International Trade Law

This article discusses the essential elements of a valid contract under the UN Convention on Contracts for the International Sale of Goods (CISG) and the Sale of Goods Act 1979. It also covers the use of sea waybills and exclusion clauses in international trade law.

Running head: INTERNATIONAL TRADE LAW
International Trade Law
Name of the Student
Name of the University
Author Note

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In the given case, the primary issue to be dealt with is whether Shipton is entitled to
compensation for the loss suffered due to the breach of obligations committed by Carrie. In this,
where Shipton has entered into a negotiation with Carrie to carry his goods from Portsmouth
located in the UK to Santander located in Spain. Here, since the transportation of goods involve
international transactions; the UN Convention on Contracts for the International Sale of Goods
(CISG) may be applied as this Convention sets out uniform legal provisions for agreements
dealing with international goods.
However, the applicability of the provisions of CISG is not restricted only to parties who
belong to countries that have adopted the convention, but it shall govern the international sale of
goods contracts if the parties select the laws of the jurisdiction that has adopted the CISG.
Generally, countries like UK that has not adopted the CISG provisions, the general perception is
that for suppliers of goods and commodities from countries having stable common law or
codified legal systems, usually seek to apply the law of that country and exclude the CISG
provisions1.
Since, in the given case, neither the parties, Carrie and Shipton have specified the laws
that would be applicable to the transactions; there are two laws that can be applicable to govern
the transportation of goods, the Sale of Goods Act 1979 and the CISG to determine whether a
contract has been formed between the contracting parties. This is because, although UK is not a
party, but Spain has adopted CISG so it is possible that the parties will either decide the law
adopted in Spain to govern the contract2. Therefore, in order to decide if Shipton has a right to
claim compensation against Carrie it is important to determine the essential elements of a valid
1Fröhlich, Beata. "I. The Theory and Practice of Precedent in Convention on Contracts for the International Sale of
Goods." Approaches to Procedural Law. Nomos Verlagsgesellschaft mbH & Co. KG, 2017.
2Folsom, Ralph, Michael Gordon, and Michael Van Alstine. International trade and economic relations in a nutshell.
West Academic, 2016.

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contract and the rights and obligations of the contracting parties under the CISG laws and Sale
of Goods Act 1979.
Essential elements to form a valid contract
The UN Convention on Contracts for the International Sale of Goods (CISG)
According to CISG, any transaction is rendered as legal and valid when there is an offer
between at least two persons where the person making the offer or the offeror proposes certain
terms and conditions to another person known as the offeree3. However, every such proposal
does not amount to an offer and requires certain essential requisites to be fulfilled in order to be
accepted as an offer. The elements include:
a) an intention to b legally bound by the offer after its acceptance;
b) adequate definiteness of the proposal; and
c) the effectiveness of the offer;
According to Article 14 of the CISG, stipulates definiteness of Addressee that is, a proposal
must be made to any person or to any specific group of persons or the offer shall be treated as an
invitation to offer. Article 14(2) requires the offeror to indicate clearly whether the proposal
made is an offer or an invitation to treat4. According to Article 14 of the CISG, the second
requisite is an intention to be legally bound by the offer after it is accepted. In order to make a
contract effective, it is important that the parties to the contract be legally bound by the contract.
Lastly, the element of ‘adequate definiteness of proposal’ as stipulated under Article 14(1)
3 Lookofsky, Joseph. "The 1980 United Nations Convention on contracts for the International sale of Goods."
International Encyclopaedia of Laws. Kluwer Law International, 2016. 1-250.
4 United Nations Convention on Contracts for the International Sale of Goods (CISG) 1980 at Article[14(2)].

