LOG305 International Trade Law: Case Study on Contractual Breach

This case study examines a scenario where BigMi, a New York-based company, breached a contract with a California-based seller by failing to issue a letter of credit after the seller chartered a ship as agreed upon for a smartphone component purchase. The analysis applies the United Nations Convention on Contracts for the International Sale of Goods (UNCISG) to determine whether a breach occurred and if the seller is entitled to damages. The study concludes that BigMi's refusal to issue the letter of credit constituted a breach under Article 25 of the UNCISG, entitling the seller to claim damages for lost profits as per Article 74, due to the necessity of selling the goods at a lower rate to another buyer. Desklib offers similar case studies and resources for students.

Running Head: INTERNATIONAL TRADE LAW
INTERNATIONAL TRADE LAW
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Facts of the case
In this given case study it has been provided that the branch of BigMi in New York Entered
into an agreement by a legal representative. The contract entered into involved purchase of
smartphones from a company based in California. The contract clearly mentioned that the
buyer will be obligated to issue a letter of credit to the seller as soon as the seller chartered
the ship. The seller duly chartered the ship however; Big Mi did not issue the letter of credit
as it had found a cheaper source of the components it required. Thus, consequentially the
seller had to sell the goods to another buyer at a cheaper rate and suffered losses. Thus it is to
be analysed whether there was breach of contractual duty on the part of BigMi and whether
the seller is entitled to claim damages.
United Nations Convention on Contracts for the International Sale of Goods
According to article 14 of the UNCISG it can be said that a proposal for concluding a
contract addressed to one or more parties can be defined as an offer. Such proposal can be
considered to definite and valid if it contains the specific description of the goods or services
to be exchanged and the consideration amount. According to article 15 an offer is considered
to be effective upon reaching the offeree. According to 16 an offer can be revoked by the
offeror prior to the dispatch of the news of acceptance by the offeree. It cannot be revoked if
it is particularly mentioned that the offer is irrevocable or if a specified time period of
acceptance is mentioned.
According to article 18 it can be stated that the conduct of the offeree indicating an assent to
the offer will constitute acceptance. According to article 21 it can be said that a late response
is also considered to be valid acceptance. Article 25 of the aforementioned convention deals

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with breach of a contract. In accordance with the aforementioned section it can be said that a
contract is said to be breached by either of the parties if such action causes subsequent
detriment to the other party. A breach of contract is expected to deprive one of the parties of
his expectations from the contract. A contract is said to be breached if such breaching action
was reasonably foreseeable to the breaching party.
According article 26 it can be said that it can be said that a contract can be avoided lawfully if
a notice of the avoidance is provided to the other party.
In accordance with article 54, it can be stated that once a contract involving sale of goods has
been successfully entered into by both the parties and when the seller has fulfilled his
responsibilities as determined by the contract the buyer is entitled to pay the price as
determined by the contract.
According to article 62 it can be said that the seller may require the buyer to pay the price for
the goods. The seller may also declare the contract to be avoided in accordance with section
64 of the aforementioned convention.
In case of a breach of contract of sale of goods by the buyer the seller can calim damages .
According to section 74 it can be said that in the event of breach of a contract, the aggrieved
party has the right to claim damages equal to the loss of profit suffered by him due to the
breach of the contract.
Case analysis
Thus by analysing the facts of the case and applying the legal provisions of the
aforementioned convention it can be said that Big Mi proposed an offer to the seller, which
involved purchase of components of smart phone in accordance with section 14 of the
aforementioned convention.

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The California based seller had accepted the offer in accordance with the provision 18 of the
convention. The contract specifically stated that the Buyer was required to issue letter of
credit once the goods were chartered on the ship by the seller. Seller fulfilled his duties and
chartered the goods, however the buyer refused to issue the letter of credit as it had found a
cheaper source of obtaining the goods. Thus this constituted the breach of contract terms and
the same can be validated in accordance with section 25 of the aforementioned convention.
The seller had sustained losses as it had to sell the goods to another buyer at a much lesser
rate.
The buyer could have intimated the seller about the revocation of the offer in accordance with
section 16. However it did not do so.
Thus in this case the seller is entitled to claim damages from the buyer for the loss of profit in
accordance with section 74.

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Reference List:
United Nations Convention on Contracts for the International Sale of Goods