Successfully reported this slideshow.

Performance of intl sale contract

587 views

Published on

  • Be the first to comment

  • Be the first to like this

Performance of intl sale contract

  1. 1. 1 Performance of international sale, contracts: difficulties and remedies
  2. 2. CISG  Date of adoption: 11 April 1980  Purpose           The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for  the international sale of goods. Thus, the CISG contributes significantly to introducing  certainty in commercial exchanges and decreasing transaction costs.  Key provisions o Governs contracts for the international sales of goods.  o Deals with the formation of the contract. o Deals with the obligations of the parties to the contract. o Provides common rules regarding remedies for breach of the contract. o Allows for freedom of form of the contract .  Relation to private international law and existing domestic law The CISG applies only to international transactions and avoids the recourse to rules of  private international law for those contracts falling under its scope of application. 2
  3. 3. CISG(contd.) The Rights and Obligations of the Parties  Obligations of the Seller He “must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention.”  Obligations of the Buyer the buyer “must pay the price for the goods and take delivery of them as required by the contract and this Convention” (article 53). The CISG also determines the place (article 57) and time (article 58) of payment and notes that the payment is due without the seller having to request payment (article 59). 3
  4. 4. CISG(contd.) Remedies  Suspension of Performance CISG adopts something close to the civil law exception (i.e. defence) for non- performance called in the civil law tradition the “exceptio non adimpleti contractus”.  Fixing an Additional Period of Time It describes as a remedy the fact that one of the parties “may fix an additional period of time of reasonable length for performance by the [the other party] of his obligations” (articles 47(1) and 63(1)).  Specific Performance In the civil law tradition the aggrieved party is usually entitled to specific performance.  Avoidance When the breach is fundamental, the parties are entitled to avoidance (article 49(1) and 64(1)). 4
  5. 5.  Damages Article 74 provides that “Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.”  Reduction in Price This remedy is inspired by the actio quanti minoris.  Other Provisions o Passing of the risks (when not governed by the contract, a trade term or an Incoterm) (articles 66-70) o Interest on damages (article 78) o Exemptions of liability (articles 79-80) o Duty to preserve the goods (articles 85-88) 5
  6. 6. 6 Performance of international sale, contracts: difficulties For buyers and sellers that are engaged in international trade, they may experience one or more of the following difficulties:  Buyer’s Insolvency/Credit Risk  Buyer’s Acceptance Risk  Knowledge Inadequacy  Seller’s Performance Risk  Documentation Risk  Economic Risk  Cultural Risk  Legal Risk  Foreign Exchange Risk  Interest Rate Risk  Political/Sovereign Risk  Transit Risk
  7. 7. Performance of international sale, contracts: Remedies For the Buyer  Deal with seller with sound reputation or established track record.  Request for performance guarantee to avoid non-performance risk.  Agree on more secure methods of payment such as documentary credit or open account.  Acknowledge and respect cultural differences with the seller.  Buy and sell in same currency to minimize foreign exchange risk. Alternatively, the buyer can hedge against foreign exchange risk by entering a forward or option foreign exchange contract with a bank.  If financing is needed, enter into a fixed interest rate loan or interest rate swap agreement to mitigate against interest rate risk.  Ensure sufficient insurance coverage against transit risk.  Always have a contingency plan against unfavorable events. 7
  8. 8. Performance of international sale, contracts: Remedies (contd.) For the seller  Deal with buyer with sound reputation or established track records.  Engage a reputable credit agency or credit insurer to minimize buyer’s insolvency or credit risk.  Engage on more secured methods of payment such as documentary credit or advance payment.  Avoid granting excessive credit period or limit to the buyer.  Ensure that the sales contract or documentary credit does not contain ambiguous or erroneous terms and conditions that are subject to future disputes.  Acquire sufficient knowledge in document preparation to mitigate against documentation risk.  Acknowledge and respect cultural differences with the buyer.  Buy and sell in same currency to minimize foreign exchange risk.  If financing is needed, enter into a fixed interest rate loan or interest rate swap agreement to mitigate against interest rate risk.  Ensure sufficient insurance coverage against transit risk.  Engage a representative in the buyer’s country to deal with the goods or relevant parties in case of non-payment or non-acceptance by the buyer.  Always have a contingency plan against unfavourable event. 8

×