International Business Law and Ethics: Problem Solving Assignment

This assignment addresses key aspects of international business law, focusing on the Convention on Contracts for the International Sale of Goods (CISG). It analyzes various scenarios involving international sales, contract formation, and breaches of contract. The assignment explores the applicability of CISG to agreements between businesses in different countries, specifically examining the requirements for contract formation under CISG, including offer, acceptance, and consideration. It delves into the incorporation of Incoterms, specifically CFR, and assesses the responsibilities of parties involved in international transactions, including issues of risk and liability for goods in transit. The assignment also examines remedies available to buyers in case of contract breaches, such as the delivery of substitute goods and claims for damages. The analysis covers issues such as non-conforming goods, and the impact of Incoterms on obligations. It also examines the liability of the seller in case of theft during shipment, and the obligations of the buyer to inspect goods upon delivery.

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International Business Law and Ethics
Professor
Institution
Date

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PART ONE: ASSIGNMENT QUESTIONS
Considering the operation of international sales law, advise Garnet:
1. Does the Convention on Contracts for the International Sale of Goods (‘CISG’)
govern the agreement between Black Diamond and Universe Gems? Why/Why not? (4
Marks)
Facts
Black diamond ordered for high quality gemstones that meet the CL-1 standard of
the Australian Classifications of Gemstones from Universe Gems. There was an
agreement between Miss Garnet Martinez and Mr. Universe over the email on issues
relating to the date of delivery and quality of what was to be delivered. Contrary to
the expectations of Black Diamond, Gems Universe delivered cubic zirconias which
are mostly used in costume jewellery and is commonly known as cheap substitute to
diamonds. Black Diamond is a business based in Australia while Universe Gems is
based in Romania.
Issue
Whether Convention on Contracts for the International Sale of Goods (‘CISG’)
governs the agreement between Black Diamond and Universe Gems?
Rule
Article 1(a) and Article 1(b) of CISG necessitate both contracting States to be
signatories to the Convention on Contracts for the International Sale of Goods (CISG).

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Article 3(2) states that in order for the CISG to apply to a certain transaction, the
contract must control relations between two parties who have their place of business in
different signatory States.
Application
As both Black Diamond and Universe Gems are based in Australia and Romania
respectively, article 1(a) and (b) of the CISG is satisfied since both states are signatories
to the convention. Australia is a signatory to the convention just like Romania, the
business are conducted in these two countries which implies that they are governed by the
CISG rules even if they fail to include this in their agreement. The transaction between
these two parties satisfies requirement of article 3(2) they operate in two different states
but both are signatories of the convention (Ferrari 2011).
Conclusion
Therefore, Convention on Contracts for the International Sale of Goods (CISG) applies
to the agreement between Black Diamond and Universe Gems given that they are all
signatories of the CISG. The Convention on Contracts for the International Sale of Goods
has the global target of promoting good faith in international business. The Convention on
Contracts for the International Sale of Goods applies uniformly to all states that are
signatories to its however it’s the duty of the involved state court to enforce it and in the
event a question arises on the ownership, domestic laws takes precedence.

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2. Have Black Diamond and Universe Gems entered into a contract? Outline the
required elements of a contract under the CISG. (5 Marks)
A contract can be defined as an agreement between two parties, out of which
contractual obligations arises. A contract can be in writing or spoken between the
parties. A contract arises out of tenancy agreements, employment or even sales of
goods like in this particular case.
Facts
Black Diamond through its director contacted Universe Gems over the phone
inquiring availability of high quality gemstones that meet the CL-1 standard of the
Australian Classifications of Gemstones. Gems Universe responded positively and
agreed to deliver the goods at an agreed price. Therefore there was an agreement
between these two parties on the sales of the specified high quality of diamond.
Issue
Did the communication between Black Diamond and Universe Gems amount to a
contract?
Rules
Article 9 (1) of the CISG states that parties are bound by any usage they have
agreed upon and by any practices they have established between themselves.
Article 9(2) of the CISG states that parties are assumed, unless agreed otherwise, to
have impliedly made agreements applicable to their contract and its formation which
ought to be widely known to the international trade given its nature.