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states that quantity, nature and price of goods are essential to be mentioned while making such
proposal5.
Nature and quantity of goods
It is essential that the nature and quantity of goods be mentioned in an offer to make a
sale contract effective. Although explicit description of such goods is not mandatory as it may be
determined implied as stipulated under Article 14 of CISG but at least an indication of the goods
and its amount should be mentioned in a manner that the same can be construed by the courts
while determining the existence of an offer. Moreover, a verbal indication of the nature and
quantity of goods is acceptable under CISG6.
Determination of Price
According to Article 14(1) of the CISG, an offer is not considered as effective if it does
not include any determined price that is, the price is nether mentioned explicitly or implicitly.
However, Article 14 also states that it is not necessary for an offer to include a fixed price
explicitly. For instance, one party may opt for late determination either due to consideration of
market price or in need for further information. Here, such uncertainty in the determination of
the consideration also fulfils the requirement of price determination as an essential requisite for
offer.
In regards to the element of ‘consideration or price determination’, there are two
contradicting provisions under CISG. Where Article 14 states that a contract is rendered as valid
only when there is a price determination mentioned in the contract either explicitly or implicitly,
Article 55 of the CISG stipulates that if the contracting parties perform the contractual
5 United Nations Convention on Contracts for the International Sale of Goods (CISG) 1980 at Article [14].
6 United Nations Convention on Contracts for the International Sale of Goods (CISG) 1980 at article [14].

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obligations without including any price, the contract is said to be effective without determining
the price7. If the contracting parties have either performed the contractual obligations or have
made clear by any conduct that the contractual obligations shall be performed, the requisite to
include determinable price can be said to have been excluded by the contracting parties based on
the concept of ‘party autonomy’ specified under Article 6 of the CISG. A party autonomy
principle under section 6 states that with certain exceptions, the parties to a contract are free to
incorporate rules of their own choice that would regulate their contractual relationship.
Sale of Goods Act 1979 [SGA]
According to section 2(1) of the SGA 1979, a sale of goods contract is a contract by
which the seller transfers or agrees to transfer the goods to the buyer in exchange for a monetary
consideration known as the price8. A sale contract may be in writing or verbal or partly in
writing or partly oral or such contract may be implied by the conduct of the contracting parties as
was held in Hillas v Arcos (1932)9.
According to section 8 of the Act, the element of ‘price’ must be mentioned in the
contract or may be determined during the course of dealing between the parties to the contract.
According to section 8(2) of the Act, if the price is not determined in the manner mentioned
under sub-section (1) of the Act, the buyer is entitled to pay a reasonable price and such
reasonable price depends upon the circumstances of individual cases.
Sea Waybills
7 United Nations Convention on Contracts for the International Sale of Goods (CISG) 1980b at Article [55].
8 Sale of Goods Act 1979 at section[2(1)].
9 Hillas v Arcos (1932) 147 LT 503

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A sea waybill, unlike a Bill of Lading, is a receipt for goods for a contract of carriage of
goods by sea. It recognizes the person to whom the carrier shall deliver the goods as per the
contract. Under the CISG provisions, article 58 describes the transport documents that control
the disposition of goods. Sea waybills are one of such documents that are non-negotiable in
nature. A sea waybill usually have the word ‘Non-Negotiable’ printed across it in large letters
carrying the name of the if the intended consignee.
A sea waybill need not be tendered by the name of the consignee or its agent at the port
where the goods are to be discharged. This is because the carrier will deliver the goods to the
consignee after obtaining the document establishing its identity. This rule has also been
stipulated under Article 45 of the UN Convention on Contracts for the International Carriage
of Goods Wholly or Partly by Sea 2009 (the Rotterdam Rules)10. A sea waybill represents the
goods to be carried and delivered to the consignee within the broader interpretation of the CISG
as stipulated under Article 58 of CISG. As this document used as a receipt of the goods carried
by sea, it demonstrates the weight, quantity and apparent condition of the goods carried, it also
reflects the obligation of the carrier to carry them to the stipulated destination.
The UNCITRAL Convention on Contracts for the International carriage of Goods
Wholly or Partly by sea or the Rotterdam Rules that was enforced in 2009 with the objective to
set out uniform statutory rules with respect to sea transport. Under this Convention, there is a
uniform rule regarding the liability of the carrier where the carriers are responsible for the goods
from the point where the goods are received to the point where it is delivered. The Carrier is
10 Tseng, Chien-Jui C. The Rotterdam Rules in harmonising the law of international carriage of goods by sea: a
study of the perspectives of shipping companies, marine insurance companies and P&I Clubs. Diss. University of
Surrey, 2016.

