The Issue of Determining if the Contract is Governed by CISG

Discuss about the International Business for Prime Productions and Film Frenzy Pty Ltd.
 

The issue here is to determine if the contract is governed by CISG.

Article 1 of the United Nation’s Convention on Contracts for the International Sale of Goods (CISG) states that when there is a contract for sale of goods between entities in different contracting states then the contract would be governed by CISG (Lookofsky 2017).

This contract is between Film Frenzy Pty Ltd (based in U.S) and Prime Productions Pty Ltd (based in Australia). Thus since both the states are contracting states, this contract would be governed by CISG by virtue of the provisions of Article 1 of the CISG (Chengwei 2014).

Conclusion

To conclude the contract between Prime Productions Pty Ltd and Film Frenzy Pty Ltd would be governed by the provisions of CISG.

The issue here is to determine if CISG would apply in case Film Frenzy Pty Ltd is a subsidiary of an England based company and the contract was made with the English company. 

Article 1 (2) of the CISG states that the fact that the entities have their place of business in different states is to be disregarded if it does not appear in the contract, in any transaction or information exchange between the parties and thus it would still apply (Bridge 2017).

Article 1 (1) of the CISG states that when entities form two different contracting states enter into a contract for the sale of goods then the contract would be governed by CISG (Qc and Berova 2014).

Thus if Prime Productions Pty Ltd contracted with the English Holding company directly, following the provisions of Article 1 (1) and (2) CISG would still apply and the contract would be governed by the provisions of CISG (Dennis 2014).

Conclusion

Thus, even if Mark contracted directly with the holding company the contract would still be governed by the provisions of CISG.

The issue here is to determine the implications of a DAT (Delivered at Terminal) term to such a contract for international sale of goods.

As per the Incoterm Rules 2010 a DAT (Delivered at Terminal) refers to a term of a contract which implies that there is an agreed terminal for delivery and the seller must deliver the goods to that particular terminal (DiMatteo 2013). Till the goods reach the terminal the costs and risks are borne by the seller. Once the goods are delivered to the terminal the risk shifts from the seller to the buyer.

When Mark agreed to the DAT incoterm he was contracting to absolve the seller of all responsibility once the goods were delivered to the agreed terminal which was the Port of Brisbane (Kroll, Mistelis and Viscasillas 2015). Thus once the goods were delivered to the terminal Film Frenzy Pty Ltd no longer had any responsibility to ensure that that the goods arrived at the offices of Prime Productions Pty Ltd. The contract meant that Film Frenzy Pty Ltd would only have to ensure safe delivery of the goods to the Port. 

The Application of CISG on a Contract with a Subsidiary of an England Based Company

Conclusion

In terms of this contract the DAT term implied that Film Frenzy Pty Ltd would only have to deliver the goods to the Port of Brisbane and thus all responsibility in relation to the goods ceased to exist from the seller’s side once the goods arrived at the Port.

The issue here is to determine if there is a contract between the two entities.

As per a Article 19 (1) of the CISG common follows the “mirror image” rule which states that as long as there is a valid offer and acceptance there would be concluded contract between the parties and as long as the parties belong to two contracting states CISG would govern the parties as provided in Article 1 (1) of the CISG (Berman 2016).

From the exchange of mails between the parties we see that there was a valid offer when the quotation for the products and the part payment demand was received. It is also evident that Mark accepted the same from his responding email and subsequent payment. The companies were from USA and Australia and thus two contracting states were involved. Following the provisions of Article 19 (1) of CISG and Article 1(1) of CISG it can be inferred that there was a valid contract between the parties (Ramberg 2013).

Conclusion

To conclude the parties had entered into legally valid contract which would be governed by the provisions of the CISG.

Mark alleges breach of contract with respect to the following:

• The 3X Cameras.
• The HD Microphones.
• The Camera Mounts.
• Delivery of the goods.

The issue here is to determine if such breaches were made. 

Article 35 (1) of CISG states that it is the obligation of the seller to ensure that the goods delivered match the quantity, quality and packaging description as agreed upon in the contract (Schwenzer 2014).

Article 35 (2) (a) and (b) state that the seller breaches this obligation if the delivered goods arenot fit for the purpose they would reasonably be used for or are not fit for the purpose that is made known to the seller (Coetzee 2013).

As discussed above as per the Incoterm Rules 2010 an agreement to DAT implies that the seller’s obligation towards the goods exists till the goods are delivered at the terminal (Bridge 2014). After the goods are delivered to the terminal any damage to the goods would be responsibility of the buyer. However, for damage that is done to the goods before the goods are delivered to the agreed terminal the seller would be held liable.

From the email that is sent by Mark as the invitation to offer we see that the purpose of the equipment to be used for making 3D movies is made amply clear and explicitly mentioned in the contract. The 3D movie requirement however is not mentioned when Felicia made the offer which was accepted by Mark. Thus the purpose which was filming 3D movies would not form a part of the contract. Thus in terms of the 3X cameras Film Frenzy Pty Ltd was not in breach of its obligations (Viscasillas 2013).

Implications of a DAT Term to International Sales of Goods Contract

The microphones have however been damaged during shipping due to being covered in liquid. Following the DAT term of the contract, during the shipping process any damage to the goods would be the seller’s responsibility and thus Film Frenzy Pty Ltd in breach of its obligations under the contract.

The camera mounts require fixing due to defects such as loose screws these are thus defects which make the product unfit for the specified purpose. This is thus a conspicuous breach of the seller’s duties under Article 35 (1) of the CISG as defined by Article 35 (2) of the CISG. Thus in this case Film Frenzy Pty Ltd had breached its obligations as per the terms of the contract.

