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International Business TransactionsText: International Business Transactions, 6th Ed., Folsom, Gordon, Spanogle1)Transfer of technology v. Foreign direct investmenta)Transfer of technology- you find someone in Tropica who will make the stuff and you license them the technology.b)Foreign direct investmentyou go there and start a plant yourself and keep the technology secret.c)Problem: Some countries are known for using or confiscating technology without paying for it: does the country have copyright laws?d)With foreign direct investment, you dont have to worry about protecting it.2)Non-tariff barriers3)State trading organizationcommunist countries. Some of these dont let you take profits out of the country. you would want to invest in such a country because ofInvestment marketingsomeday it will pay off, change.4)World alliancesGATT, IMF, WTO,a)developed v. undeveloped nationsb)Countries cultures are important.5)Chapter 2: The Actorsa)Roles to nations play in international trade: as producers or purchasers; if so you want to ask whether they can claimsovereign immunity.b)Multinational corporation:i)does business with several foreign countries, orii)has shareholders in different countries, oriii)where it is incorporated.c)Labor issues: can you get workers, visas,whoselabor laws,whatlaws apply to the foreign nationals, how to fire them.d)Creeping expropriation: begins by a country imposing regulations on a corporation, it slowly you need more and more permits.6)Foreign law vs. international laws.a)International economic institutions.i)UN, has different economic commissions.ii)UN commission on international trade law(1)These writemodel laws, like the CISG, p. 197)Bretonwoods Conferenceafter WWII created the World Bank, GATT, WTO etc., to promote trade to countries would be less likely to go to war again.8)Documentary sales transaction, p. 48a)International transaction different from a domestic one?i)Number of parties.ii)Risks.(1)Different currencies.(a)Devaluation. You may not want the currency of country X, and it may devalue by the time it gets to you,(b)Removal from the country. Can you can take dollars out of the country.iii)Different Legal systems, lawscommon v. civil law; export laws. Does the particular buyer live in a country that has a boycott.iv)Intl law treaties. Are there treaties that will establish different legal.v)Will thesellerget paid?vi)Will thebuyergetting the quality and quantity of goods he ordered.b)Intl Laws:i)licensing requirements,ii)in US, instead of article 7 UCCiii)Federal rules applies(1)Pomerene Act(Federal Act onBill of Lading).(2)carrierof goods--COGSA, Carriage of Goods by Sea Act.iv)CISG, an intl treaty. If I do a transaction with a country that has signed onto the CISG, then theCISG applies, not the UCC. But we mightwantthe UCC to apply, and we can do that by putting it into the contract that the CISG doesnt apply.c)Responses to the risksChop the risks into smaller risks, to those who are in the best position to evaluate the risks.d)i)Special terms governed byINCOTERMS.(a)F.A.S,(b)C.I.F.,(c)F.O.B.,(d)non-negoiable Bill of Lading,(e)negotiable draft (or bill of exchange),(f)confirmed and irrevocable letter of credit.9)Problem 4.0 The basic documentary sale transaction Toys to Greece, p. 75a)factsi)Santa Claus company of Aurora, NY will sell toys to Alpha Company of Athens, Greece.b)Contracts: independent but interrelated.i)sale contract(1)between buyer and sellerii)letter of credit contract(1)betweenBuyersbank issuer and Seller (beneficiary)(a)buyer is applicant(b)Sellers Bank is confirming or advising bank;iii)Bill of Lading contract:(1)Between Seller (shipper) and carrierc)Sales Contractd)How established:(1)request for an offer:Buyer sends a request for offer, and letter from Alpha.(2)Offer made.Then Santa Claus sends the offer itself with the proforma invoice.(3)Acceptance. the purchase order is an acceptance (but this would be a rejection and counter offer, if they had changed the terms. There is a new term here delivery required prior to July 1, 2000, and a request for a response.)ii)Terms of the offer: Form 2, proforma invoice.(1)Payment terms: Confirmed irrevocable letter of credit confirmed by US bank and called forpayment against documentsin NY City in US funds.(2)F.O.B. East Aurora, NY (buyer has risk)(3)F.A.S. NY City (seller has risk) (Ill ship the stuff so itsfreealongside the ship)(4)C&F (cost and freight) (once on the ship,buyerhas the risk; on the dock side, seller has risk)(5)C.I.F. (Cost,insurance, andfreight)its payment against documents.(6)Payment against documentshe gets paid when he presents the documents, the documents are listened in the payment of credit.e)Letter of Credit Contract, FORM 4, p. 55i)Places the risk of default on the hands of the participant who can best evaluate the risk (Buyers Bank, because they can get a credit report, or have done business with Alpha in the past.)(1)Buyer is concerned about getting the right quantity and quality. How to deal with this?Inspection Certificate.ii)How established: Buyer goes to his bank and asks them to issue a letter of credit to Santa Claus. This is a contract between the Buyersbankand theSeller.