1、 2009 Pearson Education, Inc publishing as Prentice Hall10-1CHAPTER 10 SALES 2009 Pearson Education, Inc publishing as Prentice Hall10-2CHAPTER 10SALESTopics for this chapter:lUN Convention on Contracts for the International Sale of Goods (CISG)lTransactions Covered in CISGlContractual Issues Exclud

2、ed from Coverage of CISG lInterpreting CISGlInterpreting Sales ContractslFormation of the ContractlGeneral Standards for PerformancelSellers ObligationslThe Passing of RisklRemedieslExcuses for NonperformancePearson Education, Inc publishing as Prentice Hall 200910-3UN Convention on Contracts for th

3、e International Sale of GoodslThe CISG, adopted in 1980, incorporates rules from all the major legal systems. lIt provides accepted substantive rules on which contracting parties, courts, and arbitrators may rely.lIt has been ratified by 72 countries, but has not been ratified by Brazil, Japan, Indi

4、a, and the UK. Japan is expected to ratify it in 2008. Pearson Education, Inc publishing as Prentice Hall 200910-4Transactions Covered in CISG CISG applies to contracts for international sale of goods.The buyer and seller must have their place of business in different states. Either:1.Both of the st

5、ates must be contracting parties to the convention, or2.The rules of private international law must lead to the application of the law of a contracting state.lA ratifying state may declare that it will apply CISG only when the buyer and seller are both from contracting states.Pearson Education, Inc

6、publishing as Prentice Hall 200910-5Opting In and OutlParties to a contract may exclude or modify CISGs application by a choice-of-law clause.lA choice-of-law clause is a contractual provision that identifies the law to be applied in the event of a dispute over the terms or the performance of the co

7、ntract.Pearson Education, Inc publishing as Prentice Hall 200910-6Case 10-1: Asante Technologies, Inc. v. PMC-Sierra, Inc.lIssue: Does the U.S. federal court have jurisdiction and does CISG apply to this contract?lThe court determined the parties were from different states and CISG applies to contra

8、cts between such parties.lThe parties did not opt out of the CISG and it was the controlling law.Pearson Education, Inc publishing as Prentice Hall 200910-7Sales DefinedlA sale is the exchange of goods for an amount of money or its equivalent.lThe CISG does not define sales, but various sections pre

9、sent the same definition as many domestic laws, such as the U.S. UCC, which defines a sale as the “passing of title from the seller to the buyer for a price.” The goods processed through the Port of Vancouver, B.C. are likely being shipped under contracts controlled by the CISG. Photo: Public domain

10、 /wiki/ Image:PortOVan.jpgPearson Education, Inc publishing as Prentice Hall 200910-8Goods DefinedlA good is a moveable, tangible object. For the purposes of the CISG, goods do not include things bought for personal use or at an auction or foreclosure sale, nor may they be

11、 ocean-going vessels or aircrafts. These candles may or may not be a good under CISG depending upon whether they are sold to individual consumers or sold in bulk to a retailer for resale.Photo: Used with permission of the author from personal archive. Pearson Education, Inc publishing as Prentice Ha

12、ll 200910-9Mixed SaleslSeller of goods often furnishes services when delivering a product.lCISG looks upon mixed sales and service contracts as sales of goods, unless the preponderant part of the obligation” of the seller “consists in the supply of labor or other services.” Pearson Education, Inc pu

13、blishing as Prentice Hall 200910-10Contractual Issues Excluded From the Coverage of CISGlCISG only deals with:1.The formation of the contract, and2.The remedies available to the buyer and seller.lCISG excludes questions about:1.the legality of the contract,2.the competency of the parties,3.the right

14、s of third parties, and4.liability for death or personal injury. Pearson Education, Inc publishing as Prentice Hall 200910-11PreemptionlIf CISG applies to a particular contractual issue, domestic law is preempted. Remedies provided in CISG are the only remedies available.lPreemption helps to fulfill

