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BFA603 Legal Case Analysis: Chocolate Retailer in Launceston Assessment 1 Answer

BFA603 - International Trade Regulation and Practice - Semester 1, 2019

Assessment task 4 – Assignments

Assignment 1 

On 15 January a chocolate retailer in Launceston, Tasmania called Grays’ ordered 900 Swiss chocolate eggs (each in special packaging) from Specialist Goods, an importing company in Adelaide. The agreed price was A$15 per kilogram including the cost of delivery and insurance and the eggs were to be delivered to Grays’ in Launceston at least one week before Easter week commencing on 15 April. 

Grays’ paid a cash deposit of 50% of the price to Specialist Goods on 19 January and Specialist Goods then placed an order under Incoterms 2010 CIP Adelaide for the eggs (each in special packaging) with a Swiss chocolate manufacturer called Innisbruck which was well known for both the quality of its chocolate and the cuteness of its packaging. A 30% deposit was paid and delivery in Adelaide was to be before the end of March.

A special packaging item unique to the eggs supplied by Innisbruck was manufactured in Fuzhou China and Innisbruck, needing to ensure sufficient packaging to meet this order, had ordered FOB Shanghai an additional quantity of the packaging in January and expected to receive it early in February. However, it was delayed in delivery and Innisbruck decided to use as many of the packages as it had in stock and to split the order in two; the first shipment of 500 packaged eggs was despatched and reached Adelaide on 5 April and the second shipment of 400 was despatched as soon as the additional packaging arrived from China; it reached Adelaide on 13 April.    

Upon arrival of the first shipment in Adelaide the freight forwarder hired by Specialist Goods at first decided to store that shipment and consolidate it with the second shipment for delivery to Grays’ in Launceston. This would follow standard practice for Tasmanian deliveries.

Several days later when Specialist Goods became more concerned about the delay being encountered it instructed the freight forwarder to despatch all of the eggs to Launceston by air as soon as the second batch arrived. This was done but the eggs did not arrive until after Easter, on 19 April due to an industrial dispute at Melbourne where the eggs needed to be transhipped. Unfortunately one package of eggs was left on the tarmac at Melbourne airport and in the hot sun the eggs melted.

The outcome was that - 

  • The freight forwarder claimed 3 times the freight originally agreed upon; and 
  • Grays’ rejected the eggs due to the failure to deliver before Easter and the fact that one package of eggs had been damaged in transit; 
  • Grays’ seeks return of its deposit paid to Specialist Goods and damages for the loss of profit as a result of not being able to sell the eggs at the pre-Easter retail price of A$25 each. 

REQUIRED

You are asked to write a report which considers the position of each of the parties involved in this scenario and which makes a recommendation as to the remedies available to:

  1. Grays’ for the return of its deposit paid to Specialist Goods;
  2. Grays’ for damages for the loss of profit;
  3. The freight forwarder for its increased freight cost;
  4. Specialist Goods for the return of its deposit paid to Innisbruck.   

It will be noted that there is a number of factors involved in this scenario – you should first identify   the issues which need to be addressed in order to answer the above four questions. Then you should identify the rules, regulations, legislation and cases which might provide guidance in arriving at your recommendations. In your report you may criticise the actions of any of the various participants and advise how better practice might have avoided a problem. 

A full list of references must be given at the end of your report. 

Word count not to exceed 2000 words – reference lists and in text references will not be included in the word count.

Value: 10%

Answer

Legal case analysis


Introduction 

This report reflects the key understanding on the legal implication of the scenario of the chocolate retailer in Launceston called Tasmania In the scenario, a chocolate retailer in Launceston called Tasmania called GRAY’S on 15th of January order 900 Swiss chocolate eggs one week before the Easter week commencement on 15th April. He gave order to a company named SPECIALIST GOODS which is an importing company in Adelaide. GRAY’S on good faith and gave the order. It was agreed on a price of A $15 per kilogram including the cost of delivery and insurance. The delivery has to be made at least one week before commencement of Easter week commencing on 15 April. 50% of the payment was made to the SPECIALIST GOODS on 19th January and at the same time the order was placed under Incoterms 2010 CIP. Now the order was made by the SPECIALIST GOODS to the company names INNISBRUCK which is well known for its quality and cuteness of its packing. Deposit of 30% is made to INNISBRUCK and it was agreed that order will be delivered before the end of the March.  The special packing is done by the company itself named INNISBRUCK manufactured at Fuzhou in china, INNISBRUCK (Barnett, 2015).

