International Trade Law - Australia

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INTERNATIONAL TRADE LAW
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INTERNATIONAL TRADE LAW1
Issue
The issues involved in the given scenario whether the seller or the buyer will be liable for
compensation in terms of FOB contract.
Rules
In the given scenario, the terms and conditions of the FOB contract between the two
companies will apply here. The contracts regarding the sale of goods in international commerce
will be implicated here to decide the issues that arise in the contract. The term FOB means ‘Free
on Board,’ which is a term of shipment indicates the liability of the consumer or the trader of the
goods if there is any destruction arise.1 The destruction of the products in this situation will occur
if the commodities have been destroyed at the time of shipping. The term ‘FOB origin’ or ‘FOB
shipping point’ means that the buyer of the commodities is at the peril, and the ownership of the
goods will take place when the seller of that product has shipped the products. The case law
Carlos Federspiel & Co SA v Charles Twigg & Co Ltd 1957 and its decision will apply here for
the advice regarding this FOB contract to the parties.2 The rules of case law Bunge Corp vs.
Tradex Export S.A 1981 will apply here as it has decided in this case that if the buyer of FOB
contract fails of nominating a ship or vessel in a reasonable time, then he will liable for the
1 Asanwana, Ufuo, and Okor Efombruh. "Understanding FOB and CIF Contracts: And When
Property and Risk Pass in These Transactions." (2018) Available at SSRN 3278642.
2 Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd's Rep 240 (QB)

INTERNATIONAL TRADE LAW2
breach of terms of contract and the seller may refuse to deliver the commodities.3 The rules in the
United Nations Convention on the Contracts for International Sale of Goods at Vienna 1980 will
apply here.4 The government of Australia has participated in the Vienna Convention, which has
enforced as the law in several territories of Australia. A series of Territory of State Acts of
Australian Law has enacted this Convention and it is generally named as the Sale of Goods
(Vienna Convention) Acts such as Sale of Goods (Vienna Convention) Acts 1986 (NSW)5, Sale of
Goods (Vienna Convention) Acts (WA), 19866, Sale of Goods (Vienna Convention) Acts (NT)7
and many others. Article 11, along with Article 29 Part II of the Convention8, has dealt with the
requirements of the sale as the contract between the parties may not be required in writing and
does not specify any particular requirement. The case law Woodhouse AC Isreal Cocoa Ltd. SA
vs. Nigerian Produce Marketing Co. Ltd. 1972 will apply here for the consideration to bind a
contract between the international parties.9 According to the judgment of this case, any contract
or agreement for the sale of commodities and products will usually fulfill the requirement as a
3 Bunge Corp vs. Tradex Export S.A [1981] 2. All ER 540: [1981] 1 WLR (HL): affirming
[1981] 2 All ER 524.
4 The United Nations Convention on the Contracts for International Sale of Goods at Vienna
1980
5 Sale of Goods (Vienna Convention) Acts 1986 (NSW)
6 Sale of Goods (Vienna Convention) Acts 1986 (WA)
7 Sale of Goods (Vienna Convention) Acts 1986 (NT)
8 The United Nations Convention on the Contracts for International Sale of Goods at Vienna
1980
9 Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741

INTERNATIONAL TRADE LAW3
bilateral contract, which has been made by an interchange of the executory promises and every
undertaking should be constituted the consideration for another. The case law Nicolene Ltd. Vs.
Simmonds 1953 will apply in this given scenario, that there should be a certainty in terms of the
contract and the agreement of sale can be on any existing product as well as any future goods.10 It
is essential in this context that the subject matter, as well as the goods of the contract, should be
identified with an appropriate particularity to be recognized in the court of law. Mere failure of
ascertaining every term may not have resulted in an invalid contract. The term ‘Incoterms’ will
apply in this scenario as the terms of trade and the vital elements regarding the sale of
international contracts between the parties of the contract.11 It has informed the parties of the
international contract about what to act in respect of carriage the commodities or goods from the
vendor to the purchaser, and the import or export clearance. It has also explained the risks and
divisions of costs between the international parties to such a contract. The International
Chamber of Commerce (ICC) has reviewed this Incoterms for corresponding and adopting the
best practices in every decade for the growth of the international trade and relation between the
parties. This term ‘Incoterms’ is used in such international trade and it has also firmed that the
ship goods in the US should follow the Uniform Commercial Code (UCC) for such type of
international trade.12 It is also mentioned in this context that as there are several rules and
regulations regarding international trade and commerce, thus the parties to the international
10 Nicolene Ltd v Simmonds [1953] 1 QB 543.
11 Schaefer, Thomas J. "Incoterms® use in buyer-seller relationships: a mixed methods study."
(2017).
12 Uniform Commercial Code (UCC) 1987