Liability to Breach of Contract in International Sale and Purchase of Goods

This document discusses the liability to breach of contract in international sale and purchase of goods. It covers the effect of 2010 incoterm, parties responsible for ensuring goods arrived by stipulated time, seller and buyer obligations, shipper and carrier obligations, damages incurred by parties, and who should bear liability for damages.

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Name:
Course
Professor’s name
University name
City, State
Date of submission

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From
Daniel Survey
Gibson and Gibbs Law Associates
Melbourne Street
To:
Sally Robinson
Orchard Resellers Pty Limited
Sales Manager
19th September 2019
Re: Liability to Breach of Contract in International Sale and Purchase of Goods
What is the effect of 2010 incoterm?
The international commercial terms which have been given the acronym Incoterm are the
specific set of regulations that apply to many terms of purchase and sale of goods in
international trade. The terms were made in 1923 by the international chamber of commerce
ICC but the terms were not referred to until the year 1936. Over the years, the guidelines and
terms to the international commercial terms have been amended severally. 1The most recent
amendment to the terms were done in 2010 and in 2020 a set of expected changes in terms
1 Chow, D.C. and Schoenbaum, T.J.. International Trade Law: Problems, Cases, and Materials.
Wolters Kluwer Law & Business. 2017

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are expected to be made. This will be the eight version of revision.2Recent amendment on
Incoterm can be found in the ICC websites. The effect of the 2010 incoterm is to make sure
that international commercial terms between parties are met by each party expected in the
sale and purchase agreement.
Incoterms are designed to consolidate various terms in a sale of goods and purchase contract
used by seller, buyers, clients, governments, lawyers and other parties involved in a trade
industry on a set of pre-defined rules.3 The effect of this set of terms is to make sure that that
it reduces the misunderstanding that arise from multiple terms in the sale and purchase
contract. Its main purpose and effect is to make sure that the new terms that are set by ICC
are understood by everyone regardless of their geographical location hence reducing and
eliminating the seller buyer disputes that may occur and were common at a time during the
trade.
Which party to the Sales and Purchase Agreement was responsible for ensuring the
goods arrived by the stipulated time?
The first party to the trade are between Orchard Resellers Pty Ltd and Preloved Machines
Limited based in Jalkarta.4 In this case, Orchard was responsible for ensuring that the goods
arrived in the stipilated time by loading the goods to the dsetination required in time fro the
2 Bernard, A.B. and Fort, T.C., Factoryless goods producing firms. American Economic
Review, 105(5), pp.518-23.2015
3 Markovits, D. and Schwartz, A., Exemplary Damages. Commercial Remedies:
ResolvingControversies, Forthcoming.2016
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place of orrigin which is Melbourne. The second contract is between the shipper and the sea
haulier. It is between the shipper and Fast Ships Ltd for transportation of goods from
melbourne to Jarkata in Indonesia through a carriage contract.
This are the two contracts that and contracting terms that are responsible for ensuring that the
goods arrive in the Port of Jarkata within the sipulated time.
Who is the Seller and Buyer in this arrangement; and what are their obligations?
The buyer in this case in Preloved Machines limited and the seller is Orchard Reseller Pty Ltd
in Melbourne Australia. The obligation of the buyer and the seller in this case is to transport
and deliver Orange products which are both personal computers and laptops to Jakarta for
resale. Orcahrd wanted to expand internationally so it enterd into a subcontracting
arrangement with the reatila shop in Jarkata. It is a new pre-trial market of selling pre-
conditioned organge products to the new market. Representatives from both markets agrred
that Orchard would sell Preloved equipment in telecommunication worth $ AUD 550,000 in a
sales and purchase agreement. The agreement was executed in July 1 st 2019 where Preloved
was supposed to make an equivalent of $AUD 550,000 from the resale in profits. In a mixed
sale agreement, the parties agreed that there would be a mixed sale of reconditioned of $
50,000 in contact support services to answer to customer enquiries for a six month period.
The orange products are supposed to reach the port of Jarkata and a total of seven days for
claerance in the indonesian port of Jarkata, package the goods and distribute them to the
Preloved retail outlets in Indonesia.
 Who is the Shipper and Carrier; and what are their obligations?

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The shipper and the carrier to the contract are Amazegoods and Fast Ships Limited
respectively. Orchard would have preferred airfreight due to its convenience and fastness for
carriage and transportation. However, Australian Airline banned the transportation of orange
products due to their safety recall that could catch fire after overheating. The shipper
preferred the use of shipping services by Fast ship ltd due to this transportation ban. The
obligation in this contract is for the shipper to transport the consignment to the port of Jakarta
in a renegotiated time as the ship is slower that air transport. The second obligation is to
transport the consignment and reach the destination in their original form and shape without
any damage to the consignment. The value of the consignment was brought into the attention
of the shipper and noted in the Bill of Landing and the shipper described Orange products
aboard as reconditioned devices. However, the obligation is to get the consignment to the
destination which is the Port of Jakarta within the negotiated time and in intact or original
form and without experiencing any damage.
 Is there a breach of contract to the Agreement? If so, who is in breach? Why?
There is a breach of contract in the agreement. This is because the goods did not arrive to the
said destination and were damaged aboard the ship. The agreement was to get the
consignment to the destination which is the Port of Jakarta within the negotiated time and in
intact or original form and without experiencing any damage.5 The breach is in the parties
that were shipping the consignment. The breach is because the contract was not fulfilled and
the goods did not reach their preferred destination. The party who is in breach of the contract
5 Nadler, J., Contract Damages, Moral Agency, and Henry James’ The
Ambassadors. Canadian Journal of Law & Jurisprudence, 32(2), pp.443-471. 2019