(1)Bank promises to pay thesellerif he produces certain documents.(2)The Sellers bank confirms the letter of credit with the seller.iii)Form 4: p. 59:Confirmed and irrevocable. The seller wont be paid unless the seller produces these five documents:(1)negotiable Bill of Lading,(2)Insurance policy,(3)Packing list,(4)Commercial invoice,(5)Export Declaration.iv)Governed by the UCPUniform Customs and Practices. If this hadnt been there, the UCC probably would control.f)Bill of lading, (agreement between the shipper and thecarrier).i)Deliver the goods to the individual or entity bearing it (Deliver to the order of . . . . This makes it anegotiableinstrument.ii)This is between the buyers bank and sellers bank. The Buyers Bank is promising that if you handover thebill of lading, we will pay you. It wants to see the Bill of Lading made out To the Order of Greek bank. But we put our own name on it, because the Bill of Lading Controls the goods. I want to maintain control so Ill get paid. The letter of credit was confirmed, so the Seller just brings it to his own bank in NY. The sellers bank will pay for it because the Sellers Bank has a contract this Seller. My bank will buy the documents from me and they want the seller to signed the documents over to the NY Bank. Marine Midland Bank will then signed the documents over to Athens, in exchange for the funds. Then Athens bank is the only one who can control them. The Athens bank then sells them to Alpha, who then is the only one who can go to the dock and pick up the toys.g)Form 2, p. 53 Proforma, FORM 5.h)FORM 9. Dock Receipt--clean on board = no damage to the goods.i)COGSAinsures for up to $500 per package.1)PROBLEM 4.1, p. 75a)FACTS: Universal Pipe Inc., in Kansas sells insulation to Euro, Ltd. Offer and acceptance have different terms.(1)goods sold as is with all faults (see UCC 2-316).(2)Contract governed by the laws of Kansas.ii)Euro incurs $1m loss when insulation corrodes refinery pipes.b)Analyze breach of contracti)First: Conflict of laws(1)whose law governs interpretation of the contract?ii)Second: Contract formation/Battle of the forms(1)Substantive law question: How will contract be interpreted? will the law chosen govern it?c)Conflict of Laws Whose law governs?i)US law on conflicts (Kansas or Federal)(1)UCC 1-105, p. 993:(a)Parties chose---reasonable relation.(i)TEST: the law chosen must be that of a jx where a significant enough portion of the making or performance of the contract is to occur or occurs.Seeman v. Philadelphia.(b)Parties dont chose ---appropriate relation..(2)Restatement of Conflict of law. 188 p. 78-9 use the law of the state that has the mostsignificant relationto the transaction. (3)Problem: difficult to figure out.ii)German Law on Conflicts. p. 77-78. (1)E.E.C. Convention of the Law Applicable to Contractual Obligations.(a)freedom of choice. Art. 3(i)Mandatory lawscant escape. art.3(3) if we make a contract and the contract has everything to do with Germany, but we choose English law, we cant use Germany law to escape mandatory German law.(b)Default. Art 4(1): if no choice is made, apply the law of the country with which the contract ismostclosely connected. p. 1057, supplement.(i)TEST: characteristic performance. 4(2) presumption of closely related to the country conducting the characteristic performance:The act required of the contract(here, the shipping).d)Substantive Potential Jx--contract interpretationi)US(a)UCC 2-207, p. 81-84ii)German Substantive Law, p. 85-87(a)Ruster Article, p. 85-87iii)Treaty(1)CISG p. 91iv)United States(1)UCC 2-207--Between merchants, additional terms become part of the contract unless . . . they materially alter it.(a)Are these additional or different terms? If there is no choice of law designation, the CISG applies.(i)p. 29: CISG Art. 1 this law applies, unless under Art. 6 the parties opt out of it.(b)Different terms:(i)Choice of law: The statement that Kansas law applies.1.law of Kansas as to the contract is substantive law and it has to be material.(ii)disclaimer. comment 4: a disclaimer of warranty is a material altering.(iii)Arbitration.v)2-207 is very confusing, even White and Summers disagree, p. 81(1)gap-fillers, such as 2-314 (Implied Warranty of Merchantability). If they are different terms, they getknocked out. and you have to figure out which law will provide the gap fillers.(2)White says they both get knocked-out, even when thereisa contract. p. 82(3)What if we make the decision that both of these terms are part of the contract? Then Kansas law applies, which is UCC and CISG, federal law will trump state law.(4)How would you argue to include UCC: if I hadnt said anything the CISG, and I said Kansas law, and because you cited the UCC. In real life you need to specifically opt out of the CISG under article 6.2)B. German Substantive Law.a)Mirror image. If the acceptance isntexactlythe same as the offer, then its acounter offer.i)EX: A client calls and the goods are on the ship, and the German buyer wants to renege, why do you want the contract to be governed by the UCC? Because the German law is a mirror image rule. If German law applies, theres no contract, unless the buyerperforms, but as long as they are still in transit, buyer hasnt performed and he can renege.b)No Acceptance by silence. General rule is no. p. 86. Silence is generally not recognized as acceptance.i)Exception(1)prior business relationship.However, if youre dealing with someone with whom you have a prior business relationship, you are obligated to answer immediately, and silence will be deemed acceptance of the offer.