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BFA603 Understanding on Purchase contract Law Assessment Task 4 Answer

BFA603 International Trade Regulation and Practice

Assessment task 4 – case study no 2.

Read the sample purchase contract below and answer the following questions. You will see that many questions could be answered in a few words. However, each question asks you also to explain why you have reached your particular answer. This means that in addition to your answer you will need to support it by making reference to particular regulatory provisions and possibly illustrative cases.

Your answer should be in the form of a report, using a separate paragraph for your answer to each question and where appropriate using dot points. This is not an essay, but a report designed to inform the reader (if you wish it could be the buyer or the seller that you are informing) who is intending to enter into the contract.

Word count – 750 – 1000 words. References are not counted. 10% over required length is permitted. There is no specific allocation of words to any question – it is for you to judge. 

  1. Are the ICC Incoterms 2010 terms incorporated into this contract? If so who is responsible to arrange carriage and insurance for the goods? Explain why. What would be your preference?
  2. The law of which jurisdiction applies to this contract? Explain why.
  3. If the contract did not contain a choice of law clause, it is most likely that the law of which jurisdiction would apply to this contract? Explain why.
  4. Could the UN Convention for the International Sale of Goods (CISG) signed at Vienna apply to this contract? Explain why.
  5. Which party, the seller or the buyer, is clause 5 of this contract designed to protect? Explain why.
  6. Which party’s interests, the buyer’s or the seller’s, are protected by clauses 6, 7 and 8 of this contract? How would these clauses assist the relevant party? Explain why.
  7. Which party do you think drafted this contract? Briefly explain.
  8. If a dispute arises between the parties to this contract, how and where should that dispute be resolved? Explain why.


PURCHASE AGREEMENT

The company named below as the Seller (“the Seller”) hereby sells to Choc-oholics Anonymous of China (CAC), of 456 Kuai Le Road, Beijing, PRC (hereafter, “the Buyer”) the goods described below (“the Goods”) upon and subject to the terms, conditions and specifications set out below: 

Special Conditions

The Seller:Gippsland Fine Milk Chocolates

123 Milky Way

Dandenong, Victoria 

Quantity:14,400 (Fourteen Thousand four hundred) x 75gram bars = 120 boxes of 120 bars each. 

Description (quality, grade, packing etc. of goods):

75 gram bars of chocolate with minimum non-fat milk content of 20% each, and minimum pure cocoa powder of 6% each.  Each bar individually wrapped in foil and packed in cardboard presentation boxes of 120 bars each.  

Price:$48 per box 

Terms:30 days

Payment Currency:United States Dollars

Shipment/ Delivery instructionsFCA Melbourne (Incoterms) on or before 31st September 2018

Payment:Letter of Credit payable on presentation of Seller’s term draft drawn on the issuing bank and advised by National Australia Bank, 360 Collins Street, Melbourne. 

Insurance:To be advised. 

Carrier:To be advised.

Other Special Conditions:Seller’s bill of lading to indicate carriage of goods not above 6 degrees centigrade.  


General Conditions


  1. This agreement shall be interpreted in accordance with the International Rules for Uniform Interpretation of Commercial Terms in use at the time of this agreement. 
  2. The law of Beijing Municipality and the People’s Republic of China is the proper law applicable to this agreement.  
  3. To the extent that the Special Conditions of this agreement are in conflict with or alter or modify these General Conditions, these General Conditions shall be void and have no legal effect. 
  4. The terms and conditions of this agreement may only be altered by a memorandum in writing signed by the Seller and the Buyer. 
  5. Goods which are defective or of inferior quality or condition at the time of delivery to those specified in this agreement shall be deemed not to have been delivered to the Buyer.  If 10% or more of any shipment of goods is found upon delivery not to comply with the specifications in this agreement then such shipment shall be deemed not to have been delivered to the Buyer.  The Seller shall at its expense remove any such goods and immediately replace them with goods which comply with the specifications in this contract.  
  6. The Seller will deliver the Goods strictly in accordance with the shipment instructions unless otherwise authorized by the Buyer in writing.  The Seller will be deemed not to have delivered the goods if the shipment/ delivery instructions are not strictly complied with.  
  7. The Buyer or its servants or agents shall have the right to inspect the Goods at the premises of the Manufacturer of the Goods and take samples at any stage prior to the delivery of the Goods but unless a sample of the Goods is found not to comply with the specifications of this contract, the Buyer shall not be entitled to sample more than 1% of any shipment of the Goods.  
  8. In addition to any other warranties implied by law, the Seller warrants that the condition specification and description of the goods will comply with all applicable regulations conditions and restrictions applicable to the export and import of the Goods in the country of origin and the country in which the goods are to be delivered. 
  9. Any dispute concerning the interpretation of this agreement or any supporting or relating documentation or in any way affecting the transaction between the Seller and the Buyer shall be submitted in accordance with and subject to the Rules for the Conduct of Commercial Arbitrations of the Chinese International Economic and Trade Arbitration Commission in Beijing, PRC. 
  10. The Seller hereby indemnifies the Buyer against any loss or damage suffered by the Buyer as a direct or indirect result of any claims by third parties against the Buyer relating to any failure by the Seller to deliver goods in accordance with the terms and conditions of this agreement.  
  11. The Buyer intends to sell and export the Goods.   The Seller will provide the Buyer with any information assistance and documentation necessary to enable the Goods to be exported.  
  12. The failure of the Seller to deliver the Goods and comply with all the other terms and conditions of this agreement shall entitle the Buyer to treat this agreement as repudiated by the Seller and to repudiate it accordingly, but no such repudiation by the Buyer shall affect any of the legal rights of the Buyer to recover damages or costs from the Seller for any breaches of the terms and conditions of this agreement by the Seller.  