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is Fast Ship Limited that never delivered the goods to the preferred destination. 6However,
the value of the consignment was brought into the attention of the shipper and noted in the
Bill of Landing and the shipper described Orange products aboard as “reconditioned
devices”. As the shipper agreed to transport the goods to the destination, they did not fulfill
the contract obligation the parties.
The second breach of contract is for Orchard limited who did not deliver the goods to
Preloved as agreed in their contract. The obligation of the buyer and the seller in this case is
to transport and deliver Orange products which are both personal computers and laptops to
Jakarta for resale. Orcahrd wanted to expand internationally so it enterd into a subcontracting
arrangement with the reatila shop in Jarkata. Orchard did not deliver the goods to Preloved
even if the mistake was not theirs and therefore Preloved can sue Orchard for breach of
contract. The third breach of contract is between Orchard and Amazegood who is the carrier
and gave Fast ship the contract to ship. Initially, the contract is between Orchard and
Amazegood for delivery of goods and services which did not materialize.
 What damages have been incurred by the Buyer; and/or Seller; and/or Carrier;
and/or third parties?
Damage to the buyer is worth $AUD 1.1 million. Preloved ordered a consignment worth $
AUD 550,000 with an equivalent value in profits. They are the biggest losers in this property
damage as they had an initial agreement to sell and had made pre-orders with their customers
worth $ 250,000. 7
6 Halaby, A.F. and Kelly, P.W., Disgorgement of Profits as a California Breach of Contract
Remedy: Intellectual Property and Other Guideposts. UC Davis Bus. LJ, 19, p.151. 2018
7 Goudkamp, J.,Exemplary Damages. Commercial Remedies: Resolving Controversies,
Forthcoming.2016

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The seller also has damages incurred on them. The original consignment is worth $AUD
550,000 sold to Preloved.8 This is the damage it will have to incur in case of the losses.
The carriers have damages since fire destroyed the consignment worth $550,000. The
carrier’s damage will have to include the damages to all parties as the carrier is the one
responsible for the loss of the goods.
Third parties have also had losses. Preloved Machines limited had made pre-sales where their
customers had bought goods prior to the delivery. The goods worth was $ 250,000 in online
presales order.
Fast ship is also facing damages to its properties as a carrier of $ 67,000 due to handling of
goods and unplanned deviation.
 Who should bear liability for any of the damages which you have identified?
The liability should be borne by the shipper. All the damages are as a result of shipping in
conditions that would lead to damage of property. The carrier in this case has no problem as
their obligation was only to transport the goods to their destination of choice without fail.
Orchard is not liable as he has done all he could to transport the Orange products to Preloved
in time and communicated the same. 9Preloved has not breached any contract therefore is not
liable as the goods did not reach any of their retail shops. Preloved are considering a claim for
breach arising from non-performance of the contract and lost profits. However, the shipper is
the one who is responsible for the breach of the contract.
8 Bertino, L., . Breach of Contract: Automatic and Unilateral Price Reduction. European
Review of Contract Law, 14(1), pp.24-59. 2018
9 Pathak, A., Contractual Damages: Principles and Applications. 2017

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Yours Sincerely,
Danny.
Bibliography
Bernard, A.B. and Fort, T.C., 2015. Factoryless goods producing firms. American Economic
Review, 105(5), pp.518-23.
Bertino, L., 2018. Breach of Contract: Automatic and Unilateral Price Reduction. European
Review of Contract Law, 14(1), pp.24-59.
Chow, D.C. and Schoenbaum, T.J., 2017. International Trade Law: Problems, Cases, and
Materials. Wolters Kluwer Law & Business.
Goudkamp, J., 2016. Exemplary Damages. Commercial Remedies: Resolving Controversies,
Forthcoming.

9
Halaby, A.F. and Kelly, P.W., 2018. Disgorgement of Profits as a California Breach of
Contract Remedy: Intellectual Property and Other Guideposts. UC Davis Bus.
LJ, 19, p.151.
Markovits, D. and Schwartz, A., 2016. (In) Efficient Breach of Contract.
Nadler, J., 2019. Contract Damages, Moral Agency, and Henry James’ The
Ambassadors. Canadian Journal of Law & Jurisprudence, 32(2), pp.443-471.
Pathak, A., 2017. Contractual Damages: Principles and Applications.