International Sales Law and Incoterms Assignment - BUS706

This assignment analyzes a case study involving international sales law, focusing on the application of the Convention on Contracts for the International Sale of Goods (CISG) and Incoterms. The student advises Garnet on issues related to contracts between Black Diamond and Universe Gems, and Bla...Read More

INTERNATIONAL BUSINESS LAW AND ETHICS 1
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 CISG’) govern for the International Sale of Goods
(‘the agreement between Black Diamond and Universe Gems? Why/Why not? (4 Marks)
Issue
Did Universe Gem perform its contractual obligation?
Black diamond through its director, Garnet Martinez, intended to purchase high quality
gemstones that meet the CL-1 standard of the Australian Classifications of Gemstones.
Contrary to their expectations, Universe Gems delivered Cubic zirconias which are a
cheap alternative to diamonds that are often used in costume jewellery. Garnet Martinez
feels aggrieved and Universe Gems failed to perform its contractual obligation yet the
payment was made in full for high quality diamond.
Rule
A seller must adhere to the terms of the contract as agreed by the parties. In the
absence of aforementioned terms, a seller has a mandatory obligation to transfer property
in goods and deliver the goods as agreed earlier in accordance with article 30 to 34 of the
Contracts for the International Sale of Goods. The delivery should also be in line with the
requirements of the contract ranging from description of the goods to documents related
to the goods.
Application

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Contracts for the International Sale of Goods main aim is to promote good faith in
international trade. Given that Australia is a signatory of the CISG the provision of its
laws will apply in the case of the two companies which were involved in a contract
(Ferrari 2011). In this case Universe Gems failed to perform a contractual obligation;
therefore they shall be liable for failing to honour their end of the agreement and will be
subjected to the Contracts for the International Sale of Goods laws before a competent
court.
Conclusion
A party in a contract has the duty to perform their contractual obligation failure on which
they remain liable for any losses suffered and damaged caused to the aggrieved party.
Contracts for the International Sale of Goods is a uniform law that applies to its signatories
but it’s the duty of the courts to enforce its provisions and the domestic laws of a state
governs the ownership rules should such an issue arise.
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 a written or spoken agreement between parties
concerning sales, employment or even tenancy, which is intended to be enforceable
by law.in most cases people enter into a contract and create contractual relationship
which consequently gives rise to contractual obligations of each party to the contract.
In this case Black Diamond and Universe Gem entered into a contract given the
facts surrounding the nature of transaction they had. Black Diamond inquired from
the Universe Gem as to whether they could supply them with high quality gemstones

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that meet the CL-1 standard of the Australian Classifications of Gemstones, Universe
Gem replied to this positively agreeing to supply the same on consideration that Black
Diamond paid for the order they made. As a result of this an agreement arose between
these two parties and date for delivery was agreed upon, consequently Black Diamond
paid the requisite amount for its order.
The elements of a valid contract under CISG include;
A contract, in the context of the CISG, involves an actual offer from one party, followed
by effective acceptance from the person the offer is made to. A contract should be adequately
definite and specify the intention of the offeror to be bound in case of acceptance. There also
has to be a clear definition of goods and quantity. A specific price must be quoted as the
consideration element of the contract. CISG also requires that a contract must be enforceable
before the law though the enforceability is governed by the domestic state of the parties
involved or based on the agreement between the parties.
3. Have Black Diamond and Universe Gems successfully incorporated an Incoterm into
the proposed contract? Why/Why Not? (2 Mark)
Issue
Whether Black Diamond and Universe Gems successfully integrated an Incoterm into the
proposed contract?
Rule

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The International Chamber of Commerce (ICC) provides for rules regulating incorporation
of incoterms in commercial transactions.
Application
Incoterms are a conventional of rules which outline the responsibilities of sellers and
buyers for the delivery of goods under sales contracts (Herczeg 2012). Therefore in this case
the responsibilities were presumed by both parties given that they were taken as implied
terms that don’t have to be included in a contract.
Conclusion
It’s always important to outline some specific responsibilities between parties when
contracting so as to avoid inconvenience in the event one party fails to honour their
contractual obligation.
4. What remedy would be most appropriate in this circumstance? Explain your answer
with reference to the CISG. (4 Marks)
Issue
What remedies is Black Diamond entitled to given Universe Gem’s breach of the contract?
Rule
According to article 70 of the CISG ; if the seller has committed a important breach of
contract, articles 67, 68 and 69 do not prejudice the remedies accessible to the buyer on
account of the breach. Article 74 of CISG also stipulates the remedies available to the buyer.
Application

