Ulla Terese Kræmer

BUSINESS LAW Ulkr@easj .dk

lesson two

Today's topic:

CISG, part III

Obligations of the Parties

The substantial rules of sales

A sale implies that property is transferred from one owner to another against payment

An international sale is when seller and buyer have their place of business in different states.

DEFINITION OF A SALE

In consumer sales

By auctions

On stocks, shares ect.

Of ships, aircrafts etc.

CISG DOES NOT APPLY:

Seller: To deliver, handing over papers – chapter II

At the right time (when?) In the right place (where?) The right quality and amount (what?)

Buyer: to pay, taking delivery – chapter III

At the right time (when?) In the right place (where?) The right amount (what?)

OBLIGATIONS OF THE PARTIES

No help in CISG

”The seller’s actions to bring the goods in the buyer’s possession,

including handling over documents.”

DEFINITION OF DELIVERY?

Art. 33

On the agreed time

If a period of time has been agreed, seller decides when to deliver within the period

Or else within reasonable time (estimate)

RIGHT TIMEWHEN?

Art. 31

The agreed place (according to the contract)

Consignment sale: Handing the goods over to the fi rst foreign carrier (passing of risk)

Placing the goods at buyer’s disposal in seller’s place of business or the place where the goods were at the conclusion of the contract

IN THE RIGHT PLACEWHERE TO DELIVER?

Art. 35Conformity of the goods

The agreed quality/amount – art 35(1) (warrants or guarantees – a matter of words)

Oral agreements The parol evidence rule: ”Once a written agreement has been duly executed (signed) then it

cannot be altered or annulled by any oral evidence that may contradict the terms of the agreement”

in contrary to Art. 8 and 11 in CISG

Conclusion Art. 8 and 11 require only due consideration

THE RIGHT QUALITY/AMOUNTWHAT TO DELIVER?

Markedsføringsøkonomi | Erhvervsret10

Basic qualities Defi nition of quality/conformity – art 35(2)

Fit for the purposes – bowling balls must be suitable for bowling etc. – resalable – ordinary use – compliance with regulatory standards in the buyer’s country

Fit for the specific purpose the seller knew – Sometimes buyer use the goods in an unusual way and if the seller knows this, he must deliver the goods which can be used for this purpose

Similar to the sample/model that the seller presented to the buyer

Packaged: in a usual manner – adequate to protect the goods

QUALITY/CONFORMITY – ART 35(2)

Seller’s failure of preformance:

Delay: Delivery too late or no delivery at all

Defects: Actual defects – quality or quantity

Defective title (third party claims):

Legal defects – sale of goods with third person’s right

SELLER’S BREACH OF CONTRACT

Markedsføringsøkonomi | Erhvervsret12

SELLER’S BREACH OF CONTRACT

• Art. 45-52

Definition of Seller’s Breach of Contract, art. 45(1)

”If the seller fails to perform any of his obligation under the contract or this convention, the buyer may:

• Exercise the rights provided in art. 46-52• Claim damages as provided in art. 74-77

Markedsføringsøkonomi | Erhvervsret13

What will you do, if the contract does not specify neither the time nor place

of delivery?

QUESTION FOR YOU:

Markedsføringsøkonomi | Erhvervsret14

BREAK

The seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer – even if the defect is fi rst discovered much later

Burden of proof?

Time for notice in case of non-conformity?

1. Reasonable time: Buyer must inform the seller within reasonable time after he has – or ought to have – discovered the defect. (art. 39(1))

2. Examination: Buyer are obliged to inspect the goods – most courts require the buyer to move quickly (art. 38)

3. Two years of notice (limitation period) – cut of rule – after that time the buyer is barred from a non-conformity claim against the seller. (Art. 39(2))

NOTICE OF NON-CONFORMITY

Reasonable intensive examination

Random sampling

Stress test

The more expensive - the greater intensivitetNot expect the buyer to uncover defects discoverable only by experts

INTENSITY OF EXAMINATION?

Specificity requirement

”poor workmanship” - ”improper fi tting”

But timely notice of a serious non-conformity which do not initially specify the defect with suffi cient precision – the buyer schould be given a chance to provide supplementary specifi cation

Art. 40 can be used in situations where the result will be unfair for seller – a narrow ”safty valve” – used in exceptional circumstances

Art. 44 ”safty valve” for courts/arbitral tribunal if a buyer have reasonable excuse for failing to notifi the seller in accordance with art. 39(1)

SPECIFY THE NATURE OF THE LACK OF CONFORMITY

What are Third-party claims?

It’s a legal defect, since the buyer dos not get the full title to the goods

The mere assertion by a third party of such claim constitutes a breach by seller

The buyer must notice the seller in ”reasonable” time – art. 43

FREE OF THIRD-PARTY CLAIMS ART. 41

Payment and taking delivery – art. 53

At the right time – when?

At the agreed time

When seller is placing the goods at his disposal or documents are handed over

Art. 58 + 59

OBLIGATIONS OF THE BUYER, WHEN?

Payment and taking delivery

In the right place – where?

At the agreed place

At seller’s place of business

Art. 57

OBLIGATIONS OF THE BUYER, WHERE?

Payment of the right sum

the agreed sum

Art. 55:”… the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally

charged at the time of the conclusion of the contract for such goods…”

Open price term: If an open-price contract is pheld, because the parties intended to be bound, the price-gab can be filled bu the price ”generally charged” at the time of the conclusion of the contract.

OBLIGATIONS OF THE BUYER, WHAT?

Obligation to receive the goods – art. 60

Refusal of receipt = Breach af contract

Arrangement of payment: e.g. documentary credit

Examination of the goods – art. 38

OBLIGATIONS OF THE BUYER

All the acts in order to enable the seller to make delivery

Taking over the goods

Obligatet to accept the seller’s performance

– if not = breach of contract

OBLIGATIONS OF THE BUYER TO TAKE DELIVERY

BREAK

. Delivery is a ”crucial point” of a sale!

Who should pay in the event taht the goods are lost, damaged or destroyed?

Delivery is decisive for:

Passing of the risk – art. 67-69

Delay

Defects – art. 36

PASSING OF RISK

Who is carrying the risk of accidental loss?

(damage or destruction of the goods)

Delivery and passing of the risk generally ”go together” – art. 66-70

Delivery

Seller’s risk Buyer’s risk

PASSING OF THE RISK

Art. 67: Consignment sale:

The risk is passing to the buyer, when the marked goods are handed over to the first foreign

carrier

MarkedFoeign

PASSING OF THE RISK

INCOTERMS (THE INTERNATIONAL CHAMBER OF COMMERCE)

The risk passes when the buyer actually takes over the goods(as in a retail outlet)

Collect within a given period?

The risk will not pas until the period has passed

In a warehouse (a place other than seller’s place) within a given period?

Before the period has passedRemember identifi cation of the goods!

NON-CARRIER CASES ART. 69

What is a fundamental breach?1. Work in 5 groups for 15 minutes, describe the concept of a

fundamental breach – please put your names on the paper .2. Give your reply to another group - and so on – until your reply have

been to all 5 groups3. When you receive another group's reply – you have 5 minutes to add

additional points

4. I will then copy the 5 documents and give you a copy to the next lesson, where we will be reviewing “remedies for breach”

FUNDAMENTAL BREACH?

SEE YOU NEXT WEEK