Studied by 1 person
Acceptance
All legal systems recognize the formation of a contract when an offer and acceptance are exchanged (exchange of promises or bilateral contract). Many international transactions involve long negotiations, along with numerous exchanges of correspondences and documents. It is a difficult task of a court or arbitral tribunal to determine if and when the contract was formed (acceptance of an offer).
Additional Term
Terms added to the contract via other business documents such as the acceptance document (e.g., a purchase order)
Adequate Assurance
The suspending party must lift suspension in the event that the other party provides adequate assurance that it will perform as contracted.
Anticipatory Breach
(Anglo American legal derivation). The civil law does not recognize the right of a party to avoid or suspend a contract obligation in anticipation of a breach by the other party. The contract avoidance is permitted only at the time of breach or by way of a court order. Article 71 of the CISG allows a party to suspend its performance if it becomes clear that the other party will not perform; the suspending party must give immediate notice of suspension
Battle of the Forms
Exchanging forms with conflicting or varying terms. For example, when the acceptance includes different terms from the offer
Bilateral Contract
An offer to sell followed by “I accept”
Boilerplate Terms
Standard contract terms (unilateral)
Choice of Law Clause
It is used to avoid application of the CISG (must be carefully drafted)
Computer Software Sales
This recognizes that the sale of software includes a license to use the software, but ownership in the intellectual property remains with the seller (“licensor”).
Conflict of Law Rules
Courts have fashioned to assist them in making choice of law decisions. These rules are essentially a list of factors used to determine the country with the closest connection to the case. Under the Restatement (Second) of Conflict of Laws, the law of the jurisdiction with the “most significant contacts” governs both tort and contract claims. In evaluating tort claims, the following four factors are relevant: (1) the domicile, place of incorporation, and place of business of the parties; (2) the place where a tort occurred; (3) the place where the relationship of the parties is centered; and (4) the place where the injury occurred. With respect to contract claims, the factors are: (1) the place of contracting; (2) the place of negotiation; (3) the place of performance; (4) location of the subject matter of the contract; and (5) the domicile, place of incorporation, and place of business of the parties.
Consequential Damages
Damages that are incurred because of special circumstances after a breach of contract. In order for damages to be recovered, the special circumstances must have been unforeseeable at the signing of the contract.
Contract Formation
One of the four parts of CISG (General Provisions, Contract Formation, Rights and Obligations, and Ratification)
Reasonable Person Standard
The common law uses the objective theory of contract, where the focus is not on the parties’ actual subjective intent, but on the meaning a neutral third party would attach to the parties’ words and conduct.
Convention on the Limitation Period in the International Sale of Goods
Provides uniform rules governing the period of time within which a party may bring a claim in conjunction with a contract for the international sale of goods.
Course of Performance
It is premised on the fact that the parties’ conduct in performing the contract is a good indication of what they believe to be its meaning. Evidence of post formation conduct of the parties to determine what the parties believed that the contract meant.
Disclaimer
Any form is technically enforceable under CISG. CISG provides no formal requirements.
should be drafted with clear and conspicuous language
Doctrine of Frustration
(contractual excuse or except the breaching party from claims for damages); the performance may still be objectively possible but the reason for the performance has ceased
Doctrine of Impossibility
(contractual excuse or except the breaching party from claims for damages); requires the contracting party to be objectively prevented from performing and generally entails the destruction of the subject matter of the contract
Doctrine of Impracticability
Arises when a party cannot perform their obligations under the contract due to an uncontrollable event that makes it extremely difficult (but not impossible) to perform
Force Majeure
(Clause) lists the types of events that allow the parties to excuse out of the contract (wars, blockades, strikes, government interference, fire, transportation problems, etc.). Must be custom drafted to take into account the type of industry as well as the countries and type of carriage (transport) involved
Four Corners Analysis
also known as the parol evidence rule, stipulates that if two parties enter into a written agreement, they cannot use oral or implied agreements in court to contradict the terms of the written agreement.
Requires a court or arbitral panel to find the answer to the issue in dispute within the contract
Hardship Clause
Since the force majeure clause generally does not recognize changes in circumstances that result in mere hardship, the parties may expand the clause to include events that make performance not impossible but unduly costly.
