Case Study: International Business Law and Goods Transportation

This case study analyzes a legal dispute arising from the damage of perishable goods during international shipping. Mr. Grey Gander contracted with SS Golden Goose Lines to transport baked goods from Florida to Australia, with refrigeration agreed upon. Due to a COVID-19 quarantine and a subsequent lightning strike that disabled the refrigeration, the goods were rendered unfit for consumption. The analysis focuses on the application of the United Nations Convention on Contracts for the International Sale of Goods (CISG), the Carriage of Goods by Sea Act 1991, and Incoterms (specifically FOB). The study examines the responsibilities of the seller and carrier, considering factors like due diligence, acts of God, and quarantine restrictions. It concludes that the carrier is not liable for the damage due to the lightning strike and quarantine restrictions but explores the seller's potential liability under a CIF contract if the goods were not insured.

INTERNATIONAL BUSINESS
LAWS

TABLE OF CONTENTS
ISSUE .............................................................................................................................................1
RULE ..............................................................................................................................................1
APPLICATION...............................................................................................................................3
CONCLUSION ...............................................................................................................................3
REFERENCES................................................................................................................................5

ISSUE
Law of International businesses in Australasia assists the students, practitioners and the
business people to understand practical and legal aspects of the international trade and the
operations. In present case Mr Grey Gander has entered into contract with carrier SS Golden
Goose Lines for carrier for shipping 100 tonnes of perishable baked good form Florida port in
Unites States to New Castle Port of Australia on vessel Golden Gosling. It was agreed in the
contract that goods will be refrigerated during carriage. Prior to commencement of voyage
master of vessel had conducted due diligence ensuring that ship was seaworthy and the ship was
properly manned. However inspection regarding the refrigeration operating condition was not
made.
When ship reached port of Newcastle ship was placed in quarantine for 14 days period as
per order of Border Force Department regarding pandemic of COVID-19. During quarantine
period ship was hit by lightening strike and this disabled refrigeration system of Golden Gosling.
During unloading it was found that good were no more good for human consumption as they
were thawed due to electricity failure in refrigeration of ship. Contract for sale of goods provided
that the incoterm FOB will be used as neither party insured the goods. Investigation conducted
by Rooster revealed that refrigeration was working effectively till it was strike by lightening and
failed after ship was struck by the lightening. Mr Gander wants to conduct legal proceeding
against the carrier or seller of goods. It has to analyse the rules regarding the international
business law for claiming compensation for the loss of goods in carriage as the goods were
damaged due to lightening strike.
RULE
United Nation Conventions on the Contacts for Sale of Goods(CISG) is known as
Vienna Conventions which is multilateral Treaty establishing uniform framework for the
international trade and commerce. They are designed for facilitating international trade CISG
removes barriers among the state parties providing the substantive rules regulating duties and the
obligation of the parties to commercial transaction like contract information, delivery of the
goods and the remedies related to breach of contracts.
Contract for International Sale of Goods (Vienna Conventions)
Contracts for International Sale of Goods Act It is applicable to contract for sale of good
between the parties having place of business in different states. Offer of contract has to be
1

addressed to the person and sufficiently definite describing quantity, goods and the price and
indicates intention for offeror to have binding acceptance. Article 25 to 88 deals with sales of
goods, obligation of seller obligation of buyer, passing of risks, common obligation of buyer and
seller (Hayward, Zeller and Andersen, 2018). It provides that the seller has to deliver goods, to
hand over the documents and transfer property in goods required by contract.
Article 30 Provides seller is under obligation for delivering goods (CIGS, 2020). At
several instances the parties to contract that are governed by Convention had specified duty of
delivering using price delivery terms that then prevails over rules of convention.
Free On Board
FOB ports indicates that seller will be paying for the transportation of goods to port of the
shipment and loading cost. Buyer pays for cost of insurance, marine freights, unloading and the
transportation from arrival port to final destination. The buyer is responsible for insurance and all
other obligations once the goods are loaded by seller.
Incoterms Rules 2010
Circumstances where buyer or seller of goods is overseas contract for the sale of goods
include Incoterm Rules. These rules prescribes about when the ownership, risks and
responsibility of insuring goods is passed from seller to buyer. For instance Goods transported by
the sea are shipped commonly as Free on Board (Mamytov and Petsche, 2019). It means that the
goods once pass ship's rail means loaded in ship at overseas departure point, the ownership and
risk as well the goods is passed from international party to party in Australia.
CIF Contracts
Cost Insurance and Freight is form of contract for sale of the goods where amount paid
by buyer not only covers cost of goods but also terms of the insurance and the freight. Insurance
policy in CIF transaction completes protection afforded to buyer against the damage or loss of
goods providing cover in the situations where carrier will be excused from liability (CIF
Contracts, 2020).
Carriage of Goods by Sea Act 1991
The law is established for introducing regime for marine cargo liability. Article 3
provided carrier is bound before and beginning of voyage for exercising due diligence. The
shipper is deemed to have been guaranteed to carrier about accuracy at time of the shipment and
shipper is to indemnify carrier against all the losses, damage and the expenses arising out of
2