(2)Good faith; Acceptance of the new offer by silence is assumed where food faith standards would have require explicit rejection. p. 853)CISG (Treaty law default law, art. 1)a)Material changecounter offer.Article 19, p. 32;i)No contract.if terms materially change the contract, then its a counter offer, and there is no contract. If no materially change, then acceptance. (UCC would justknock outthe different terms, but there would still be a contract)ii)Material: paragraph 3: terms relating to the price, payment, quality and quantity of the good, place and time of delivery,extent of one partys liabilityto the other, or thesettlement of disputesare considered to alter the terms of the offer materially.iii)But a german court held that such a modification wasnonmaterial,and there was therefore still a contract. p. 92. So we dont know how the CISG will be interpreted. A German court may interpret it narrowly (more like the UCC), while a French court may interpret it broadly.b)Defaultabsent choice of law.Filanto,p. 94i)Citing art 1(a) of the CISG, the court state that absent a choice of law provision, theCISG governs all contracts between partieswith places of business in different nations, so long as both nations are signatories to the CISG.c)Parties may opt out under Article 6.i)USA has made a reservation under art. 95, with respect to art. 1(b). We want to apply the UCC.ii)Germany: as to any country that has reserved rights under art. 95, we reserve the right to treat them reciprocally. Apply 1(b) with reciprocity.d)When would 1(b) apply? CISG will apply between contracting parties. But when theres a Contracting party (USA) and a non-Contracting party (Thailand), and they have a choice of forum clause which places them in a German court.e)The contract says apply Kansas law. You want CISG to apply. How could it come in under 1(b)?--CISG lawisKansas law because of the preemption law. So the German court should apply CISG, but theyre not going to because Germany has made a reservation which says that were not going to apply 1(b) to those who have made a reservation regarding 1(1)(b).f)p. 91: Germany holds the view that Parties to the Convention that have made a declaration under art. 95 of the Convention are not considered Contracting States within the meaning of subparagraph (1)(b) of art. 1 of the Convention. Accordingly, there is no obligation to apply [...] this provision when the rule of a private intl law leads to the application of the law of a party that had made a declaration to the effect that will not be bound by sub 1(1)(b) art. 1 of the Convention.4)UNIDROITa Restatement of International trade custom. use to supplement your contract terms. Why would you want toa)UNIDROIT Principles: If the parties have difficulty agreeing ... p. 97b)Battle of forms, p. 97i)custom made acceptance(including handwritten)-same as art 1 of the CISG.ii)Use ofPre-printed standard form(boiler plate) form of acceptance of either parties form forms agree or else they knockout.iii)Written confirmations:If a written confirmation of a contract previously made is sent by one party to the other, and additional or different term becomes part of the contract unless it materially alters the contract or the recipient of the confirmation objects to the term.c)Arbitrators often use UNIDROIT.d)Problem: theres no database to find all the UNIDROIT decisions.5)Filanto v. Chilewicha)Chilewich is buying shoes....contract with Russia includes an arbitration clause. Chilewich contracts with an Italian company, and says that all disputes have to be resolved in Russia. The first communication says arbitration, the second says no arbitration. There was no response from Filanto and Chilewich opened a letter of credit, which sounds like reliance. Then Filanto sends a letter excluding the Russian arbitration clause. Filanto sues in US District Court. Chilewich says you cant sue us in a US district Court.i)p. 95ii)R: What law applies?- CISG.iii)Silence as acceptance under CISG. Court focuses on 18(1) A statement made byor other conductof the offeree indicating assent to an offer is acceptance. Filanto says that because it was silent there was no acceptance. The court says you knew that Chilewich had opened a letter of credit in Filantos name.b)Moral: if your client needs a particular term, make sure that its in the contract before hand, because if you have to go into a foreign court. If the other party wont allow that term, tell your client to charge more.6)Problem 4.2 Commercial Terms, Bills of lading and insuranceBooks to Bath, p. 105a)Facts;Sam (Your client) is a book writer. Bill Bones (publisher in England) wants two dozen gross. Howard Hunt Terms: contract with Bones; FOB Savanna; contract governed by ICC INCOTERMS (1990). Contract with Hunt: CIF, Bath, United Kingdom; terms governed by ICC INCOTERMS (2000). CN: no letter of credit in this case, these are small sells, and people with whom Sam has dealt with before.b)difference betweeni)mandatory laws. (state laws binding on the parties , may not be set aside),(1)COGSA(2)Pomerene Act.ii)optional laws, eg.,(1)UCC(2)trade customs-INCOTERMSc)Trade termsi)FOB(1)English meaning of fob = the Americanfob vessel.