Topic 2: International sale

of goods

1
 Reference

1. UN Convention on Contracts for International

Sale of Goods 1980
2. UNIDROIT Principles of International
Commercial Contracts 2004/ 2010
3. American Uniform Commercial Code 1952
4. English Sale of Goods Act 1979/ 1995
5. Australian Trade Practices Act 1982
6. Vietnam’s Commercial Law 2005
7. Decree 187/2013/ND-CP
2
 Differences between international
sales and domestic sales
1. Parties to the contract
2. Form of the contract
3. Language in the contract
4. Purposes of the contract
5. Objects of the contract
6. Formation of the contract
7. Currency
8. Governing laws
3
 Outline

1. Sources of law governing the contract – CISG

2. Conflict of laws
3. Formation of contract
4. Terms and conditions of contract
5. Remedies for breach of contract

4
Sources of law for contract of
international sales of goods

6
 I. Sources of law for contract of
international sales of goods
⚫ Convention/ Treaty

⚫ National law

⚫ Customary law/ Commercial practices

⚫ Case law

7
 1. Convention
⚫ Binding to the parties to contract?

⚫ Application: Convention or National Law?

⚫ Contracting members of a Treaty

⚫ Not Contracting members of a Treaty

8
 Question
⚫ American party & Chinese party?

⚫ American party & Vietnamese party?

⚫ Vietnamese party & Laotian party?

⚫ Cambodian party & Laotian party?

9
 Vienna Convention
⚫ UNCITRAL (United Nation Commission on
International Trade Law)
⚫ Uniform rules
⚫ 82 contracting members: America, Japan,
China, Germany, France, Singapore,..
⚫ More than 2500 cases, books, articles, theses

-www.uncitral.org

-www.unilex.info

-www.cisg.law.pace.edu
10
Map of CISG contracting states

ĐH NGOẠI THƯƠNG 11
 Application
Article 759 (2) Vietnam’s Civil Code 2005: “In
cases where a treaty to which the Socialist
Republic of Vietnam has signed or acceded
contains provisions different from the provisions
of this Code, the provisions of such treaty shall
apply.”
Article 5 (1) Commercial Law 2005: “Where a
treaty to which Vietnam is a contracting party
stipulates the application of foreign laws or
international commercial practices, or contain
provisions different from those of this Law, the
provisions of such treaty shall apply.”
12
 Application
Article 1 of Vienna Convention 1980
(1) This Convention applies to contracts of sale of
goods between parties whose places of business
are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law
lead to the application of the law of a Contracting
State.

13
 Vienna Convention
⚫ UNCITRAL (United Nation Commission on
International Trade Law)
⚫ Uniform rules
⚫ 82 contracting members: America, Japan,
China, Germany, France, Singapore,..
⚫ More than 2500 cases, books, articles, theses

-www.uncitral.org

-www.unilex.info

-www.cisg.law.pace.edu
14
 Vienna Convention
101 articles:
⚫ Part I (Art. 1-13) Sphere of application and
general provisions
⚫ Part II (Art. 14- 24) Formation of the contract
⚫ Part III (Art 25- 88) Sale of goods:
implementation, obligations of the parties,
remedies for breach of contract, passing of
risk
⚫ Part IV (Art. 89- 101) Final provisions:
ratification, acceptance, approval, reservation
15
 Contractual Issues Excluded
From the Coverage of CISG
⚫ CISG only deals with:
1. The formation of the contract, and
2. The remedies available to the buyer
and seller.
⚫ CISG excludes questions about:
1. the validity of the contract,
2. the capacity of the parties,
3. the rights of third parties, and
4. liability for death or personal injury.
16
 Question

Seller has places of business in both State A

and State B.

Buyer has a place of business in State B.

Is the CISG applied?

18
 Question
Seller’s place of business is in State A and the
Buyer’s place of business is in State B. State A
is a Contracting State; State B is not. Buyer
brings an action against Seller in State A; State
A has retained Sub (1)(b). The rules on private
international law of State A point to the law of
Seller’s state—State A.

19
 Case No.1

A, a company from Bitburg (Germany),

supplies 1,000 bottles of beer to a Groenen
B.V., a Dutch company established in
Groningen. However, the Dutch buyer does
not pay in time. The German seller wants
to nullify the contract. Is it possible that ,
in case of a lawsuit between the German
seller and the Dutch buyer, the competent
court of law uses the CISG to answer this
question?
20
 Case No.2
A, a Dutch company from Alkmaar, supplies 1,500
kilos of Leerdammer cheese to Brown Ltd. a
company established in the UK. The English
buyer pays only half the price, claiming that he
only received half the amount of kilos he
ordered. Since this is complete rubbish, the
Dutch seller wants to claim the other half of the
price from the English buyer. Can the court of
law that has jurisdiction use the CISG in this
case?
21
 Scope of application
101 articles:
⚫ Part I (Art. 1-13) Sphere of application and
general provisions
⚫ Part II (Art. 14- 24) Formation of the contract
⚫ Part III (Art 25- 88) Sale of goods:
implementation, obligations of the parties,
remedies for breach of contract, passing of
risk
⚫ Part IV (Art. 89- 101) Final provisions:
ratification, acceptance, approval, reservation
22
 2. National law
⚫ When domestic law apply?

⚫ How to apply domestic law?

⚫ How to choose a local law?

23
 2. National law
The places of business of Seller and Buyer
are in States A and B. A contract of sale
was signed by representatives of Seller and
Buyer in State C. The contract provided
that Seller would deliver the goods to Buyer
in State C. The contract had no provision
designating the applicable law.
What laws apply to the transaction?

24
 When local law apply?
⚫ Chosen by the parties
-
-
-
⚫ A treaty or convention leads to the
application of local law

⚫ Chosen by courts or arbitration panels?

- Rules on choice of law (conflict of law)
- Laws of the most related or closely connected
country 25
 How to apply local laws?

⚫ Rules on application of local law

- Specific law >< general law
-

⚫ Statute >< delegated legislation

26
 Question
Company X in country A sells 500 computers to
company Y in country B. 40% of the computers
don’t work during 6 months of warranty.
The seller proposes to replace the defective
computers in accordance with the warranty.
However, the buyer alleges that the number of
defective computers is so enormous that he is
entitled to cancel the contract.
There is no provision on the termination of the
contract in the contract itself. Therefore, the
parties look for the applicable law to solve the
dispute. 27
 Question
In the law of country B, it stipulate that:
“Where the goods delivered by the seller are in
the so poor condition that the number of
defective goods is excessive, the buyer is entitled
to return the goods and get back the contract
price which has been paid.”

