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Answered

This Assessment consists of FOUR questions. ALL questions must be answered. Questions 1 and 2 are worth 30 Marks each and Questions 3 and 4 are worth 20 Marks each for a TOTAL of 100 Marks.

Fact Pattern for Questions 1 and 2

Small Engine Parts, Inc. (SEP) is a company organized pursuant to the incorporation laws of the State of Delaware, USA, with a principal place of business in Seattle, Washington, USA. SEP specializes in the manufacture of small engine parts used in a variety of gasoline combustion engines. The Chief Executive Officer (CEO) of SEP is a Canadian citizen. 

SEP is the parent company of Small Engine Parts Exporting, Ltd. (SEPE), a wholly-owned subsidiary company organized pursuant to the incorporation laws of the State of New South Wales, Australia, with a principal place of business in Sydney, New South Wales, Australia. SEPE is the world-wide marketing and exporting arm of SEP. The Chief Executive Officer (CEO) of SEPE is the same person who is the CEO of SEP.

Gasoline Combustion Engines, Inc. (GCE) is also a company organized pursuant to the incorporation laws of the State of Delaware, USA, with a principal place of business in Portland, Oregon, USA. GCE specializes in the manufacture of gasoline combustion engines and sources small engine parts world-wide used in the manufacture of the gasoline engines it produces. The Chief Executive Officer (CEO) of GCE is an Irish citizen.

GCE is the parent company of Gasoline Combustion Engines Importing, Ltd. (GCEI), a wholly-owned subsidiary company organized pursuant to the incorporation laws of England, UK, with a principal place of business in London, England, UK. GCEI is the world-wide purchasing and importing arm of GCE. The Chief Executive Officer (CEO) of GCEI is the same person who is the CEO of GCE.

GCE is in the middle of fulfilling a large supply order for gasoline combustion engines for an airplane manufacturing company in Seattle, Washington, USA. However, GCE is near to exhausting its on-hand supply of small engine parts required to complete the supply order of engines. GCE needs to source a supply of small engine parts rather quickly so as not to breach its supply order with the airplane manufacturing company.

The CEO of GCE and GCEI and the CEO of SEP and SEPE meet at a trade show in San Paulo, Brazil. The CEO of GCE and GCEI makes an offer to purchase a quantity of 1 million small engine parts to the CEO of SEP and SEPE on a GCEI Purchase Form at the trade show. The Purchase Form is on GCEI letterhead with its London, England, UK postal address, telephone number, email account, and fax number clearly shown on it. The Purchase Form states: “subject to the standard terms and conditions of CGEI.” However, there is noting more stated on the Purchase Form other than the number of small engine parts that will be purchased (1 million), the unit price per engine part (US$10.00), and the total sales price of the engine parts (US$ 10 million). The CEO of GCE and GCEI signed the Purchase Form, personally handed the original of it to the CEO of SEP and SEPE, and faxed a copy of the original of it to his personal assistant at the principal place of business of GCEI in London, England, UK.

The CEO of SEP and SEPE then responds with an acceptance to sell a quantity of 1 million small engine parts to the CEO of GCE and GCEI on a SEPE Supply Form. The Supply Form is on SEPE letterhead with its Sidney, New South Wales, Australia postal address, telephone number, email account, and fax number clearly shown. The Supply Form states: “subject to the standard terms and conditions of SEPE.” However, there is nothing more stated on the Supply Form other than the same number of small engine parts that will be sold (1 million), the unit price per each individual engine part (US$ 10.00), and the total sales price of the engine parts (US$ 10 million). The CEO of SEP and SEPE signed the Supply Form, personally handed the original of it to the CEO of GCE and GCEI, and scanned and emailed a copy of it to his personal assistant at the principal place of business of GCEI in Sydney, New South Wales, Australia.

The standard terms and conditions of both GCEI and SEPE provide that all sales contracts are subject to the Buyer first obtaining Letter of Credit financing and then delivery of the goods shall be by FOB INCOTERMS. The standard terms and conditions of GCEI stipulate that all goods are to be shipped to the Port of Dover, England, UK; whereas the standard terms and conditions of SEPE stipulate that all goods are to be shipped from the Port of Sydney, New South Wales, Australia. The standard terms and conditions of both GCEI and SEPE are silent with respect to choice of law and jurisdiction.

After the trade show in San Paulo, Brazil has concluded, the CEO of GCE and GCEI flies to London, England, UK and the CEO of SEP and SEPE flies to Sydney, New South Wales, Australia. The personal assistant of the CEO of GCEI at his direction sends an email to the personal assistant of the CEO of SEPE in Sydney, New South Wales, Australia to load the goods on board the SS Trans-World Shipper in Sydney Harbour on August 1, 2014. 