 Case analysis 

In order to ensure meeting of the order, INNISBRUCK ordered FOB in Shanghai for the additional packing in order to meet out if there is any kind of insufficiency of the packing. Due to the delay in the delivery of the packing material, it results to use of materials had in stock to be used. It divided the stock into two parts. The first shipment of 500 packed eggs which was dispatched and reached Adelaide on 5th April. Whereas, the second shipment of 400 was dispatched as soon as additional packing arrived from China which reached Adelaide on 13 April. The freight forwarder hired by SPECIALIST GOODS. It was first decided to store the first shipment and consolidate it with the second shipment for the delivery so that complete delivery could be made to GRAY;’S in Launceston, who would follow the standard practice for Tasmanian deliveries. Now with the delay in the delivery on part of the freight, forwarder made specialist goods more concerned (Carbone, & Stone, 2015). It was instructed to the freight forwarder to dispatch all the eggs to Launceston by air as soon as the second batch of delivery arrives from the INNISBRUCK. The delivery was made by INNISBRUCK but they did not arrive until after Easter, on 19 April due to an industrial dispute at Melbourne where the eggs have to be transshipped. Now one of the packages of eggs was left on the tarmac of Melbourne airport and in the hot sun the eggs melted (Dwyer, 2018).

 GRAY’S demand for a deposit of 50 % to be returned from Specialist goods. 

As we know that GRAY’S deposited 50% of the amount for the order which was delivered after the date of delivery by the specialist goods afterward. It is now the obligation of the specialist goods to return back the money to the GRAY’S. GRAY’S gave him the work and now it’s the duty of specialist goods to complete the work so given in time.  The order reached after the deadline and was of no use to GRAY’S afterward. He suffered immense loss. He would have earned profit by selling those Easter eggs and now as he has nothing in hand. In fact, he has a loss of the amount of 50 % paid for the work which was not complete in time. The specialist goods should return the amount of 50% which was given by the GRAY’S itself. The specialist goods shall recover the amount of 30% of the amount given to the INNISBRUCKS for the delay in the delivery (Francis, Blumenstock, & Robinson, 2017). As the delivery was to be made at the end of the march, but the delivery made by them were in two parts. The first shipment of delivery of 500 packaged eggs was dispatched on 5 April whereas, the second shipment of 400 packaged eggs was dispatched on 13 April. Both were made after the deadline so instructed by specialist goods. As a consequence of which the order was rejected by the GRAY’S to whom delivery has to be made. So the specialist goods shall recover the 30% of the amount from INNISBRUCK whereas the left difference of the amount has to be paid by the specialist goods to the GRAY’S. Now for the damage of the one package of the eggs left on the tarmac at Melbourne airport which was damaged due to the hot sun shall be recovered from the insurance (Frąś,  Olsztyńska, & Scholz, 2018).

GRAY’S demands for the damages for the loss of profit.

 Due to the delay caused on part of the specialist goods, GRAY’S suffered a loss of profit which he would have attained by selling the Easter eggs of $ 25. For such loss suffered by GRAY’S, it demanded damages for the losses which shall only be recovered from specialist goods. It is the delay on the part of the specialist goods because of which the consequences have been suffered by the GRAY’S only. On calculating the loss suffered by GRAY’S for 900 parcels which are $ 9000 (Aberg, 2016). This should be paid to GRAY’S as the negligence in the work done by the specialist goods. Even though the delay was not part of specialist goods only. It was on the part INNISBRUCK also because of the delay on the part of their work the consequences have been suffered by GRAY’S. So for the delay, the GRAY’S can demand compensation form the specialist goods and the specialist goods shall claim damages for the delay caused by the INNISBRUCK (Hughes, & Middlebrook, 2015).

Demands made by freight forwarder because of increase in the freight cost. 