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Application
In this particular transaction, Universe Gems entered into a contract given that their
agreement met all elements of contract as required of a valid contract. Their contract
is within the provisions of CISG under article 9(1) and 9(2). Given the nature of
communication they had, there was an offer and the other party accepted thus
acceptance element. There was also consideration inform of the price set for the
goods. The intention was established the moment Black Diamond ordered for the
goods. Other elements such as legality were met considering that it was not an illegal
transaction between the two parties.
The elements of a valid contract under Convention on Contracts for the
International Sale of Goods include;
The CISG requires contracts to have particular elements as stated in its provisions
for a contract to be valid, this includes; offer, acceptance, consideration, intention,
legality inter alia. Article 14 of the CISG requires contracts to be adequately definite
and show the intention of the offeror to be bound in a case of acceptance in order to
have an effective offer. Clear identification of goods and the price is required as this
covers the element of consideration. Article 15(1), 16(2) and article 18 provides more
light to the elements of offer and acceptance on how what should be considered by
parties involved.

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3. Have Black Diamond and Universe Gems successfully incorporated an Incoterm into
the proposed contract? Why/Why Not? (2 Mark)
Facts
Over the call conversation both Miss Garnet and Mr. Greg agreed on certain
matters regarding the delivery and payment of the goods, Universe Gems agreed to
deliver the required goods on a specific date while Black Diamond had the
responsibility of making the payment.
Issue
Whether Black Diamond and Universe Gems successfully incorporated an Incoterm into
the planned contract?
Rule
Article 9(2) of the CISG states that parties are assumed, unless agreed otherwise, to have
impliedly made agreements applicable to their contract and its formation which ought to be
widely known to the international trade given its nature
Application
This term in the Convention on Contracts for the International Sale of Goods allows for
the integration of Incoterms in trade contracts (Herczeg 2012). It also allows Incoterms to be
excluded. In this case each party’s responsibilities were implied given that they had agreed on
various issues.
Conclusion
Therefore the incoterms in this particular contract were implied on each party given the
nature of the transaction.

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4. What remedy would be most appropriate in this circumstance? Explain your answer
with reference to the CISG. (4 Marks)
Facts
Universe Gems failed to deliver diamonds of high quality of as expected by Black
Diamond as a result Black Diamond was aggrieved by Universe’s failure to honour its
contractual obligation.
Issue
What remedies can Black Diamond claim against Universe Gems?
Rule
Article 46(2) of the Convention on Contracts for the International Sale of Good states
that; if goods delivered do not conform to the agreement, the buyer may demand for delivery
of substitute goods as a remedy. The buyer can also claim damages.
Article 74 of the CISG outlines remedies available to the buyer in the event of a breach of
contract.
Application
In accordance with the CISG, Black Diamond has numerous remedies at its disposal. They
can demand for delivery of substitute goods under article 46(2) of CISG since the goods
provided failed to conform to the quality of the goods ordered. They can also use restitution
as a remedy so that they are reinstated to their previous financial position before the
transaction occurred. Other remedies include claiming damages and specific performance
inter alia.

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Conclusion
Black Diamond is entitled to remedies against Universe Gems for failing to perform their
contractual obligation.
PART TWO: ASSIGNMENT QUESTIONS
Considering the operation of international sales law, advise Garnet:
5. Does the Convention on Contracts for the International Sale of Goods (‘CISG’)
govern the agreement between Black Diamond and Crystale? Why/Why not? (5 Marks)
Facts
Black Diamond ordered for some goods from Crystale. Black diamond and Crystal
conduct their business in Australia and Belarus respectively.
Issue
Does the Convention on Contracts for the International Sale of Goods apply to the
agreement between Crystale and Black Diamond?
Rule
Article 1(a) and Article 1(b) of CISG necessitate both contracting States to be
signatories to the Convention on Contracts for the International Sale of Goods
(CISG).
Article 3(2) states that in order for the CISG to apply to a certain transaction, the
contract must control relations between two parties who have their place of business
in different signatory States.

