sales
DESCRIPTION
TRANSCRIPT
![Page 1: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/1.jpg)
www.StudsPlanet.com
1CHAPTER 6
DOCUMENTARY SALE AND TERMS OF TRADE
![Page 2: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/2.jpg)
CONTRACTS AS A WAY TO MANAGE RISK
• Negotiate terms• Allocate risk• Fix performance obligation
www.StudsPlanet.com 2
![Page 3: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/3.jpg)
WHERE IS THE RISK IN AN INTERNATIONAL TRANSACTION?
• Similar in domestic transaction• Payment risk• Delivery risk
www.StudsPlanet.com 3
![Page 4: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/4.jpg)
DEFINITION
• Documentary Sale:• Buyer is required to pay upon presentation of
NEGOTIABLE DOCUMENT OF TITLE by seller
•Document of title= evidences ownership dock receipts, warehouse receipts and bills of lading
www.StudsPlanet.com 4
![Page 5: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/5.jpg)
DEFINITION
• Negotiability= legally transferred from one to another in return for value
www.StudsPlanet.com 5
![Page 6: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/6.jpg)
BILL OF LADING
• A document of title issued by a carrier to a shipper upon receiving goods for transport• Negotiable bills must be to order or to bearer
( but bearer instruments not used in Int. transactions)• Order instruments must be delivered and
indorsed
www.StudsPlanet.com 6
![Page 7: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/7.jpg)
DOCUMENTARY COLLECTION:PAYMENT AGAINST DOCUMENTS
• Separation of goods and documents facilitates trade• Controlling documents means you control the
goods
www.StudsPlanet.com 7
![Page 8: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/8.jpg)
STAGES IN DOCUMENTARY TRANSACTION
• Seller gives goods to Carrier and gets bill of lading• Seller indorses bill of
lading and gives to bank with other documents (ins.,cert. or origin, documentary draft)
www.StudsPlanet.com8
![Page 9: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/9.jpg)
DOCUMENTARY DRAFT
• Facilitates payment• Negotiable order to pay made out by seller• Drawn on buyer, payable to the seller• May be used with letters of credit which we
will discuss later
www.StudsPlanet.com 9
![Page 10: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/10.jpg)
THE DOCUMENTARY SALE
www.StudsPlanet.com 10
JapaneseImporter
American Exporter
CollectingBank
Exporter’s U.S. Bank
(Remitting Bank)
Sales ContractCIF Japanese Port
Documents Against Payment
A
A. Sales contract calls for documentary sale
B
B. Documents prepared - export license obtained - goods delivered to carrier
C
C
C. Negotiable bill of lading, insurance policy, certificates of origin, invoice withdraft attached presented to remitting bank
D
D. Documents forwarded for collection through International banking system
E
E. Documents presented for negotiation on payment
F
F. Payment remitted and exporter’s account credited
G
G. Importer claims goods and makes entry
![Page 11: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/11.jpg)
STAGES
• Seller’s bank forwards to collecting bank in buyer’s country• Documents released when buyer pays
www.StudsPlanet.com 11
![Page 12: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/12.jpg)
SPECIAL PROTECTION FOR PURCHASERS OF BILLS OF
LADING• Special protection for purchasers who take by
negotiation- they take free of any adverse claims• “Good faith purchaser” is one who purchases• for value( not to settle debt)• in good faith and without notice of ant claim• in the ordinary course of business
www.StudsPlanet.com 12
![Page 13: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/13.jpg)
IF YOU ARE NOT A GOOD FAITH PURCHASER, THEN
YOU ONLY TAKE THE RIGHTS OF A TRANSFEREE
• Who does this protect?
www.StudsPlanet.com 13
![Page 14: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/14.jpg)
KANEMATSU V. EURASIA EXPRESS
• Eurasia Express released the goods to Billiongold without the bill of lading and is therefore liable to the holder of the bill of lading.
www.StudsPlanet.com 14
![Page 15: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/15.jpg)
TRADE TERMS
• Responsibilities of buyer and seller need to be negotiated. Trade terms can be used as a short hand for assigned responsibilities and allocating when the risk passes from one party to another.
www.StudsPlanet.com 15
![Page 16: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/16.jpg)
TYPES OF CONTRACTS:SHIPMENT AND DESTINATION
• CIF= cost, ins. and freight included in price• Risk of loss passes when goods cross ship’s rail
at port of shipment
www.StudsPlanet.com 16
![Page 17: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/17.jpg)
BIDDELL BROTHERS V. CLEMENS HORST, P. 194
• Under CIF contract buyer has no right to inspect the goods before payment• Obligation to pay upon presentation of the
documents• Buyer wanted to inspect prior to payment even
though it was a CIF contract• Held for seller, the buyer is obligated to pay upon
presentation of the documents
www.StudsPlanet.com 17
![Page 18: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/18.jpg)
DOCUMENTARY SALE PROTECTS BUYER AND SELLER
• Risks for both?
www.StudsPlanet.com 18
![Page 19: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/19.jpg)
CERTIFICATES OF INSPECTION TO PROTECT BUYER AND BANK’S
RESPONSIBILITY
• Basse v. Bank of Australia: Plaintiff specified that bill of lading must include a certificate of analysis by Dr.. Helms. The seller submitted phony samples of ore and the Dr. submitted a certificate. The plaintiff sued the bank for paying on the bill of lading.• Issue: Did the bank breach its duty by not
discovering the fraud in transaction?
www.StudsPlanet.com 19
![Page 20: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/20.jpg)
BASSE V. BANK OF AUSTRALIA
• No, the bank is only obligated to look at the face of the documents. The certificate was in order and the bank properly paid.• What recourse does the buyer have?
www.StudsPlanet.com 20
![Page 21: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/21.jpg)
MEASUREMENT OF DAMAGES IN CIF CONTRACT
• Damages measured by the market price of the goods at the port of shipment on that date• Seaver v. Lindsay
www.StudsPlanet.com 21
![Page 22: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/22.jpg)
RISK OF LOSS
• Shipment contract- risk passes when goods are given to the first carrier
• Destination contract- risk passes when goods are given to buyer at destination point
www.StudsPlanet.com 22
![Page 23: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/23.jpg)
AM. KNITWEAR V. ALL AMERICA EXPORT-IMPORT
• All America (buyer) ordered from Knitwear (seller) yarn. Buyer used form which stated “pick up from your plant..for shipment to Santos, Brazil.” Buyer also typed FOB plant per lb. $1.35 but the blank for FOB terms was blank. Seller made the goods available to a driver who turned out to be a thief.
www.StudsPlanet.com 23
![Page 24: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/24.jpg)
AM. KNITWEAR V. ALL AMERICA EXPORT-IMPORT
• Held: The seller is liable. FOB plant means delivery to the carrier. Risk of loss does not pass to the buyer until the goods are delivered to the carrier.
www.StudsPlanet.com 24
![Page 25: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/25.jpg)
BASIC CONCEPTS
• Presumption is a shipment contract• Negotiate and price responsibilities accordingly• You can have a destination contract but it will be
expensive, but maybe worth it• Be explicit, reference clear set of terms
www.StudsPlanet.com 25
![Page 26: Sales](https://reader036.vdocuments.us/reader036/viewer/2022081518/54be75d64a795913778b4634/html5/thumbnails/26.jpg)
BASIC CONCEPTS
• Attempts to customize trade terms only adds to confusion• Should reference standard trade terms
www.StudsPlanet.com 26