Textbook Notes (368,214)
Canada (161,710)
LAW 724 (17)
Gil Lan (1)
Chapter 7

LAW724 Chapter 7 Notes.docx

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Law and Business
LAW 724
Gil Lan

Chapter 7 Negotiating the International Sales of Goods • Stare decisis “to stand by a previous decision” • Civil law tradition is far more prevalent around the world than is the common law system THE LAW OF CONTRACT Essential Elements of a Valid contract 1. Intention on the part of each party to create a legal relationship 2. Must be an offer and an unequivocal acceptance of the offer 3. Parties to the contract must have legal capacity to make a contract 4. Contract must be made for a legal purpose The Common Law Requirement for Consideration • Contract must be supported by consideration, if there is no consideration it will not be enforceable • Consideration, also known as bargain theory, is the idea that a contract must be characterized by an exchange of value moving from each party to the other • An agreement that is not supported by consideration is referred to as a gratuitous promise and is not enforceable • Requirement for consideration can be avoided by having parties sign the contract under seal (pg 185) Enforceability of Contracts • May meet requirements above but still not enforceable due to defects • Defects include undue influence, duress, mistake, and misrepresentation Undue Influence Duress Mistake Mispresentation (pg 16) Breach of Contract and Remedies Privity of Contract • Innocent party of the contract may sue for damages • Third parties of contract cannot sue, was amended for specific situations such as insurance contracts Breach of Warranty and Breach of Condition • Breach of contract: failure to perform a less important or non-essential term of the contract • Breach of condition: a breach of important or essential term of the contract (pg 187) Mitigation of Damages • In the event that one party injures another through breach of contract, the injured party must mitigate, or reduce the loss if possible TORT LAW (pg 188) The Purpose of Tort Law Elements of a Tort Action Product Liability – Product Liability in Canada, Product Liability in the United States, Product Liability in the EU INTERNATIONAL CONTRACTS FOR THE SALE OF GOODS (pg 191) The Importance of the Primary Contract • Certain considerations may become significant (due to long distances and across national boundaries) in negotiations as the usual questions of price, quality, date of delivery, and payment terms Trade Terms Used in Export Sales • Incoterms deal exclusively with obligations of buyers and sellers and stipulate which parties’ bears the risk of loss during transit • Incoterms relate only to the contract of sale not to the supper contract for carriage insurance and financing. (pg 193) CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS • The Convention on Contracts for the International Sale of Goods CISG applies to all contracts of Sale of Goods when the parties have the places of business and different contracting States • It will automatically apply unless the parties opt out of it or contract out of it • It only applies to commercial sales of goods and does not apply to household organizer the goods sold by auction or still the securities electricity or aircraft (pg 202) Opting Out of the CISG • If the parties do decide to opt out of the CISG, in whole or in part, the wording of exclusion must be clear and unambiguous. • It is not sufficient to state for example Ontario law apply to this contract to Ontario law will result in the application of the CISG. The Provisions of the CISG • It does not deal with the validity of the contract issues such as fraud minority or other problems of the capacity are not covered by the convention nor does the convention deal with questions of title to the goods. Also excluded from the convention are the questions of product liability. • This position has the effect of doing away with the difficult common law parole evidence rule. This common law rule prevents parties from successfully bringing evidence before a court to contradict the terms in a written contract and prove that charges to the contract has been agreed upon before or at the time that a written contract was signed. (pg 205) Has a Valid Contract Been Formed? Requirement of writing The sale of goods law of Canada the United Kingdom the United States and those other countries require that commercial contracts for the sale of goods having any significant value be in writing to be enforceable in court What Constitutes an Offer? • THE COMMON LAW o Under the common law, such activities are viewed as mere invitations to do business and it is the buyer you must make an offer based on the information contained in advertisement or quotation. • THE UCC o The UCC provides that an offer should contain all essential elements of a contract and is a statement that the offeror intends will bring in the binding contract accepted an altered by the offeree • THE CISG o Article 14 of the CISG provides that a proposal address to one or more specific person's is an offer if it is sufficiently definite and indicates intention of offeror to be bound Revocation of an Offer (The Common Law, UCC, CISG) Requirement for a Valid Acceptance (The Common Law, UCC, CISG) The Battle of the Forms (pg 210) The Question of Missing Terms (The Common Law, UCC, CISG) Verbal Variation of Written Contracts (The Common Law, UCC, CISG) Performance of the Contract Invoices (pg 214); Packing; Timelines for Delivery; Loss of Goods in Transit; Acceptance and Rejection of Goods; Implied Warranties; Payment; Breach of Contract in Damages; Avoidance of Contract; Specific Performance; Frustration of Contract; Drafting the Contract (force majeure and best effort clause pg. 226) Countertrade • A contract provides for a text an exchange of goods for goods is not a contract of sale in the proper legal sense. It is properly referred to as a barter contract. • Countertrade is defined as the transaction where a sale to an importer is conditional on a reciprocal purchase or undertaking by the exporter (pg. 229) Types of Countertrade Transactions Reciprocal sales agreements; Barter; Product Buyback Agreement; Advance Purchase Negotiation of Countertrade Agreements (pg. 232) Chapter 8 Ancillary Contacts for the International Transaction: Financing, Transportation and Insurance • Additional or supporting contracts that are essential to these commercial transactions • These are separate contracts between one of the main Contracting Parties and another party, and they are most often in the areas of financing or credit arrangements, transportation, & insurance • Remembering the rule of privity of contract, it is important to incorporate the obligation of the parties to conclude these separate contracts with third parties into the primary contract as a condition, so that if a party fails to make these separate contacts as promised, the innocent party is relieved of its application to perform under the primary contract, and the failure is actionable as a breach of contract between the two principal parties Financing the International Transaction Understanding the Letter of Credit Arrangements • The payment arrangement most often agreed upon by Canadian parties doing business in countries other than the United States is the letter of credit LC. And issuing bank and a corresponding or a nominated will be required. • The issuing bank issues the letter of credit a written undertaking by the bank given to the exporter at the request of and in accordance with the instructions of the importer to affect payment up to a specified amount, against stipulated documents, and within a prescribed time limit. (pg 237) • The corresponding or nominated bank may be an advertising or confirming bank, depending on the wording of the credit agreement. • A confirming bank undertakes a direct obligation to the exporter to pay on the proper presentation of documents under the LC. • An advising bank undertakes only to examine and forward the documents to the issuing bank it is not obligated or authorized to negotiate a draft or pay the seller. And LC that does not state otherwise is irrevocable. (pg 238) Negotiation of the Letter of Credit Arrangements • Requirements for the letter of credit must be spelled out and made a condition of sales contract. Important provisions that must be anticipated and agreed on by the parties include the following... (pg 240) International Rules for Letters of Credit • The set of internationally agreed on rules that govern the letter of credit transactions is a uniform customs and practices for documentary credits. • It is of utmost importance of important or purchaser of services be sure of the reputation and reliability of provider of goods or service Documentary Credit and Standby Letters of Credit: Important Differences • Increasingly, letters of credit are now being used to provide insurance to purchaser of large- scale services for owners of large-scale projects in the event that the contractor or project is not completed. • A standby letter of credit anticipated the possibility that something will go wrong or a negative event will occur, such a failure of the applicant to make a payment under a loan agreement or the failure of the applicant to perform some contractual obligation. • A standby letter of credit is payable only if things go wrong in the underlying tra
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