(2)supply transactionseller needs to obtain export license.(3)Export transactionbuyer needs to obtain export license.ii)C&F/CIF(1)Must have a negotiable Bill of Lading,p. 109(2)basically FOB plus obligation for seller to arrange forcarriageandcarriage and insurance, respectively.(3)Two critical points(a)passing of the risk, like FOB - atport ofshipment.(ships rail)(b)costs of carriage and insurance, occurs atport ofdestination.iii)CIF-Sale of documents, p. 1101)Shipping documents: The seller has the obligation of tendering:i)bill of ladingii)insurance policyiii)invoice(1)shows the price, and a deduction of thefreightwhich the buyer pays before delivery at the port of discharge.2)CIF is a contract for the sale of goods to be performed by thedelivery of documents, at which time thea)buyer is bound to payfor the goods, even ifi)goods have already been lost. p. 111,C. Groom v. Barberii)Name not controlling. if a contract does not possess this sale of documents character, it will not be a CIF, even though the parties call it that.The Julian, p. 111.3)No right to inspection. youre buying documents in lieu of the goods, you cannot refuse to buy the documents just because you have not had the opportunity to inspect the goods.4)Loading of goods. If the goods are not being loaded in the tradition way that is, using a crane to take the goods over the ships rail, then you dont want to use either CIF or FOB.5)INCOTERMS(2000 ed.), p. 113 : separate from substantive law, but rules which the parties may choose.a)Free on Board meansb)Questions on 105:--FOBi)No, Sam has no duty to do this, INCOTERMS, p. 113, A3 (sellers has no obligation to contract carriage or insurance), the buyer is supposed to arrange for the transportation of the goods for an FOB.ii)If Sam arranges transportation, and wants to be sure that Bill pays--Make the Bill of Lading anegotiablebill, (its starting to look like a CIF)iii)No, seller has not responsibility to obtain insurance, only in a CIF.iv)In an FOB, seller doesnt need to buy any insurance. But you should go ahead and buy insurance. But COGSA already provides insurance. But there are lots of limitations on the insurance that COGSA provides. So you probably want to buy additional insurance. But if youre going to pay forcarriageandinsuranceits essentially a CIF.v)Can he put them all in one container and ship them separately? No, they are separate contracts and require separate documents.vi)Buyers have no right to inspect.vii)What kinds of FOB contracts require anegotiablebill of lading--all? UCC 2-319, p. 1006. Only one person will be able to pick up that one package.negotiable bill of ladingCIFto the order of

negotiable bill of lading, not necessaryFOBto the bearer of

viii)must relate only to the goods which the buyer has agreed to buyp. 111: Where the bill of lading is tendered to the buyer, it must relate only to the goods which the buyer has agreed to buy; if it covers other goods as well, the buyer may refuse the tender.(1)To enable the buyer to deal with the goods while they are afloat the bill of lading must be one that covers only the quantity of goods called for by the contract. The buyer is not required to accept his part of the goods without a bill of lading because the latter covers a larger quantity , not is he required to accept a bill of lading for the whole quantity under a stipulation to hold the excess for the owner.1008, UCC, 2-320, comnt 4:c)Right to inspect.i)YesFOBplant.ii)No(1)C.I.F.p. 1008: comnt 1, the buyer has no right to inspection prior to payment or acceptance of documents.(2)FOB vessel, FAS--If itspayment against documents, whether fob or otherwise. see UCC 2-319(4).(3)The leading case concerning buyers (lack of a) right of inspection under CIF contract (or any other contract which requires payment against documents) isBiddell Bros. v. Clemens Horst. See, p. 112;iii)Not directly covered under INCOTERMS, but.(1)A10FOB vessel--thesellermust render the buyer every assistance.iv)Since both buyers have declared INCOTERMS, buyer would have the right to inspect.v)If they specified the UCC, then buyer wouldnt have the right to inspect.d)CIFis negotiable, made to the order ofi)The Carrier stamps it On Board Sams Load, Weight & Count and Contents Unknown Itsnot a clean bill of lading. Sam is worried that its a foul or unclean bill of lading. But does this stamp make it an a foul Bill of lading? no.(1)p. 126, note 10: The following clauses do not convert a clean into an unclean bill of lading:e)Mandatory laws. Can theshipperdisclaim responsibility for shipping the wrong goods? Look to the mandatory laws? COGSA. Or in international law: the Hague Convention (1924), which were an attempt to codify an uniform international aw of carriers and shippers. This was amended in the Hague/Visby (1968), now the Hamburg convention.i)Carriers liability. It is now less advantageous to the carrier: Now they say that they cannot have exclusion law, but liability is limited to $500 per package.ii)Declaring a higher valueobvious opportunity. What if Im the shipper and I want more than $500 of coverage? You declare a higher value on the Bill of Lading. (p. 64). The carrier must give the shipper anobvious opportunityto declare a higher value. But then the carrier can charge the shipper a little more.iii)Paramount clausep. 