international sales law - seminar 2004 isl contractual risk management in transnational sales...

INTERNATIONAL SALES LAW - seminar 2004ISL

Contractual Risk Management in Transnational Sales Transactions

ISL: objectives, functions and structure

Management of information on ISL

Management of risk of contractual disputes

Management of risk of contract breach

Management of risk of loss of or damage to the goods

Management of risk of changed circumstances

Case study

Case studies

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http://www.jus.uit.no/ansatte/keskitalo/ISL/ISL%20-%20Lectures%200.pps










Contract lawContracting

(risk of non-performance, delay or non-conformity)Management of risk of contract breach

ISC

Default distribution of risks in sales law ISL

- CISG art. 25-26, 28, 45-52, 61-65, 71-88

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- duty to co-operate (art. 60)- right/obligation to specific performance (art.

46.1 and 62)- right to suspend performance (art.71)- substitute performance (art. 46.2)- repairment (art. 46.3)- price reduction (art. 50)- avoidance (art. 49, 64, 72, 73)- damages (art. 74-77, 79)

CISG art. 74:

Damages for breach of contract by one party consists of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the other party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.

CISG art. 77:

A party who relies on a breach of contract must take 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.

CISG art. 71:

…(2) If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller...

http://www.cisg.law.pace.edu/cisg/text/cisg-toc.html











ISCPECL

ARTICLE 8:105: Assurance of Performance

(1) A party who reasonably believes that there will be a fundamental non-performance by the other party may demand adequate assurance of due performance and meanwhile may withhold performance of his own performance so long as such reasonable belief continues.

(2) Where this assurance is not provided within a reasonable time, the party demanding it may terminate the contract if he still reasonably believes that there will be a fundamental non-performance by the other party and gives notices of termination without delay.

Management of risk of contract breachDefault distribution of risks in contract law

- PECL art. 6:111 and chapters 7 to 9

- UPICC chapters 6 and 7

- CENTRAL TLDB chapters VI-IX

UPICC

ARTICLE 7.4.13 (Agreed payment for non-performance)

(1) Where the contract provides that a party who does not perform is to pay a specified sum to the aggrieved party for such non-performance, the aggrieved party is entitled to that sum irrespective of its actual harm.

(2) However, notwithstanding any agreement to the contrary the specified sum may be reduced to a reasonable amount where it is grossly excessive in relation to the harm resulting from the non-performance and to the other circumstances.

UPICC

ARTICLE 7.1.6 (Exemption clauses)

A clause which limits or excludes one party’s liability for non-performance or which permits one party to render performance substantially different from what the other party reasonably expected may not be invoked if it could be grossly unfair to do so, having regard to the purpose of the contract.

PECL

ARTICLE 8:107: Performance Entrusted to Another)

A party who entrusts performance of the contract to another person remains responsible for performance.

ISL

Contracting- CISG art. 25-26, 28,

45-52, 61-65, 71-88

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http://www.jus.uio.no/lm/eu.contract.principles.1998/doc.html

http://www.unidroit.org/english/principles/princ.htm

http://www.tldb.de/











(- bid bonds)- performance bonds- payment conditions and securities- liquidated damages and other ”hostages”- exemption clauses

- CISG art. 25-26, 28, 45-52, 61-65, 71-88


ISC

Contractual allocation of risks in contracting practice




ISL

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ICC Uniform Rules for Contract Guarantees

(URCG)ICC Publication No 325


- CISG art. 25-26, 28, 45-52, 61-65, 71-88


ISC





ISL

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ICC Uniform Rules for Demand Guarantees

(URDG)ICC Publication No 458

Rules on International Standby Practices (ISP 98)

ICC Publication No 458












- CISG art. 25-26, 28, 45-52, 61-65, 71-88

ISC






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PAYMENT

Management of risk of contract breachContractual allocation of risks in contracting practice