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According to the CISG rules, Black diamond has a variety of remedies applicable to their
case. They can seek for restitution so that they don’t suffer any loss and they are reinstated to
their previous financial position before the transaction took place. They can also claim for
money damages so that they are compensated. Alternatively they can opt for specific
performance so that universe Gem can deliver the quality of diamond they agreed on.
Conclusion
It’s necessary to include some specific remedies in a contract to protect both parties in the
event one fails to perform their obligation or breaches the contract.
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)
Issue
Whether Convention on Contracts for the International Sale of Goods applies to
the agreement between Black Diamond and Crystale?
Rule

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Convention on Contracts for the International Sale of Goods governs contracts for
the sale of goods that are between sellers and buyers whose relevant places of
business are in different countries that have made the CISG part of their law.
Application
Since both Belarus and Australia are signatories of Convention on Contracts for
the International Sale of Goods, this law applies to the contract between Black
Diamond and Crystale. In this case there was an agreement between Black Diamond
and Crystale for supply of commodities outlined by Black Diamond. Crystale agreed
to supply 500 White Diamonds Princess Cut, 100 Amethysts and 100 Pearls. Later
issues arose as to the obligation of each party to the contract. The duties of the buyer
and the duties of the seller came into question given that the commodities were
delivered on time but not taken immediately. The issue of quality meeting the
description also arose as Garnet claimed that the diamonds provided did not meet the
qualities of the sample sent. Therefore with these aforementioned issues, Convention
on Contracts for the International Sale of Goods is applicable to this kind of contract.
Generally CISG is not applicable for goods bought for family, household and personal
use (Gillett and Walt 2016).
Conclusion
The Convention on Contracts for the International Sale of Goods is applicable in the case
of Black Diamond and Crystale given the nature of the transaction.
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)

INTERNATIONAL BUSINESS LAW AND ETHICS 8
Cost and freight is a legal phrase in international trade. It is a kind of contract where the
sale is CFR, the seller has to organize for the carriage of goods by sea to a port of destination
and give the buyer the documents essential to acquire them from the carrier. Under CFR, the
seller does not have to acquire marine insurance against the risk of damage or even loss of the
cargo during transit.
CFR is applicable to this agreement between Black Diamond and Crystale because the
goods are to be transported by boat by Crystale. This transaction involves shipment of the
goods agreed upon by the two parties to the contract. Crystale has the duty of packing the
goods according to the specification and needs of Black Diamond.
Contracts including international transportation regularly comprise of abbreviated trade
expressions that define matters such as the place and time of delivery, payment and the
circumstances under which the risk of loss moves from the seller to the buyer (Brodie 2013).
CFR is a term used firmly for cargo transported by sea.
Issue
Is Crystale liable for the robbery of the 100 Pearls at the Port of Brisbane?
Rule
According to the rules and provisions of CFR, a seller is not responsible for the loss or
damage of goods during transportation or once they are delivered. The liability shifts to the
buyer.
Application
In this case the goods had already been delivered, Black Diamond’s employee failed to
follow up on the delivery message, as result of the delay 100 pearls were stolen. The

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moments the goods were delivered on agreed date the liability of loss or damage to the goods
automatically shifted to Black diamond, therefore Crystale is not liable for the loss of the 100
pearls.
Conclusion
The CFR protects the seller from any liability that arises when goods are stolen once they
are delivered on time. The buyer is responsible for all risks and charges from the seller’s
warehouse until the destination place.
7. Under the ‘CFR’ term, did Crystale need to provide insurance for the merchandise? (1
Mark)
Under CFR, Crystale is not responsible for providing insurance for the merchandise. CFR
excludes the seller from the responsibility of buying insurance for the merchandise (Herr
2011).
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)
Issue
Did Crystale breach the contract by to providing diamonds that did not
match the sample?
Rules

