CHAPTER 1 - INTERNATIONAL SALE OF GOODS
by Robin Burnett
(Updates Chapter 1)
Robin Burnett
Law of International Business Transactions 2nd edition
Update - February 2003
CHAPTER 1 - INTERNATIONAL SALE OF GOODS
Australian and New Zealand Cases dealing with
with the Vienna Convention for
Contracts for Sale of Goods
Edited versions of most of these cases find their way to the CISG website of
the Institute of International law at Pace University at
<http://www.cisg.law.pace.edu>. In most instances the edited version of a
PACE case is prefaced by an editorial summary. At the conclusion of the
edited version a critical review of the decision is sometimes available. In many
instances the reviewer starts from the premise that common law jurisdictions
are reluctant to look outside their own jurisdiction to find authority for
interpreting the convention, or worse, to recognise that the convention
regime exists and is relevant to the contract under review. In many instances
this may be true. A good example of the first tendency is Delchi Carrier SpA
v Rotorex Corporation, cited at fn 163, page 29 of this chapter. However, in
many instances academic writers seem over preoccupied with picking over the
judgments and pointing out ways in which the “expert” considers that the
judge should have done better.
In the following list of Australian and New Zealand cases a reference
to the provisions of the CISG cited in the case is provided. This is followed
by a summary of the way in the relevant issues were addressed and a reference
to academic comment.
Note that cases using the CISG provisions to support acceptance of a
principle which has not yet achieved acceptance in Australian or New
Zealand law have also been included.
Australian Decisions dealing with the CISG
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26
NSWLR 234 at 263 (Art 7(1)). Not a CISG contract. Priestley JA refers to the
broad acceptance of the CISG Art 7(1) to support the proposition that good
faith is widely recognised in contract law.
South Sydney District Rugby League Football Club Ltd v News Ltd [2000]
FCA 1541 (Art 7(1)). Not a CISG contract. Finn J refers, inter alia, to Renard
Constructions for support of the proposition that:
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Australian law has not yet committed itself unqualifiedly to the
proposition that every contract imposes on each party a duty of good
faith and fair dealing in contract performance and enforcement” and
notes that the “supposed uncertainty of” good faith terminology has not
deterred every State and Territory in this country from enacting into
domestic law the provisions of Article 7(1) of the United Nations
Convention on Contracts for the International Sale of Goods.
Roder Zelt v Rosedown Park Pty Ltd (1995) 57 FCR 216 (Arts 4, 8(1), (2), 11,
15(1), 18(1), 25, 26, 29(1), 53, 61, 74, 75, 76, 81, 84). The first reported
Australian case which applied the CISG to a contract for sale of goods.
Roder, a German manufacturer of tents contracted with an Australian firm,
Rosedown. The terms of the contract required that the goods were to be
delivered in Australia upon which Rosedown became liable for payment of
the price by instalments plus interest. The contract contained a retention of
title clause in Roder’s favour and also provided that Rosedown was the bailee
and fiduciary agent of the German company until payment was completed.
Rosedown fell behind in its payments. Roder took no action about
this breach of contract. Rosedown then went into liquidation. At about that
point Roder repudiated the contract because of failure to make payments and
other breaches. It sought return of the goods.
Having decided that the CISG applied because it dealt with a sale of
goods between parties in two different States, the judge addressed the claim
by buyer for return of goods under a retention of title clause and the
argument by the administrator that Roder was simply an unsecured creditor.
Citing Art 8(1), (2) he found that the contract of sale included a retention of
title clause and that the retention of title clause equated to a property right. It
therefore fell outside the Convention regime and the judge applied domestic
law, holding it to be valid.
The judge then dealt with rights and duties of the parties by looking
at avoidance by seller for fundamental breach by buyer of obligations under
Art 53 (Art 64, Art 25); notification of avoidance (Art 26) and fixing of
additional time for buyer’s performance (Art 63 ). He found that while Roder
had done nothing to recover monies owing (despite continual failure by
Rosedown to meet its payment obligations) until the Directors decided the
company was insolvent, the appointment of an administrator could allow
Roder to justify avoidance under Art 64. On the facts it resulted in such
detriment to seller as to substantially alter what it was entitled to expect (Art
25) because the seller could not take action to recover the property. (In
addition, the denial by the administrator of the retention of title clause also
constituted a fundamental breach.) Roder gave no specific notification of
avoidance as required under Art 26 but the judge found this requirement
met by the filing of court proceedings in the case. There was no evidence to
support a finding on the question of damages and this was deferred. When it
came before the court at a later stage the question of damages under the
CISG was not addressed.