Impediment
CISG article 79 allows for an excuse of non performance due to an impediment that is beyond the control of the breaching party and was not foreseeable at the time of contract formation. However, the excuse is not permanent
Implied Warranty for a Particular Purpose
(Recognized by CISG article 35) occurs if a seller knows or has reason to know of a particular purpose for which some item is being purchased by the buyer. The seller then guarantees that the item is fit for that particular purpose
Implied Warranty of Merchantability
(Recognized by CISG article 35) is a merchant's basic promise that the goods sold will do what they are supposed to do and that there is nothing significantly wrong with them. In other words, it is an implied promise that the goods are fit to be sold
International Customary Law
Trade usage, business customs, soft law principles
Jurisdiction
Power of a court to adjudicate cases and issue orders. Territory within which a court or government agency may properly exercise its power
Lex Mercatoria
or law of merchants refers to a system of rules of law created by international merchants, independent of any legal system, for the purpose of governing international business transactions.
Limited Express Warranty
an agreement by a seller to provide repairs or a replacement for a faulty product, component, or service within a specified time period after it was purchased. Buyers rely on these promises or guarantees and sometimes purchase items because of them
Mailbox Rule
(aka dispatch rule) holds that the contract is formed upon the sending of the acceptance by placing it into a reasonable means of transmission. This is a common law rule. Other legal systems and the CISG, determine the conclusion of a contract when the notice of acceptance is received by the offeror
Merger Clause
(restates the parol evidence rule) agreement clause that extinguishes any and all prior agreements and understandings not expressed in the writing. Extinguishes all prior oral agreements.
Mirror Image Rule
Old common form adopted by the CISG (during battle of the forms) in which acceptance must be a mirror image of the offer. If the terms are not “a mirror image of each other”, the acceptance turns itself into a counteroffer, resulting in a finding of no contract.
Mixed Sale
CISG covers only transactions for the sale of goods. Therefore, the sales of services and transfer of intellectual property rights would not come under the jurisdiction of the CISG. Transactions that include more than one subject matter are a mixed sale (e.g., sales involving the sale of a tangible asset, along with a service agreement and a license pertaining to intellectual property rights - a computer)
Nachfrist Notice
Concept foreign to Anglo American contract law (civil law notion). A delay in performance, does not in itself, constitute a material breach of contract. the notion allows a buyer or seller to fix an additional time for performance beyond what is specified in the contract. the additional time must be of reasonable duration
Objectively Unforeseeable
Most excuse doctrines require that the change circumstances were objectively unforeseeable at the time of contract formation. If they are foreseeable, then the losses resulting from the breach will be considered as an allocated risk to be borne by the party assigned the risk.
Objective Theory of Contract
Used by common law. The focus is not on the parties actual subjective intent but on the meaning a neutral (fictitious) third party would attach to the parties’ words and conduct
Offer
All legal systems recognize the formation of a contract when an offer and acceptance are exchanged (exchange of promises or bilateral contract).
Offeree
Is that party that received the offer, and is empowered to create a binding contract through the acceptance of the offer. (the key issue is determining the exact time of formation)
Offeror
The party making the offer to contract
Parol Evidence Rule
Protects the sanctity of the written contract intended to be the final agreement of the parties’ negotiations. The rule prevents admitting into evidence any prior or contemporaneous oral statements or writings that contradict the contract. The CISG has no parol evidence rule, therefore all types of evidence, even oral statements, that contradict the written contract are admissible evidence.
Place of Business
In determining the country of a party for CISG jurisdiction purposes, the court must decide the party’s place of business that is most closely connected to the particular business transaction. That which has the closest relationship to the contract and its performance.
Plain Meaning Rule
Sometimes referred to as the four corner analysis. One of the tools that courts use to interpret the contract.
Prior Dealings
Prior contracts and performances between the parties that establish a common basis of understanding for interpreting subsequent contracts
Products Liability
Unlike the UCC, the CISG does not allow for recovery for breach of warranty that results in injury to persons or property. Article 5 of the CISG states that it does not cover claims resulting from the “liability of the seller for death or personal injury caused by the goods to any person.” Therefore, product liability remains to be determined under national laws. In contrast, the UCC allows for the recovery of consequential damages stemming from the seller’s breach due to “injury to person or property approximately resulting from any breach of warranty.”
