Remedies for Breach of International Sales

Remedies for Breach of International Sales

CISG provides remedies similar to the UCC:

§Monetary damages that are foreseeable, consequential damages.

§Damages are difference between contract price and market price.

Parties can agree to what law they will use.

Seller- Goods in Seller’s Possession

Seller may withhold delivery of the goods:

§If material breach by Buyer, Seller can withhold delivery of all goods.

§If non-material breach, Seller can withhold delivery of this installment.

Seller can withhold delivery of all goods if Buyer is insolvent.

Seller may rescind the contract.

Seller may identify the goods to the contract.

Seller may sell raw materials for scrap or finish production.

Seller may resell the goods; and

§Recover damages: the difference between the contract price and the resale price + incidental damages+ damages = the market price at the time & place of tender  + incidental damages - expenses saved.

§If No Damages, Seller can sue for lost profits.

Case 22.1:  Brandeis Machinery v. Capital Crane Rental (2002).

Seller may sue Buyer for breach of contract.

§Recover Damages = the market price at the time & place of tender  + incidental damages.

•if there are no damages, Seller can sue for lost profits.

Seller-Goods in Transit

Goods are “in transit” when Seller has tendered goods to Carrier.

Goods are in transit until:

§Buyer is given negotiable document of title to goods.

§Buyer is given non-negotiable document of title or Bailee has acknowledged Buyer’s right to have the goods.

§Buyer has had a reasonable time to pick up the goods.

Seller has the right to stop the goods in transit if:

§Buyer is insolvent - Seller can stop entire shipment of goods.

§Buyer is in breach - Seller may stop a whole truckload or whole container.

Seller-Goods in Buyer’s Possession

Seller may sue for the purchase price.

§Seller may also sue Buyer if goods were  “specially-made” which Seller cannot resell.

§Seller may also sue for the purchase price if the goods were destroyed and the risk had already passed to the Buyer.

Seller can reclaim goods received by an insolvent Buyer if demand made within 10 days of receipt.

Partial Performance

Partial Performance

Sometimes unforeseen event only partially affects Seller’s capacity to perform.

In that event, Seller has duty to reasonably allocate any remaining production capacity to fulfilling contractual performance.

Buyer has the right to reject.

Case 21.2: Kock Materials Co. v. Shore Slurry Seal, Inc.  (2002).

Destruction of Goods

Destruction of Goods

If no fault of either party and it occurs,

Before risk passes to Buyer then,

Both Seller and Buyer are excused from performance.

Installment Contracts

Installment Contracts

Installment Contracts can be rejected if:

§ Installment is substantially non-conforming and can’t be cured.

§ Non-conforming installment substantially impairs the entire contract.

Commercial Impracticability

Commercial Impracticability

Occurrence of an unforeseen contingency that makes performance impracticable.

Nonoccurrence was a basic assumption on which the contract was made.

If only partial impracticability, Seller must allocate what he/she has.

Case 21.1: Maple Farms v. City School District of Elmira (1974).

Substitution of Carriers

Substitution of Carriers

If a carrier becomes impracticable or unavailable through no fault of either party, a commercially reasonable substitute is acceptable.

Seller’s Cure

Seller’s Cure

Seller has the right to “Cure” (ship conforming goods to Buyer) if:

§ Agreed time of performance has not yet expired; or

§ If Seller had reasonable grounds to expect that Buyer would accept non-conforming goods, i.e., these goods are better than goods ordered, or Buyer has accepted non-conforming goods in the past.

Agreement of the Parties

Agreement of the Parties

Parties agree that some defective goods will be acceptable.

Parties agree that defective goods can be replaced or repaired within a certain time.

International Contracts and Letters of Credit

International Contracts and Letters of Credit

Parties.

§ Account: Buyer.

§ Issuer: Bank.

§ Beneficiary: Seller.

Issuer is bound to pay the beneficiary who has complied with the terms and conditions of the letter of credit, usually requiring a bill of lading to the issuer to prove shipment has been made.

Acceptance

Acceptance

Buyer can accept goods:

§ By words or conduct.

§ If Buyer had reasonable amount of time and failed to reject.

§ Buyer performs an act which indicates he thinks he is the owner.

Partial Acceptance.

Buyer’s Obligations

Buyer’s Obligations

Buyer has right to inspection before paying:

§ Costs of inspection borne by Buyer.

§ However, C.O.D., C.I.F. and C&F give Buyer no right to inspect.

Buyer-Lessee Obligations

Buyer-Lessee Obligations

Furnish facilities reasonably suited for receipt of the goods.

Make payment at the time and place the Buyer receives the goods.

§ Credit has to be prearranged.

•    Credit period begins on the date of shipment.

§ Pay with cash, credit card, and check.

•     But if Seller asks for cash, Seller has to give Buyer time to get cash.

Exceptions to the Perfect Tender Rule

Exceptions to the Perfect Tender Rule

ü Agreement of the Parties.

ü Cure.

ü Substitution of Carriers.

ü Installment contracts.

ü Commercial Impracticability.

ü Destruction of Identified goods.

Partial Performance.                   

The Perfect Tender Rule

The Perfect Tender Rule

If goods, or tender of delivery, fail in any respect to conform to the contract, the Buyer has the right to:

§  Accept the goods;

§  Reject the entire shipment; or

§  Accept part and reject part.

Place of Delivery—Carriers

Place of Delivery—Carriers

Shipment contracts. Seller has a duty to:

§ Put goods into hands of independent carrier.

§ Make contract for transportation.

§ Obtain and promptly deliver or tender to the Buyer any documents necessary.

§ Promptly notify Buyer that shipment has been made.

Destination contracts. Seller has duty to:

§ Tender the goods at a reasonable hour and hold conforming goods at the Buyer’s disposal for a reasonable period of time.

Place of Delivery--Non-Carriers

Place of Delivery--Non-Carriers

Buyer picks up at Seller’s place of business or, if Buyer has no place of business, then Buyer’s residence.

If both parties know the goods are elsewhere (at a warehouse), then place of delivery is where the goods are.

Seller-Lessor Obligations

Seller-Lessor Obligations

Seller has a duty to “tender” delivery of “conforming goods.”

Tender means “delivery” to agreed place:

§ With reasonable notice.

§ At a reasonable hour.

§ In a reasonable manner.

§ Exactly, unless otherwise agreed.

Good Faith Requirement

Good Faith Requirement

Good Faith is the foundation of every UCC commercial contract.

Good faith means honesty in fact.

For a merchant, it means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade. Merchants are held to a higher standard of care than non-merchants.

Performance of Sales and Lease Contracts

Performance of Sales and Lease Contracts

Introduction

Seller must transfer and deliver conforming goods.

Buyer must accept and pay for conforming goods.

In the absence of an agreement between Seller and Buyer, UCC Article 2 controls as set out below.