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forms ofPAYMENT


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payment

documentarypayment

check/draft

payment order(SWIFT)







forms ofPAYMENT


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payment

documentarypayment

check/draft

payment order(SWIFT)

collection

documentary credit/letter of credit/

L/C

confirmed

unconfirmed

irrevocable

revocable

ICC Uniform Rules for Collections(URC)


ICC Uniform Customs andPractice for Documentary

Credits (UCP 500),ICC Publication No 500











transport documents:

- bills of lading- electronic bills of lading

- sea waybills- mate’s receipt

- air waybill- consignment note (CIM/CMR)- multimodal transport document

- warehouse warrant

ICC Uniform Rules for Contract Guarantees,


PAYMENTterms

in advance

control over the goods

repayment guarantee

performance guarantee


ICC Uniform Rules for Contract Guarantees,


The ICC Model International Sale Contract


B. GENERAL CONDITIONSArt. 5.2

”If the parties have agreed on payment in advance, without further indication, it will be assumed that such advance payment, unless otherwise

agreed, refers to the full price, and that the advance payment must be received by the Seller’s bank in immediately available funds at least 30 days before the agreed date of delivery or the earlist date within the agreed delivery period. If advance payment has been agreed only for a part of the contract price, the payment conditions for the remaining amount will be

determined according to the rules set forth in this article.”

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Rules on International Standby Practices

(ISP 98)ICC Publication No 458













simultaneousexchange for

goods/documents


COD

CAD

througha third party

PAYMENTterms

in advance


repayment guarantee






”If the parties have agreed on payment by documentary collection, then, unless otherwise

agreed, documents will be tendered against payment (D/P) and the tender will in any case be subject to the Uniform Rules for Collections

published by International Chamber of Commerce.”

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ICC Uniform Rules for Collections(URC)


by parties themselves orthrough representatives












COD

CAD


PAYMENTterms


goods/documents

in advance


repayment guarantee




gradually

ORGALIME S 2000

Clause 19.

”Whatever the means of payment used, payment shall not be deemed to have been effected before the Supplier’s amount has been fully and irrevocably credited.”

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ORGALIME S 2000

GENERAL CONDITIONSfor the supply of mechanical, electrical and electronic products

PAYMENT

Clause 18.

”Unless otherwise agreed, the purchase price shall be paid with one third at the formation of the contract and one third when the Supplier notifies the Purchaser that

the Product, or the essential part of it, is ready for delivery. Final payment shall be made when the Product is delievered.

Payments shall be made within 30 days of the date of the invoice.”











ICC Uniform Rulesfor Demand Guarantees



credit

COD

CAD

open account

documentary credit


demand guarantee

standby letterof credit

PAYMENTterms


goods/documents

in advance


repayment guarantee








gradually




”If the parties have agreed on payment by documentary credit, then, unless otherwise

agreed, the buyer must arrange for a documentary credit in favour of the Seller to be

issued by reputable bank, subject to the Uniform Customs and Practice for

Documentary Credits published by the International Chamber of Commerce, and to be notified at least 30 days before the agreed date of delivery or at least 30 days before the earliest date within the argeed delivery period. Unless

otherwise agreed, the documentary credit shall be payable at sight and allow partial shipments

and transhipments.”

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B. GENERAL CONDITIONSArt. 5.1 setting payment on open account as the default

solution,

To the extent that the parties have agreed that payment is to be backed by a bank guarantee, the Buyer is to provide, at least 30 days before the agreed date of delivery or at least 30 days before the earliest date within the argeed delivery

Art. 5.5:” period, a first demand bank guarantee subject to the Uniform Rules for Demand Guarantees published by

International Chamber of Commerce, or a standby letter of credit subject either to such Rules or to the Uniform

Customs and Practice for Documentary Credits published by the International Chamber of Commerce, in either case

issued by a reputable bank.”











gradually


credit

COD

CAD

open account

documentary credit


demand guarantee


PAYMENTterms


goods/documents

in advance


repayment guarantee



retentionof title

- warehouse warrant- bills of lading

- electronic bills of lading- sea waybills

- mate’s receipt- air waybill

- consignment note (CIM/CMR)- multimodal transport document

transport documents:

security


ORGALIME S 2000

GENERAL CONDITIONSfor the supply of mechanical, electrical and electronic

products

RESERVATION OF TITLEClause 21.