Ratification
One of the four parts of CISG (General Provisions, Contract Formation, Rights and Obligations, and Ratification)
Reasonable Person Standard
(Fictitious) third party to interpret the meaning of the contract party's intent, based on the parties’ words and conduct (objective manifestations). The meaning of a contract is not based on what the party thought the meaning was, but on what his actions and words would be interpreted to mean under the contract. The strongest evidence of objective meaning is the written contract. the contract is interpreted from the perspective of a reasonable person in that particular trade or business.
Rejection
The determination of the exact time of formation (acceptance of an offer) is important in order to decide the effectiveness of attempted revocations of offers by offerors and rejections by offerees (subsequent to the sending of an acceptance).
Revocation
The determination of the exact time of formation (acceptance of an offer) is important in order to decide the effectiveness of attempted revocations of offers by offerors and rejections by offerees.
Right to Cure
Right to repair or replace defective goods, granted under the CISG. The buyer retains the right to sue for damages and expenses caused by the delay. In some countries, ends on the delivery date specified on the contract, so it only applies if the goods are delivered early.
Specially Manufactured Goods
The UCC and its guidelines apply to all contracts involving the sale of goods. Under the UCC, “goods” are defined as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale. (??)
Standard Terms
a contract between two parties, where the terms and conditions of the contract are set by one of the parties, and the other party has little or no ability to negotiate more favorable terms, and is thus placed in a "take it or leave it" position.
Statute of Frauds
The CIGS does not contain this, thus oral statements between the parties may be used to prove a contract and the terms of a contract
Totality of the Circumstances
Analysis where the court or arbitrator looks outside of the contract to interpret its meaning
Trade Usage
Refers to the customs and practices regularly observed in a given trade or business. An example would be a provision that trade terms such as FOB, FIF, and the like must comply with the International Chamber of Commerce Incoterms
Undue Hardship
More than a mere loss. The loss must be near catastrophic. Beyond control means that the event is a type of force majeure that was impossible for the party to avoid or overcome
Uniform Commercial Code (UCC)
a comprehensive set of laws governing all commercial transactions in the United States. It is not a federal law, but a uniformly adopted state law. Uniformity of law is essential in this area for the interstate transaction of business. Provides a solid foundation for drafting a sales contract. At the international level, however, the general principles of contract law are less specific and are applied sporadically by national courts**.**
Unilateral Contract
Contracts formed by a promise to sell followed by conduct or performance (acceptance by conduct). The acceptance is effective at the moment the act is performed.
United Nations Convention on Contracts for the International Sale of Goods (CISG)
Came into force on Jan 1 1988. Over 50 years of negotiations went into making this convention. It supersedes two previous conventions: Convention relating to the Uniform Law on the International Sales of goods (ULIS) and the convention relating to a Uniform Law on the Formation of contracts for the international Sale of Goods (ULF). The convention is the work of more than 62 countries and 8 International Organizations. It was adopted at a conference in Vienna in 1980; it incorporates rules from all major legal systems of the world. Is an optional law and the parties may opt out of it through a choice of law clause in their contract and is a blend of common and civil laws
Virtual Goods
One suggested resolution for the intangibility of technology and software is to treat such items as virtual goods, the approach taken in applying the UCC to software products. Virtual goods are treated just like conventional goods for purposes of UCC and possibly CISG applications
Written Confirmation Rule
It is an exception to the UCC writing requirements (status of fraud). It states that a writing sent by one of the parties confirming the conclusion of a contract is sufficient to satisfy the writing requirement, and that the confirmation is strong evidence of the terms of the contract
GPL Treatment, Ltd. v. Louisiana-Pacific
914 P.2d 682 (Or. Sup. Ct. 1996)
The statute of frauds is an affirmative defense that must be raised and proved by the defendant.
The written confirmation exception to the statute of frauds provides that a written instrument (letter, fax, or e-mail) sent by one merchant to another merchant satisfies the writing requirement unless the other merchant objects within ten days.
A sign and return clause may or may not convert a written confirmation into a mere offer.
MCC-Marble Ceramic Center v. Ceramica Nuova D’Agostino
144 F. 3d 1384 (11th Cir. 1998)
The court suggests that the use of a merger clause would be an effective means to prevent parol evidence from being admitted. A merger clause is a statement that the final written contract is conclusive evidence of the parties’ agreement.
