LAWS8098 International Commercial Law | Hypothetical International

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LAWS8098 International Commercial Law

Question:

  1. Issue Identification, Clear and detailed identification of all issues demonstrated through insightful discussion.
  2. Legal Comprehension, Excellent and detailed knowledge and understanding of the relevant law. No errors or omissions.
  3. Research, Excellent research demonstrated and applied with professional skill to the identified issues.
  4. Analysis and Application, Thorough and comprehensive application of law and research to facts. Original critical analysis, clear and insightful conclusions.
  5. Expression, Beautiful expression which is a delight to read.
  6. Bibliography, Excellent bibliography in AGLC4 format.

Problem Question – Chocolate for Christmas

This assessment requires you to advise a client on a contentious hypothetical international commercial sale scenario assessing your ability to independently research contentious issues, and to identify, analyse and appraise the legal issues covered throughout the first part of the course in a clear, concise and logical manner with reference to appropriate authorities. This assessment task requires you to identify relevant factual issues and to research and apply appropriate law. This assessment and the feedback provided will assist your preparation for the final assessment. This assessment requires you to propose professional and feasible resolutions to the following hypothetical problem by identifying relevant factual issues and applying appropriate law.

The word limit is 1500 words. The word limit excludes your bibliography which should be in AGLC 4 format. This is a letter of advice so please avoid using footnotes but please do use in text citation for references (i.e. put references in brackets within your text such as the names of cases, legislative provisions or other authorities).

Your assignment must be submitted via Turnitin.

The Contract for Sale

Your client, Chocolate Orange PL (“COPL”), is an Australian company, registered in NSW with no overseas agents). COPL is a small business based in Orange in regional NSW which makes a variety of chocolate products. On 15 September 2020, COPL enters into a contract with Luxury Food Importers Limited (a Singaporean company, registered and trading solely in Singapore) (LFIL) for the sale of 1000 kgs of Australian chocolate (in 10,000 x 100 gm blocks) for $20,000 to be exported from Newcastle in November/December 2020 and imported into Singapore. The contract is a CIF Incoterms 2020 contract which provides that the good will be shipped Port of Newcastle (NSW) to Port of Singapore. The contract specifies that the goods are to arrive in Singapore by 15 December 2020 (in time for the Christmas rush). LFIL have local Singapore buyers lined up for the entire 1000kgs worth of chocolate. All buyers are expecting premium chocolate. The sale contract between COPL and LFIL contains an arbitration agreement stating that “The parties agree to resolve any dispute by arbitration in accordance with the law of NSW with Australia as the seat of the arbitration and in accordance with the ACICA arbitration rules.” COPL is very excited because it is the biggest sale of its Chocolate it has ever made.

The Contract for Carriage

On 20 September 2020, COPL enters into a contract with Polytéleia A.E. (PAE), a Greek shipping company, for the goods to be transported in The Fridge a ship registered in Panama which is due to depart Port of Newcastle (NSW Australia) on 15 November 2020, expected in Port of Singapore (Singapore) on 5 December 2020. Ideally the journey takes 15-20 days so the master of The Fridge is confident the ship can make it by 5 December 2020. PAE issues a bill of lading for the contract in accordance with the Amended Hague Rules (also known as Hague Visby including SDR) which are the rules applicable in Australia pursuant to the Carriage of Goods by Sea Act 1991 (Cth). COPL pays PAE $500 for the shipping of the chocolate.

The Voyage and its Aftermath

As luck would have it a number of things go wrong for COPL, LFIL and The Fridge.

COPL is a proud Australian producer which uses local and imported ingredients. In particular, COPL imports cocoa beans from Ghana. Unfortunately, there have been numerous delays in the delivery of cocoa beans to Australia from COPL’s supplier CHOGHANA throughout 2020 and COPL finds itself in the unenviable position of having an insufficient supply of cocoa to fulfill the 10 000 block order by November 2020. On 1 November 2020, COPL writes to LFIL, indicating there will be a delay in part of the shipment. It receives no reply from LFIL.

On 10 November 2020, COPL, by packing every available block of chocolate in its storeroom and shopfront, delivers 838.2kgs (in 8,382 x100 gram blocks) to Newcastle Port for loading on The Fridge. Unfortunately, The Fridge arrives in Newcastle port very late on 16 November 2020. The reasons for the delay are unclear but COPL suspect it is due to COVID 19 related checks at multiple ports slowing down all shipping processes. The Fridge is hastily unloaded and reloaded between 17 and 25 November. COPLs 8000 blocks are one of approximately 100 packages packed in a “Requires refrigeration” container. There are 200 containers on The Fridge most of which require refrigeration.

The Fridge sets sale on 25 November 2020 still hoping to make Singapore port by 15 December. Unfortunately, she hits rough seas which delay her journey. More importantly, the storm blows a generator which powers one of the refrigeration units on The Fridge. There is a back-up generator but it has not worked for years and the main generators are usually so reliable that no one has bothered to fix the back-up generator for years. When The Fridge finally limps into Singapore Port on 19 December 2020, the chocolate has been unrefrigerated for 4 days. The chocolates are not inedible but there is a risk that they have suffered heat damage which cannot be tested without opening blocks of chocolate (which would make the opened blocks unsaleable).

