bill of lading and discuss its functions. Distinguish a bill of lading under the Hague RulesfromthatundertheHamburgRules.

The single most important issue in this case is whether As failure to perform his obligation is excused under the doctrine of frustration of contract (common law) and thedoctrineofforcemajeure(CISG)undercommonlaw,suchasIndianlaw,Acannot invoke the doctrine of frustration of contract because it does not recognize economic hardship as an element of excuse. The doctrine of force majeure under CISG is more flexible because it allows A to suspend his performance since economic hardship is an impedimenttoperform. Billofladingisanimportantdocumentusedinthetransportationofgoodsbysea.The HagueRules did not define this document. TheHamburgRules, however, defined abill ofladingasevidencingcontractofcarriagebysea.Therearenationallegislationswhich provide for other two characteristics of this document, namely: that it is a document of titleand;thatitservesasareceiptforthegoodsthatarereceivedforshipment. According to Article 1 (e) of The Hague Rules the carriage of goods covers the period fromthetimewhenthegoodsareloadedontothetimewhentheyaredischargedfrom

theship.Therulethusstatedispopularlyknownastackletotackle.Thisruleisfurther dividedintotwo:shipstackle,and;shoretackle. The period of responsibility under the Hamburg Rules has been considerably increased. Accordingly, Article 4 of the Hamburg Rules states that the responsibility of the carrier for the goods covers the period during which the carrier is in charge of the goods at the port of loading, during the carriageand at the port of discharge. So, the Rules adopted the porttoport concept, which is broader in its scope than the concept of tackle to tackle.

5. b)WhatareINCOTERMS?DistinguishaCIFcontractfromFOBcontract. INCOTERMS are international commercial terms used by the businessmen in transnational context. Incoterm is codified by the ICC and is a soft law instrument; becomeseffectiveonlywhenpartieshaveexpresslyincludeditintheircontract. CIF contract requires the seller to arrange and pay for the cost of carriage as well as insurance during transport. Comparatively, A CIF contract is more onerous to the seller thanaFOBcontract.

FOB is one of the oldest delivery terms/incoterms and has traditionally held a dominant position in the world trade. The passage of ships rail is, according to FOB, decisive for the division of functions, costs and the risks between the seller and the buyer. Under FOB, it is the sellers duty to clear the goods for export as ships rail would operate as imaginarycustomsborder.

6. DiscussthegroundonwhichforeignarbitralawardscanbechallengedinIndia. Therearesevengroundsbasedonwhichapartymayrequestthecourtnottorecognize and enforce a foreign award under the New York convention as implemented in India. There grounds, specifically are: absence of a valid arbitration agreement; lack of fair opportunitytobeheard;theawardornonseverablepartofitexceedsprocedureofthe arbitration; improper composition or procedure of the arbitral tribunal; an award annulled or set aside or suspended; subject matter of the award is nonarbitable; and publicpolicyoftheenforcingstate.

7. a)Commercialreservationclause;

Commercial reservation clause is a facility given to member states of the New York Convention on Recognition and Enforcement of foreign Arbitral Awards. When used by a member state, it may restrict the scope for recognition and enforcement of arbitral awardsgovernedbytheNewYorkConvention.

b)AirConsignmentNoteandAirWayBill.

These are documents used for transportation of goods by air. The conditions required for the preparation of an airconsignment noteunder theWarsaw Convention, 1929 are greater in number. This had been simplified in the case of Airway bill under the Hague ProtocoltotheWarsawConvention,1955.