inaccuracies in particulars. Article 4 provides that carrier or ship will not be liable for
unseaworthiness unless is caused due to want of diligence on part of carrier for making ship
seaworthy securing ship is equipped, manned and supplied and inspecting refrigeration, cool
chambers and other parts of ship for carrying goods are fit and secure for carriage, reception and
preservation as per provisions of Article 3. Burden of providing that the due diligence was
carried out is over carrier or the person claiming exemption under Article 4 (Carriage of Goods
by Sea Act, 1991. 2020). It provides Carriers are not responsible for damage due to 'Acts of God'
and 'Quarantine restrictions'.
APPLICATION
In the present case the contract is covered under CISG as the goods are purchased from
the overseas. The law provides that seller has the obligation to provide goods or quantity, quality
and the description required by contract and are suitably packed and are fit for intended use.
Seller has the obligation of delivering goods not subject to claims by third party.
The obligations and seller related to the goods are transferred when the goods are loaded
at Port of Florida. Once the goods are loaded FOB provisions are applicable and seller is no more
responsible for the goods once they have been confirmed of required quality quantity and other
description (Ramesh, Ghicu and Putman, 2016).
Carrier Golden Goose has carried out due diligence before and during the shipment of
goods regarding the requirements. Though the inspection of refrigeration was not made but it
was in working condition and the burden to prove for this is on carrier. Carriage of Goods by Sea
Act specifically provides that the carrier will not be held liable for damages caused due to acts of
god and for quarantine restrictions.
Incoterms FOB rules are applicable in the case that discharge seller from the liability for
damage of goods. However seller could be held liable under CIF contract where the seller is
required to get the goods insured for securing them against damages in transit for which the
payment will be made by Grey Gander (Lee, 2017). Buyer is to bear the cost for insurance policy
taken by seller for securing goods.
CONCLUSION
Applying the above rules and provisions it could be stated that carrier Grey Gander could
not be held liable for the loss of goods caused due to lightening and quarantine restrictions
applied by Australian department. Seller could be held liable in the case as it is obligation of the
3

seller under CIF contract to take insurance for the goods on behalf of buyer. Grey Gander can
could held the seller and also claim for damages for the loss suffered due to this.
4

REFERENCES
Books and Journals
Hayward, B., Zeller, B. and Andersen, C.B., 2018. THE CISG AND THE UNITED KINGDOM
—EXPLORING COHERENCY AND PRIVATE INTERNATIONAL
LAW. International & Comparative Law Quarterly. 67(3).
Ramesh, A., Ghicu, P. and Putman, C., 2016. CISG v. UCC: Key distinctions and
applications. The Business & Management Review. 7(5). p.459.
Lee, B.M., 2017. Formation of contracts for the international sale of goods under Korean law and
the CISG. Journal of Korea Trade.
Mamytov, Z. and Petsche, M., 2019. Fundamental Breach of Contract: A Comparative Study of
the CISG and Kyrgyz Law.
Online
Carriage of Goods by Sea Act, 1991. 2020.[Online]. Available through :
<https://www.legislation.gov.au/Details/C2017C00280>.
CIGS. 2020. [Online]. Available through : <http://www.business.vu.edu.au/cisg/legislation.asp>.
CIF Contracts. 2020. [Online]. Available through : <http://lawtimesjournal.in/cif-contracts/>.
5