Advise the Parties on the Term Paper

Excerpt from Term Paper :

The seller is deemed to have delivered the goods at that point, and the buyer is therefore obligated to pay for those goods.

4. The buyer cannot reasonably deny that the seller delivered the promised shipping documents. Neither can the buyer claim that the seller should bear the risk of damaged goods. As with CIF contracts, the seller in an FOB contract must bear the risk of any loss or damage to the goods until such time as the goods have passed the ship's rail at the port of shipment. The goods are at the buyer's risk from the moment they have passed the ship's rail at the port of shipment.

3. Does it matter whether or not the seller advised the buyer that a war might break out between the two states as soon as the seller became aware of this fact?

It depends on when the seller knew of the imminent war. FOB contracts have different notice requirements than CIF contracts which give buyers additional protections. These notice requirements only have consequence if they are neglected before a particular time in the shipping process.

Background Law

Notice

Where goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their sea transit and, if the seller fails to do so, the goods are at his risk during such sea transit.

Although this provision imposes no liability on a seller who fails to provide such notice, it does impose the burden of risk on a seller who fails to give adequate notice to the buyer.

Imminent risk of war would likely be considered a "circumstance in which it is usual to insure." Thus, the seller would have been required to give notice to the buyer of the imminent war as may enable the buyer to insure them adequately during their sea transit. The issue here is whether the buyer learned of the imminent threat of war before or after it was still possible for the buyer to take out risk of war insurance on the goods.

If the seller learned of the imminent threat of war while it was still possible for the buyer to take out special "risk of war" insurance on the shipment, he would have been required to "give such notice to the buyer as may enable him to insure them during their sea transit."

Under these facts, the seller would have failed to give notice to the buyer to enable him to take out special risk of war insurance so the goods would be at his risk during sea transit. In that case, the seller would have assumed risk for the goods that were later lost or damaged at sea.

If the seller learned of the imminent threat of war when it was no longer possible for the buyer to take out special "risk of war" insurance, then it would not matter whether he notified the buyer of the imminent threat of war, because there was no possibility that the buyer could have taken out risk of war insurance for the goods. Thus, the notice requirement would have had no effect on risk.

4. Does it matter

a. Whether or not the ship and the goods on board have been destroyed?

No, the buyer must accept a good tender of documents, and pay for the goods upon tender of the documents. This is the case even where the goods are lost, or damaged prior to the tender of the documents, and the seller is aware of the loss or damage to the cargo. In Manbre Saccharine v Corn Products, the documents were tendered to the buyers two days after a submarine sank the ship carrying the cargo.

The sellers were aware of this but, nevertheless, tendered the documents. The court held that, since all the documents were in order, the sellers could tender them to the buyers, even though the goods were no longer in existence.

In the context of a

b. Whether or not the ship had to seek refuge in a port in Spain?

This scenario would introduce the possibility of liability for the carrier. However, its significance depends on two additional facts: 1) the reason the ship sought refuge in Spain, and 2) whether the ship sought refuge in Spain before or after the captain learned of the declaration of war.

The carrier is under a general duty to proceed on the contract voyage.

This duty may also be expressed in the contract of carriage between the carrier and the buyer or seller.

Deviation, however, is justified in certain circumstances and therefore not deemed a breach of contract. Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation, will not be an infringement or breach of the Hague-Visby Rules or of any contract of carriage, and the carrier will not be liable for the resulting loss or damage.

Seeking refuge in Spain would be considered a "deviation" from the voyage under the Hague-Visby Rules but is not necessarily a breach of contract or infringement of the Hague-Visby Rules. It would depend on the captain's reason for seeking refuge in Spain. If it was to save human life or preserve the voyage (i.e. repairs), then a deviation would be considered justifiable.

Even when there is no reasonable justification for the deviation, carriers may avoid liability availing themselves of certain immunities. The Act of War immunity provides that the carrier is not liable for loss or damage on account of act of war.

In this case, the ship may avail itself of the Act of War immunity if it did indeed seek refuge in response to the war. However, this would only be possible if the ship sought refuge after the war was declared.

If there is no reasonable justification for the deviation and no immunity that the carrier can avail itself of, the buyer may have recourse to the carrier for the lost or damaged goods.

Bibliography

CARR, I., & STONE, P.A. (2010). International trade law. London, Routledge-Cavendish. Carriage of Goods by Sea Act (1992)

INTERNATIONAL CHAMBER of COMMERCE. (2010). Incoterms 2010: ICC rules for the use of domestic and international trade terms: entry into force 1 January 2011. Paris, ICC

Sale of Goods Act (1979)

Carriage of Goods by Sea Act (1992)

Hague-Vigsby Rules

Institute of Cargo Clauses. Available at http://www.rhlg.com/pdfs/CargoClauses09.pdf

Johnson v Taylor Bros (1920) 122 LT 130.

Groom (C.) Ltd. v. Barber (1915) 1 K.B. 316

Manbre Saccharine v Corn Products [1919] 1 K.B. 198

Carr, 6

Carr, 6

Carr 7

Carr 7; Carriage of Goods by Sea Act (1992)

Johnson v Taylor Bros (1920) 122 LT 130.

Carr, 7-8

Sale of Goods Act, 50(1)

Sale of Goods Act, 20

Carr, 27

Carr, 26

C Groom Ltd. v Barber

Carr, 25

Carr, 25

INCOTERMs (A3(b).

Institute of Cargo Clauses, Sec. 6

INCOTERMS - FCA

INCOTERMS (A7 FOB).

INCOTERMS (A10 FOB).

INCOTERMS (A5 FOB)

INCOTERMS B8 FOB

INCOTERMS B1 FOB

INCOTERMS B4 FOB

INCOTERMS B1…

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