Law 20007 International Commercial Law

Question.

An Australian company, CBD BUILDING SUPPLIES (CBD) has been importing fibreglass cloth fibre from China for some years. CBD uses the fibreglass in waterproofing their interior wall construction. Each sheet of standard weight 90 gsm costs $12 per linear metre.

The fibreglass is sold by length and shipped in lots of 500 metres wrapped in waterproof sheeting and packed into containers for transportation. The companies have been dealing with each other for some 5 years.

This dispute relates to the shipment of 20,000 metres.

The contract of sale for the consignment contains these express clauses:

1. The cloth is tested by the UNIMELB for required moisture content in accordance with recognized standards. If the moisture content were above 40% then the FIBRO would at their expense supply substitute goods.
2. The goods delivered and the delivery must conform in every respect with the requirements of this Contract. After the date of delivery, CBD BUILDING SUPPLIES is not obligated to permit FIBRO to remedy any failure to perform. CBD BUILDING SUPPLIES may reject any offer to remedy any failure to perform after the date of delivery.
3. The contract of sale is governed by the Convention on the International Sale of Goods 1980 (CISG).
4. Fibro will make the contract of carriage for consignment, a bill of lading and stipulated CIF (INCOTERMS 2020), due for delivery on or before 31 October.

10,000 metres were shipped on 20 August on the ship NEVERBLUE 1. On loading the master of the ship delivered a clean bill of lading, noting 2 containers said to contain 200 x 500 metres of fibreglass cloth. The other 10,000 metres were shipped on the ship NEVERBLUE 2 on 14 September. Again, the master of the ship delivered a clean bill of lading, noting 2 containers said to contain 200 x 500 metres of fibreglass cloth.

NEVERBLUE 1 arrived in Australia on 14 September in Sydney. In the past, all goods had been delivered to Melbourne. NEVERBLUE 1 had several times tried to contact CBD BUILDING SUPPLIES to confirm the delivery port. Unable to do so this time they had berthed at Sydney.

On examination in Sydney of the NEVERBLUE 1 consignment, in the Sydney warehouse of CBD BUILDING SUPPLIES, it was found that the waterproof sheeting was intact. CBD BUILDING SUPPLIES then at their own expense engaged another shipping company, CHINASHIPPING, and shipped the goods CIF under a clean bill of lading from Sydney to Melbourne. The ship was delayed departing from Sydney because of a stevedoring strike and was struck by severe south-westerly gales on the Eastern coast of Australia. The severe storms washed seawater over the shipping containers. The goods arrived in Melbourne on 10 November.

On arrival in Melbourne, CBD BUILDING SUPPLIES arranged for UNIMELB to test the fibreglass cloth from both shipments. UNIMELB found unacceptable moisture content in the whole consignment. CBD want a total refund for the price of this consignment.

NEVERBLUE 2 arrived on 30 November in Melbourne. This delay was caused by a blockage of the Suez Canal by another vessel for I month. On arrival was found that only 8,000 metres of cloth was delivered.

Because of these delays and shortage in the delivery quantity, CBD BUILDING SUPPLIES is behind in their orders. They say that they have lost significant business because of this and furthermore have had damage to their reputation as a reliable and prompt builder and installer of quality waterproofing.

Moreover, they now find that the insurance taken out by FIBRO did not meet the minimum requirements of the INCOTERM and does not cover the loss of the 2000 metres on the voyage.

Answer the following questions:

1. Do CBD BUILDING SUPPLIES have to accept if FIBRO offers to supply substitute goods for the first shipment of 10,000 metres? Explain your reasons and advise CBD in their negotiation with FIBRO.
2. Can CBD BUILDING SUPPLIES claim the cost of the freight charged by CHINA SHIPPING for the Sydney to Melbourne leg of the shipment, from FIBRO?
3. Is FIBRO responsible for the business losses of CBD in their construction projects through delayed delivery to CBD?
   1. Consider each of the shipments on NEVERBLUE 1 & NEVERBLUE 2 separately.
   2. How would this loss be quantified?
4. Does CHINA SHIPPING have any liability to CBD BUILDING SUPPLIES as far as the lost 2,000 kgs are concerned? Is CHINA SHIPPING liable for the excessive moisture content in the shipment?

Question

In 2020, Importer Co (IM Co) in Australia, entered a contract with Exporter Co (EX Co) in Thailand, to buy antique Thai teak temple artefacts on an ongoing basis. In the contract the artefacts are first inspected and certified by the Thai Antiques Association to be at least 150 years old and then consolidated into shipments of around 500 kgs weight as they are sourced, shipped to Australia.

Over the following two years, several shipments of artefacts were made.

Each was paid separately, via irrevocable letters of credit set up in favour of EX Co., which expressly adopted the latest version of the Uniform Customs and Practice for Documentary Letters of Credit (UCP 600), and was payable against each shipment with the receipt of a clean, on-board bill of lading, an insurance policy, a commercial invoice identifying the quality and quantity of the artefacts and a certificate of inspection certifying the antiquity and origin of the shipment from the Thai Antiques Association. Advice of the consignments is notified by EX Co to IM Co on consolidation of the consignment and shipments then take approximately 10 days from departure from Thailand to arrival in Melbourne.

Since the pandemic over the last two years, the market for antiques has fallen markedly. IM Co now wishes to opt out of all future shipments under the contract. However, four shipments have been made in the last three days of May from EX Co. on the usual trade terms.

Advise IM Co as to their legal position in rejecting the payment demand for each of these shipments in the following separate scenarios:

1. For the first shipment, the invoice describes the artefacts to be ‘antiques certified as at least 150 years old’ whereas the letter of credit describes them as ‘antique’.
2. For the second shipment, IM Co has become aware that the certificate of inspection and origin, although on its face in order, is incorrect and negligently completed. They believe that in fact the artefacts are from Cambodia and Laos, not Thailand.
3. For the third shipment, the issuing bank has become aware of a rumour that EX Co is implicated in a racket involving forgery of bills of lading and there is a suspicion that this bill of lading may be forged. The bank has not passed this information on to IM
4. For the fourth shipment the bill of lading (BOL) is dated early June but in fact ship departed in July. The goods have not arrived yet in Melbourne.

Question

An Australian company (A Co.) owns the "Best Cameras" trademark in Australia and produces a special camera, which is known to consumers as a moderately priced quality product. A Co. entered a licensing contract with a Chinese manufacturer (C Co.) to manufacture and market these cameras utilizing the "Best Cameras" trademark in return for payment of royalties based upon a percentage of sales.

After producing Best Cameras for a short time at its Chinese facility, the manufacturer moved production to its facility in Vietnam to reduce labour costs. The cameras produced at the Vietnamese facility utilised the "Best Cameras" trademark but were marketed under the name Best Shot. Additionally, these cameras contained improved electronic features incorporated into the product by C Cos engineers. Despite the inclusion of these improvements, "Best Shot " cameras proved to be of inferior quality.

1. "Best Shot" cameras have been sold cheaply in discount retailer, Best Cameras are more expensive and sold only in specialised camera stores
2. C Co. has refused to share access with Co to the technical improvements incorporated into the "Best Shot" on the basis that they are confidential proprietary information.

Consider potential terms of the international licensing agreement in this scenario.

What clauses could A. Co. have included in its original licensing contract with C. Co. to have potentially avoided this situation and identify how these clauses could have assisted with the resolution of the legal and commercial difficulties outlined above?