Case Study: FT's Purchase of Non-GMO Soybeans from SL

Case Study

FT is a leading commodity trading company headquartered in Singapore.

 

SL is a company that processes, packs and sells soybeans from over 20 farms across Australia.

 

FT purchased 100 metric tons of “Australian grown non-GMO (non-Genetically Modified) soybeans” from SL. The purchase was made under a CIF contract, goods to be shipped to Hong Kong from Port Kembla, New South Wales, Australia, latest date of shipment, March 15, 2018.

 

Treat the additional facts in each part of the following questions independently from the other parts.

 

Additional facts

 

An irrevocable letter of credit was issued by Bank of Singapore and confirmed by Sunshine Bank in Sydney, Australia, for S$450,000 requiring the following documents:

 

. insurance certificate for S$450,000,
. clean bill of lading stating that the goods are in “apparent good order and condition”
. invoice for 100 metric tons of non-GMO soybeans at S$$450,000, and
. an inspection certificate from an Approved Certifier appointed by Australian Organic Limited certifying that the soybeans are non-GMO

 

The soybeans were loaded on board the ship in Port Kembla, New South Wales, Australia and a bill of lading was issued, shipment dated 15 March 2018. The bill of lading contained a notification in red stating that the carrier was not responsible for any bursting of bags because “packaging was insufficient, several bags torn and re-sewn”. The seller’s commercial invoice and the inspection certificate stated that the goods were “organic soybeans”.

 

These documents were presented by SL to Sunshine Bank. Sunshine Bank is unsure about making payment and has consulted Bank of Singapore.

 

Question 1

Should Sunshine Bank and Bank of Singapore make payment under the Letter of Credit? Please cite relevant provisions of the UCP (if any) to support your answer.

Additional facts

When the goods arrived in Hong Kong, the soybeans were tested by a laboratory in Hong Kong and found to be genetically modified soybeans. FT promptly emailed the laboratory results to SL, complaining of the non-conformity.

 

Question 2

i. Does the UN Convention on the International Sale of Goods (“CISG”) apply to FT’s contract with SL? Would your analysis change if the goods were electrical irons?

 

ii. If the CISG applies, advise FT of any breach by SL of its duties under the CISG for the non-conforming goods.

 

iii. Can FT can claim damages and avoid the contract under the CISG? Would your analysis change if:

 

(a) FT’s own employee had forgotten to send the soybeans for immediate testing in the laboratory, but only remembered to do so 2 months after their arrival in Hong Kong?

 

(b) The original batch of soybeans grown had been destroyed due to a freak weather occurrence in Australia, and SL had no choice but to replace them before delivery with genetically modified soybeans?

 

iv. What about specific performance? Of the two potential remedies (damages and specific performance), which in your opinion, is the better one for FT to seek?

 

Support your answers with relevant articles of the CISG (if any).

 

Additional facts

When the goods arrived in Hong Kong, the soybeans were tested by a laboratory in Hong Kong and found to be genetically modified soybeans. FT promptly emailed the laboratory results to SL, complaining of the non-conformity. FT has proceeded to sue SL in the High Court of Singapore for breach of contract. SL has responded by applying for a stay of the Singapore proceedings on the ground that Australia is the more appropriate forum, because site visits to farms in Australia will be required.

Question 3

Based on the specific facts above, discuss whether the Singapore High Court is likely to grant a stay of action in SL’s application on the basis that Singapore is a forum non-conveniens, and what legal principles, facts and considerations will be taken into account in making its decision.  

Additional facts

A secondee who just started an internship at FT wants to know whether FT has any claim under the terms of a CIF contract for non-conforming goods.

Question 4 

Explain to the secondee –

· the main characteristics of a CIF contract, and
· whether a CIF contract makes provision for buyer’s rights or remedies for non-conforming goods.