127. You cant contract out of the Hague Rules. Both the Hague and Hague/Visby Rules contain paramount clauses.iv)COGSA is the American version of the Hague Rules.(1)applies to both import and export. p. 128f)Three Roles of the Bill of Lading,p. 129,i)contract for carriageii)receipt of goodsiii)document of titleg)p. 121: Hypo: if you send your agent to the dock to deliver the goods and he returns with ai)seaway bill--not a title to the goods).ii)Multi-modal transport bill of lading-- not a negotiable, (banks dont want to make these negotiable because theres so many different carriers involved).iii)Electronic bills of ladingnon-negotiable: You give the goods to the carrier and he will create an electronic PIN. Then whoever shows up at the port with the PIN. A new Pin would have to be issued for each party. This method has not been all very successful.h)The Transnational law of intl commercial transaction, p. 130i)The various systems of national law essentially consist of two types of the legal rules. Some of them are mandatory in character, others are optional. The mandatory rules have to be accepted by the persons affected by them, whether they like them or not. The optional rules may be accepted by the parties or not, or they may be modified for their convenience.i)Carriers duty to inspect.Berisford, p. 131i)Facts; The carrier locked the containers in Brazil, and when they arrived in the USA, some of them were empty.j)COGSA requires thecarriersto conduct a reasonable inspection.k)p. 133,role of the Bill of lading: It is sole integral to international business transactions, that errors are not excused.i)acknowledgement by the carrier of receipt of the goodsii)a contract for carriageiii)a document of title it controls the possession of the goods themselves.l)Where does the carrier provide a description of the goods for which they are responsible.? On the Bill of lading.m)What if the shipper says its books, but sends garbage. Is thecarrierresponsible for a mis-description? The carrier is responsible to provide areasonable inspectionof the goods. Carriers are allowed to stamp this on the bill of lading: Desire Under the Thornbush, shippers count, weight and.n)It was unreasonable for them to say that they loaded an hundred ingots when they only shipped 30 and, and the containers weigh 78k lbs less than it was supposed to.o)Ct: yes,Carrier is contractually limited to $500 per container if you perform the contract, but if you breach the contract, then COGSA doesnt apply. So did it breach the contract, and is there a liability for mis-description?i)Even if opening of the containers posed difficulties, at the very least the carrier owed a duty toverify the weightof the containers at shipside before they were placed aboard its ship and before it stated that they contained 100 bundles of tin ingots weighing the equivalent of 111,656 lbs., which would have been 80k lbs. in excess of the weight the containers actually loaded.p)Generally, the carrier will be relieved of liability if he stamps on it Shippers Load, Weight and Count. unless a reasonable inspection . . . if it is obviously not what it says to be, then it wont be a reasonable inspection.q)Tetley, p. 129 the carrier must inspect the goods upon receiving them. The inspection is nevertheless only areasonable inspection.i)This is important so he can give aclean bill of lading. If it weighs 78k lbs less then when you received it, it is probably not reaonsable.r)POLICY REASON: to protect the integrity of the bill of lading.s)Julia case, p. 111i)CN: even if the good have been destroyed, I can turn the documents over to you have, and you have to pay. The parties called it a c.i.f. contract but it wasnt, it was just a contract to purchase. Rye was sent to Belgium, the ship gets captured by the Nazis and goods dont get delivered. Argentina found that it wasnt a c.i.f. Ex ship does not require payment against documents.Intlstate to stateWithin State

COGSA-federalHarter ActUCC

1)The problem with FOB is knowing whether it should be defined by UCC, INCOTERMS, or English law.a)Under UCCi)Does FOB provide for a negotiable Bill of lading? yes, unless FOB vessel. Does itrequirean inspection of goods? If theres a negotiable Bill of Lading..b)INCOTERMS(1)Does FOB provide for a negotiable bill of lading? no.