Module 7 b Commercial Dispute Resolution International Commercial Disputes

Module 7(b) Commercial Dispute Resolution International Commercial Disputes International Commercial Arbitration Winter 2017 ©MNoonan 2009

This presentation and Copyright therein is the property of Maureen Noonan and is prepared for the benefit of students enrolled in the Commercial Transactions course conducted by the Law Extension Committee and is available for their individual study. Any other use or reproduction, including reproduction by those students for sale without consent is prohibited. ©MNoonan 2009

International Sales of Goods So far, we have talked about sales of goods within Australia, where a dispute would be dealt with under our law and in our courts or by domestic ADR or arbitration What is the situation with contracts involving a NSW / Australian party and a foreign party? Note the need to specify the law of the contract re interpretation of the contract terms and to consider CISG.

International Sales of Goods What is the situation with • Product • Performance Liability? In this case, the law governing the outcome may not be Sale of Goods Act or ACL.

International Sales of Goods Where a contract for sale of goods is between an Australian business and a foreign business in a country a party to the Vienna Convention, the terms of the Vienna Convention/aka CISG apply ((by virtue of State Acts…in NSW, Sale of Goods (Vienna Convention) Act)), with certain exceptions, unless specifically excluded, and prevails over Australian law to the extent of any inconsistency.

CISG application If countries other than Australia are involved in any Exam Q, students should assume that CISG applies unless specifically excluded in the facts provided and applies via a national law enacted pursuant to the Convention. Note that for the purposes of this module, certain subtleties of CISG application are glossed over to enable a general view to be given in one module. In practice, these subtleties may have significance.

CISG Applies: Where law of the contract is law of a party to the convention. Students can assume in this course that is always so. CISG does not apply To sales of goods bought for personal, family or household use, auction sales, sales of financial instruments and securities, ships, electricity and sales by authority of law.

Sale of Goods Note that CISG applies to sales of GOODS only…. not services or information. Do we have contracts for the sale of goods in VIS Moot 11?

CISG Seller to deliver goods and any documents (Arts 31 -34) of the quantity, quality, description, packaging required by contract (Art 35). Partial and excessive delivery (Art 51, 52). Goods must conform. If seller does not meet obligations, buyer may compel performance, claim damages or reduce price. Buyer may fix additional time (Art 47) or declare contract avoided (Art 49) Buyer may reduce price for non conformity (Art 50). Buyer obliged to pay price and take delivery (Arts 53, 60). Unpaid seller remedies (Arts 61). Arts 54 -59 deal with determining price when not fixed. Seller may compel buyer to pay price or take delivery (Art 62) or fix additional period for performance (Art 63). Seller can avoid contract for fundamental breach (Arts 64, 25). Anticipatory breach and instalment contracts dealt with in Arts 71 -73. Damages covered by Arts 74 -77.

Formation of Contract While Agreement (offer and acceptance) and intention to be bound are elements of a contract under the Convention, consideration is not a necessary element. See Article 23

Offer • Offer must be sufficiently definite and indicate an intention to be bound…indicate goods, price and quantity. Article 14 • Offer to be interpreted “according to the offeror’s intention as perceived by the offeree” • Offer becomes effective when it reaches offeree. Article 15 • Offer can be revoked if revocation reaches offeree before they have dispatched acceptance. Article 16 • Offer terminated when rejection reaches offeror. Article 17

Acceptance is statement or conduct indicating assent to an offer. Article 18 Acceptance effective as soon as it reaches offeror. An acceptance which attempts to modify an offer is a counter-offer and a rejection of original offer. Article 19 Subjective intent important and parol evidence can be used, even if written contract meant to be complete record-different to local law.

Modification and usage Can be modified by agreement. Article 29 A failure to object to a unilateral attempt to modify does not constitute agreement. Parties bound by any usage they have agreed or any practices they have established between themselves. Article 9

Conformity Seller must deliver goods which are of the quantity, quality and description required by contract and in containers or packaging required by Contract. Article 35. In the absence of agreement to contrary, goods do not conform unless • they are fit for the purposes for which goods of the same description would ordinarily be used • fit for any particular purpose made known. • Have same qualities as any sample • Packaged in manner usual for such goods or if no such way, adequate to preserve and protect goods. Note details in Article 35.

Liability for non conformity Seller liable for nonconformity existing at the time risk passes even if only becomes apparent later. Article 36 Also liable for nonconformity occurring after risk has passed due to a breach of any seller obligation. If delivered prior to delivery date, seller can make up deficiency or part to time of delivery. Article 37 Buyer must examine goods for nonconformity within shortest period practicable Article 38 Buyer must notify non conformity or lose right to rely on it. Article 39 If goods do not conform, buyer may reduce the price in certain circumstances. Article 50

Article 35 The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for 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 at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model; (d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.

Liability for third party claims Seller must deliver goods free from rights or claims of third parties. Article 41 Seller must deliver goods free of IP claims. Article 42 Buyer cannot rely on these provisions unless they give notice. Articles 43, 44.

Payment Buyer must pay price, including take steps required by contract or law to enable payment to be made. Articles 53, 54. In absence of price deemed to have agreed comparable price. Article 55 Buyer not bound to make payment until given the opportunity to examine goods, and other payment details. Article 58.

Delivery Seller must deliver and transfer property in goods. Article 30. If place not specified, provisions in Article 31. Date –on date specified or within range specified or reasonable time after contract. Article 33 Buyer must take delivery as required. Article 53, including all acts reasonably expected to enable delivery. Article 60.

Risk Loss or damage to goods after risk has passed to buyer does not discharge obligation to pay unless loss or damage caused by seller’s act or omission. Article 66 Where carriage included, risk passes when handed to first carrier. Article 67 See also 68, 70.

Exemptions See Article 79. Party not liable for failure due to an impediment beyond their control Article 79 Party who fails to perform must notify other party of impediment. If notice not received within reasonable time, defaulting party is liable for damages resulting.

Anticipatory breach Article 71. A party may suspend performance if, after entry into contract, it becomes apparent that the other party will not perform a substantial part of their obligation as a result of a serious deficiency in their ability to perform or creditworthiness or their conduct in performance or preparation. Must give notice.

Fundamental breach Article 25 A fundamental breach results in such detriment to other party as substantially deprives them of what they are entitled to expect BUT not fundamental breach if party in breach did not foresee, and a reasonable person would not have foreseen such a result.

Buyers remedies Exercise rights provided by Articles 46 -52 -require performance, give an extension, require nonconformity to be remedied, avoid contract or reduce price. And/or Claim damages. Article 45

Seller Remedies Exercise rights Articles 62 -65 require performance, given an extension, avoid contract or make a specification Damages. Article 61

Avoidance No automatic avoidance. Must be declaration. Avoidance releases parties from contract obligations subject to damages, but does not affect terms re dispute settlement or rights and obligations on avoidance. See Articles 72, 64, 49 for circumstances when declarations of avoidance can be made. See Article 73 re instalment deliveries.

Mitigation Article 77 A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.

Damages and measure Articles 74, 75 Meant to provide equivalent of benefit of bargain Must be capable of calculation Lost profits recoverable Can recover interest Article 78 Specific performance determined under domestic law Art 28 Restitution Article 81.

VIS Moots Useful as a study tool for: • Conduct of International Arbitration • International disputes involving sales of goods See http: //www. cisg. law. pace. edu for copies of problems and memoranda for claimant and respondent.