28
 Question
In the law of country A, there are 02 cases
relating to the matter in question.
Case 1: Among the 500 computers imported by
the buyer, 30% of the goods were defective. The
seller didn’t replace the defective goods. It were
held that the buyer was entitled to return the
goods and get back the money.
Case 2: The buyer bought 1,000 computers, and
400 didn’t work. The seller agreed to replace the
defective computers. It was held that the buyer
can’t terminate the contract
29
 How to choose local laws?

⚫ Intention of the parties

⚫ Bargaining power

⚫ Understanding of the national law

⚫ In their favour

30
 Which local laws? Reality?

Seller Buyer Applicable law

Singapore Vietnam English, Singapore
South Korea Vietnam French, Korean, Singaporean
Switzerland Vietnam Singaporean
England Vietnam English
China Vietnam Vietnamese
Thailand, UEA Vietnam English
Japan Vietnam Singaporean, Japanese
Vietnam HongKong Singaporean, Vietnamese
America Vietnam Singaporean
Germany Vietnam Swiss, Singaporean
 Choice of law clause
⚫ This contract shall be governed by Vietnam’s
Commercial Law 2005
⚫ This contract, and all questions relating to its
formation, validity, interpretation or performance
shall be governed by…
⚫ “Applicable law: The validity and performance of
this purchase shall be governed by the laws of
the state shown on Buyer’s address on this order”
⚫ “The contract between the parties is made,
governed by, and shall be construed in
accordance with the laws of Canada applicable
therein, which shall be deemed to be the proper
law hereof…” 32
 3. Customary law/ commercial
practice
Requirements of a commercial practice
⚫ A custom (established – repeated)

⚫ Widely recognised in a region or worldwide

⚫ An explicit meaning

⚫ Identifying the rights and obligations of the

parties to contract
33
 When practices apply?
⚫ Chosen by the parties

⚫ Governing convention or law leads to

⚫ Where the matters in questions are not

addressed by laws nor agreed by the
parties

34
 How to apply?
⚫ Incoterms

⚫ UCP

⚫ Right to agree in different terms

- FOB
- The seller is under a duty to take out an
insurance policy

35
 4. Case law
⚫ UK, US, Australia, New Zealand, Canada,
Singapore,…

⚫ Principle of “stare decisis” or principle of

precedent

⚫ Statute >< case law

⚫ Common law >< equity law

36
Conflict of law

37
 II. Conflict of laws
A Japanese businessman and an American
businessman agree in London to the sale of
goods situated in France and they will be
delivered to England.

38
 Example
⚫ An American company entered into a written
contract with a Chinese company. Later, The
parties contacted by phone to discuss about
additional terms of the contract relating to
packing of the goods.
⚫ The Chinese company didn’t comply with the
agreement on the packing.
⚫ The American alleged that the Chinese Co. had
broken the contractual obligation.
⚫ The Chinese Co. argued that the agreement by
phone was not valid
39
 Example
⚫ S, a English manufacturer, contracts to sell to B, a
multinational corporation with its head office in
Denmark, textile fabrics to be delivered to B’s factory
in Lyon, payment to be made in euros under a letter
of credit to be issued by a German bank. The contract
of sale is concluded by an exchange of letters through
the post. Under English law, an export license is
necessary, for which S hasn’t applied. B’s managing
director later writes from his New York office stating
that B wishes to renegotiate the price and is not
prepared to arrange for the opening of the letter of
credit. 40
 Example
⚫ Can S sue B in England?
⚫ If an English court has jurisdiction, must it be exercised?
⚫ If S obtains judgment against B in Denmark, France, Germany
or the US, will an English court be prepared to recognise the
judgment? And how will the judgment be enforced in England?
⚫ By what law will S’s rights be determined? Possible candidates
are English, Danish, French, German and American law. Does it
necessarily follow that all aspects of the matter will be
governed by the same law?
⚫ Assuming that the transaction as a whole is governed by a law
other than English law, does this mean that an English court
should disregard rules of public policy of English law or the
mandatory provisions of an English statute or regulations, eg:41
those requiring an export license?
 Causes

⚫ 2 or more legal systems can be applied

⚫ Those legal systems are different

42
 Samples of conflict of laws
⚫ Form of the contract

⚫ Capacity to contract

⚫ Content of the contract

⚫ Governing law

⚫ Jurisdiction in dispute settlement

43
 How to overcome

⚫ Creating uniform rules on the matters

⚫ Applying conflict of laws rules

44
 Applying conflict of laws rules
⚫ Article 769 of Civil Code: “The rights and
obligations of the parties to a civil contract
shall be determined in accordance with the
law of the country where the contract is
performed…”

⚫ Article 770 of CC: “Forms of a contract

must comply with the law of the country
where the contract is entered into…”
45
 Jurisdiction/ choice of court
⚫ Domicile of the defendant
- Individuals
- Corporation/ company/organisation: place of
business registration or principal place of
business or place of central administration

46
 Jurisdiction/ Choice of court
⚫ Forum shopping of the plaintiffs
- matters relating to a contract, the courts for
the place of performance of the obligation
in question
- a dispute arising out of the operations of a
branch, agency, the courts for the place in
which the branch, agency is situated

47
 Example
A Liberian company resident in Dubai
enters into contract with a Kuwaiti
company. The parties agree to arbitration
in London. The contract is made in English
standard form.

48
 Governing law

⚫ Intention of the parties/ implied to choose

- Agreement on dispute settlement

- Standard forms of the contract

49
 Governing law
⚫ Laws of the most related or closely
connected country
- The law of the country where the party who is
to effect the characteristic performance of the
contract has habitual residence
- In course of trade or profession, the law of the
country in which the principal place of business
is situated.
- Where the performance of the contract is
effected through a branch or agency, the law
of the country in which the branch or agency 50is
situated
Formation of contract

51
 III. Formation of contract

⚫ Fundamental principles of entering

into contract
⚫ Essential validity of contract
⚫ Invalid contract
⚫ Offer & acceptance in formation of
contract

52
 1. Fundamental principles

⚫ Freedom of contract

⚫ Voluntary agreement

⚫ Equality

⚫ Honesty & good-faith

53
 2. Essential validity of contract

⚫ Capacity to contract

⚫ Terms of contract

⚫ Forms of contract

⚫ Principle of complete voluntariness

54
 Capacity to contract

⚫ Civil legal capacity

⚫ Capacity for civil conducts

- Vietnamese individuals or companies?

- Foreign individuals or companies?

55
 Capacity to contract

⚫ The person who signs in the contract

must have the rights to do so.