(2)Buyer pays cost of Inspection? yes.c)Payment against documents precludes inspection.1)PROBLEM 4.3 Wars and other Frustrations: Oil from Araby, p. 136a)Section 1: the Settingi)Gulf Refinery(Araby) ----Jean Val Jean-----Javert(France)1)Contract w/ Gulf Refinaryi)FOB Refinery in Arabyii)Forcemajeure2)Contract with Constant Carrier:i)Liberties clause: in event of great risk, Carrier may require shipper to take the goods at the port of shipment, or he make unload the cargo somewhere. He neednt give notice of this, and such discharge will constitute complete delivery and performance of the goods.3)Contract with Javert.i)c.i.f. Marseilles, Franceii)escalator clauseiii)Excuse clause4)Events:i)Fire in Araby refinery causing delaysii)War between Iran-Iraqb)CN: Either the law of US or Araby? Are they both members of the CISG. On an exam you want to say, you didnt tell me if they are members of the CISG, but if they are then CISG applies, if they are not then apply the UCC. Do a choice of law for each contract.c)Whose law applies in the contract between Jean and Araby?i)Issue: is there an excuse to get us out of the contract?ii)France:Use Contractual obligations (EEC):if the contract is entered into in the course of the partys trade or profession ... [then apply the law of] where theperformance is to be effected. p. 1057, art. (4)(2) (absent a choice of law, the law of the country which is most closely connect, which, when the contract is entered into in the course of that partys profession, where performance is to be effected.) and the performance would be effected in France, so French law applies.[even though neither party is French??]iii)Also, the contracts themselves should apply, thus the force majeure, thus excuse. If the force majeure clauses dont apply then . . .iv)What could have been done better for our client regarding the force majeure clauses. Provide some kind of remedy?v)it looks like Araby is excused, if it wasbeyond their control. But what if there were no force majeure clause? Can we make Araby pay damages?vi)What substantive law applies? Araby is not a party to the CISG, so you cant use that. Look at all the possible laws, which one is best for your client? You want something that says that Araby cant get out unless its absolutely impossible. Which is the harshest law? -- French.vii)The French law.(1)p. 161, it has to beabsolutely impossible.(2)According to the doctrine of force majeure,prerequisites for discharge are:(a) unforeseeability of a fortuitous event,(b)absolute impossibilityof performance and not mere onerousness, and(c) no fault on the obligors part.viii)Which conflicts of law will we apply?: Araby may be a former French colony, so they may follow French law. Where suing? England, Araby?d)All of the laws require unforeseeability.i)The following general characteristics can be traced in all national jx:(1)(a) occurrence of an eventafterthe making of contract;(2)(b) unforeseeable of the event;(3)(c) alteration of the contract in an intolerable degree, and(4)(d)no fault on the obligors part. p. 163:(i)CN: even if its completely impossible to perform, they may not be excused because it may betheir own fault.ii)Was it Araby Oil refinerys fault? Did they have fire trucks handy? was someone smoking?iii)Is it unforeseeable?(1)The more sophisticated and widespread international commerce becomes, the more difficult it is to say that a party could not reasonably have been expected to take an impediment into account. This is reflected in the paucity of successful cases under 2-615 of the UCC (Impracticality . .. a contingency the nonoccurrence of was a basic assumption ). p. 153(2)As commerce grows more sophisticated and multinational it becomes more vulnerable to disruption from embargoes, wars, revolutions, and terrorism in countries producing natural resources. p. 156e)Force Majeure clauses are options. We can select the CISG. But force majeure clause could amend the force majeure clause and the same things with the UCC.f)Substantive law:g)English:Radical difference(1)The Eugenia, p. 141(a)The ship was stuck in the canal. Once they got out the original contract called for them to travel through the Suez, but it was blocked so they had to go around Africa. The owners say they had to pay more money. But the charterers say that it should be excused.(2)TEST: a situation must arise which renders performance of the contract a thingradically differentfrom that which was undertaken by the contract.(3)R: The fact that it has becomemore onerousormore expensivefor one party than he though is not sufficient to bring about a frustration.(4)By the time you have to look at is the entire trip, and theres not that much of a difference.h)There are things which distinguish this case and make it radically different?i)p. 156:j)p. 145: If the goods were subject to spoilage (here is was iron ore).5)Which Contract would the CISG (Treaty) apply to?a)With Javert-France is a party to the CISG.i)EXCUSE: article 79:impediment beyond his control. The CISG applies to any party in any situation. Whereas theb)Elastic words, p. 151 (Nicolas)The court decides if theres an impediment. But the problem with elastic words, It allows for nonconformity in the interpretation of law, between the civil and common law system. Courts in these different systems will start interpreting the terms in this convention and in doing so they will rely on their own precedent. The Germans will look at how German courts will interpret it:broadly, whereas france will interpret itnarrowly. This defeats the purpose of having an international convention.c)First, look to thedefinitionsof the contract. Does the CISG allow you to change the definition under article 6?d)If you dont use your own law, you look to other courts. If there a prevailing pattern which ise)article 7(1)in the interpretation of the convention, regard is to be made to its international character and