1. The contract between Beauty Bananas Ltd and Fresh Fruit Inc. stated that BB was responsible for the delivery of the cargo to a designated ocean carrier nominated by FF on or before the third. BB was also responsible for the export clearance whereas FF was responsible for the ocean freight. The contract also stated that the seller Beauty Bananas Ltd. was responsible for the marine insurance.
The designated ocean carrier for the first shipment was China Fruit Shipping (CFS), the first shipment was to be delivered on 8 February 2018, and the second shipment was to be delayed until after 17 June 2018 but delivered before 20 June 2018. However, before the first shipment was delivered, as per the contractual agreement, BB sent FF documentary evidence of delivery to CFS. FF received their first shipment on 8th June; however, the cargo was less by 100 kilograms than what was declared in the documentary evidence sent to FF. The second shipment arrived on the 8th July 2018 but two containers containing 2 tonnes were missing, and 5 tonnes were spoiled.
The aim of Part V of the Trade Practices Act 1974 was an international approach to consumer law. However, these benefits were short-lived and as a result, individual government resulted in them pursuing consumer laws independently. This has led to advancement of the consumer laws, resulting in divergence, complexity, and duplication. These complications and developments have resulted in businesses and consumers not being able to comprehend their rights and obligations under the law. This leads to cost implications that amount to money and time wastage.
The Sale of Goods Act legislation seeks to regulate contracts governing the sell and buying of goods. The legislation recognizes the buyer as a person or an entity who wants to purchase goods from the seller whereas the seller is an individual or an entity who sells something that a buyer wants. A Sales of Good sets out several obligatory legal rules, which are concerned with a collection of conjectures and disguised terms, which aim to replicate the viable prospects in the most frequently, agreed sales contract. In a situation where the contractual arrangement is not present, the compulsory rules in the Act governs the sale within the Act’s remit.
The Convention on the International Sale of Goods (CISG) is applicable only where the buyer and seller operate in two different geographical regions (different countries). The contract between the two companies BB and FF fits the framework of CISG as the cargo is to be shipped across the ocean; BB is a Brisbane based company whereas FF is a China based company. In addition, the CISG state that the contract must concern ‘predominantly’ the sale of goods and not services. Services such as stocks, shares, negotiable instruments, investment securities, or money are not covered by CISG. The CISG will not apply where the contract expressly excludes the CISG. A specific reference such as the parties hereby agrees that the United Nations Convention on Contracts for the International Sales of Goods is not applicable in this contract is recommended when excluding the CISG from the contract.
The International Commercial Terms are pre-defined commercial terms published under the International Chamber of Commerce linking to the global commercial law. The aim of the Incoterms framework is to communicate the tasks, the associated menaces, and the charges involved in the transportation and delivery of merchandises. The Incoterms however do not institute a contract of govern law, does not outline where the titles transfer, and does not capture the prices payable, the credit terms, and the currency.
The Incoterms are fundamental in international trade as they form part of contracts for the sale of goods globally providing with a legal guidance framework to importers, exporters, lawyers, suppliers, transporters among others. Incoterms 2010 [provided a framework covering the responsibilities and the obligations of both the buyer and the seller in relation to the export transaction. They further speak to the transfer of risks from the buyer to the seller as well as providing with a basis for dispute resolution.
In a contract of sale, there are specific points that must be addressed relating to the Incoterms. These points include who pays for the customs clearance, covers loading and pre-inspection of the cargo, who between the seller and the buyers makes payment to the carrier. The underlying principle under the Incoterms it that the party better suited to handle the tasks of clearance, payment of duties, and other related costs in connection to the transaction should do so. Hence, under all the F terms the seller is responsible for the clearance of the goods for export, under the C terms the seller is accountable for all obligations related to the export whereas the buyer covers obligations related to imports. In addition, in exception of the DDP, the D-terms state that the buyer should do what is expected to facilitate the clearance of the goods for importation. The EXW obligates the buyer to cater for both the imports and exports, which is an exception to the principle warranting the exporter to clear the goods for export hence minimizing the obligations of the seller. The Incoterms are used where the transactions do not have any custom requirement as the obligations relating to exports and imports are only relevant where applicable.
The Incoterm applicable in this case is the CIF (Cost, Insurance, & Freight), under the CIF the seller caters for the marine insurance cost for the period the cargo is still in transit to a designated port of destination. Risk is transferred to the purchaser when delivered on board the ship. The obligation of the buyer in relation to the insurance cover is limited to the minimum. The buyer can make extra arrangements for the insurance. The policy should be in the same currency as the contract. To take ownership of the goods from the carrier or make any relevant claims to the insurer, the buyer must provide with the necessary documentation. This documents provided by the buyer include an invoice, the bill of lading, and the insurance policy which stand for the cost (invoice), insurance (insurance policy) and the freight. The seller’s obligations terminate once all the relevant documents are handed over to the buyer. The CIF is only applicable where the goods are non-containerized otherwise, CIP should be used.
Based on the CISG, the Incoterms 2010, and sale of goods, Beauty Bananas has satisfied all its obligations as per the requirements of the contract between the two companies. BB in this case is recognized as the seller whereas Fresh Fruit Inc. is recognized as the seller. The contract states that BB was to deliver the agreed amount of bananas to an identified carrier and cater for the export clearance; FF however was responsible for the ocean freight. The responsibilities of the BB as the seller also included payment for the insurance costs of the goods.
