International Legal Framework free essay sample

The buyer remains the legal shipper of the goods where he is the main contracting party in the contract of the carriage. Cases: J. Raymond Wilson amp; Co. Ltd v N. Scratchard Ltd. Held that if a party sells goods FOB, he has to put the goods on board and to pay the expense of doing so and delivery is made and the goods are the risk of the buyer when they are on board, the expense having been paid by the seller. Although the oldest form of FOB is where the buyer assumes the role of the shipper of the goods, FOB contracts have gone through developments where the terms have been varied. The parties may modify their obligations under an FOB contract, in particular the relationship between seller, buyer and carrier may be varied according to the nature of the arrangements made. Cases: N. V. Handel My. J. Smits Import-Export v English (London) Ltd. Sellers have agreed to do their best to secure shipping space for a cargo to be delivered FOB Rotterdam. However, the sellers failed to nominate a ship. The question was whether the contract was an FOB contract. It was held that a contract does not cease to be an FOB contract by virtue of the fact that the seller has agreed to secure the shipping space. . The FOB can be only used for sea or inland waterway transport. 5. The sellers fulfils its obligations to deliver when the goods have passed over the ship’s rail Classification of FOB: * First variation known as classic type, where the buyer nominated the ship and the seller put the goods on board for the account of the buyer, procuring a BOL in his own name or showin g the buyer as a consignor. The seller was a party to the contract of carriage. * Second variation are FOB with additional services whereby the seller may undertake additional uties which is seller nominates vessel, makes contract of carriage and arranging insurance cover for the cargo. The seller will place the goods on board ship and receive a BOL in his own name, which he will forward to the buyer in return of payment. Also the freight and insurance cost are to the buyer’s account. The seller may also charge a commission for the services he has tendered the buyer in obtaining the contract of carriage and the contract of insurance in this type of FOB contract. The buyer is likely to require these additional services of the seller when he is ill placed to obtain them in the seller’s country. * Third variation is FOB Ab Initio. This is where the seller puts the goods on board, takes a mate’s receipt and gives this to the buyer or his agent who then takes a BOL. In simple word, the buyer nominates vessel, obtaining the insurance premiums and makes a contract of carriage (through his agent) with the carrier. Cases : Pyrene amp; Co Ltd v Scindia Steam Navigation Co Ltd Pyrene sued Scindia in negligence for the cost of repairs ? 966. However, Scindia relied on a clause, incorporated into the carriage contract by the Hague Rules which limited the liability of the carrier to ? 200. The issue was then whether Pyrene could be bound by the contract to which they were not directly a party. Court held that although the buyer had made the contract, the court held that it must have been intended to bind and benefit the seller and had therefore been on his behalf. It was necessary to load the goods in order to fulfil the seller’s duty to deliver the goods on board and he must therefore be in a contractual relationship with the carrier based on the acts of delivering the tender to the rail and lifting in abroad. Cases: Ian Stach Ltd v Baker Bosley Ltd Court held that under a classic FOB contract, the buyer has the right and responsibility of selecting the port and of making the arrangements for shipping. Duties of Seller: 1. Supply conforming goods, packed appropriately or in accordance with contract and supply documents conforming conformity. Cases: Wimble v. Rosenburg amp; Sons According to this case, the seller must put on board ship goods which conform to the contract and must pay all charges in connection with the loading. The seller is not obliged to book shipping space in advance ; the buyer must nominate the ship to carry the goods and notify the seller of the nomination in time to allow the seller to deliver the goods on board. The cost of carriage are for buyer’s account. Cases: George Wills amp; Sons Ltd v Thomas Brown amp; Sons Herrings were sold FOB London to an Australian buyer. The packing was inadequate and the herrings deteriorated. The seller was held to be in breach of the implied term that the goods must be fit for any purpose made known, expressly or by implication to the seller. 2. Deliver goods to buyer by placing them on board the vessel which has been notified by buyer – at the port for delivery, at the time agreed and without delay inform the buyer of the fact. Cases: Peter Turnbull amp; Co Pty Ltd v Mundas Trading Co (Australasia) Pty Ltd. Good were sold FOB Sydney. The sellers then alleged they were unable to deliver at Sydney and asked to deliver at Melbourne. The buyers refused. The buyer sued the seller for non-delivery of goods at Sydney and the sellers were held liable. The duty of deliver at the agreed port of loading will not be affected by the fact that the seller has undertaken to arrange for the carriage of the goods. The port of loading is the essence of the contract and is considered as part of the description of goods. Similarly, the buyer cannot claim delivery elsewhere than the port agreed in the contract. . Place the goods on the vessel in the position and manner required 4. Pay any costs incidental to deliver of the goods. Means seller must pay any cost i. e handling, transferring the goods to the ship and loading. However, the seller is not responsible to pay the freight and cannot be forced to provide freight pre-paid of BOL from the carrier because the contract of carriage and the freight are made between the carrier and the buyer. 