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Application
Both Black Diamond and Crystale are based in Australia and Belarus respectively,
article 1(a) and (b) of the CISG is satisfied since both states are signatories to the CISG.
Australia is a signatory to the convention the same way Belarus is, the business are
conducted between the two countries which suggests that they are governed by the
convention rules. The contract between these two parties fulfils requirement of article
3(2) since they work in two different states but both are signatories of the convention
(Gillete and Walts 2016).
Conclusion
The CISG is can be applied in the case of Black Diamond and Crystale owing to the fact
that they are both signatories of the convention.
6. What is ‘CFR? How does ‘CFR’ apply to this agreement? Is Crystale liable for the
robbery of the 100 Pearls at the Port of Brisbane? Explain your answer. (5 Marks)
CFR a type of contract in which the seller organises the carriage of goods by sea to a
port where they are expected and hand over to the buyer important documents that
enables the buyer to acquire them from the carrier (Brodie 2013). Cost and Freight
excludes the seller from the liability of any loss encountered once the goods are on transit.
Cost and Freight is applicable to the contract between Crystale and Black Diamond
because the goods ordered by Black Diamond are to be transported through the sea using a

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boat. It involves shipment of goods and this requires proper packaging and there could also
be loss during the transportation hence the need for CFR (Herr 2011).
Issue
Is Crystale responsible for the burglary of the 100 Pearls at the Port of Brisbane?
Rule
Article 38 of CISG states the following; goods must be examined by the buyer within
adequate and reasonable time.
Application
Black Diamond’s employee failed to respond to a message indicating that the goods had
already arrived at the port. Due to this delay, some of the ordered jewellery was stolen when
robbers broke into the port. The buyer has the duty to examine goods upon delivery of the
goods and take possession. The goods were stolen after the buyer delayed to pick them at the
port.
Conclusion
Crystale is not liable for the loss of the 100 pearls which occurred after the goods were
delivered. The CFR protects the seller from such kind of liabilities.
7. Under the ‘CFR’ term, did Crystale need to provide insurance for the merchandise? (1
Mark)

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According to CFR Crystale is exempted from the duty of purchasing marine
insurance for the transported merchandise.
8. Garnet has accused Crystale of breaching their contract. Consider each of the
following issues and determine whether Crystale has breached their obligation?
(a) The diamonds that do not match the sample Crystale provided (3 Marks)
Facts
Crystale had sent a sample of Diamond to Black Diamond. Contrary to
their expectations, the diamond that Black Diamond received did not
match the sample.
Issue
By providing a diamond that did not match the sample was Crystale in
breach of the contract?
Rules
Article 35(2) of CISG provides that; except where the parties have
agreed otherwise, the goods do not conform with the contract unless they
possess the qualities of goods which the seller has held out to the buyer as
a sample (Widmer 2016).
Application
Crystale failed to perform its contractual obligation by delivering
diamonds that did not match the sample they sent earlier. The agreement

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was based on Crystale providing diamonds of qualities that matched the
sample they had sent but upon examination by Black Diamond, the
diamonds did not match the quality of the sample.
Conclusion
Crystale was in breach of the contract for providing goods that did not
match the sample they had sent.
(b) The damaged amethysts due to poor packaging (4 Marks)
Facts
Upon examination of the goods, Miss. Garnet discovered that some
amethysts were damaged due to poor packaging.
Issue
Did Crystale breach the contract by providing damaged goods?
Rules
Article 35(1) of CISG states that goods must be of the quality,
description, quantity and packaged in the mode required by the contract.
Article 39 of the CISG states that buyer should inform the seller of
these defects within a realistic time.
Application
During packaging the goods were damaged from crystals end. Crystale
has the responsibility of providing goods that are merchantable and these