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entitled to exercise due diligence while carrying the goods by sea. The legal claims may be filed
within two years from the date of delivery11.
In the given case, after entering into negotiation with Carrie regarding transportation of
certain goods of Shipton from Portsmouth in England to Santander in Spain, Carrie agreed to
Shipton and issued him sea waybill. As explained earlier that in order to form a valid contract, it
is essential that there is a valid offer, acceptance and a legal intent to be bound by the contract. In
the given scenario, Shipton proposed Carrie to transport his goods by sea as Carrie runs a small
shipping line. The proposal included all the three essential elements that must be present to
establish a proposal as an offer under the CISG.
Firstly, Shipton was specific about the addressee while making the offer, that is he made
the proposal to Carrie specifically; secondly, he had the legal intention to be bound by the
contract, if she accepted the same. Thirdly, Shipton mentioned about the nature and quality of
all the goods that he wanted Carrie to transport, thus, fulfilling the requisites of an offer as
stipulated under Article 14 of the CISG. Moreover, with respect to the element of ‘price
determination’ though the price has not been explicitly mentioned in the contract, but since the
contracting parties have performed the contractual obligations, here, Article 55 may be
applicable. It implies that the contract is effective without including the ‘price determine’
element in it that is based on the principle of Party autonomy stipulated under Article 6 of the
CISG. Therefore, it can be stated that a contract was formed between Carrie and Shipton under
the legal provisions of CISG.
11 Rogers, Anthony, Jason Chuah, and Martin Dockray. Cases and Materials on the Carriage of Goods by Sea.
Routledge, 2016.

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Further, under the Sale of Goods Act 1979, according to section 2(1), when goods are
transferred from one person to another in exchange of monetary consideration known as price, it
leads to the formation of a sale contract. In the given scenario, Shipton offered Carrie to transport
his goods from Portsmouth to Santander and she agreed to the same, implying an acceptance of
such offer. Although the consideration for such transportation is not expressly mentioned in the
contract, it is implied as Carrie has issued a transportation document to Shipton in the form of a
sea waybill that is a receipt of the good to be carried by sea12.
As mentioned above that a sea waybill is merely a receipt of goods to be carried by sea, it
is stipulated in the Rotterdam Rules that carriers are responsible for the goods from the place
where the goods are received to the place of its delivery. The Carrier is also entitled to exercise
due diligence while carrying the goods by sea. Any legal claims may be filed within two years
from the date of delivery.
Exclusion clause
However, while entering into the contract, Carrie had incorporated an exclusion clause in
its shipping documents wherein she is exempted from all liability that arises from the loss of the
goods to be transported irrespective of the cause resulting in such loss.
Under CISG, according to section 6, limitation and exemption of liability clauses are
usually common in international sale contracts. The freedom of party to exclude or limit the
remedies of the aggrieved party under the CISG terms is the outcome of the general principle of
party autonomy as stipulated under Article 6 CISG. This principle lays emphasis on the freedom
of the contracting parties to derogate from any of the CISG provisions that stipulates remedies to
12 Thomas, Rhidian, ed. The carriage of goods by sea under the Rotterdam Rules. Taylor & Francis, 2017.

