CHAPTER CHAPTER HAPTER 1 - INTERNATIONAL NTERNATIONAL SALE OF GOODS by Robin Burnett (Updates Chapter 1) Robin Burnett Law of International Business Transactions 2 nd edition Update - February 2003 HAPTER 1 - INTERNATIONAL NTERNATIONAL SALE OF GOODS Australian and New Zealand Cases dealing with the Vienna Convention for Contracts for Sale of Goods Edited versions of most of these cases find their way to the CISG website of the Institute of International law at Pace University at <http://www.cisg.law.pace.edu>. In most instances the edited version of a PACE case is prefaced by an editorial summary. At the conclusion of the edited version a critical review of the decision is sometimes available. In many instances the reviewer starts from the premise that common law jurisdictions are reluctant to look outside their own jurisdiction to find authority for interpreting the convention, or worse, to recognise that the convention regime exists and is relevant to the contract under review. In many instances this may be true. A good example of the first tendency is Delchi Carrier SpA v Rotorex Corporation, cited at fn 163, page 29 of this chapter. However, in many instances academic writers seem over preoccupied with picking over the judgments and pointing out ways in which the expert considers that the judge should have done better. In the following list of Australian and New Zealand cases a reference to the provisions of the CISG cited in the case is provided. This is followed by a summary of the way in the relevant issues were addressed and a reference to academic comment. Note that cases using the CISG provisions to support acceptance of a principle which has not yet achieved acceptance in Australian or New Zealand law have also been included. Australian Decisions dealing with the CISG Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263 (Art 7(1)). Not a CISG contract. Priestley JA refers to the broad acceptance of the CISG Art 7(1) to support the proposition that good faith is widely recognised in contract law. South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 (Art 7(1)). Not a CISG contract. Finn J refers, inter alia, to Renard Constructions for support of the proposition that: 1
Australian law has not yet committed itself unqualifiedly to the proposition that every contract imposes on each party a duty of good faith and fair dealing in contract performance and enforcement and notes that the supposed uncertainty of good faith terminology has not deterred every State and Territory in this country from enacting into domestic law the provisions of Article 7(1) of the United Nations Convention on Contracts for the International Sale of Goods. Roder Zelt v Rosedown Park Pty Ltd (1995) 57 FCR 216 (Arts 4, 8(1), (2), 11, 15(1), 18(1), 25, 26, 29(1), 53, 61, 74, 75, 76, 81, 84). The first reported Australian case which applied the CISG to a contract for sale of goods. Roder, a German manufacturer of tents contracted with an Australian firm, Rosedown. The terms of the contract required that the goods were to be delivered in Australia upon which Rosedown became liable for payment of the price by instalments plus interest. The contract contained a retention of title clause in Roder s favour and also provided that Rosedown was the bailee and fiduciary agent of the German company until payment was completed. Rosedown fell behind in its payments. Roder took no action about this breach of contract. Rosedown then went into liquidation. At about that point Roder repudiated the contract because of failure to make payments and other breaches. It sought return of the goods. Having decided that the CISG applied because it dealt with a sale of goods between parties in two different States, the judge addressed the claim by buyer for return of goods under a retention of title clause and the argument by the administrator that Roder was simply an unsecured creditor. Citing Art 8(1), (2) he found that the contract of sale included a retention of title clause and that the retention of title clause equated to a property right. It therefore fell outside the Convention regime and the judge applied domestic law, holding it to be valid. The judge then dealt with rights and duties of the parties by looking at avoidance by seller for fundamental breach by buyer of obligations under Art 53 (Art 64, Art 25); notification of avoidance (Art 26) and fixing of additional time for buyer s performance (Art 63 ). He found that while Roder had done nothing to recover monies owing (despite continual failure by Rosedown to meet its payment obligations) until the Directors decided the company was insolvent, the appointment of an administrator could allow Roder to justify avoidance under Art 64. On the facts it resulted in such detriment to seller as to substantially alter what it was entitled to expect (Art 25) because the seller could not take action to recover the property. (In addition, the denial by the administrator of the retention of title clause also constituted a fundamental breach.) Roder gave no specific notification of avoidance as required under Art 26 but the judge found this requirement met by the filing of court proceedings in the case. There was no evidence to support a finding on the question of damages and this was deferred. When it came before the court at a later stage the question of damages under the CISG was not addressed. 2