- Legal representative

- Authorized representative

56
 Authorized representation
⚫ In writing or by oral or by implication?
⚫ Who is liable for breach of contract if
the contract falls into the scope of
authorisation?
⚫ Legal consequences of the contract
entered into and performed by
representatives beyond the scope of
authorisation?
⚫ Do the authorized representatives have
the rights to authorize a third party? 57
 Terms of contract
⚫ The goods aren’t banned from
importing & exporting in both the
export & import countries.
⚫ Requirements on definiteness of
term
- Name of the goods
- Quantity of the goods
- Quality of the goods
- Price
⚫ CISG?
⚫ Vietnam? 58
 Forms of contract
⚫ In writing
- Email?
- Telex?
- Fax?
⚫ By oral
⚫ By conduct
- CISG?
- Vietnam’s Commercial Law 2005?
- UCC 1952
- Sale of goods act 1979 59
 Form
⚫ The CISG states that a contract for sale need not be
concluded in or evidenced by writing and is not
subject to any other requirements as to form. It
may be proved by any means, including witnesses.
⚫ However, CISG authorizes a contracting state whose
legislation requires contracts of sale to be concluded
in or evidenced by writing to make a declaration at
the time of ratification the CISG provision does not
apply where any party has his or her place of
business in that state.
⚫ Vietnamese Commercial Law requires contract for
international sales of goods must be in writing
60
 Complete voluntariness

⚫ Fraud

⚫ Threat

⚫ Mistake

61
 Mistake
⚫ Article 3.4 of PICC: “Mistake is an erroneous
assumption relating to facts or to law existing when the
contract was concluded.”
⚫ Article 131 of CC05: Invalidity of civil transactions
due to misunderstandings: “Where one party
misunderstands the contents of a transaction and enters
into the transaction due to the unintentional fault of a
second party, then the former party has the right to
request the second party to change the contents of such
transaction, and if the second party does not agree then
the former party has the right to petition the court to
declare the transaction invalid.” 62
 Threat
⚫ Article 132 of CC05: Invalidity of civil transactions
due to deception or threat “A threat in a transaction
means an intentional act of a party or of a third party
which compels the other party to implement the
transaction in order to avoid danger to life, health,
honour, reputation, dignity or property or that of its
parents or spouse.”
⚫ Article 3.9 of PICC: “…a threat is unjustified if the
act or omission with which a party has been
threatened is wrongful in itself, or it is wrongful to
use it as a means to obtain the conclusion of the
contract.” 63
 Fraud/ Deception

⚫ Art. 132 of CC05: “Fraud in a transaction means an

intentional act of a party or of a third party for the
purpose of misleading the other party as to the
subject, nature of the entity, or contents of the civil
transaction which has caused the other party to enter
into the transaction.”
⚫ Art.3.8 of PICC: “A party may avoid the contract
when it has been led to conclude the contract by the
other party’s fraudulent representation, including
language or practices, or fraudulent non-disclosure of
circumstances which, according to reasonable
commercial standards of fair dealing, the latter party
64
should have disclosed.”
 4.1. Legal consequences of invalid
contract
⚫ The parties are released from the rights
and obligations of the contract from the
time the contract is entered into
⚫ The parties shall return to each other
what they have received under the
contract
⚫ The party at fault must pay compensation
for any loss

65
 Offer & Acceptance
in formation of contract

66
 Question
⚫ On 6th June company A offered to sell a cargo to company
B for £ 12,000. On 7th June Co. B declined the offer.
⚫ On 8th June, Co. A offered £11,000 for the cargo.
⚫ On 9th June, Co. B replied they would agree to pay
£10,000. Co. A replied that they would need to think
about this and assured Co. B that they were not carrying
on negotiations to sell to anyone else.
⚫ On 27th June, Co. A wrote to Co. B declining the offer of
£10,000.
⚫ On 28th June, Co B wrote back accepting the original offer
to sell the cargo at £11,000.
⚫ Can Co. A refuse to sell the cargo for £11,000
67
 4.1. Offer
What is an offer?
⚫ In writing?
⚫ Promissory: Promise to do something or to refrain from
doing a certain act
⚫ Intention: To be legally binding
⚫ Communication: To Promisee
⚫ Certainty: Terms must be clear & certain
⚫ Finality: Must be a degree of finality with the terms

68
 4.1. Offer
Definition
An offer to enter into a contract means a
clear expression by the offeror of his or her
intention made to another specific party to
enter into a contract and to be bound in
case of acceptance.

69
 Time-limit for
effectiveness of the offer
⚫ The time-limit specified in the offer
- This offer is valid until 01/07/2009 or this
offer is binding until 01/07/09
- This offer is valid in 30 days since the date of
signature
- This offer is binding within 30 days
⚫ No specified time-limit

70
 Offer

An offer must be made to another

person
⚫ Offeror: party that makes the offer
⚫ Offeree: party that receives the offer

71
 Offer

Offer must be communicated

⚫ Offeror to Offeree
⚫ Mode of Communication
Verbal/ Writing/Post

72
 Withdraw/revoke the offer

⚫ Offer can be withdrawn prior to its

reaching the offeree (Art. 392)
⚫ Offer can be revoked anytime before
acceptance (Art.393)
⚫ Withdrawal and revocation must be
communicated to the offeree in some
reasonably reliable manner.

73
 Rejecting an offer
⚫ Offer can be rejected expressly or by
implication
⚫ How can be understood “implication”?
Implied rejection : counter offer
Eg - A offers to sell his car to B for $1000. B says to A,
“I will give you $750". B statement amounts to a
counter offer which terminates the original offer by A

74
 The fate of a offer

⚫ Offeror may withdraw the offer

⚫ Offeror may revoke the offer
⚫ Offer may lapse due to passing of time
⚫ Offeree may reject the offer
⚫ Offeree may accept the offer

75
 4.2. Acceptance
Definition
The acceptance of an offer to enter into a
contract is the offeree's reply to the offeror on
the acceptance of the whole contents of the
offer.
 Acceptance

⚫ A contract comes into existence at the

time the offer is accepted.
⚫ A reply to an offer which proposes an
alteration of the terms of the offer will
amount to a counter offer
 Does silence amount to acceptance?

⚫ On June 1 Seller sent Buyer an offer

to sell a specified type and quantity of
goods at a stated price, and added:
"This is such an attractive offer that I
shall assume that you accept unless I
hear from you by June 15."
⚫ Buyer did not reply.
⚫ Seller shipped the goods on June 16.