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the aggrieved party. However, the contracting parties are free to derogate any of such remedial
provisions provided the obligee is not denied of all the remedies that are available under the
CISG Convention. It is mandatory that the obligee be subjected to at least a minimum adequate
remedy.
In other words, it must be ensured that the exclusion or the limitation clause depriving the
remedies available to the obligee must not create circumstances where the fulfillment of the
contractual obligations becomes merely optional, though the same should be the willingness of
the obligator13. Thus is because such circumstances would amount to the violation of the general
principle of reasonableness which is otherwise is considered as the most essential principles of
the CISG and it shall also amount to a contravention of the observance of good faith as stipulated
under Article 7(1) CISG.
The other remedies apart from damages include the following:
i. specific performance under section [46(1)];
ii. reduction of price [Art 50];
iii. repair of lack of conformity of the goods [ Art 46(3)];
iv. remedy of avoidance under {Art 64]
v. right of seller to cure [Art 48];
Therefore, an agreement where the clause that excludes or limits the liability of the obligator
in the event of commission of breach of the contractual obligations, must not deprive the
aggrieved party with no contractual remedies for the enforcement of the rights of such aggrieved
party under the contract.
13 Smits, Jan M., ed. Contract law: a comparative introduction. Edward Elgar Publishing, 2017.

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Under the English law, the person relying on exclusion clause must establish that the cause
formed a part of the contract and the party is bound by the contractual terms as was held in
L’Estrange v Graucob [1934]14. However, such clause must be incorporated on a contractual
document and not in any document that only acknowledges payment like receipt as was held in
Parker v SE Railway Co [1877]15. Further, in Olley v Marlborough Court [1949]16, it was
established that the incorporation of such clause must be acknowledged to the other party either
prior to the commencement or at the time of entering into such contract. Furthermore, a
reasonable notice is to be given to the other party and it is not necessary to provide any actual
notice as was held in Thompson v LMS Railway [1930]17
However, the test of reasonableness is subjected to individual cases. Further, in case of any
uncertainty in the exclusion clause, the court shall interpret such clause against the party
incorporating such clause and relying on it, which is known as the rule of contra proferentem.
Furthermore, in order to claim damages for the loss suffered, the aggrieved party must establish
that the loss suffered due to the breach of the contract was substantial and provided such loss
resulting from the breach is not too remote. This rule has been interpreted in the case of Hadley v
Baxendale where it was held that the loss suffered by the aggrieved person has been a direct
outcome of the breach and the loss was that was within the knowledge of the parties at the time
of commencement of the contract were the results of the breach.
In this given scenario, it can be observed that while providing Shipton with shipping
documents, it included a clause stating an exclusion clause that she shall not be liable for any
loss in whatever way it may be caused. However, since she incorporated the clause in the
14 L’Estrange v Graucob [1934] 2KB 394
15 Parker v SE Railway Co [1877] 2 CPD 416
16 Olley v Marlborough Court [1949] 1 KB 532
17 Thompson v LMS Railway [1930] 1 KB 41

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contractual document it shall be considered as a part of the contract as was observed in Parker’s
case. However, in Olley’s case, it was also held that the inclusion of such clause must be
reasonably notified to the other party.
If Shipton were reasonably notified about the exclusion clause, it would deprive him of
making claim against such clause; however, if he is not aware of the clause, Shipton might claim
damages against the loss he sustained. Nevertheless, Shipton must establish that he had suffered
loss from the breach of the contract and that such loss is the direct result of such breach and is
not too remote as was observed in Hadley’s case.
Consequences of Passing of risk [Article 66] of CISG
There are no differences in the outcome of the passing of risk between the English law
and CISG provisions. This article reaffirms the provisions stipulated under Article 53 that
imposes the obligation on the buyer to the price-risk, which is passed on to the buyer after the
seller is relieved of the risk of loss. However, in case a contract includes transit, the risk of loss is
transferred at the time of concluding the contract as was observed in Sterns Ltd v Vickers Ltd
[1923]18.
However, before the risk is passed on to the buyer, the seller must preserve, procure and
repair the goods if necessary and bring them duly to the place of delivery. If damage is caused to
the goods accidentally during the transit process, the seller must resupply them as the he is still
under obligation towards the buyer19. Furthermore, if the loss or damage to goods occur after the
performance of the contractual obligations and the goods are under the control of the buyer, the
buyer shall held liable. Nevertheless, there is a possibility that the performance risk passes back
18 Sterns Ltd v Vickers Ltd [1923] 1 KB 78.
19 Kroll, Stefan, Loukas Mistelis, and Pilar Perales Viscasillas. "Introduction to the CISG." UN Convention on
Contracts for the International Sale of Goods (CISG). Nomos Verlagsgesellschaft mbH & Co. KG, 2015.