LFIL decides it should reject the chocolate delivery. Its buyers are all purely premium chocolate buyers and it is concerned about delivering substandard goods. On 20 December 2020, LFIL notifies COPL of its decision to reject the shipment. COPL disputes that there is non-compliance with the contract in relation to the 8,382 blocks of chocolate delivered, claiming the chocolate should still be able to be sold as premium. COPL urges LFIL to at least attempt to on sell the chocolate. LFIL opens and randomly tests 10 bars of chocolate and finds them all to be delicious and not obviously heat damaged. LFIL then agrees it will with comply with COPLs request and proceeds with its precontracted on sale of 6000 blocks of chocolate. However, LIFIL is forced to break its contract with one of its 3 buyers for 4000 bars of chocolate (which it was selling for $4.00 per bar constituting $8000 profit which is lost) partly because it notes that the delivery from COPL is short 2000 bars of chocolate.

LFIL then purports to reject the remaining 2000 bars as unsaleable and sells these remaining 2000 bars of chocolate, which are no longer contracted for on sale, to bargain retailers for $2000. LFIL tells the bargain retailers it is selling on behalf of COPL. LFIL believes this urgent sale is the best possible action for the remaining chocolate which it considers will perish if not sold immediately. COPL has not seen the chocolate and reserves its position in relation to LFIL’s actions.

LFIL also notes that the chocolate delivered is not the complete shipment ordered. The contract was for 1000kgs of chocolate (10,000x100gm blocks). The Bill of Lading lists “approx. 860 kgs packaged chocolate” for the shipment. The weight of the packaging is small but not negligible. LFIL says it only received 8,100 bars in Singapore and that, on arrival at port, there was evidence that the container  and the packaging had been tampered with. LFIL does not know if the damage and theft occurred during the voyage or at Singapore customs.

LFIL pays COPL: $7,200 [LFIL calculates the payment as follows: $20,000 contract less $3,800 for the 2000 bars it says were not delivered; less $2,000 for the rejected chocolate; less $8,000 lost profit from the failed on sale contract; plus $1,000 for the money received on behalf of COPL from the bargain retailers].

Although the contract is CIF, COPL had organised Cargo Institute A coverage for the voyage, in accordance with the agreed negotiation with LFIL with Australian Marine Protect P/L (AMPPL). The insurance premium was $350 and was paid by COPL to AMPPL on 15 November 2021 for carriage of 10 000x100gm bars of chocolate.

COPL is devastated. It is angry with its suppliers, LFIL and The Fridge and it believes that LFIL should pay at least another $8000 on the contract. However, it also desperately wants future contracts with LFIL so it does not wish to damage its ongoing relationship.

COPL is also rather annoyed about the missing 282 blocks of chocolate which it delivered to The Fridge but which LFIL claims did not arrive in Singapore. COPL has a very strong suspicion as to where those bars of chocolate went. COPL has been sent, by several amused customers, a link to a viral TikTok video called “Chocolate Sea Shanty” featuring a number of men on a ship having a chocolate eating competition while simultaneously singing lyrics about the joys of pillaging on the high seas. The chocolate being consumed is clearly recognisable as COPL chocolate. COPL believes the missing 282 blocks were stolen by crew of The Fridge and eaten during the voyage.

Your Brief

You are a junior lawyer at the Super Cheap Rapid Answer Practice (SCRAP). COPL wants SCRAP to look into this matter for it. Because of the small amounts involved in the dispute, COPL cannot afford to pay SCRAP more than $1,500 for your advice so it is happy for your letter of advice to be in draft form and rough. COPL definitely does not want to go to arbitration but would be happy to try to informally negotiate with any other party. COPL asks you to briefly identify as many issues as you can and inform it whether it might be able to recover anything from any other party.

Despite receiving a massive delivery of cocoa from Ghana in February 2021, COPL is struggling to keep up with a huge increase in demand for its chocolate. This may or may not be a result of the viral TikTok video. COPL says, because it is so busy, it does not have any time to provide you with any further information but to let it know, in your draft advice, if there are further questions you need to ask.

In providing your advice, you might consider the following issues:

  1. What role does the Vienna Convention on the International Sale of Goods 1980 play in the transaction?
  2. What effect do the CIF Incoterms 2020 have on the responsibilities of the parties?
  3. What role do the Amended Hague Rules (as per COGSA 1991 (Cth) Australia) have on the problem?
  4. Who is the carrier and what role does it play in COPL’s loss?
  5. Who, if anyone, is liable for the stolen chocolate bars?
  6. Which parties might be responsible for COPL’s loss and are they directly responsible to COPL under the relevant contracts?
  7. What information are you missing that you would need to finalise your advice?

LAWS8098 International Commercial Law

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