On August 1, 2014 SEPE loads the engine parts on board the SS Trans-World Shipper. A Bill of Lading was not demanded from the Master of the Ship, since GCEI had no intention of selling the goods to a third party purchaser for value while the goods were in transit. The Issuing Bank in the Letter of Credit transaction found no discrepancy in the international sales transaction documents presented to it without a Bill of Lading, since there was none, and, therefore, the Letter of Credit was approved.  The Confirming Bank paid SEPE the sales price of the goods, the Issuing Bank paid the Confirming Bank the sales price of the goods, and GCEI paid the Issuing Bank the sales price of the goods. The SS Trans-World Shipper was supposed to take no more than 50 days to arrive at the Port of Dover, England, UK, as time was of the essence. On September 19, 2014 the ship had not yet arrived in Dover. In fact, the SS Trans-World Shipper did not arrive in Dover until September 29, 2014, some 10 days after its expected date of arrival.

The SS Trans-World Shipper encountered a typhoon off the southwest tip of South America in the Pacific Ocean and also a hurricane off the southeast tip of South America in the Atlantic Ocean on its voyage from Sydney to Dover. The ship was severely buffeted by high winds and rain which damaged the ship’s radar equipment while rounding Cape Horn, and the stormy weather caused the delay in the voyage.

GCE ran out of its on-hand supply of engine parts as GCEI had expected the engine parts purchased from SEPE to have arrived in Dover 10 days before they actually did arrive. Consequently, GCE then breached its supply contract with the airplane manufacturer in Seattle, Washington, USA, and the airplane manufacturer subsequently brought a law suit against GCE.

GCEI inspected the goods when they finally arrived in Dover. GCEI personnel discovered that 25 percent of the goods did not function at all due to a manufacturing defect—a latent defect—which made those engine parts useless, and that an additional 25 percent of the goods were waterlogged—a patent defect—which made those engine parts useless, too. Thus 50 percent of the engine parts purchased by GCEI were defective and therefore useless when the goods were inspected by GCEI upon arrival in Dover.

You are employed in your home country as an associate lawyer by a law firm specializing in international trade law. The CEO of GCE and GCEI makes an appointment to consult one of the senior partners in your law firm about the legal positon of GCEI in respect of the 50 percent of engine parts which are useless. The senior partner comes to you and asks you to conduct legal research for him before he meets with the CEO, and the senior partner asks you to research two specific questions.

Question 1 [30 Marks]

What remedies, if any, are available to GCEI in respect of the 25 percent of the engine parts that were useless due to the manufacturing defect?                                            [30 Marks]

Question 2 [30 Marks]

What remedies, if any, are available to GCEI in respect of the 25 percent of the engine parts that were useless due to being waterlogged?                             [30 Marks]

Your legal research for the senior partner should take the form of a fully reference essay.

Question 3 [20 Marks]

Refer to the facts in Question 1 and assume: (1) that a Bill of Lading was issued by the Master of the Ship of the SS Trans-World Shipper, because the ship carried the goods of more than one shipper; (2) time was not of the essence; and (3) the United Kingdom and Australia have both incorporated the Hague Visby Rules into their respective COGSAs. Would your answer to Question 1 differ? (Students may refer to the following hyperlink for the SDR Exchange RateBritish-Asian Road Hauliers Ltd. (Road Hauliers) is a company that transports goods by road internationally. Southeast Asian Fruit Growers Association (Fruit Growers) is a consortium of fruit growers in the Indo-China region from whom British grocery chains purchase fresh fruits.

On September 1, 2014 Road Hauliers was engaged by Fruit Growers to transport 10,000 kilograms of fruit from Bangkok, Thailand to London, England. Road Hauliers transported the fruit by road vehicle from Bangkok to Beijing, China. At Beijing the road vehicle was driven onto a cargo airplane which flew from Beijing, China to Paris, France. At Paris the read vehicle was driven off the cargo airplane and by road to Calais, France. At Calais the road vehicle was driven onto a cargo ship which sailed from Calais to Dover, England. At Dover the road vehicle was driven off the cargo ship and by road to London, England, the final destination of the fruit. There was no delay in the transportation of the fruit by Road Hauliers. It was entirely accomplished by means of roll-on, roll-off haulage. The actual value of the fruit was not declared by Fruit Growers; however the currency of both the international sale of goods contract and the contract of affreightment were expressed in British Pound Sterling (UK£). 

Assume the following facts: (1) China and France have both ratified the Montreal Convention; (2) France and the UK have both adopted the Hague Visby Rules in their respective COGSAs; and (3) the UK has adopted the CMR Convention in its national legislation.

Further assume that when the fruit arrived in London that 25% of it had spoiled and could not be used for human consumption.

What remedies, if any, do the British grocery chains have and against whom if:

(a) The fruit was spoiled from Bangkok to Beijing? [4 Marks]

(b) The fruit was spoiled from Beijing to Paris? [4 Marks]

(c) The fruit was spoiled from Paris to Calais? [4 Marks]

(d) The fruit was spoiled from Calais to Dover? [4 Marks]

(e) The fruit was spoiled from Dover to London? [4 Marks]

 

Law of International Trade

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