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A critical comment on the case is provided by a Canadian academic
Professor J Zeigel at <http://cisgw3.law.pace.edu/cases/> who is by his own
admission much influenced by the Canadian and United States law which
treats retention of title clauses as “conditional sales”. Leaving aside his
discussion of the status of a retention of title clause, he raises questions as to
whether this was a case of fundamental breach (Art 25) or rather a case of
anticipatory repudiation (Art 72). In this context he suggests that Arts 73 and
74 should also have been considered.
Downes Investment Pty Ltd v Perwaja Steel SDN BHD [2000] QSC 421 (Arts
1(1)(b), 25, 54, 63, 64, 72; 75, 77, 78). A contract for sale of goods between a
Queensland and a Malaysian firm. The relevant contract stated that the
Parties agreed that the law applying in Brisbane would define their
contractual obligations; therefore CISG applied.
The Queensland firm obtained a contract for shipment of scrap metal
to the defendant. Before shipment the international price for scrap metal
collapsed and the defendant did not open the letter of credit as required
under the contract. This was found to constitute a fundamental breach
which, taken with other actions or inaction of the buyer allowed the seller to
avoid the contract and recover damages on the ground of the buyer’s
repudiation and/or non-compliance with an essential term of the contract.
For reference to a critical academic review by B Zeller see below.
Perry Engineering (Receiver and Manager appointed) (Administrators
appointed) v Bernold AG [2001] SASC 15 (Art 1). Contract subject to CISG
but case brought under Sale of Goods Act. Contract between Australian and
Swiss companies stated that it was subject to the laws of South Australia.
Plaintiff had obtained an interlocutory judgment for breaches, inter alia, of
the South Australian Sale of Goods Act against the Swiss defendant which
did not enter an appearance. Plaintiff then sought assessment of damages. At
that late stage the presiding judge concluded that the CISG, not the South
Australian Sale of Goods Act applied to the question of liability under the
contract. In giving judgment he declined to proceed with an assessment of
damages based on the provisions of an Act of Parliament which plaintiff
acknowledged did not apply to the claim. This flaw also prevented assessment
of damages for tort and breach of the Trade Practices Act.
See the critical academic review of the Downs Investment case by B
Zeller in (2001) 5 Vindobona Journal 124 at <www.business.vu.edu.au/cisg>.
Do you agree with his conclusion: “In sum in Australia the significance of the
CISG as an international sales law has not been fully appreciated if case law is
any indication. Considering the ever-growing jurisprudence and academic
writing on the CISG, which is obtainable on the net one would assume that
in future these aids to interpretation would be consulted and utilised.”
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New Zealand cases dealing with the CISG
[Note: It is important to appreciate that New Zealand decisions are subject to
appeal to the Privy Council (England has not accepted the CISG). This adds
a further complication to arguments that a provision of the Convention
should lead to acceptance of a proposition not accepted in English law.]
Crump v Wala (1993) (unreported, extract on Pace website) (Art 49(1)(a))
Not a CISG contract. In a case dealing with nonconforming goods, the judge
cited the CISG rule that buyer may only reject for fundamental breach, in
support of his view that there is a need for law reform to remedy unnecessary
complexity as to buyers rights.
Hideo Yoshimoto v Canterbury Golf Club Ltd [2001] NZLR (CA) 523 (Art
8(1), (2), (3)). Not a CISG contract. Court asked to admit extrinsic evidence
of pre-contractual negotiations which made it clear that the plain meaning of
a contractual clause was not what parties intended. Thomas J at para 88 et
seq recognised that “London” would not accept such evidence. He went on
to note that it would be open to the Court of Appeal to depart from English
common law on the basis of the implementation into New Zealand law of the
CISG Art 8. He also referred to Unidroit Principles of International
Commercial Contracts 1994, Art 43. The judge quoted with approval the
argument of Professor DW McLaughton, that it seems odd that while Art 8
of the CISG applied to permit evidence of pre-contractual negotiations in the
case of international sales agreements such evidence cannot apply to
commercial and other domestic contracts. “A Contractual Contradiction”
(1999) 30 VUWLJ 175 at 195. However, Thomas J concluded that the Privy
Council would not allow New Zealand to depart from English common law
and bring New Zealand law into line with the CISG and UNIDROIT
Principles. He therefore felt obliged to reject the arguments for admission of
extrinsic evidence of pre-contractual negotiations. The remaining judges did
not comment on this issue and the appeal was upheld on other grounds.