5. Obtain export license or other documents necessary for exportation of goods. Means: These duties will depend on a wide range of factors to determine who is responsible to obtain such documents. Relevant documentations for export which can be required are: certificates of origin, movement certificates, invoices of value and origin, pre-shipment inspection certification, standard shipping notes, dangerous goods note, certificate of health. Cases: Brandt amp; Co v Morris amp; Co Ltd. An order had been made by the British Government prohibiting export without license of a type of oil which was the subject matter of the parties FOB contract. Seller applied for license but failed to get until delivery period expired. Buyers sued for non-delivery. It was held that it was the buyer’s duty to obtain license as it was their duty to find an effective vessel which is legally capable of taking the good out of the country. Cases: AV Pound amp; Co v Hardy amp; Co Inc The court did not follow the decision in Brandt’s case. In this case, export license was required by Portuguese authorities for the delivery of turpentine. The license was not obtained. The sellers sued the buyers for breach of contract but the court held that the seller was responsible for obtaining the export license because the seller had a supplier in Portugal and they were in a better position to obtain the license. On the other hand, the seller may give any assistance which is requested by the buyer in obtaining documents facilitating export and give information to enable the goods to be insured. 6. Ship goods on time at port of shipment. Means: under an FOB sale, the buyer is responsible for making the arrangement for shipping the goods to their destination. Therefore, the seller is not under the duty to deliver the goods until he has received the shipment instruction from the buyer. The buyer is also under obligation to name the port of shipment. Cases: Harlow and Jones Ltd v Panex (Interntaional) Ltd The contract stipulated that the cargo was to be delivered during August/ September at the supplier’s option. The seller notified buyer that ? cargo was ready for an August shipment and therefore buyer should arrange for vessel. Buyer did not respond. On 1st August, buyer informed seller that he would be calling for loading between 12 and 23 August and the remainder at the end of August. On 3rd August, buyer inform seller he would not be able to load between 12 and 22 August since received no confirmation of his communication on the 1st August. On 11th August he wanted seller to give guarantee that he would be able to load the entire cargo between 24 and 27 August. Therefore, in whatever situation, once the seller is instructed by the buyer (whether the time will be fixed by the seller of the option was iven to the seller to fix the time of shipment) here, the seller is bound under obligation to ship the goods within the shipping period at the correct port of shipment. 7. Deliver goods on specified date at specified port of shipment. Means: the seller under obligation to deliver goods on the date specified at the port of shipment. If they didn’t, they’re fails to follow description in contract. The seller is deemed t o deliver the goods to the buyer when the goods pass the ship rail on the date of shipment. The time of the actual arrival is irrelevant. Cases: Bowes v Shand The contract called for a cargo of 600 tons of Madras rice to be shipped at Madras during March and April. The seller tendered a cargo most of which had been loaded during February. The court held that the buyer was entitled to reject the goods. In FOB contract the property in goods passes when the goods cross the ship’s rail. Once the goods have been crossed the ship’s rail, the seller is deemed to have delivered the goods to the buyer. 8. Notify the buyer of the shipment. Means: generally in a classic type of FOB contract, the time of shipment was supposed to be determined by the buyer instead of the seller. However, in certain circumstances the option will be given to the seller to fix the time of shipment. 9. Obtain the relevant shipping documents and forward them to the buyer Means: Under classic FOB, the seller will receive the BOL which must be clean, shipped bill. Other types of FOB – the buyer books shipping space in advance and the seller will receive mate’s receipt. Duties of Buyer: 1. Secure shipping space Means: The buyer in FOB contract has to nominate a ship which is suitable for loading. He has to determine a shipping period, place and also must give notice to the seller of readiness to the vessel. In other word, the buyer has to arrange for carriage of the goods. In classic FOB, the nominated ship must be an effective vessel; the vessel must be one which is ready and able to carry the goods in accordance with the contract of sale and also the vessel must be available to load the goods at the time and place fixed by the contract. Cases: J amp; J Cunningham Ltd v RA Munro and Co Ltd The contract was for the sale of bran, delivery FOB Rotterdam October shipment. The sellers had carried the goods to port by Mid-October but the buyers had not yet given any notice of readiness to load. They were only able to procure shipping space much later although it was still within shipment period. The bran had in the meantime deteriorated and sellers argued that the risk in the goods had shifted to buyers from the time the cargo was brought to Rotterdam. It was held that the 1st step to the performance of FOB contract is to be initiated by the buyers and not the sellers. The court found sellers liable for the goods as they had delivered the goods to port without 1st receiving notice of readiness from buyers. 2. Payment of the price for the contract Means : Section 31 of SOGA(1957) Malaysia, the buyer is under obligation to make payment. The payment of the price is determined by the contract. However, if no time stipulated in the contract, the buyer must pay the price in due as soon as the seller delivered the goods according to the contract. Under the FOB contract, there would be express provision as to manner of how and when payment is to be effected. In general, the buyer also must pay all cost to the goods, when the goods passed the ship’s rail. Payments included price of the goods, any cost due to failure to arrange of the contract, any cost incidental to importation of the goods, any cost incurred if the buyer need assistance from the seller. 3. Bear all the risk (loss/damage) to goods once they pass the ship’s rail 4. Obtain appropriate licenses and authorisations Means: for import of the goods and must comply with customs formalities whether in country of destination or country of transit.