”The product shall remain the property of the Supplier until paid for in full to the extent that such retention of property

is valid under the applicable law.The Purchaser shall at the request of the Supplier assist him

in taking any measures necessary to protect the Supplier’s title to the Product in the country concerned.

The retention of title shall not affect the passing of risk under Clause 9.”

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gradually


credit

COD

CAD

open account

documentary credit


demand guarantee


PAYMENTterms


goods/documents

in advance


repayment guarantee



retentionof title

security


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factoring/forfaiting

financialleasing

projectfinancing














ISC

- CISG art. 25-26, 28, 45-52, 61-65, 71-88





B. GENERAL CONDITIONSArt. 10

Late delivery, non-delivery and remedies thereof

”10.1 When there is delay in delivery of any goods, the Buyer is entitled to claim liquidated damages egual to 0,5% or such other percentage as may be agreed of the price of those goods for each complete week of delay. Where the Buyer so notifies the Seller within 15 days from the agreed date of delivery, damages will run from the agreed date of delivery or from the the last day within the

agreed period of delivery. Where the Buyer so notifies the Seller after 15 days of the agreed date of delivery, damages will run from the date of the notice.

Liquidated damages shall not exceed 5 % of the price of the delayed goods or such other maximum amount as may be agreed.”

”10.4 In case of termination of the Contract under article 10.2 or 10.3 then in addition to any amount paid or payable under article 10.1, the Buyer is entitled to

claim damages for any additional loss not exceeding10 % of the price of the non-delivered goods.”

ORGALIME S 2000

GENERAL CONDITIONSfor the supply of mechanical, electrical and electronic products

TIME FOR DELIVERY. DELAY

Clause 13.

”If the Product is not delivered at the time for delivery (as defined in Clauses 10 and 12), the Purchaser is entitled to liquidated damages from the date on

which delivery should have taken place.The liquidated damages shall be payable at a rate of 0.5 per cent of the

purchase price for each completed week of delay. The liquidated damages shall not exceed 7.5 per cent of the purchace price.

If only part of the Product is delayed, the liquidated damages shall be calculated on that part of purchase price which is attributable to such part of the Product as cannot in consequence of the delay be used as intended by

the parties...”

Clause 14.

The Purchaser shall forfeit his right to liquidated damages if he has not lodged a claim in writing for such damages within six months after the time

when delivery should have taken place.

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- CISG art. 25-26, 28, 45-52, 61-65, 71-88

ISC


ORGALIME S 2000

GENERAL CONDITIONSfor the supply of mechanical, electrical

and electronic products

Consequential Losses

”43. Save as elsewhere stated in these conditions there shall be no liability for either party towards the other party for loss of production, loss of profit, loss of use, loss of contracts or for any consequential or indirect loss whatsoever.”

NL 01 E

GENERAL CONDITIONSfor the supply of machinery and other

mechanical, electrical and electronic equipment.

Liability for Defects

”34. The Seller shall have no liability for defects save as stipulated in Clauses 21–33. This applies to any loss the defect may cause, such as loss of production, loss of profit and other consequential economic loss. This limitation of the Seller’s liability shall not apply, however, if he has been guilty of gross negligence.”

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VI Management of risk of loss of or damage to the goods


international sales law - seminar 2004 isl contractual risk management in transnational sales...

Documents

breach of contract

contract breach cisg

isl management of risk

goods management of

contract law pecl

assurance of performance

aggrieved party

substitute performance