Chapter Three

1. Chapter Three The Law of International Sales Qingdao Agricultural University

2. Teaching aims • The students are required to learn about: • Master the contents of CISG. • 2. Pay attention to the difference of the relative problems between the two legal systems.. Qingdao Agricultural University

3. Main and difficult points • The duties of the buyer • and the seller. 2. The transfer of the title and risk. Qingdao Agricultural University

4. The sources of International sales law 1. International conventions, such as, the United Nations Convention on Contracts for the International Sale of Goods (CISG), convention on the Limitation Period in the International Sale of Goods, the United Nations Convention on the Carriage of goods by Sea, Hague-Visby Rules, etc.; 2. International custom such as INCOTERMS, the Uniform Customs and Practice for the Documentary Credits, Warsaw- Oxford Rules, etc.; 3. Related laws of separate nation or district, such as Civil Law of France, Uniform Commercial Code, The Economic Law of the PRC. Qingdao Agricultural University

5. CISG (Contracts for International Sale of Goods) (1) CISG came into force on January 1, 1988, climaxing more than fifty years of negotiations. It governs the sale of goods between parties in over sixty countries, unless the parities to the sale contract have expressly “opted out” of the Convention. As a self-executing treaty, no separate implementing legislation is needed. Qingdao Agricultural University

6. CISG (Contracts for International Sale of Goods) (2) Organization of CISG: • PartⅠ Contains the Convention’s general provisions, including rules on the scope of its applications and rules of interpretation; • PartⅡ Govern the formations of contracts; • Part Ⅲ Governs the rights and obligations of buyers and sellers; • Part Ⅳ Contains provisions for the ratification and the entry into force of the Conventions. Qingdao Agricultural University

7. CISG (Contracts for International Sale of Goods)(3) Objectives of CISG: • To adopt uniform rules governing contracts for the international sale of goods; • To adopt uniform rules that account for different social, economic, and legal system; • To contribute to the removal of legal barriers in international trade and to promote the development of international trade. Qingdao Agricultural University

8. CISG (Contracts for International Sale of Goods)(4) Exclusion of CISG • (1) The sale of goods for personal, family or household use, unless the seller did not know or have reason to know that the goods were bought for this use; • (2) A sale by auction; • (3) A sale pursuant to a legal remedy, such as execution or foreclosure; Qingdao Agricultural University

9. (4) The sale of goods that are to be made substantially from materials supplied by the buyer; • (5) An obligation that is primarily for the supply of labor or other services; • (6) The sale of stocks, shares, investment securities, negotiable instruments, or money; • (7) The sale of electricity. Qingdao Agricultural University

10. CISG: Formation, Form and Main Provisions in a Contract: Teaching Aims and Demands The students are required to learn about: 1. Formation of sales contract 2. Form of the contract main provisions in a contract

11. CISG: Formation of Sales of Contract The offer An offer is a proposal by one person to another indicating an intention to enter onto a contract under specified terms. It is a proposal addressed to specific persons indicating an intention by the offeror to be bound to the sale or purchase of particular goods for a price. Should there be some doubt whether a communication is an offer or not, CISG directs a court to ascertain if the offeror communicated an intention to be bound.

12. Firm Offer and Counter Offer Firm offer: An offer that the offeror promises to keep open for a fixed period of time. Counter offer: If the buyer’s purchase order form and the seller’s order acknowledgement form differ as to any material term, there is no offer and acceptance4. Instead, there is an offer, followed by a rejection of that offer and a counter offer (usually the seller’s order acknowledgement form).

13. Three Requirements of An Offer • It must be a proposal for concluding a contract, which is a standard provision; • 2. It must indicate an intention to be bound in case of acceptance, which will distinguish an offer from a general sales catalogue or advertisement or a purchase inquiry; • 3. An offer must sufficiently definite. • This provision is directed toward • only three contract term: • the description of the goods, • their quantity and their price.