15、 the goal of the convention to establish uniform rules for international sales contracts.The only permissible remedy for a defective saw is the one provided by CISG when there is an international sale. Photo: public domain Source: /SLTC/etools/woodworking/radial.htmlPearson Educati

16、on, Inc publishing as Prentice Hall 200910-12Interpreting CISG lTo interpret CISG, a court is to consider:1.the international character of the convention,2.the need to promote uniformity in the conventions application, and3.the observance of good faith.lThe CISG implies that a court may only use the

17、 plain meaning of the language of the convention. lCourts may also look the travaux preparatories or legislative history to determine intent. Pearson Education, Inc publishing as Prentice Hall 200910-13Interpreting CISG: General PrincipleslCISG calls for courts to look to the general principles on w

18、hich the convention is based when interpreting its provisions.lTwo of the suggested principles are:1.A party to a contract has the duty to communicate information needed by the other party, and2.Parties have the obligation to mitigate damages resulting from a breach. Pearson Education, Inc publishin

19、g as Prentice Hall 200910-14Interpreting Sales ContractslA contract is said to be formed only when the parties have a meeting of the minds. This subjective intent approach says that contracts should be interpreted according to the actual intent and understanding of the parties at the time they made

20、their agreement.lCISG says courts are to use subjective intent only if the other party knew or could not have been unaware of the speakers intent. lIf intent is unclear, courts use objective intent. Pearson Education, Inc publishing as Prentice Hall 200910-15Negotiations lWhen a court is to determin

21、e intent, CISG directs that due consideration be given to all relevant circumstances, including:1.the negotiations leading up to the contract,2.the practices that the parties have established between themselves, and3.the parties conduct after they agree to the contract.lCISG does not apply the techn

22、ical rules that domestic courts use to interpret contracts, such as the parole evidence rule. Pearson Education, Inc publishing as Prentice Hall 200910-16Practices and UsageslParties are bound by any practices which they have established between themselves.lA court is allowed to consider any usages

23、that the parties agreed to. A usage is the customary method of performing or acting that is followed by a particular group of people, such as people within a particular trade.lCISG lets a court consider “a usage of which the parties knew or ought to have known which in international trade is widely

24、known to, and regularly observed by parties to contracts of the type involved in the particular trade concerned.” Pearson Education, Inc publishing as Prentice Hall 200910-17Case 10-2: Treibacher Industrie, A.G. v. Allegheny Technologies, Inc.lDefendant TDY entered into consignment contracts with Tr

25、eibacher, then refused shipment when it found a cheaper supplier.lCourt had to interpret, under the CISG, the word consignment. Issue turned on whether that word should be interpreted according to its meaning based on the “course of dealings” or “customary usage in trade.” Court applied course of de

26、alings and awarded $5,327,042. Pearson Education, Inc publishing as Prentice Hall 200910-18FormlThe CISG states that a contract for sale need not be concluded in or evidenced by writing and is not subject to any other requirements as to form. It may be proved by any means, including witnesses.lHowev

27、er, CISG authorizes a contracting state whose legislation requires contracts of sale to be concluded in or evidenced by writing to make a declaration at the time of ratification the CISG provision does not apply where any party has his or her place of business in that state. Pearson Education, Inc p

28、ublishing as Prentice Hall 200910-19Formation of the Contract:The OfferlA contract is formed when an offer to buy or sell a good is accepted.lAn offer is a proposal by one person to another indicating an intention to enter into a contract under specific terms.lTo be a valid offer, the offeror must c

29、ommunicate an intention to be bound.lA proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and price.Pearson Education, Inc publishing as Prentice Hall 200910-20Effectiveness of an OfferlAn offer becomes effect

30、ive only after it reaches the offeree, a specific person addressed in the offer.lOffers can be withdrawn before they reach the offeree.lOffers can be revoked any time before the offeree dispatches an acceptance.lA firm offer is an offer that the offeror promises to keep open for a fixed period of ti