The agreement contained a DAT term and thus the seller would only be required to deliver the goods to the agreed terminal which was the Port of Brisbane. Thus, there was no breach by the seller in terms of this obligation as the goods were delivered to the Port of Brisbane (Zhou 2014).

Conclusion

• In terms of the 3X cameras there was no breach by the seller.
• In terms of the Microphones there was a breach by the seller.
• In terms of the camera mounts there was a breach by the seller.
• In terms of the place of delivery there was no breach by the seller.

The issue here is to determine the remedies available to the buyer (Prime Productions Pty Ltd) under CISG.

The remedies available to the buyer under CISG are (DiMatteo 2014):

• Right to specific performance.
• Right to avoid the contract.
• Right to damages and interest.
• Right to suspend performance.
• Right to repair.
• Right to replacement of goods.
• Right to demand a diminished price. 

Under the set of fact and circumstances Prime Productions Pty Ltd should ideally opt for the right to replacement of goods as it has already made part payment and any other remedy would negate that payment or cause the buyer to incur further costs.

Conclusion

The most appropriate remedy for Prime Productions Pty Ltd is to demand a replacement of goods from the seller.

The issue here is to determine the circumstances under which the contract would be governed by Australian consumer law and UK sale of goods act.

As stated in Article 2 (a) of CISG the convention does not apply to consumer transactions. These are transactions for goods bought for personal or domestic use (Jansen 2013).

Mark was purchasing the equipment for the purpose of filming 3D movies and thus the movies for the company Prime Productions Pty Ltd. This thus ensured that the contract would be governed by CISG as defined by Article 1(1). However, if he was purchasing the goods for personal use and the sale price of goods were less than $40,000 then Australian Consumer law would apply.

Conclusion

To conclude if Mark was purchasing the equipment for his personal or domestic use and is the sale was below a price of $40,000 then ACL would apply and UK sale of goods would alos govern the transactions.

The issue here is to determine the “Soft laws” that could be incorporated into the contract to govern the agreement.

Soft law refers to rules which are not strictly binding on parties but do not completely lack the force of law. These are codes of conduct, guidelines and other regulations which are not statutes. CISG is hard law by nature but acts as soft law in practicality (Viscasillas 2013). It governs the conduct of the parties in case of international sale of goods and thus ensures that such a sale is undertaken considering the rights and responsibilities of both parties.

The Issue of Determining if there is a Contract Between the Two Entities

If the obligations of the buyer and seller as stated in the CISG were included into the written terms of the contract these would govern the contract efficiently and ensure that the contract is executed in a way that protects the rights of both parties (Coetzee 2013).

Conclusion

The obligations of the buyer and seller as stated in CISG should have included as soft laws into the terms of the contract.

Good were damaged during transit from the port to the office of Prime Productions Pty Ltd. The issue here is to determine how such a risk could have been awarded.

DAT refers to an agreement relating to a terminal. The seller’s obligation in the goods only exists till the goods are delivered to the terminal. Any damage during transit from the terminal to another location is the responsibility of the buyer and the seller has no obligations regarding the same (Bridge 2014). Thus if the agreed terminal was the offices of Prime Productions Pty Ltd then this risk would have been avoided by Mark.

Thus in order to avoid the risk of damage to the goods in transit from the agreed terminal to the offices of Prime Productions Pty Ltd Mark should ideally have changed the designated terminal to its offices.

Conclusion

To conclude, designating the terminal as the offices of Prime Productions Pty Ltd would avoid the risk of damage to the goods in transit. 

Reference list

Berman, P.S., 2016. The inevitable legal pluralism within universal harmonization regimes: the case of the CISG. Uniform Law Review, 21(1), pp.23-40.

Bridge, M., 2014. The CISG and the UNIDROIT principles of international commercial contracts. Uniform Law Review, 19(4), pp.623-642.

Bridge, M.G., 2017. The International Sale of Goods. Oxford University Press.

Chengwei, L., 2014. Remedies for Non-performance-Perspectives from CISG, UNIDROIT Principles and PECL.

Coetzee, J., 2013. The Interplay between Incoterms and the CISG. JL & Com., 32, p.1.

Dennis, M.J., 2014. Modernizing and harmonizing international contract law: the CISG and the UNIDROIT Principles continue to provide the best way forward. Uniform Law Review, 19(1), pp.114-151.

DiMatteo, L.A., 2013. CISG as Basis of Comprehensive International Sales Law. Vill. L. Rev., 58, p.691.

DiMatteo, L.A., 2014. The CISG across National Legal Systems. International Sales Law, A Global Challenge, pp.588-602.

Jansen, S., 2013. Price reduction under the CISG: a 21st century perspective. JL & Com., 32, p.325.

Kroll, S., Mistelis, L. and Viscasillas, P.P., 2015, September. Introduction to the CISG. In UN Convention on Contracts for the International Sale of Goods (CISG) (pp. 1-18). Nomos Verlagsgesellschaft mbH & Co. KG.

Lookofsky, J., 2017. Understanding the CISG. Kluwer Law International.

Qc, F.G. and Berova, N., 2014. The rule of law online: Treating data like the sale of goods: Lessons for the internet from OECD and CISG and sacking Google as the regulator. Computer Law & Security Review, 30(5), pp.465-481.

Ramberg, J., 2013. CISG and UPICC as the Basis for an International Convention on International Commercial Contracts. Vill. L. Rev., 58, p.681.

Schwenzer, I., 2014. Interpretation and gap-filling under the CISG.

Viscasillas, P.P., 2013. Applicable Law, the CISG, and the Future Convention on International Commercial Contracts. Vill. L. Rev., 58, p.733.

Zhou, Q., 2014. The CISG and English Law: An Unfair Competition. International Sales Law A Global Challenge (CUP New York 2014), pp.669-682