in need to preserve uniformity.6)Apply:a)Is Jeanexcusedin the Javert contract under the CISG? Maybe, under 79(2). This force majeure clause is a form force majeure clause, its too generic. One of the things Jean could have done was to define what any circumstance is. Jean could have say Im going to deliver this unless anything intervenes, like my supplier breaks down.b)But 79(2) would only work ifArabywould be excusedc)But this force majeure clause is so vague that it could be interpreted that he still has to deliver oil and he can still get oil form other source such as the Holland on the spot market, though at a high expense. He should have put it into the contract oil from Araby.d)What obstacles will jean run into if he starts including all these provisions? it suggests that the oil shortage was within his reasonable contemplation.e)Perhaps a generic force majeure is better because it show he didnt contemplate this fire ....but this couldnt help because theselleris responsiblef)p. 155 To assist...i)Cn: just because we dont address it in the contract, there are contingencies which ...the seller will be held liable notwithstanding the occurance.g)CISG covers both the buyer and the seller.i)Rise in market price is not excuse to seller.(1)Exception. Astronomical increase in price. Lord Reid,Tsakiroglou. note 4, p. 148. He hints that an astronomical increase in price might be a factor. neither is a rise in the market, because ... but a severe shortage due to a contingency such as war...but it must be unforeseen. there is very little today which is unforeseen, and court often will not use this to let you out of the contract.h)UCC provisions rarely lead a court to permit excuse for performance....The court should seek to determine whether the risk was consciously undertaken or not. If so, it should follow the parties expectations based on(a)type of business each merchant engaged in(b)how a reasonable person would allocate risk(c)the historical background of such risks(d)how that would affect foreseeability.(e)Note 8, p. 167 (Like Summers article):ii)Youre not expected for foreseeeverycontingency, but you are supposed to foresee the things that have happened in the past: the Suez closes, the mid-east is constantly at war, oil refineries catch fire.i)The Sellers answer is to charge more.i)LAW:(1)CISG--(2)UCC--impracticality(3)English lawradical difference testii)Civil law -- provides for reformation, because contracts are for the social good.iii)Common lawstrictly upheld. felt this was a contract between two individuals and we will uphold it. But it is starting to become more forgiving.(1)France exception, which is very strict. Rapsomaticous.iv)UNIDROITfor majeure and hardship. p. 157(1)Force majeure comes under the nonperformance.(2)Hardshipnothing short oftotal impossibilitywill excuse nonperformance.7)Problem 4.4 Electronic Commerce:Professor Pedro Buys A book, p. 169a)CN: contract made over the internet; not in writing, non-human. Is there a contract?--Pedro orders some books over the internet which he pays for with his brothers credit card. The books are automatically packed and sent by rhein.com and new books ordered from rhein.com from East.b)CN: E-commerce is a huge industry. But different countries are passing different laws, which leads to a non-uniformity. What did companies do to get around these laws?Trading partner agreementswhere two entities agree to conduct business electronically, and promise not to sue each other under UCC 2-201--statute of frauds, which requires a signature and a writing. They establish the procedure by which an offer and acceptance are to take place.c)Pedro, rhein.com and East all want to know if they have enforceable contracts.i)Rhein.com is a German company owned by an American company, rivers.com. River.com prepares lists of customers preferences, and wants to know if it can continue this practiced)in light of the new EU Privacy Directive.i)Law: all of these pretty much say that an electronic contract will be binding despite that the writing is in an electronic form. A writing can be reflected in an electronic media, but there is the question of authentication.8)Federala)Electronic Signatures in Global and National Commerce Act (E-SIGN Act),Suppl. p. 980:contract cannot be denied legal effect because they are based on an electronic signature.i)102-exemption to preemptionif the state adopts the Uniform Electronix Transactions Actii)106-definitions9)Statea)Uniform Electronic Transactions Act(UETA)( same guys as wrote UCC)(preempts federal),2, 4,7, Suppl. p. 1037.i)Parties must agree to electronic media. applies only when the parties have each agreed to the use of electronic media. 5(b).ii)Must in fact be persons act. 9(a)an electronic record or signature is attributable to a person only if it is in fact produced by an act of that person.iii)No Presumptions.b)Authentication--Digital Signature Statutes, (see Hornung: p. 172). How to get around the Statute of frauds when there is no signature? The UCC requires a writing foreverysale valued at $500 or more.i)PKI(public key encryption infrastructure). The problem with this is that it creates a bureaucracy, because you need a third party who verifies the signature. Problems: there could still be fraud but theres probably only fraud if you gave it to an agent; also, it doesnt provide for a natural evolution and PKI may limit the methods of authentication.