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to th seller if the loss or damage to the goods are caused due to any act or omission of the seller
as stipulated under article 66 of CISG.
Thus, from the above discussion, it can be inferred that a contract has been formed
between Shipton and Carrie when she accepted the offer made by Shipton regarding
transportation of his goods from Portsmouth to Santander Spain. They agreed on the terms of the
contract with respect to the nature and quality of the goods to be transferred. In regards to the
passing of risk it can be stated that since as per Article 66 of the CISG, since Santander was the
place of delivery and was different from that of the business of Carrie, Shipton would be liable
for the risk of loss after it was delivered to him at its location.
However, before the risk could pass to Shipton, Carrie was responsible for preserving the
goods and deliver the accordingly. Therefore, the performance risk is transferred to her from the
Buyer. Since the goods were damaged after performance of contractual obligations, there is no
breach of a contract, Shipton cannot claim compensation but Carrie is entitled to resupply the
goods to Shipton for the damage caused to the goods during transit process due to the omission
of Carrie.

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Reference List
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Chow, Daniel CK, and Thomas J. Schoenbaum. International Trade Law: Problems, Cases, and
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Ciger, Selim. Potential impact of the Rotterdam rules on certain aspects of the carrier's liability
in English law: a critical evaluation of the convention's treatment of delay, carrier's sub-
contractors and multimodal transport. Diss. University of Bristol, 2015.
Clarke, Malcolm A. International carriage of goods by road: CMR. CRC Press, 2014.
Folsom, Ralph, Michael Gordon, and Michael Van Alstine. International trade and economic
relations in a nutshell. West Academic, 2016.
Fröhlich, Beata. "I. The Theory and Practice of Precedent in Convention on Contracts for the
International Sale of Goods." Approaches to Procedural Law. Nomos Verlagsgesellschaft mbH
& Co. KG, 2017.
Hadley v Baxendale [1854] EWHC J70
Hillas v Arcos (1932) 147 LT 503
Kroll, Stefan, Loukas Mistelis, and Pilar Perales Viscasillas. "Introduction to the CISG." UN
Convention on Contracts for the International Sale of Goods (CISG). Nomos Verlagsgesellschaft
mbH & Co. KG, 2015.

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L’Estrange v Graucob [1934] 2KB 394
Lookofsky, Joseph. "The 1980 United Nations Convention on contracts for the International sale
of Goods." International Encyclopaedia of Laws. Kluwer Law International, 2016. 1-250.
Lookofsky, Joseph. Understanding the CISG. Kluwer Law International, 2017.
McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK),
2014.
Olley v Marlborough Court [1949] 1 KB 532
Omar, Paul, ed. International insolvency law: Themes and perspectives. Routledge, 2016.
Parker v SE Railway Co [1877] 2 CPD 416
Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
Rogers, Anthony, Jason Chuah, and Martin Dockray. Cases and Materials on the Carriage of
Goods by Sea. Routledge, 2016.
Sale of Goods Act 1979 at section[14(1)]
Smits, Jan M., ed. Contract law: a comparative introduction. Edward Elgar Publishing, 2017.
Sterns Ltd v Vickers Ltd [1923] 1 KB 78.
Thomas, Rhidian, ed. The carriage of goods by sea under the Rotterdam Rules. Taylor &
Francis, 2017.
Thompson v LMS Railway [1930] 1 KB 41

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Tseng, Chien-Jui C. The Rotterdam Rules in harmonising the law of international carriage of
goods by sea: a study of the perspectives of shipping companies, marine insurance companies
and P&I Clubs. Diss. University of Surrey, 2016.
United Nations Convention on Contracts for the International Sale of Goods (CISG) 1980