A critical comment on the case is provided by a Canadian academic Professor J Zeigel at <http://cisgw3.law.pace.edu/cases/> who is by his own admission much influenced by the Canadian and United States law which treats retention of title clauses as conditional sales. Leaving aside his discussion of the status of a retention of title clause, he raises questions as to whether this was a case of fundamental breach (Art 25) or rather a case of anticipatory repudiation (Art 72). In this context he suggests that Arts 73 and 74 should also have been considered. Downes Investment Pty Ltd v Perwaja Steel SDN BHD [2000] QSC 421 (Arts 1(1)(b), 25, 54, 63, 64, 72; 75, 77, 78). A contract for sale of goods between a Queensland and a Malaysian firm. The relevant contract stated that the Parties agreed that the law applying in Brisbane would define their contractual obligations; therefore CISG applied. The Queensland firm obtained a contract for shipment of scrap metal to the defendant. Before shipment the international price for scrap metal collapsed and the defendant did not open the letter of credit as required under the contract. This was found to constitute a fundamental breach which, taken with other actions or inaction of the buyer allowed the seller to avoid the contract and recover damages on the ground of the buyer s repudiation and/or non-compliance with an essential term of the contract. For reference to a critical academic review by B Zeller see below. Perry Engineering (Receiver and Manager appointed) (Administrators appointed) v Bernold AG [2001] SASC 15 (Art 1). Contract subject to CISG but case brought under Sale of Goods Act. Contract between Australian and Swiss companies stated that it was subject to the laws of South Australia. Plaintiff had obtained an interlocutory judgment for breaches, inter alia, of the South Australian Sale of Goods Act against the Swiss defendant which did not enter an appearance. Plaintiff then sought assessment of damages. At that late stage the presiding judge concluded that the CISG, not the South Australian Sale of Goods Act applied to the question of liability under the contract. In giving judgment he declined to proceed with an assessment of damages based on the provisions of an Act of Parliament which plaintiff acknowledged did not apply to the claim. This flaw also prevented assessment of damages for tort and breach of the Trade Practices Act. See the critical academic review of the Downs Investment case by B Zeller in (2001) 5 Vindobona Journal 124 at <www.business.vu.edu.au/cisg>. Do you agree with his conclusion: In sum in Australia the significance of the CISG as an international sales law has not been fully appreciated if case law is any indication. Considering the ever-growing jurisprudence and academic writing on the CISG, which is obtainable on the net one would assume that in future these aids to interpretation would be consulted and utilised. 3
New Zealand cases dealing with the CISG [Note: It is important to appreciate that New Zealand decisions are subject to appeal to the Privy Council (England has not accepted the CISG). This adds a further complication to arguments that a provision of the Convention should lead to acceptance of a proposition not accepted in English law.] Crump v Wala (1993) (unreported, extract on Pace website) (Art 49(1)(a)) Not a CISG contract. In a case dealing with nonconforming goods, the judge cited the CISG rule that buyer may only reject for fundamental breach, in support of his view that there is a need for law reform to remedy unnecessary complexity as to buyers rights. Hideo Yoshimoto v Canterbury Golf Club Ltd [2001] NZLR (CA) 523 (Art 8(1), (2), (3)). Not a CISG contract. Court asked to admit extrinsic evidence of pre-contractual negotiations which made it clear that the plain meaning of a contractual clause was not what parties intended. Thomas J at para 88 et seq recognised that London would not accept such evidence. He went on to note that it would be open to the Court of Appeal to depart from English common law on the basis of the implementation into New Zealand law of the CISG Art 8. He also referred to Unidroit Principles of International Commercial Contracts 1994, Art 43. The judge quoted with approval the argument of Professor DW McLaughton, that it seems odd that while Art 8 of the CISG applied to permit evidence of pre-contractual negotiations in the case of international sales agreements such evidence cannot apply to commercial and other domestic contracts. A Contractual Contradiction (1999) 30 VUWLJ 175 at 195. However, Thomas J concluded that the Privy Council would not allow New Zealand to depart from English common law and bring New Zealand law into line with the CISG and UNIDROIT Principles. He therefore felt obliged to reject