31、me. Pearson Education, Inc publishing as Prentice Hall 200910-21AcceptancelA contract comes into existence at the time the offer is accepted. lAn acceptance is a statement of conduct by the offeree indicating assent that is communicated to the offeror. lSilence does not constitute acceptance.lAccept

32、ance must be received within the time period specified in the offer. If no time period is given, acceptance must be received within a reasonable time.lAcceptance is effective when received by offeror.Pearson Education, Inc publishing as Prentice Hall 200910-22Case 10-3: United Technologies Internati

33、onal, Inc. v. Magyar Legi Kozlekedesi VallalatlPlaintiff offered to sell aircraft engines to defendant at specified prices in a quantity to be selected by the defendant depending upon how many planes they purchased.lDefendants sent acceptance.lTerm requiring government approval was not a condition p

34、recedent. An enforceable contract was formed. Pearson Education, Inc publishing as Prentice Hall 200910-23Assent by Performance of an Act, Withdrawal, and RejectionlIf the offeror asks for performance of an act rather than the indication of acceptance, the acceptance is effective when the act is per

35、formed.lAn offeree may withdraw his/her acceptance any time before or simultaneous with its receipt.lA rejection becomes effective when it reaches the offeror. If the offeree sends both an acceptance and a rejection, the one that reached the offeror first would be given effect. Pearson Education, In

36、c publishing as Prentice Hall 200910-24Acceptance With ModificationslIf the acceptance modifies some of the terms of the offer, there is a counteroffer instead of an acceptance if these inconsistencies are “material.”lUnder the CISG, additional terms or different terms relating, among other things,

37、to the price, payment, quality of the goods, place, and time of delivery, extent of one partys liability to the other, or the settlement of disputes are considered to alter the terms of the offer materially. Pearson Education, Inc publishing as Prentice Hall 200910-25Case 10-4: Filanto, SPA v. Chile

38、wich International Corp. lChilewich was supplying boots to a Russian company that were being made by Filanto. lChilewich made reference to an arbitration clause in the Russian Contract with Chilewich.lFilanto failed to object to the incorporation by reference of the Russian Contract in a timely fash

39、ion. The arbitration clause become part of the contract, requiring arbitration in Moscow. Pearson Education, Inc publishing as Prentice Hall 200910-26Fundamental BreachlWhen one party breaches, the other party may avoid the contract or make a demand for specific performance.lA breach of contract com

40、mitted by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him or her of what he or she is entitled to expect under the contract.lThe injured party may use the remedy of avoidance by notifying the other party and returning any goods alr

41、eady received.Invoice used in Taiwan Photo: CC-BY /wiki/Image:Invoice_TW_front.JPGPearson Education, Inc publishing as Prentice Hall 200910-27Requests for Specific PerformancelAn injured party may be able to request specific performance if the other party is in breach.lSpe

42、cific performance is a court order directing a party to carry out the obligations he or she had contractually promised to do.lIn some civil law countries, a party is entitled to require performance. lIn the US, specific performance is granted if the goods are unique and cannot be obtained elsewhere.

43、 Pearson Education, Inc publishing as Prentice Hall 200910-28Sellers ObligationslA seller is required to:1.deliver the goods,2.hand over any documents relating to them, 3.ensure that the goods conform to the contract.lThe place for delivery is the place agreed to in the contract. Otherwise, it is:1.

44、the first carriers place of business, or2.the place where the parties knew the goods were located or were to be manufactured. Pearson Education, Inc publishing as Prentice Hall 200910-29Time for Delivery andTurning Over Documents lSeller is to deliver goods on the date fixed in the contract.If no fi

45、xed date, within a reasonable time after the conclusion of the contract. lAt time and place of delivery, seller must turn over any documents relating to the goods that the contract requires.lIf documents are delivered early, seller has the right to cure any defect in the documents.Pearson Education,

46、 Inc publishing as Prentice Hall 200910-30Conformity of Goods lSeller must deliver goods which are of the quantity, quality, and description required by the contract and are packaged in the manner required.lGoods do not conform unless they:a)are fit for the purpose of which goods of the same descrip