Since the CISG has been adopted in numerous countries, any previous foreign decisions on a particular issue should be reviewed in order to obtain uniform interpretations of the CISG.
The CISG provides a price reduction in its Article 50 as a remedy for the delivery of nonconforming goods.
The two-year period found in Article 39 of the CISG is the outside limit for giving a notice of defect. A party must give notice within a reasonable time, which will normally mean within days of finding the defect. In addition, the parties can agree to a shorter notice period.
Pratt & Whitney Corp. v. Malev Hungarian Airlines
Metropolitan Court of Budapest, 13 Bp. P.O.B. 16 (1991)
Although ships, vessels, and aircraft are excluded from the CISG, a sale of parts for such items is covered by the CISG.
An offer is sufficient even if it allows the offeree to fix the quantity term at some later date.
A conditional acceptance does not prevent the formation of a contract.
Golden Valley Grape Juice and Wine, LLC v. Centrisys Corporatio
2010 U.S. Dist. LEXIS (E. Dist. Cal. 2010)
Contracts may be formed by acceptance through a promise (“I accept”) or by the conduct of the party receiving the offer. In this case the act of including the offer in a subsequent contract with another party was an acceptance that bound the contract.
In acceptance by conduct, the offeror must have allowed for acceptance by conduct or performance instead of a statement of acceptance.
The CISG does not provide a rule for the incorporation of General Conditions (standard terms) into a contract. The Court held that the attachment of the General Conditions to an e-mail was sufficient to make them part of the contract.
The U.S. Supreme Court held that forum selection clauses should be enforced unless there is a strong public policy reason against their enforcement.
Filanto, S.P.A. v. Chilewich International Corp.
789 F. Supp. 1229 (S.D.N.Y. 1992)
The Federal Arbitration Act requires courts to enforce reasonable arbitration clauses. Any state law that restricts the federal policy in favor of arbitration is preempted.
The ability of one party to add or delete contract terms in the battle of the forms scenario is lost if the party delays its response beyond a reasonable time or after the other party begins performance.
A court will take into consideration the conduct of the parties following the formation of the contract (course of performance) when interpreting a contract.
Tee Vee Toons v. Gerhard Schubert GmbH
00 Civ 5189 (RCC) (S.D.N.Y. 2006)
Unlike American contract law, the CISG contains no statute of frauds or parol evidence rule (written contracts cannot be contradicted by other types of evidence); therefore, oral statements between the parties may be used to prove a contract and the terms of the contract.
The CISG Article 8 adopts both the subjective (actual intent) and objective (manifestations of intent) approaches to contract interpretation. Contracts are to be interpreted based upon evidence of the parties’ actual subjective intent. If this is not possible, contracts are to be interpreted using the reasonable person standard (objective intent), that is, what would a reasonable third party witnessing the parties’ actions and words interpret the contract to mean?
In this case, the written contract’s standard terms included a disclaimer of the implied warranties found in CISG Article 35 (implied warranty of merchantability or ordinary purpose and implied warranty for a particular purpose), however, the buyer argued that the disclaimer of warranties was not part of the contract because the parties had orally agreed that the standard terms did not apply.
The common law’s parol evidence rule would bar the use of the evidence of the oral statements to contradict the written contract, while the CISG has no such rule and the evidence of the oral agreement would be admitted into evidence. However, the standard terms also included a merger clause, which is a contract form of the parol evidence rule that prohibits the consideration of extrinsic evidence (oral representations that the standard terms would not apply) if it contradicts the written contract (including the standard terms).
If the court determines the parties had subjectively agreed that the standard terms would not apply despite the objective fact that they were included in the contract, then the disclaimer would not exist and the buyer would be able to proceed with its claims of breach of the implied warranties of CISG Article 35. If the court finds that the standard terms did apply under the reasonable person standard, then the disclaimer would be effective and the merger clause would prevent the buyer from presenting evidence of the oral agreement. But, the court states a second issue if the standard terms apply, and even though the merger clause was part of the standard terms, the court would still have to determine if the parties actually intended the merger clause to prevent the admission of extrinsic evidence that shows their true intent. The court sent the case back to the lower court to determine the parties’ subjective intent relating to the enforceability of the standard terms and, secondly, the enforceability of the merger clause within the standard terms.