BB was supposed to deliver its first shipment on 8th February 2018, which they did promptly. Having sent documentary evidence to FF of the delivery of the first shipment to China Fruit Shipping meant that they had satisfied all the requirements of the contract. Based on the fact that China Fruit Shipping accepted to ship and actually shipped, the first cargo of bananas translates to the fact that the BB had also satisfied the insurance agreement and that the luggage was as per the stated standards.
2. Having taken possession of each shipment of bananas, China Fruit Shipping provided Beauty Bananas with a bill of lading, which excluded its liability to damaged goods because of a breakdown of the refrigeration system. During the freight, the employees of CFS stole the 100 kilograms missing from the first shipment. Also along the freight, two containers were tossed off the ship as it was compromised due to the ocean earthquake, 3 tonnes spoilt as a result of complication in the refrigeration system, and the remaining two tonnes had being delivered overripe which led them to spoil.
Investigations revealed that BB had bribed CFS to provide with a clean bill of lading to the advising bank, which also accelerated the compromised documents to the issuing bank. Credit to the advising bank from the issuing bank was based on a compromised document. CFS cannot be absolved off the blame, as its employees were aware that the refrigeration system in the Ship was not working and they were waiting for replacement parts from Germany scheduled to arrive on 18th June 2018.
A bank issues a letter of credit based on a bid made by its client. The responsibility of the bank is to facilitate compensation to the beneficiaries in agreement to the terms and conditions set out in the letter of credit. However, the privileges of an issuing bank to a corresponding bank are rather different as the association among the two banks is that of the principal and agent. The corresponding bank functions as an agent when the issuing bank directs the bank to facilitate credit on its behalf to the beneficiary. The conditions of the issuing bank must be followed by the correspondent bank, which is the agent. By facilitating the payment to the beneficiary as per the instructions of the issuing bank, the corresponding bank acts in its capacity as the agent of the issuing bank. As an agent of the issuing bank, it has to observe the directions given to it to earn legal protection from the issuing bank, which can invoke the right of recourse against a customer.
An individual who is the legitimate holder of a bill of lading shall have reassigned to and bestowed in him all the privileges of suit as per the contract of carriage as if he had been a part of the contract. Whomever the legitimate holder of the bill of lading transfers to becomes subject to the legal implications associated with the legitimate holder as if he was part of the initial contract. A bill of lading that manifests that the identified goods have already being shipped, and which does the ship’s master sign or his agent is irrefutable indication of delivery for shipping.
The bill of lading has three main functions that include; the bill itself can be viewed and concluded as a valid receipt acknowledging that the declared goods in the bill have being received. The bill also carries evidence of the terms of the contract of carriage. Thirdly, the bill serves as a document of title of the goods, which is subject to the nemo dat quod non-habet rule.
The amended Hague Rules speaks to the state of the ship, marking of the consignment, how goods are to be loaded in the ship, how losses are to be addressed and how the shipper is to be notified, and the time bar for actions. Under the amended Hague Rules, the bill of lading has being changed to a sea carriage document. Under the amended Hague Rules, the definition of goods also include the goods ferried on or above the deck of the ship, however the goods carried on deck are subject to the limited opt-out provided by Article 6A. Other modifications to the Acts require the shipper by means of writing to write to the carrier of all the stowage requirements for the goods. The revised Act removes the carrier’s protections under the rules such as the limits on liability provided the goods are carded on or above deck.
The carrier identified as China Fruit Shipping will be held accountable for the loss of or the damage to the goods only if the appellant can prove that the loss, damage, delay, or the circumstances that led to the damage, loss, or delay occurred during the freight when the carrier was responsible for the cargo. However, the carrier can be relieved of all or part of the liability provided that the carrier can prove that the loss or damage was not a result of their doing or any person associated with the carrier. Moreover, the carrier is also indemnified of any liability provided that the circumstances leading to the loss or delay were an act of God, accidents of the sea or other navigable waters, a hostile environment, and quarantine restrictions. Saving or attempting to save life at sea and reasonable measures to save or an attempt to save property at sea indemnifies any liability from the carrier. CFS cannot be held liable for the two containers lost at sea that occurred during the earthquake, which can be considered an act of God.
CFS will be held liable, notwithstanding, for all or part of the loss, damage, or delay if the claimant proves the loss or damage was a result of the unseaworthiness of the ship. Investigations reveal that the ship crews were aware that the refrigeration system was faulty and that the expected repair parts were not expected not earlier than 18 June 2018 and were to be shipped from Germany. As a result, three tons of the cargo was spoilt due to refrigeration problems. CFS will be held liable for the loss of the two tons because of the faulty refrigeration system. Despite part of the bananas being overripe, CFS accepted the package and issued the bill of lading, which was used by the advising bank for credit purposes. The fact that the bill of lading was issued absolve the shipper any liability despite the bribe allegations, the risk was transferred to the carrier.
Australian Government , Commonwealth Numbered Regulations – Explanatory Statements. <https://www5.austlii.edu.au/au/legis/cth/num_reg_es/cogbsr19981998n174332.html>
Federal Register of Legislation, Carriage of Goods by Sea Act 1991.<https://www.legislation.gov.au/Details/C2013C00662>
McMahon, J. P., Guide for Managers and Counsel: CISG. <https://www.cisg.law.pace.edu/cisg/guides.html>
Searates Inc. ,incoterms 2010: icc official rules for the interpretation of trade terms . <https://www.searates.com/reference/incoterms/>
Vallely, G., Shaddick, S. & Lamont, Commercial overview of the shipping industry. The shipping law review , Issue 4 (Gideon Roberton2017)
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