the arguments for admission of extrinsic evidence of pre-contractual negotiations. The remaining judges did not comment on this issue and the appeal was upheld on other grounds. Paperless Trading page 34 Add at end of section, immediately after footnote 196: Many other solutions are being developed to meet the needs of traders and other players who wish to take advantage of paperless trading. Most are confined to business to business arrangements between trusted trading partners. An example of a wider ranging initiative was launched in September 1999. This is BOLERO (Bills of Lading Electronic Registry Organisation) which is sponsored by a business consortium of shipping companies, banks and telecommunication companies. (See insert below to Chapter 3 for further details of this initiative.) 4
International Rules for the Interpretation of Trade Terms Incoterms 2000 pages 35 67 General Comment Since publication of the 2 nd edition, there has been a revision of Incoterms 1990. Incoterms 2000 have been issued under the auspices of the International Chamber of Commerce. ( ICC Publication No.560 ) Professor Jan Ramberg writing in the Guide to Incoterms 2000 (ICC Publication No. 620) states: The most important differences in substance between the 1990 and 2000 versions concern. the placing of the export clearance obligation under FAS on the seller (previously on the buyer);. the specification of the seller's obligation to load the goods on the buyer's collecting vehicle and the buyer's obligation to receive the seller's arriving vehicle unloaded under FCA; and. the placing of the import clearance obligation under DEQ on the buyer (previously on the seller). In addition, the terminology in Incoterms has in some instances been changed for consistency and ease of understanding. The revision aimed at generally updating Incoterms and the result, may to some appear rather meagre. In particular, the strong demand for a change to the traditional "FOB - point" met with considerable resistance from the great majority of the ICC national committees.... (p11) It is worth while reiterating the point made in the text (p 35) that it is important to insert the words "Incoterms 2000" (or "Incoterms 1990" if the earlier version is used) after the trade term abbreviation. For example, "FOB [named port of shipment] (Incoterms 2000)", to avoid argument about what is meant by the particular trade term selected. Incoterms 1990 Replace all references to "Incoterms 1990" with references erences to "Incoterms 2000". For example, on page 41 line 2, "FAS [ [named point of shipment] ] (Incoterms 2000) 5
Page 41, line 20, after the sentence ending "obtain a bill of lading" Delete "The" and insert "Under both the FAS and FOB terms the" Page 58 FCA [ [named place] ] Incoterms 1990 Change 1990 to 2000 and delete the final two paragraphs (the definitions of "transport terminal" and "container"). This flows from the changes to (d) delivery of the goods see below. Page 60 line 16 Delete "The FCA term has been carefully drafted in an effort to avoid the problem". Insert The FCA Incoterm is intended to deal with modern cargo handling practices (such as containerisation). These modern practices have two major consequences to which the FCA term attempts to respond. First, the point of delivery is moved from the traditional FOB ship's rail point to an earlier point in the transport chain as where the goods are delivered to the main carrier at his cargo terminal or delivered by the seller to a vehicle sent by the main carrier to collect the goods after they have been containerised at the seller's premises. Second, there may be a problem Page 60-61, 61, delivery of goods Delete all material after footnote 285 up to and including footnote 286. Substitute: Incoterms 2000 deals with these two consequences of modern loading practices on the question of when delivery takes place by distinguishing between two situations: (1) Where the named place of delivery is at the seller's premises. In this situation the delivery obligation is completed when the goods have been loaded by the seller on to the means of transport provided by the nominated carrier. (2) In other cases the delivery obligations is complete when the seller makes the goods available to the nominated carrier on the seller's means of transport. The seller is not required to unload the goods. If no specific point of delivery has been agreed within the named place, and if there are several points available, the seller may select the point at the place of delivery which best suits his purpose. Failing precise instructions from the buyer the seller may deliver the goods for carriage in such a manner as the transport mode and/or the quantity and/or the nature of the goods may requires. 6
Page 66 line 12 Delete the sentence beginning "If it is not intended. Substitute: Under Incoterms 2000 the buyer is responsible for clearing the goods on importation and paying the related charges. This reflects the principle that the party domiciled in the country of import is best placed to arrange and pay for import clearance. 7