Frigaliment Importing v. B.N.S. International Sales Corp.
190 F. Supp. 116 (S.D. N. Y. 1960)
Four-corners analysis requires a court or arbitral panel to find the answer to the issue in dispute within the contract.
In a totality of the circumstances analysis the court or arbitrator looks outside of the contract to interpret its meaning.
In performing a totality of the circumstances analysis, a court applies the reasonable person standard.
Under the reasonable person standard, the contract is interpreted from the perspective of a reasonable person in that particular trade or business.
Delchi Carrier, S.P.A. v. Rotorex Corp.
71 F.3d 1024 (2d Cir. 1995)
Article 74 of the CISG allows a party to collect any foreseeable damages incurred due to a breach of contract.
Article 77 of the CISG requires the plaintiff to mitigate its damages. Expenses incurred, such as expediting shipment of substitute goods, are recoverable against the breaching party.
The plaintiff may also collect incidental damages, such as costs incurred in repairing, storing, and protecting the defective goods.
A plaintiff may collect lost profits caused by delivery of defective goods, but only those profits that can be proven with reasonable certainty.
In sum, under the CISG and the UCC, damages are restricted by three principles: (1) they must have been foreseeable at the time that contract was signed, (2) they were not caused by the plaintiff’s failure to mitigate, and (3) they must be proven with reasonable certainty and are not merely speculative
T.J. Stevenson & Co. v. Bags of Flour
629 F.2d 338 (5th Cir. 1980)
Under the UCC any defect is ground for rejection. The CISG gives a right of rejection only if there is a fundamental breach.
The court disregarded the specific notice requirements of the contract by imputing actual notice from the actions and correspondence between the parties after the goods were delivered.
FAS stands for Free Alongside Ship. Under this term the risk of loss to the goods is transferred to the buyer when the goods are delivered to the port of shipment and ready for loading onto the ship. However, the court found that since the goods were defective upon delivery to the ship the risk of loss never passed to the buyer. FAS (Free Alongside Ship) is a trade term that will be discussed in detail in Chapter 14
If nonconforming goods can be resold for another purpose, then a court, under the CISG, is likely to find that the breach did not constitute a fundamental breach. In such a case the buyer has no right to reject the goods. Instead, the buyer may make use of the price reduction remedy provided for in the CISG. Under this remedy the buyer can unilaterally reduce the price of the goods by the difference in value between the goods in their defective condition and the value of conforming goods.
International Chamber of Commerce
Case No. 6281 of 26 August 1989
Most price or cost increases will not be considered the type of unforeseeable event that provides a party an excuse for breaching a contract.
Losses due to cost increases, market price changes, or currency fluctuations are considered allocated risks and are to be borne by the party that is allocated the risk in the contract.
The non-breaching party may have to agree to a price increase under the duty to mitigate damages. It would then be able to recoup the price increase by suing for damages.
17 COGSA Exemptions
If the carrier fulfills its obligations, then its liability is limited to not more than $500 per package. In addition, it obtains the protection of 17 COGSA exemptions. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
a) act, neglect, or default of master or employees in the navigation or in the management of the ship
b) fire
c) perils of the sea
d) act of God (natural disasters)
e) act of war
f) act of public enemies
g) arrest or restraint or seizure under legal process
h) quarantine restrictions
i) act or omission of the shipper or owner of the goods
j) strikes, lockouts, or stoppage of labor
k) riots and civil commotions
l) saving or attempting to save life or property at sea
m) wastage in bulk or weight or any other loss arising from inherent vice of the goods
n) insufficiency of packing
o) insufficiency of marks
p) latent defects not discoverable by due diligence
q) any other cause arising without actual fault or privity of the carrier
but the burden of proof shall be on the person claiming the benefit of this exception
Air Waybill
Most air transport of goods are handled by _______ issued by air carriers. They are not negotiable. The carrier must make delivery to the consignee named in the bill
All Risks Policy
Covers any losses on cargo except those specifically exempt in the policy; marine insurance policy; burden to prove that the loss was due to an exempt situation falls on the insurance company; exemptions: war, revolution, riot, or strikes (can be mitigated through a war risk policy)
American Institute of Marine Underwriters (AIMU)
Trade association representing the United States ocean marine insurance industry as an advocate, educator and information center.