78
 Question
On May 1 Seller delivered to Buyer an offer that
stated: "I will hold this offer open until June 1." On
May 7, Buyer delivered to Seller the following: "I
cannot accept your offer since the price is too high,"
but on May 10 he delivered to Seller the following:
"I hereby accept your offer of May 1." Seller
immediately informed Buyer that this "acceptance"
was not effective because of the earlier rejection;
Buyer replied that this was not true because Seller
had promised to hold the offer open.
 Question
Buyer offered to purchase complex machinery from Seller,
which Seller would manufacture according to designs supplied
by Buyer. The offer included a stated price and stated that the
offer would be irrevocable for two months to enable Seller to
determine whether he could make the machinery at that price.
Seller immediately started the process of designing
manufacturing procedures and computing costs of production.
Two weeks later, when Seller had spent substantial sums in
computing costs but had not completed this work, Buyer
notified Seller that he could no longer use the machinery and
withdrew the offer. Seller thereupon stopped work on the cost
estimates since it would be uneconomic to invest further funds
in preparing to make machinery that Buyer would not accept
and perhaps could not pay for. Does the Seller have to right to
make a claim against the Buyer?
 Acceptance
⚫ Acceptance must be unconditional
- Mirror approach (Art. 396 of CC05)
- Non-material modification approach (19.3 of CISG)
⚫ Acceptance must be received within the time
period specified in the offer (within the time-limit
for reply)
⚫ Only the offeree may accept the offer
⚫ An acceptance may be withdrew by the offeree
⚫ Silence does not constitute acceptance.
 Acceptance With Modifications

⚫ If the acceptance modifies some of the terms

of the offer, there is a counter-offer instead of
an acceptance if these inconsistencies are
“material.”
⚫ Under the CISG, additional terms or different
terms relating, among other things, to the
price, payment, quality of the goods, place,
and time of delivery, extent of one party’s
liability to the other, or the settlement of
disputes are considered to alter the terms of
the offer materially.
82
 Question
⚫ The sellers wrote to the prospective buyers stating that they
were willing to sell iron to the buyers and stated that the offer
was open for a period of time. On the last day of that period
the buyers faxed to the sellers: “Please fax whether you would
accept to deliver over two months, or if not, longest limit you
would give”. Later that day the sellers sold the iron to a third
party and they sent a fax to the buyers to inform them of this.
Before they received the fax from the sellers, the buyers found
a sub-buyer for the iron and sent a fax to the sellers in which
they accepted the sellers’ offer to sell the iron. The sellers
refused to deliver the iron to the buyers and so the buyers sued
for non-delivery. One of the grounds on which the sellers
sought to deny liability was that the buyers’ first fax was a
rejection of the sellers’ offer so that their offer was no longer
open
83 for acceptance when the buyers purported to accept it
later in the day. Is there a contract between the parties?
 Self-quiz

A company in HaiPhong sent a P/O to a

company in Hanoi for 1000 file cabinets.
The company in Hanoi immediately
transport the ordered file cabinets to
HaiPhong with an invoice attached.
Is there a contract between A and B?

84
 Question
On April 22nd 2009, Petrolex (VN) sent a firm offer for
sale of crude oil to IPI (France) in which there were 6
terms and conditions; delivery time was in 6,7,8/
2009. The offer was valid until 16h30 May 17th 2009
(which was Sunday)
On 16h30 May 16th Petrolex drafted the revocation of
the offer to send to IPI because the following day
would be Sunday. Yet, the person in charge of sending
it was off-work. Therefore, the revocation was sent on
May 18th.
23h18’ May 16th, IPI sent an acceptance stating that:
“We are happy to accept your offer on April 22nd 2009
about delivery in 6,7,8/2009, and we will later discuss
with you about the method of delivery in details” 85
 Question
Petrolex alleged that the acceptance on late
Saturday night was a late acceptance and there
was no contract between the parties, therefore,
Petrolex didn’t deliver the goods.
IPI argued that the acceptance came to the offeror
within the time-limit for accepting the offer, and
the L/C was issued, therefore, a contract came into
existence. Petrolex had breached the contract, not
delivering the goods.
IPI wished to terminate the contract and claimed
for damages of $47,600.
Did a contract come into existence?
(Applicable law is Vienna Convention)
86
 Case No.1

⚫ Anderson, a company established in Sweden wants to

make an agreement with Bonhoff, a company established
in Holland. He sends texts to Bonhoff that he is willing to
sell a machine at a price of €500,000. Just before Bonhoff
sends his acceptance to Anderson, he receives a message
from Anderson informing him of the fact that Anderson is
revoking his offer. Bonhoff, who was inclined to accept
the offer made by Anderson, is of the opinion that
revoking the offer in this case is not possible. So Bonhoff
sends his acceptance to Anderson.
⚫ Question: Has an agreement been reached in this case?
87
 Case No.2

⚫ Anders, a company established in Germany offers Egberts,

a company established in Holland, a consignment of coffee.
Anders informs Egberts in writing that the time limit for
Egberts to accept the offer is 03 months. One month after
his offer to Egberts, Anders sees an opportunity to sell
these goods to Christensen, a company from Denmark at
a much higher price. Anders revokes the offer made to
Egberts. Nevertheless Egberts accepts the offer after Anders
has revoked it.
⚫ Question: Has an agreement been reached in this case or
not?
88
 Case No.3
⚫ The Food Company B.v., a company established in Holland makes an
offer to Ulbricht GmbH, a company established in Germany concerning
the sale and delivery of a high tech machine for the production of
food. In the offer, Food Company includes a copy of their terms of sale
and delivery. Ulbricht GmbH sends its acceptance of the offer
containing their terms of sale and delivery, which differ on various
points from the terms of sale and delivery of Food Company.
Problems arise when, after delivery, the machine does not function
properly and several leaks in the hydraulic system, causing severe
pollution of the products and physical damage to consumers. Food
Company states that they have excluded all liability for this kind of
damage in their terms of sale and delivery and so they are not
liable in any way. According to the terms of sale of Ulbricht GmbH
Food Company is responsible for this kind damage.
⚫ Question: Which terms of sale and delivery apply to this contract?
89
 Case No.4
⚫ On June 1 Buyer delivered to Seller a Purchase Order that offered to
purchase specified production machinery. The Order, in addition to
identifying the machinery, stated the price at $20,000, to be paid one
month after receipt of the machinery, and called for shipment by August
1. The reverse side of the Order set forth the following terms: Clause
#1: Seller will be responsible for damages resulting from defects in the
machinery; Clause #2: Any dispute will be settled by arbitration.
⚫ On June 15 Seller delivered to Buyer an Order Acknowledgment stating
that Seller would ship the machine ordered by Buyer by August 1 and
that the price was $20,000 to be paid one month after receipt, as has
been set forth in Buyer’s Order. The reverse side of Seller’s form
included the following terms: Clause #1: Seller will replace or repair any
defective part of the machinery but will not be responsible for shut down
costs or other consequential damages; Clause #2: An arbitration clause
like the one in Buyer’s Order.
90
 Case No.4
⚫ Neither party mentioned the terms on the reverse of the other’s forms.
Seller shipped the goods on July 15 and they were received and put into
use on August 1.
⚫ Shortly after Buyer placed the machinery in operation, defects in the
machinery led to shutdown in Buyer’s assembly plant with serious
consequential damages. Seller offered to repair or replace the defective
machinery pursuant to Clause #1 on the back of Seller’s
Acknowledgment. Buyer contended that, in addition, Seller must pay for
shutdown and other consequential damages pursuant to Clause #1 on
the back of Buyer’s Order.
⚫ Is there a contract between the parties?
⚫ What rule governs the scope of Seller’s responsibility for the
defective goods?