47、tion would ordinarily be used;b)are fit for any particular purpose expressly or impliedly made known to the seller;c)possess the qualities of goods which the seller has held out for the buyer as a sample;d)are packaged in the same manner usual for such goods. Pearson Education, Inc publishing as Pre

48、ntice Hall 200910-31Third-Party Claims, Waiver, Time for Examining Goods, and Curing DefectslGoods are nonconforming if they are subject to third-party claims such as ownership and rights in intellectual property.lThe parties may waive the conformity requirement.lBuy has an obligation to examine the

49、 goods for defects within as short a period as is practicable after delivery.lBuyer is obligated to inform the seller of any discovered defect within a reasonable time.lIf a seller delivers early, he or she may cure any defect up to the agreed upon date for delivery. Pearson Education, Inc publishin

50、g as Prentice Hall 200910-32Buyers ObligationslA buyer is required to (1) pay the price and (2) take delivery of the goods.lUnless a different time is specified, the buyer must pay when the goods or the documents controlling their disposition are delivered.lIf place of delivery is specified, payment

51、 is also made there. If no place of delivery is specified, then buyer must pay at the sellers place of business.Pearson Education, Inc publishing as Prentice Hall 20099-33Case 10-5The Natural Gas CaselThe plaintiff, a Germany company, negotiated to buy natural gas from an Austrian partnership. The d

52、efendant was to ship the propane from the US to the plaintiff in Belgium. The plaintiff was to obtain a letter of credit once the defendant told it where the propane was to be loaded.lIssue: Had the defendant breached the contract by failing to deliver the propane or was its duty to perform excused

53、by the plaintiff not obtaining a letter of credit? Pearson Education, Inc publishing as Prentice Hall 200910-34Case 10-5The Natural Gas CaselHeld: The buyer was excused from opening a letter of credit because the defendant never provided the necessary information for the letter. The breach was due t

54、o the sellers failure to make proper arrangements to ship the gas.Pearson Education, Inc publishing as Prentice Hall 200910-35Passage of RisklThe legal concept of passage or risk is the point in time when the buyer becomes responsible for losses to the goods. lOnce the risk passes, the buyer must pa

55、y for the goods. Even if they are damaged or destroyed.lCISG allows the parties to allocate risk and specify when risk will pass. The parties usually show passage of risk through the usage of trade terms, such as Free on Board (FOB) or Cost, Insurance, and Freight (CIF).Sinking ship in the Strait of

56、 Gibraltar. Photo Lic: CC-BY http:/commons ./ wiki/Image:MV_New_Flame_salvage.jpgPearson Education, Inc publishing as Prentice Hall 200910-36Means of DeliverylGoods may be delivered by a carrier or by the seller.lIn shipment, transshipment, in-transit, and destination contracts, the ris

57、k of loss will not pass until the goods are clearly identified to the contract by markings on the goods, shipping documents, or notice given to the buyer.lIn a shipment contract where the seller is to deliver the goods to a carrier and does not require that the seller deliver to a particular place,

58、the risk passes when the goods are handed over to the first carrier.Pearson Education, Inc publishing as Prentice Hall 200910-37Means of DeliverylIf the goods are to be delivered “Free Alongside Ship” (FAS) Big Ocean, New York City, NY, the seller bears the risk until the goods are delivered to NY a

59、longside the Big Ocean.lWhen a contract requires the seller to arrange transportation to a specific destination, the risk of loss does not pass to the buyer until the goods are handed over or placed at his/her disposal at that place. When a seller in China agrees to a contract containing a “Delivere

60、d Duty Paid (DDP) Los Angeles, California, the seller bears the risk of transporting the goods to LA. Pearson Education, Inc publishing as Prentice Hall 200910-38Buyers RemedieslThe buyers remedies are cumulative, meaning they are able to be joined or taken together.lThe remedies unique to the buyer