14. Acceptance Acceptance refers to agreement to enter into a contract proposed by an offeror. A contract comes into existence at the point in time when an offer is accepted. Acceptance is a statement or conduct by the offeree indicating assent that is communicated to the offeror. The form or mode in which an offeree expresses assent i is unlimited; however, the offeree must c communicate his assent to the offeror. Silence or inactivity does not c o constitue acceptance.

15. Time of acceptance Acceptance must be received by the offer or within the time period specified in the offer. If no time period is given, acceptance must received within a “reasonable” time. If the offer is oral, the acceptance must be made immediately, unless the circumstance indicate otherwise.

16. Withdrawal Withdrawal refers to cancellation by the offeree of an acceptance. Because an acceptance is normally not effective until the offeror receives it, an offeree may withdraw his acceptance any time before or simultaneous with its receipt.

17. Rejection Rejection refers to refusal by an offeree to become a party to a proposal contract. A rejection becomes effective when it reaches the offeror. If an offeree were to dispatch both a rejection and an acceptance at the same time, the one which reached the offeror first would be the one given effect.

18. Form of the Contract Article 11 of the Convention states: “A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses.” Article 96, however, authorizes a contracting state “whose legislation requires contracts of sale to be concluded in or evidenced by writing” to make a declaration at the time of ratification that Article 11 “does not apply where any party has his place of business in that state.”

19. If one of the parties makes an offer and promises to keep it open for a period 30 days, can it later change its mind and withdraw the offer? List the main provisions in a contract. When does an acceptance become effective? Does it matter if the acceptance calls for miner changes in the terms contained in the offer? Exercises

20. CISG (Contracts for International Sale of goods) (1) CISG came into force on January 1, 1988, climaxing more than fifty years of negotiations. It governs the sale of goods between parties in over sixty countries, unless the parities to the sale contract have expressly “opted out” of the Convention. As a self-executing treaty, no separate implementing legislation is needed.

21. CISG: Sellers’ and Buyers’ Obligations (2) Place of delivery: • Delivery contracts in which the seller must deliver to the place specified in the contract; • 2. Shipment contracts, in which the contract “involves carriage of the goods”, but does not require • delivery to any particular place; • 3. Sales of goods at a known location which • are not expected to be transported; • 4. Sales of goods whose location is not known • or specified, and which are not expected to be transported.

22. CISG: Sellers’ and Buyers’ Obligations (3) Time for delivery: The seller is to deliver the goods on the date fixed in the contract, or, if no date is fixed, within a reasonable time after the collection of the contract. If a time period is provided, the seller may deliver at any time within that period, unless the contract expressly says that the buyer is to choose the time.

23. CISG: Sellers’ and Buyers’ Obligations (4) Turning over of documents: At the time and place for delivery, a seller must turn over any documents relating to the goods that the contract requires. A seller who delivers defective documents early may cure any defects until the date due under the contract, if possible, and Buyer must take the cured documents, even though the original tender and cure has caused damage to buyer.

24. CISG: Sellers’ and Buyers’ Obligations (5) Conformity of goods: CISG Article 35 obligates the seller to deliver goods of the quantity, quality, description and packing required by the contract. This provision is similar to many warranty provisions found in common law countries, with the notable exception that it does not use the terms “warranty” or “ guarantee”. This is important, because the seller’s obligation (and the buyer’s right) arises— and can be waived—without the use of these terms.

25. CISG: Sellers’ and Buyers’ Obligations (6) Buyer’s Obligations: 1。Payment of the price: The buyer is obliged to take whatever preliminary steps are necessary “under the contract or any laws or regulations to enable payment to be made”. He is then to pay the price at the time and place designated in the contract. If no time is specified, the buyer is to pay when “ the goods or the documents controlling their disposition” are delivered..

26. 2.Taking delivery of the goods: In connection with the taking of delivery, a buyer is obligated to cooperate with the seller to facilitate the transfer and to actually “take over the goods”. A buyer who fails to co-operate will be responsible for any resulting cost, and one who fails to take delivery assumes the risk for any damage to the goods after the time.