In concert with the increase in the freight charges. Whether the increase in the charge will be levied or not. Since the payment of the delivery is already been agreed and decided between GRAY’S and specialist goods. Now due to the industrial dispute in Melbourne caused the delay and increase in the freight charges and the burden of pay rises. With the increase in the charges, the question of payment of such charges came into question. The payment of such charges shall be made by the party who agreed with the price for the delivery which is specialist goods and not on the GRAY’S. So for the excessive charges, it's the liability of the specialist goods to pay it (Krajewska, & Kopfer, 2016).

 For the payment of the 30% deposit given to INNISBRUCK for the work which was transshipped to specialist goods, after the time period prescribed for the delivery.

 With the delay of delivery made on the part of INNISBRUCK the money deposited is claimed back by the specialist goods. Due to the delay the order so made was not accepted by the GRAY’S because they were of no use to him. The loss caused to delay in the delivery made specialist goods to pay compensation and the deposit money to be paid to GRAY’S but for the delay caused on the part of the INNISBRUCK was not acceptable because they are also equally liable for the delay.  If the INNISBRUCK had made the completion and delivery of the item on time. There would have not been any kind of such consequences. So the specialist goods are eligible receiving the deposit money of 30 % which was given to INNISBRUCK (Krajewska, et al. 2008).

Legal factors considered in the scenario.

International trade regulation and practices relating to import and export relating to the scenario.

Australia is considered as a country having strong trade treaties on an international level. The government has a number of policies which have been developed and resulted in the Australian business involved in international trade. Government has a major concern in order to protect the domestic industries from the effect of the international trade and other countries supplies competition in the Australian market (Kulkarni, Agrawal, Sharma, & Jain, 2015).  There has been agreed and the treaties between the different countries to regulate the activities in a systematic and healthy way. There are regulations which are imposed on the import and export of the commodities from the country and in the country. There are many aspects which determine the price for the export of the commodity.  These regulations differ from domestic and foreign dealings (Levinson, 2016).

INCOTREM 2010 CIP RULES.

The incoterm 2010 CIP rules were considered as the rules on the bases of with the freight charges are been determined. It states that Incoterm or cost will be given by who seller or the buyer. There are different segments where the payment shall be made by different parties like for packing, loading from warehouse, pre-carriage, main transportation shall be paid by the seller. Whereas handling at arrival, Import customs clearance, post-carriage, unloading into the warehouse shall be paid by the buyer (Murphy, & Daley, 2017).

In the case of MSC Mediterranean Shipping Company S.A. v Cottonex Anstalt [2016] EWCA Civ 789 in Australia. Their situation prevented the merchant from returning container because of the delay was such that it concluded in repudiation of the contract of carriage. The carrier cannot keep the contract alive and recover the damage unless there has been a legitimate reason on the basis of which it can stand in the court. This case was very useful for the guidance for the industries having such difficulties (Warren, et al. 2017).

In the case of Andrew v Australia and New Zealand Banking Group Ltd, the high court stated that penalty doctrine may apply where the payment is not triggered by the breach of contract in the circumstances. The high court stated the distinction between fee that it is a security in order to perform an obligation and a fee which is under pre-existing arrangement for the service (Zadbuke, et al. 2013). Therefore, it could be inferred that for the easy process, it was required to comply with the applicable laws and regulations in an effective manner by the parties to the contract.  

CONCLUSION

In my point of view, the action done by the GRAY’S was definitely in good faith but the outcome of the act was the loss suffered by him. GRAY’S should keep a check on the work allotted to the specialist goods so that there could not be any kind of delay. The specialist goods gave the work to INNISBRUCK for the completion of the Easter egg chocolate and with cute packing. They should have checked the status of the work and forced the work was given to be completed in time. There has been negligence on the part of everyone. It is the negligence of every party because of which everyone is facing consequences. If there is proper check between the parties as to their work so that there could not have been any kind of delay. The parties should have placed the order deadline 5 days before the day when the order is actually needed, but such fixing should be depending upon the type of product if it is perishable then the condition would be different. The insurance of the product shall be made at every part of the transaction by the parties because there can be any kind of circumstances which could lead to differential result than expected. So if the parties to the dealing deal with the order before the time and keep the check on the working status then there would not have been such kind of problem afterward. 

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