Answer

Purchase contract Law

Introduction 

This report reveals the key understanding of the purchase agreement contract and its related terms which helps the party to the contract to understand and performance of the duties. However, a valid purchase agreement is based on several terms which are described in this report.  

ICC Incoterms 2010

ICC Incoterms 2010 had been incorporated in this contract. According to these terms, the Chocoholics Anonymous of China (CAC), of 456 Kuai Le Road, Beijing, PRC (buyer) is responsible for the carriage and insurance of goods, once goods are delivered alongside the ship. It is because as per the rules of ICC Incoterms 2010 it is given that Fee Alongside Ship, Free On Board, Cost and Freight, Cost, Insurance and Freight are all risks transfer to the buyer once goods had been delivered alongside the ship. These are certain risks is evolved while in the transportation of goods and therefore it becomes necessary that who will bear the cost and therefore it works as a contract between the seller and buyer. 

Law

 The law of Beijing Municipality and the People's Republic of China is applied in this contract. In the laws of China, there is no systemic civil law jurisdiction as of Germany. It follows all the administrative rules and regulations. The international trade norms have been made in which the tariff duty has been highly reduced and various steps had been taken to prevent the buyer from the frauds of international trade.  

International law

The International Rules for Uniform Interpretation of Commercial Terms shall be applied to the contract. These are the laws that have been used for cross border transactions. There is often conflicts arise in the domestic contracts for a number of reasons. The laws had been made by various independent experts from all over the word major legal systems and from the geographical political areas of the World. It has the approval of the Unification of Private Law (UNIDROIT). 

UN convention on sale of Goods

It is the treaty for the uniform international sales law and it has been signed by the 91 states that include the USA and China. It allowed the exporters to avoid the choice of law issues. However, in this contract, there is a choice of law but in this contract, the seller is of the USA and the buyer is of China and therefore it can be said that this treaty has been applied on contract. It is the most successful and legislative document.  

Clause 5 

Clause 5 of the contract has been safeguarding the buyer. If any defective goods been delivered to the buyer than it will not be deemed as delivered.  In the case of Wallis v. Pratt, 1910 2 K.B.1012 the court ruled that if any obligation not performed by the seller for the buyer than it will be deemed as the failure on the part of the seller. The seller will be liable and not the buyer. Therefore it supports clause 5 of the contract that protects the buyer (Chaney, 2018). 

Buyer Rights

The interest of the buyer has been protected in this contract in clause 6, 7 and 8. These rights have been provided under the World Trade Organization where both USA and China are members.  These protection has been given in these clauses so that buyer cannot be cheated from the seller (Neary, 2016).  

Contract Drafted

In my thinking, the buyer has drafted this contract because the jurisdiction of China has been provided in the contract for any disputes and also most of the terms are in favor of Buyer. The contract clearly shows that all the terms have been made in favor of Buyer of the goods. In the contract, the rights have been given under clause 5,6, 7 and 8 where the buyer will not be responsible if there are defective goods been delivered and the seller have to deliver the goods according to the strict norms that show that mostly clauses are advising the seller and preventing the buyer. The law has also been applied to China and the dispute been resolved according to the nation of the buyer it shows that this contract favors the buyer (Jones, & Kierzkowski, 2018).

Dispute Resolution place

The dispute resolution is a very challenging process for the dispute of trade between two nations and therefore the one place is necessary for solving the disputes between the countries. The World Trade Organization is the most active and prominent institute for resolving the International disputes as both countries are the members of the World Trade Organization. These disputes are in accordance with the international trade laws will be resolved. The disputes resolved by the domestic laws are mostly criticized and therefore through the World Trade Organization the disputes can be resolved easily (Vernon, 2017).

Conclusion

After assessing all the details and case study of this purchase agreement contract, it could be inferred that parties to the contract are based on the several terms which need to be compiled by both parties who are entering into the purchase agreement. The enforcement of the purchase agreement is based on these terms only.  

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