91
PERFORMANCE OF CONTRACT

92
 Duties of the parties
SELLER BUYER
⚫ Deliver the goods ⚫ Pay the price (time
(place of delivery, time of payment, place of
of delivery, ensure the payment)
conformity of goods) ⚫ Take delivery of
⚫ Hand over any the goods
documents
relating to the
goods

93
 1. Seller’s Obligations

⚫ A seller is required to:

1. deliver the goods,
2. hand over any documents relating to them,
3. ensure that the goods conform to the
contract.
⚫ The place for delivery is the place agreed to in
the contract. Otherwise, it is:
1. the first carrier’s place of business, or
2. the place where the parties knew the goods
were located or were to be manufactured. 94
 Time for Delivery
⚫ Seller is under a duty to deliver the goods on
5th December.

⚫ Seller is under a duty to deliver the goods in

the last quarter of 2014

⚫ The latest delivery date is 5th December

⚫ No fixed or determinable time of delivery

95
 Time for Delivery and
Handing over Documents
⚫ Seller is to deliver goods on the date fixed in
the contract.
⚫ If no fixed date, within a reasonable time
after the conclusion of the contract.

⚫ At time and place of delivery, seller must

hand over any documents relating to the
goods that the contract requires.

⚫ If documents are delivered early, seller has

the right to cure any defect in the
documents.
96
 Time for Delivery and
passing of risk/ property

⚫ The goods are sold on CIF terms

⚫ While the goods are at sea, the sellers
give an order to the carriers to
transport the goods to another
destination.
⚫ And then the sellers sell the goods to
another buyer.
⚫ The sellers sell their own goods or the
buyer’s goods? 97
 Time for Delivery and
Effectiveness of contract
⚫ Time of delivery is in December 2013, and
delivery by installment is allowed.
⚫ Effectiveness of the contract is ended on 15th
Jan. 2014
⚫ On 10th Jan, the half of the goods were delivered,
and the buyers received the goods.
⚫ On 17th Jan, the rest of goods were shipped on
board, and the sellers informed the buyers
⚫ The buyers refused to take delivery
⚫ The buyers have right to do so?
98
 Conformity of Goods

⚫ Seller must deliver goods which are of the

quantity, quality, and description required by
the contract and are packaged in the manner
required.
⚫ Goods do not conform unless they:
a) are fit for the purpose of which goods of the
same description would ordinarily be used;
b) are fit for any particular purpose expressly or
impliedly made known to the seller;
c) possess the qualities of goods which the
seller has held out for the buyer as a sample;
d) are packaged in the same manner usual for
such goods. 99
 Conformity of Goods

⚫ Quality standard

⚫ Sale by sample or model

⚫ Sale by description

100
 Inspection of quality of the goods
1. Inspection of the quality of the goods shall be made
by Vinacontrol before shipment, and at the port of
loading.
2. Inspection of the quality of the goods shall be done by
Vinacontrol at the port of loading, and the certificate is
final and binding to the parties to contract.
3. Inspection of the quality of the goods shall be done by
SGS in Singapore at the port of unloading
4. Inspection of the quality of the goods shall be done by
SGS in Singapore at the port of unloading, and the
report is binding to the parties to contract.
5. Inspection of the quality of the goods shall be done by
Vinacontrol before shipment. At the destination port,
the goods shall be inspected by SGS in Singapore, and
the report is binding to the parties to contract. 101
 Inspection of quality of the goods
At the port of loading

⚫ Is the duty to check the quality of the goods

compulsory to the sellers?

⚫ Which inspection companies?

⚫ Time and place of inspection?

⚫ Methods and specifications?

102
 Inspection of quality of the goods
At the port of unloading

⚫ Is the duty to check the quality of the goods

compulsory to the buyers?

⚫ Which inspection companies?

⚫ Time and place of inspection?

⚫ Methods and specifications?

103
 How to solve the dispute over
quality

Sellers Buyers

Certificates ? Reports

104
 Example
⚫ Schubert, a company established in Germany, sells to
Hermsen, a company established in Holland, a number of
shirts, to be delivered before 1 May 2010. The shirts
are delivered on 29 April 2010. Unfortunately, the labels
indicating the size of the shirts are wrong. Hermsen gets a
little nervous because he is to supply these shirts to
Berin SA, a company established in France on May 2nd
2010. If these shirts are not delivered to Berin on that
date, Hermsen has to pay a fine of €25,000. Another
Dutch company is willing to change all the labels within
one day at a price of €15,000.
⚫ Question: What options does Hermsen have, if Schubert
cannot deliver the shirts with the right labels in them
before 1 May 2010? 105
 Question
In the contract

⚫ The Vietnamese seller and the Polish buyer entered

into a contract for sale of 12 MT of black tea

⚫ Quality: class B, maximum moisture ratio 9%,

maximum ash ratio 6.5%, maximum impurities ratio
0.3%

⚫ Inspection of the quality of the goods shall be done by

Vinacontrol at the port of loading. 106
 Question
Implementation
⚫ Before loading, VN seller requested Vinacontrol to inspect the
quality of the tea. The certificate dated May 7th 2010 states
that the quality of the tea complied with the specifications in
the contract, but no details were specified.
⚫ In June 2010, the goods arrived at Gdynia port, Poland
⚫ In Nov. 2010, the buyer requested SGS to examine the quality
of the tea, issuing the report dated Nov 15th 2010 in which
stating that: the quality didn’t meet the specifications in the
contract (iron-containing magnetic impurities: 6.05%, ash
insoluble in water: 11.14%), the tea was non-consumable
⚫ Sanitary government agency in Gdynia also inspected the
quality of the tea and issued the same outcome report.
⚫ Hygiene Food Standard Agency didn’t issue the import license
107
to the buyer
 Question
The buyer made a claim against the VN seller:

⚫ The contract value for 12 MT: $9,300

⚫ Freight shipping cost from Haiphong port to Gdynia

port: $1,925

⚫ Shipping detention charge: $10,250

⚫ Cost of storing the tea at the destination port: $570

⚫ Inspection fee: $300

Was the claim valid? What losses were recoverable

108
 2. Buyer’s Obligations
⚫ A buyer is required to (1)
pay the price and (2) take
delivery of the goods.
⚫ Unless a different time is
specified, the buyer must
pay when the goods or the
documents controlling their
disposition are delivered.
⚫ If place of delivery is specified,
payment is also made there. If
no place of delivery is specified,
then buyer must pay at the
seller’s place of business.
109
 Price/ Payment
Price
⚫ Fixed price: $300/MT
⚫ Open price

Payment
⚫ Relation between L/C and the contract
▪ Parties
▪ L/C terms >< contract terms

110
 Question
⚫ A contract called for Seller to send 10 bales of No. 1
quality cotton to Buyer; the terms were F.O.B.
Seller’s city. Buyer agreed to pay in exchange for
shipping documents that were to be presented after
arrival of the goods.
⚫ Seller loaded the 10 bales of No. 1 quality but during
carriage the cotton was so charred by fire as to be
worthless.
⚫ Buyer exercised his right to inspect the goods before
payment and refused to pay for the goods because
they were not "No. 1" quality as required by the
contract. 111

⚫ Does the buyer have right to do so?

 Payment
⚫ In the contract, time of delivery is in Sept.
2010
⚫ In L/C, the goods shall be delivered before
15th Sept. 2010
⚫ Can the L/C alter the contract term?
⚫ If the seller delivered the goods on 29th
Sept., 2010
⚫ Was the seller late in delivery? Pay
compensation?
⚫ What was the risk to the seller? 112
 Take delivery
⚫ Delay in taking delivery

⚫ Refusal to take delivery

113
LIABILITY FOR BREACH OF
CONTRACT

114
 3. Liability for breach of contract

Basis of liability
⚫ Breach of contract
⚫ Damage
⚫ Proximate cause
⚫ Fault: “the rule on presumption of fault”
 Basis of liability

⚫ Breach of contract
- complete failure to perform
- improper performance
 Basis of liability

⚫ Damage
- physical damage >< spiritual damage
- direct damage >< indirect damage
- actual damage >< speculative damage
- compensatory damage >< non-
compensatory damage
 Example
▪ The parties entered into the sale of yarn; however, the
quality of the yarn was poor and didn’t comply with the
description in the contract.
▪ The buyer reprocessed the yarn for the cost of X USD
▪ During the time for reprocessing the yarn, the working
capacity of the factory was reduced due to shortage of the
yarn. This led to the loss of profit for Y USD
▪ The buyer was late in delivery the textile fabric to its
customer, getting a penalty for Z USD
▪ The buyer was late in paying the wages to its workers.
They carried out a strike, causing the loss of T USD
▪ Which loss was the buyer entitled to recover?
118
 Basis of liability

⚫ Proximate cause

Damage must be proximately caused by the

wrongful conduct of the defendant.
 Example

▪ Sale on FOB Incoterms 2010

▪ The buyer is late in requesting the carrier to
load the cargo for 20 days
▪ The seller suffers some losses:
- Cost for storage
- Loss caused by rain during storage of the goods
- Loss caused by theft
▪ What loss are recoverable?
120
 Basis of liability

⚫ Fault: “the rule on presumption of

fault”
“Where one party breached any of its
obligations under the contract, he shall be
presumed guilty, and if so, the breaching
party must bear civil liability.
If the breaching party doesn’t wish to
bear civil liability, he must prove that he is
innocent or he isn’t at fault.”
 3. Liability for breach of contract
Excuses for breach of contract
⚫ Force majeure (Art.161 Civil Code 05)
An event of force majeure is an event which occurs in an
objective manner which cannot be foreseen and which
cannot be remedied by all possible necessary and
admissible measures being taken.

⚫ Dirty hand (entire fault of the obligee) (Art.

302(3) Civil Code 05)

⚫ A third party at fault

 Excuses for breach of contract
Force majeure
⚫ Taking place within the effectiveness of the
contract.
⚫ Occurring in an objective manner
⚫ Can’t be foreseen
⚫ Can’t be remedied by all possible necessary
and admissible measures
 Obligations of the parties who fails to
perform

⚫ Giving notice to the other party

If not giving notice?

⚫ Providing the certification of the force majeure

event and proving the causation
If can’t provide the evidence?
 Legal effects of force majeure

⚫ Natural disasters

⚫ Human or technical failure

 How to define a force majeure clause

⚫ Give a definition of force majeure

⚫ Draw up an open list of typical force majeure

events

⚫ Clearly specify the obligations of the parties in

breach

⚫ Stipulate the legal effects

 A third party at fault

Manu-
domestic Seller international Buyer
facturer

Non-delivery Non-delivery

? Is the seller exempted from liability to the buyer

 A third party at fault
Seller contracted to sell Buyer a machine to be
built in accordance with specifications supplied
by Buyer. Seller contracted with Electron to
manufacture the machine. Electron had a good
reputation for efficiency and responsibility but,
in this case, mismanaged production so that it
was unable to deliver the machine. At the time
of Electron’s default, Seller could not obtain the
machine from another supplier and was unable
to deliver the machine to Buyer.
REMEDIES FOR BREACH OF
CONTRACT

129
 Buyer’s Remedies

⚫ The buyer’s remedies are cumulative,

meaning they are able to be joined or taken
together.
⚫ The remedies unique to the buyer are:
1. to compel specific performance,
2. to avoid the contract,
3. to reduce the price,
4. to refuse early delivery, and
5. to refuse excess quantities.
130
 Buyer’s Remedies

⚫ The buyer may avoid a contract if either

1. The seller commits a fundamental breach or
2. The buyer gives the seller a Nachfrist notice
and the seller rejects it or does not perform
within the period it specifies.
⚫ A buyer’s Nachfrist notice is the fixing of an
additional period of time of reasonable length
for performance by the seller of his or her
obligations.
⚫ During the Nachfrist period, the seller is
entitled to correct or cure the nonconformity
at his or her own expense.
131
 Reduction in Price
⚫ If a buyer is not entitled to damages when a
seller delivers nonconforming goods, the
buyer will be entitled to a reduction in price.
⚫ The buyer may reduce the price in the same
proportion as the value that the goods
actually delivered had at the time of delivery
bears to the value that conforming goods
would have had at that time. The formula is:

132
 Seller’s Remedies
⚫ The seller’s remedies mirror those of the
buyer.
⚫ The seller’s remedies are both cumulative
and immediate.
⚫ The remedies unique to the seller are:
1. To compel specific performance,
2. To avoid the contract for a fundamental
breach or failure to cure a defect, and
3. To obtain missing specifications.
133
 Remedies Available to Both Buyers
and Sellers

⚫ Remedies available to both are:

1. Suspension of performance,
2. Avoidance in anticipation of a fundamental
breach,
⚫ A remedy available to either party when
it becomes clear that the other party will
commit a fundamental breach.
3. Avoidance of an installment contract, and
4. Damages.
⚫ A breaching party is liable only for those
damages that he/she foresaw or ought
to have foreseen.
134
 Remedies for breach of contract

⚫ Specific performance
Specific performance means the innocent
party requests the defaulting party to
properly implement the contract or to take
other measures to cause the contract to
be performed, and the defaulting party
shall bear any costs incurred.
 Remedies for breach of contract

⚫ Penalty (liquidated damages)

A penalty for breach means an agreement
between the parties within the contract,
pursuant to which a party breaching an
obligation shall pay a sum of money to
the party whose rights are breached.
 Penalty (liquidated damages)

The Seller shall refund the price for the

returned goods within 120 days of the
return, otherwise, 1% daily interest shall
be added.
 Penalty (liquidated damages)

Article 300 of CL 2005

The penalty level shall be agreed by the parties but shall
not exceed 8% of the value of the contractual obligation
which is subject of the breach
Article 422 of CC2005
1. A penalty for breach means an agreement between the
parties within the contract, pursuant to which a party
breaching an obligation shall pay a sum of money to the
party whose rights are breached.
2. The amounts of penalties for breach shall be as agreed
between the parties.
 Remedies for breach of contract

⚫ Damages
Damages means the breaching party pays
compensation for the loss caused to the
innocent party by a breach of the contract.
 Damages

⚫ General rule for measuring damages:

The innocent party has a right to be fully compensated
for all actual losses suffered as a result of the breach of
contract and he is to be put in the same position as he
would be in had the breach not occurred
⚫ Loss can be compensated:
(i) loss of property
(ii) reasonable expenses to prevent or mitigate damage
(iii)loss of income or profit
 Remedies for breach of contract

⚫ Cancellation
⚫ Fundamental breach
Effect of cancellation of contract
⚫ The contract shall be ineffective as from the
time at which it was entered into
⚫ Each party must return anything it has
received from the other party; if restitution
cannot be made in kind, it must be paid in
money.
⚫ The party at fault in relation to the
cancellation of a contract must compensate
for any damage.
 Fundamental breach
Article 25 of CISG
A breach of contract committed by one of the parties is
fundamental if it results in such detriment to the other
party as substantially to deprive him of what he is entitled
to expect under the contract, unless the party in breach
did not foresee and a reasonable person of the same kind
in the same circumstances would not have foreseen such a
result.
Article 3(13) of CL 2005
Fundamental breach means breach of contract by one
party causing loss to the other party to the extent that
such other party is unable to achieve its objective in
entering the contract.
 Exercise 1

⚫ Abels, a company established in Holland,

sells to Bartels, a company established in
Germany, a number of radios at a price of
€150,OOO. The moment they are delivered
to Bartels it becomes clear that these
radios suffer from an electronic defect.
⚫ Question: Has the seller fulfilled his legal
obligations?

143
 Answer

Art. 35, 1 and 2, (a) CISG: is a breach

of contract by the Dutch seller Abels because
the radios are not fit for normal use.
Exception in Art. 35, 3 CISG: if artels,
the German buyer, knew he was buying
radios with these kinds of defects, then of
course there is no breach of contract

144
 Exercise 2
⚫ Angelo, a company established in Italy, sells a machine
to Bouvais, a company established in France, to be
delivered before 1 March 2005. When Angelo fails to
deliver the machine on time, Bouvais makes a written
demand that Angelo perform his delivery within 14
days. Angelo does not respond and Bouvais, after
informing Angelo once again in writing that he
considers their contract cancelled, orders a new machine
on 15 March 2005 from another seller. On 20 April
2005 Angelo still wants to deliver the machine to
Bouvais.
⚫ Question: Does Bouvais have to accept this
delivery of Angelo? 145
 Answer

No, as the contract has been correctly

nullified using Art. 49 CISG after the period of
three weeks given to the Italian seller
Angelo by the French buyer Bouvais (Art. 46
and 47 CISG), there no longer is a contract
and there are no further obligations

146
 Exercise 3

⚫ Amelie, a company established in France,

buys a machine from Gomez, a company
established in Spain. In their contract no
arrangement is made concerning where
payment of the machine should be made.
⚫ Question : Where does payment of the
machine have to take place?

147
 Answer

Art. 57, 1, (a) CISG: if no place for

payment has been agreed upon, the seller's
place of business is the place for payment,
so the place for payment in this case is
where Gomez, the Spanish seller has his place
of business

148
 Exercise 4

⚫ Arragon, a company established in Spain,

sells a machine to Bruinink, a company
established in Holland, at a price of
€300,000. The payment of the machine shall
be made cash on delivery. The machine is
to be delivered at Bruinink's factory on 1
March 2005. But the factory is closed on
this date and Arragon cannot deliver the
machine to Bruinink that day.
⚫ Question: Does Bruinink nevertheless have to
pay? 149
 Answer

Art. 53 and 60 CISG: Bruinink has the

obligation to receive the goods and to pay
the price; that the factory was closed on the
day of delivery is his own fault.

150
 Exercise
⚫ Arranguez, a company established in Spain, has to
deliver a machine to Bleckmann, a company
established in Germany. It is agreed that buyer
Bleckmann is to take care of its transport.
Bleckmann hires Derksen, a company established in
Holland, to take care of the transport . Derksen's
truck is subsequently struck by lighting and both
the truck and the machine are destroyed.
⚫ Question: Does Bleckmann have to pay
Arranguez for the machine?
151
 Answer
Yes, as under Art. 67 CISG the risk passed
from Arranguez to Bleckmann the moment
the goods were handed over to the first
carrier, this being Derksen. And after the risk
passes to Bleckmann he has an obligation
to pay, even though the goods have
perished, this according to Art. 66 CISG.

152
 Exercise
The buyer, a company with its headquarters in the UAE placed an order with
the seller, a French company, for 128 decorated laminated glass panels for
the construction of a dome in an Egyptian hotel. The buyer noted when the
goods arrived at the port of Dubai in February 2012 that 35 of the panels
were unusable because the decorative films had come unstuck and were
creased. On 26 February 2012 the buyer sent a fax to the seller stating that
"the product does not meet the required standards". The buyer had a number
of amicable expert evaluations carried out with a view to finding out whether
the lack of conformity of the goods was due to a manufacturing fault or a
transport fault, but the reports produced conflicting results. The last
evaluation report was issued on 22 August 2012. On 6 May 2013 the buyer
brought an action against the seller and claimed avoidance of the contract as
well as restitution of the price with interest and payment of damages.
The seller argued that the claim for avoidance is inadmissible because
avoidance had not been declared within a reasonable time, as required by
article 49(2) CISG
What are your opinions?