27. CISG: Remedies (1) Buyer’s remedies for seller’s breach : Buyer’s remedies are cumulative. That is to say, the right to recover damages is not lost if a buyer exercises any other available remedy. They are also immediate: Unlike the rules in some civil law countries, CISG forbids a court or tribunal from granting the seller a period of grace in which to comply with a buyer’s demand for a remedy.

28. CISG: Remedies (2) The remedies unique to the buyer are to: • 1. Compel specific performance; • 2. Avoid the contract for fundamental breach or nondelivery; • 3. Reduce the price; • 4. Refuse early delivery; • 5. Refuse excess quantities.

29. CISG: Remedies (3) Buyer’s remedies for seller’s breach : • Compel specific performance; • 2. Avoid the contract for a fundamental breach or failure to cure a defect; • 3. Obtain missing specifications.

30. CISG: Remedies (4) Remedies available to both buyers and sellers: • Suspension of performance ; • 2. Anticipatory avoidance; • 3. Avoidance of installment of contracts; • 4. Damages

31. The Passing of Risk and Title (1) Teaching Aims and Demands • The students are required to learn about: • The Passing of Risk • 2. The Passing of Title

32. The Passing of Risk and Title (2) The Passing of Risk Passing of risk refers to the point in time the buyer becomes responsible for losses to the goods. The contract will often contain a term that expressly allocates the risks, such as “FOB” OR “CIF”, and such terms supersede the CISH provisions. If there is no such delivery term, under CISG the risk in a shipment contract passes to buyer when the goods are “handed over” by the seller to the first carries. They need not be on board by the means of transportation, or even pass a ship’s rail—any receipt by a carrier will do. Further, they need not be “handed over” to an ocean-going or international carrier—possession by the local trucker who will haul them to the port is sufficient. However, if the seller uses its own vehicle to transport the goods, seller bears the risk until the goods are handed over to an independent carries, or the buyer.

33. The Passing of Risk and Title (3) The Passing of Title In most situations, title and risk are treated separately. Thus, manipulation of title through the use of documents of title, such as negotiable bill of lading, is irrelevant and has no effect on the point of transfer of the risk of loss. The passing of title of negotiable documents means the passing og\f title of goods.

34. A Standard Contract in International Sales Contracts (1) • Name of contract: 2. Contract No. & Date. 3. Names, Addresses, Tel No., Fax,Emails

35. A Standard Contract in International Sales Contracts (2) 4. Terms and Conditions:. (1) Name of Commodity and Specification (2) Quantity; (3) Unit Price; (4) Amount; (5) Total Value; (6) Packing; (7) Time of Shipment; (8) Port of Loading; (9) Port of Destination; (10)Terms of Payment; (11)Insurance; (12) Shipping Mark; (13) Documents Required; (14) Terms of Shipment; Shipping Advice; (16) Quality Guarantee;(17) Inspection; (18) Claim; (19)Late Delivery and Penalty；（２０）Force Majeure;　（２１）Arbitration;　（２２）Notices;　（２３）Additional Clause;

36. Exercises １. What kinds of remedies can a buyer get if the seller breach of the delivery duty? 2. What kind of influence does it have on the transfer of the risk?

37. Exercises（1） 1. Are goods bought for personal use included under CISG? 2. If a buyer is not entitled to damages when a seller delivers nonconforming goods, will the buyer be entitled to a reduction in price? 3. If the seller delivers early, is the buyer still under obligation to take delivery? Why or why not? 4. Explain the duties of the buyer and the seller separately.

38. Exercises 5. What is anticipated breach of contract? If one party of the contract anticipates breach the contract, what are the possible measure of the other party can take? 6. What kinds of remedies can a buyer get if the seller breach of the delivery duty? And what kind of influence does it have on the transfer of the risk? 7. When does usually the risk transfer according to CISG? 8. What are the four remedies available to the buyer if the seller breaches the sales contract?