Video 25: International Sales and Lease Contracts
1. If the parties cannot resolve the problem in their discussions, what law appears
to control the contract? Does it matter if it was signed in Mexico or the U.S.? If
the contract does not specify any particular law, what law applies? What
language controls the contract?
Since Mexico and the U.S. have both signed the CISG, it would be the default
rule of law that would govern the contract since it did not specify the law of either
of those two nations. The CISG could be applied by either of the courts or
arbitrators in either country. Since the contract was originally written in Spanish,
even though it did not declare that Spanish was the official language of the
contract, it is likely to be the language that controls the contract since it was
signed in Mexico, in Spanish, and calls for arbitration in Spanish.
2. If the contract calls for “arbitration in Mexico,” but nothing more, is that a binding
term since it is so vague? Or, can Ray force the matter to court in the U.S.?
It is foolish to agree to such a vague term, but it is enforceable. Arbitration in
Mexico clearly does not mean going to court in the U.S. Presumably courts in
Mexico have standard methods to declare how arbitration is to be accomplished
if the parties cannot agree upon how arbitration itself will proceed in Mexico.
3. Is the substitution of one quantity for another likely to be acceptable under the
law?
That is likely to depend on common commercial practices. If the “standard
documents” that are “incorporated by reference,” which is a legitimate term to
use in a contract, in fact refer to standard procedures in the jalapeno or food
business about what is done in case of problems, or if Jalapenos Unlimited in
fact did what is common in the industry, then the substitution may be acceptable.
However, it is not clear why a phone call was not made at the time the problem
arose to discuss the problem, rather than act without communication. Parties are
expected to operate in good faith under the CISG, so if the action by Jalapenos is
not in accord with industry practice, then the buyer may be in a stronger position,
although it is not clear what damages they would have. Jalapenos are a common
item, so replacement should have been easy. Unless the buyer clearly stated to
Jalapenos that the peppers were to be used for filming and that it was highly
important that a specific quantity be delivered on the day in question or there
could be a lot of money lost due to the inability to shoot the commercial, the
damages that Jalapenos would be liable for in case of breach would likely be less
than the cost of going to arbitration over the matter.