Paperless Trading – page 34
Add at end of section,
section, immediately after footnote 196:
Many other solutions are being developed to meet the needs of traders
and other players who wish to take advantage of paperless trading. Most
are confined to business to business arrangements between trusted trading
partners. An example of a wider ranging initiative was launched in
September 1999. This is BOLERO (Bills of Lading Electronic Registry
Organisation) which is sponsored by a business consortium of shipping
companies, banks and telecommunication companies. (See insert below
to Chapter 3 for further details of this initiative.)
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International Rules for the Interpretation of Trade Terms
Incoterms 2000 – pages 35 – 67 General Comment
Since publication of the 2nd edition, there has been a revision of Incoterms
1990. Incoterms 2000 have been issued under the auspices of the
International Chamber of Commerce. ( ICC Publication No.560 )
Professor Jan Ramberg writing in the Guide to Incoterms 2000 (ICC
Publication No. 620) states:
The most important differences in substance between the 1990 and 2000
versions concern
. the placing of the export clearance obligation under FAS on the seller
(previously on the buyer);
. the specification of the seller's obligation to load the goods on the buyer's
collecting vehicle and the buyer's obligation to receive the seller's arriving
vehicle unloaded under FCA; and
. the placing of the import clearance obligation under DEQ on the buyer
(previously on the seller).
In addition, the terminology in Incoterms has in some instances been
changed for consistency and ease of understanding. The revision aimed at
generally updating Incoterms and the result, may to some appear rather
meagre. In particular, the strong demand for a change to the traditional
"FOB - point" met with considerable resistance from the great majority of the
ICC national committees . . . . (p11)
It is worth while reiterating the point made in the text (p 35) that it is
important to insert the words "Incoterms 2000" (or "Incoterms 1990" if the
earlier version is used) after the trade term abbreviation. For example, "FOB
[named port of shipment] (Incoterms 2000)", to avoid argument about what
is meant by the particular trade term selected.
Incoterms 1990
Replace all references to "Incoterms 1990" with references
references to "Incoterms
2000".
For example, on page 41 line 2, "FAS [named point of shipment] (Incoterms
2000)
2000)
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Page 41 , line 20, after the sentence ending "obtain a bill of lading"
Delete "The" and insert "Under both the FAS and FOB terms the"
Page
Page 58 FCA [named place] Incoterms 1990
Change “1990” to “2000” and delete the final two paragraphs (the
definitions of "transport terminal" and "container"). This flows from the
changes to (d) delivery of the goods – see below.
Page 60 line 16
Delete "The FCA term has been carefully drafted in an effort to avoid the
problem". Insert
“The FCA Incoterm is intended to deal with modern cargo handling
practices (such as containerisation). These modern practices have two major
consequences to which the FCA term attempts to respond. First, the point
of delivery is moved from the traditional FOB ship's rail point to an earlier
point in the transport chain as where the goods are delivered to the main
carrier at his cargo terminal or delivered by the seller to a vehicle sent by the
main carrier to collect the goods after they have been containerised at the
seller's premises. Second, there may be a problem”
Page 6060-61, delivery of goods
Delete all material after footnote 285 up to and including footnote 286.
Substitute:
Incoterms 2000 deals with these two consequences of modern loading
practices on the question of when delivery takes place by distinguishing
between two situations:
(1) Where the named place of delivery is at the seller's premises. In this
situation the delivery obligation is completed when the goods have
been loaded by the seller on to the means of transport provided by the
nominated carrier.
(2) In other cases the delivery obligations is complete when the seller
makes the goods available to the nominated carrier on the seller's
means of transport. The seller is not required to unload the goods.
If no specific point of delivery has been agreed within the named place, and if
there are several points available, the seller may select the point at the place of
delivery which best suits his purpose. Failing precise instructions from the
buyer the seller may deliver the goods for carriage in such a manner as the
transport mode and/or the quantity and/or the nature of the goods may
requires.
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Page 66 line 12
Delete the sentence beginning "If it is not intended”. Substitute:
Under Incoterms 2000 the buyer is responsible for clearing the goods on
importation and paying the related charges. This reflects the principle
that the party domiciled in the country of import is best placed to arrange
and pay for import clearance.
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