153
 Exercise
A Swiss buyer ordered 500 cubic metres of Romanian wood through an
Austrian middleman, who accepted full liability for the delivery of the wood
on behalf of the seller, a Romanian company. It was agreed that 70 per cent
of the price should be paid upon inspection and approval of goods and the
rest upon delivery. The seller provided security for the part of the price to be
prepaid.
The Swiss buyer, after inspection and approval of the wood, placed an order
for only 200 cubic metres and paid the advance payment by ordering a bank
transfer for 70 per cent of the corresponding reduced price.
The Romanian seller refused to deliver the reduced quantity of wood,
insisting on the original conditions on the contract, and sold all the wood to
another client at a reduced price. When asked to return the advance payment
to the Swiss buyer, the seller kept it to offset the damages arising from the
sale at a reduced price. The buyer sued the Austrian middleman to recover
the advance payment.
What are your opinions?

154
 Exercise
Downs Investment, an Australian company (the seller), entered into a
contract with the Malaysian company Perwaja Steel (the buyer), for the
purchase and shipment of scrap steel to be shipped from Australia to
Malaysia.
According to the contract, an irrevocable letter of credit from the buyer in
favour of the seller was required prior to shipment. Shortly before having to
provide the letter of credit, the structure and management of the buyer
changed. Under this new management structure, the buyer was obliged to
obtain permission from an executive committee before it could provide a
letter of credit. The buyer failed to provide a letter of credit upon the seller's
request, as the executive committee could not communicate any instructions
within a short time.
Upon receipt of this communication from the buyer, the seller terminated the
contract.
Can the seller do so?

155
 Question
On June 1 Seller delivered to Buyer a Sales Order form that proposed
the sale of $1,000 bags of No. 1 quality sugar on specified terms,
including shipment on July 1. Printed provisions on the back of the
Sales Order form included the statement: "The goods will be
packaged in sound bags." On June 5 Buyer delivered to Seller a
Purchase Order form that purported to accept Seller’s offer. The back
of the Purchase Order had printed terms that, in general
corresponded with those on Seller’s form, but included the
statement: "Shipment in new packages or bags." Seller did not
object to Buyer’s Purchase Order and expected to ship the sugar on
July 1 in new bags. On June 25 there was a sharp drop in the price of
sugar. Buyer consulted his lawyer to see whether he was legally
bound. Comparison of the two forms revealed the divergency as to
"new bags," and on June 27 Buyer cancelled the order on the ground
that Seller had not accepted his "offer" of June 5.

Advise the Buyer?

 Questions
On June 1 Seller delivered to Buyer a Sales Order form that proposed
the sale of $1,000 bags of No. 1 quality sugar on specified terms,
including shipment on July 1. Printed provisions on the back of the
Sales Order form included the statement: "The goods will be
packaged in sound bags." On June 5 Buyer delivered to Seller a
Purchase Order form that purported to accept Seller’s offer. The back
of the Purchase Order had printed terms that, in general
corresponded with those on Seller’s form, but included the statement:
"Shipment in new packages or bags." On June 6 Seller wired Buyer:
"Do not have adequate supply of sugar in new bags; can ship sugar in
sound, secondhand bags." On June 7 Buyer replied: "Insist on new
bags." On June 8 Seller wired "Cannot comply with your request."
Buyer did not reply and Seller did not ship. By July 1 the price of
sugar had advanced, and Buyer claims damages for breach of
contract.
Advice the Buyer?
157
 Reduction in Price

⚫ If a buyer is not entitled to damages when a

seller delivers nonconforming goods, the
buyer will be entitled to a reduction in price.
⚫ The buyer may reduce the price in the same
proportion as the value that the goods
actually delivered had at the time of delivery
bears to the value that conforming goods
would have had at that time. The formula is:

158
 Seller’s Remedies

⚫ The seller’s remedies mirror those of the

buyer.
⚫ The seller’s remedies are both cumulative
and immediate.
⚫ The remedies unique to the seller are:
1. To compel specific performance,
2. To avoid the contract for a fundamental
breach or failure to cure a defect, and
3. To obtain missing specifications.
159
 Remedies Available to Both Buyers
and Sellers

⚫ Remedies available to both are:

1. Suspension of performance,
2. Avoidance in anticipation of a fundamental
breach,
⚫ A remedy available to either party when
it becomes clear that the other party will
commit a fundamental breach.
3. Avoidance of an installment contract, and
4. Damages.
⚫ A breaching party is liable only for those
damages that he/she foresaw or ought
to have foreseen.
160
 Excuses for Non-performance
⚫ Force majeure – a party is not liable for any
damages resulting from his/her failure to
perform if the party can show:
1. the failure was due to an impediment
beyond his/her control,
2. that the impediment was not something
he/she could have reasonably taken into
account at the time of contracting, and
3. that he/she remains unable to overcome
the impediment.
⚫ Examples: disasters, war, strikes
161
 Study Vietnam Commercial
Law 2005!

⚫ Remedies available;
⚫ Basis for remedies;
⚫ Excuses for non performance.

162
 Means of Delivery

⚫ Goods may be delivered by a carrier or by the

seller.
⚫ In shipment, transshipment, in-transit, and
destination contracts, the risk of loss will not
pass until the goods are clearly identified to the
contract by markings on the goods, shipping
documents, or notice given to the buyer.
⚫ In a shipment contract where the seller is to
deliver the goods to a carrier and does not
require that the seller deliver to a particular
place, the risk passes when the goods are
handed over to the first carrier.
163
 Means of Delivery

⚫ If the goods are to be delivered “Free Alongside

Ship” (FAS) Big Ocean, New York City, NY, the
seller bears the risk until the goods are delivered
to NY alongside the Big Ocean.
⚫ When a contract requires the seller to arrange
transportation to a specific destination, the risk of
loss does not pass to the buyer until the goods
are handed over or placed at his/her disposal at
that place. When a seller in China agrees to a
contract containing a “Delivered Duty Paid (DDP)
Los Angeles, California, the seller bears the risk
of transporting the goods to LA.
164
 Third-Party Claims, Waiver, Time for
Examining Goods, and Curing Defects

⚫ Goods are nonconforming if they are subject to

third-party claims such as ownership and rights in
intellectual property.
⚫ The parties may waive the conformity
requirement.
⚫ Buy has an obligation to examine the goods for
defects within as short a period as is practicable
after delivery.
⚫ Buyer is obligated to inform the seller of any
discovered defect within a reasonable time.
⚫ If a seller delivers early, he or she may cure any
defect up to the agreed upon date for delivery. 165