Bailee
a party to whom the goods are delivered for a purpose without transfer of ownership
Blanket Policy
Variant of over cover policy; shipper is not required to declare the individual values of each shipment
Booking Contract
Form used by a freight forwarder to reserve space on a carrier
Cargo Insurance Certificate
Document indicating the type and amount of insurance coverage in force on a particular shipment
Cargo Policy
Made to cover risk of loss for periods of time before the loading and after the unloading of the goods
Carriage of Goods by Sea Act (COGSA)
Codification of Hague Rules for the US; applies to international import and export shipment involving a bill of lading for transport to or from a US port
Charter Party
When a shipper leases the entire ship from the ship’s owner
Clause Paramount
Needed to be included in the bill of lading for Hague Rules to be applied to deck carriage (Hamburg Rules automatically apply to deck carriage of goods); burden of proof is on the shipper under the Hague Rules to prove that any loss was due to the fault of the carrier
Comprehensive General Liability (CGL) Coverage
most salient feature is its comprehensiveness. It also provides a broad duty on the part of the insurer to defend the carrier in related lawsuits or arbitrations. Thus, the insured is provided with the luxury of having legal services paid for by the insurance company even on claims where insurance coverage is unlikely.
Common Carrier
Companies that contract with the public for transportation of goods or persons and include commercial airlines, overnight courier services, and international shipping by sea
Containerization
Allows a single container to be used in different modes of transit
Customary Freight Unit (CFU)
Measure used to determine “number of packages” of non-packaged goods to determine carrier liability.
Customs Brokers
Provide a variety of services including advising the importer on the formalities, regulations, and tariff (taxes or duties) for the specific country of import; advises the importer on selecting the correct HTS classification number describing the goods to be imported (see Chapter 5) in the hope of paying a lower tariff rate. It also prepares and reviews customs documents, delivers them to the customs authorities, and obtains the document releasing the goods for importation. Additional services provided include arranging for the warehousing of the goods at the port of importation (after the goods clear customs). The documents issued by them include the Application for Import License, the Import Declaration, and the Special Customs Invoice;
is the agent for an importer or purchaser
Deck Cargo
The carrier is entitled to carry the goods on deck only if such carriage is in accordance with an agreement with the shipper or with the usage of the particular trade or is required by statutory rules or regulations.
Due Diligence
Attempting to prevent misconduct through thorough review of applicable rules/regulations
Excess Clause
Covers all claims outside the coverage of the underlying policy
Excess Insurance
“umbrella” insurance; incorporates one of a number of popular clauses that control when that coverage becomes available; excess clause covers all claims outside the coverage of the underlying policy
Exculpatory Clause
Generally insulates one of the parties from liability due to its own negligent acts.
Extension Clause
Extends the standard marine coverage to a period before the loading of the goods and a period between offloading and delivery to the consignee
Extraordinary Expenses
Incurred by the shipowner for the joint benefit of the ship and its cargo
F.C. & S. Clause
Free of capture and seizure; interpreted to exclude any losses due to war or civil strife (rebellion and revolution; Coverage may be requested through an endorsement on the underlying policy or through a separate war risk policy)
Fair Opportunity
For the shipper to declare a value above the per package limitation by providing notice and a space to declare a higher value on the face of the bill of lading
Federal Arbitration Act (FAA)
Congress enacted in 1924 “to ensure judicial enforcement of privately made agreements to arbitrate.” The Act sets up “a presumption in favor of arbitration,” and requires that courts “rigorously enforce agreements to arbitrate.”
Force Majeure Clause
Lists the type of events that allow the parties an excuse out of the contract; excuses nonperformance when circumstances beyond the control of the parties prevent performance
Forwarder’s Bill of Lading
It is common practice for the forwarder to issue carrier-type documents such as the forwarder’s bill of lading or receipt. In such cases, the forwarder assumes the liability of a carrier or possibly of a multimodal transport operator
Free of Particular Average (FPA)
Marine insurance policies also generally specify whether they cover only total losses. The marine term for loss is the word average
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Flashcard (76)