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Article 35(2) of the CISG neccesitate that goods should have the same
qualities as given samples, any good that has contrary qualities and does
not conform with the contract leads to breach the terms of the contract
(Widmer 2016).
Under the common law there is an implied condition that the bulk shall
match to the sample. There is also an implied condition under the common
law that the goods shall be free from any flaw rendering them
unmerchantable which would not be easily visible on reasonable
inspection of sample.
Application
When Garnet examined the diamonds and found the bulk not
responding to the sample Crystale sent earlier, it would only mean that
Crystale were in breach of the contract for delivering diamonds that does
not match the sample they agreed on.
Conclusion
The law protects the buyers from incidences where the seller delivers
goods that do not match the quality of the sample sent. Sale by sample is
common and remedies are available to the aggrieved parties.
(b) The damaged amethysts due to poor packaging (4 Marks)
Issue

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Did Crystale breach the contract by to providing damaged amethysts
due to poor packaging?
Rules
The damage of the goods is solely on the seller until delivery has been
made.
Application
Crystale in this is in breach of the contract for goods that were found
damaged due to poor packaging. The seller has a duty to provide
merchantable goods free from any damage and nothing should happen to
the goods rendering them unmerchantable.
Conclusion
A seller should always ensure that goods are well packed before
putting them up for delivery as this a mandatory duty on the part of the
seller.
(c) The amethysts lost at sea (2 Marks)
Issue
Did Crystale breach the contract when amethysts got lost at the sea?
Rule
According to the rules and provisions of CFR, a seller is not responsible
for the loss goods during transportation or once they are delivered. The
liability shifts to the buyer.

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Application
The buyer incurs any loss when goods are lost according to provisions
of CFR. The seller is excluded from such liability the moment the
shipment begins, therefore Crystale is not in breach of the contract in
respect to this matter.
9. What remedy would be most appropriate to solve the breaches in Question 8 (a)-(c)?
Explain your answer to each issue with reference to the CISG. (5 Marks)
The diamonds that do not match the sample Crystale provided.
According to Article 46(2) of the Convention on Contracts for the International Sale of
Good; if the goods delivered do not conform to the agreement, the buyer may demand for
delivery of substitute goods. The aggrieved party may need performance of the other party’s
obligations through specific performance, claim damages or avoid the contract. The buyer is
also entitled to the right of reducing the price where the goods transported do not conform to
the contract.
The damaged amethysts due to poor packaging
Under Article 49 of the CISG the buyer may declare the contract avoided if the seller fails
to perform their obligations under the agreement. The buyer can also claim damages.
The amethysts lost at sea
Article 51 of the Convention on Contracts for the International Sale of Goods states that; if
goods are lost the buyer cannot claim the pact is avoided unless failure to make the complete
delivery which amounts to fundamental breach. The buyer can also claim damages.

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References
Brodie, P. (2013). Commercial Shipping Handbook, Second Edition. Boca Raton, FL: CRC
Press.
Ferrari, F. (2011). Contracts for the International Sale of Goods: Applicability and
Applications of the 1980 United Nations Convention. Leiden, Netherlands
Gillette, C. and Walt, S. (2016). The UN Convention on Contracts for the International
Sale of Goods: Theory and Practice. Cambridge, England: Cambridge University Press.
Herczeg, L. (2012). The Incoterms 2010 and Risk Management Strategies. Gazdaság és
Társadalom, 2012(Különszám), 54-64. doi:10.21637/gt.2012.00.03
Herr, P. (2011). Surface Freight Transportation: A Comparison of the Costs of Road, Rail,
and Waterways Freight Shipments That Are Not Passed on to Consumers. Collingdale,
PA: DIANE Publishing.
Widmer, L. (2016). United Nations Convention on Contracts for the International Sale of
Goods (1980)—Full Text, Part III Sale of Goods, Ch.II Obligations of the Seller, Article
30. Schlechtriem & Schwenzer: Commentary on the UN Convention on the International
Sale of Goods. doi:10.1093/law/9780198723264.003.0034