(1)Germany use(2)Utah useii)Biometricsretina scans, fingerprintsiii)Digital signatures rarely used.no one is really using these digital signatures. People are using the existing infrastructure such as credit card numbers, billing address. Antifraud software that companies have recorded your spending history. Companies are assuming the risks theyve always assumed. Winn, p. 180iv)digital certificates,v)PinOp10)Internationala)UNCITRAL Model Law on Electronic Commerce, see Reed,7, 11, Suppl. p. 65: (written by the CISG writers, purpose: harmonize trade law) party autonomy. Does not specify what method of signing a message might be appropriate under particular circumstances. Even an X at the end of an e-mail would make it legally binding.b)GUIDECavoids mandatory systems based on a specific technology. p. 182.i)signature(1)any symbolexecuted or adopted by a party with present(2)intention to authenticatea writing. Because an ensured message (digital signature) is difficult to forge, its use binds the signatory, precluding a later repudiation of the message and form the basis for forming legally binding contracts ... since the ensured message can provide electronically the same forensic effect a signed paper message provides.(a)Ensured message means:(i)1) ensurer hadcontactwith the message and(ii)2) message has beenpreserved intactsince it was ensured.(b)Agency: a principal will be bound if the agent had sufficient authority to ensure the message.11)Foreigna)Digital Signature Statutesi)EU Directive on Electronic Signatures, see Barofsky:ii)Germany: one of the most restrictive legal regimes in cyberspace in terms of signatures. PKI only, no legal effect to electronic signature or email exchanges. If you dont meet the technical standard established by the German government for the proper PKI, you achieve no legal recognition.12)Computer initiated transactions, p. 184a)Can a computer bind a contract? Only persons legally capable of contracting may enter into a binding contract, onlynatural personsor those who have legal capacity. You had to have intent, and ability to negotiate.i)Agency law: consent by both parties is required. The computer is an extension of the human being. We canattribute human action to the computerso the computer contracts on behalf of the individual. What if there is a malfunction? The principal has to take responsibility.b)UNCITRAL, article 2: theoriginatorof a data message includes both a person by whom or on whose behalf a message is purported,which includes computers. Article 13(2)(b)attributes the operations of electronic devised to the person who originate the data message if it was sent by an information system programmed by, or on behalf of, the originator to operate automatically.c)UETA2(6) expressly recognizes that anelectronic agenta can operate without review or action by an individual and the definition of electronic agent seems wide enough to encompass both electronic agents that act automatically and those that act autonomously (intelligent agents).13)(b) Privacyi)EU Privacy Directive on Data Protection. p. 190. Suppl. p. 1079--EU passed this omnibus privacy law because the various countries were each developing their own. ii)General Rule: Article 25 prohibits Member states from sending personal data to any nation outside the EU(1)unlessthat nations privacy protections are(a)similar and provide similar regulatory structure, including enforcement actions. 25(3) if you decide it doesnt haveadequate protection, inform the other Members. 25(4) the commission may have already decided that the third country does not provide adequate protection. circumstances to look to: the nature of the data, the purpose and nature of the proposed processing, the country of origin, the country of final destination, the rules of law in the third country and the professional rules and security measure in the third country.iii)Exceptions:(1)25(2) adequate protections.(2)26(1) consent.(3)26(2) where the controller of the data determines that adequate safeguard of individuals privacy rights exist. p. 193:(4)Article 25 does not explain what constitutes an adequate level of protection. p. 195. How to show adequate protection: 193: circumstancesb)The US has no similar privacy protection regulation. U.S. has patchwork of privacy laws. Fair Credit Reporting Act, 1970; Privacy Act, 1974; Computer Matching and Privacy Protection Act, 1988. This is because of the First Amdt. Also, noninterference by the govt.14)Application: rhein.com will violate article 25 by sending the information to its parent company, unless it getspermissionfrom Pedro, or unless the US hasadequate protection. But the US doesnt have adequate protection.a)p. 196: Although Member state should not white list the entire private sector, particular areas of the private sector do ensure adequate protection. EX: credit reporting industry, part of the telecommunications sector.b)Member states should not white list many areas of US private sector. Ex: data protection in health care, direct marketing.15)In general will river.com have adequate protection? no. But does it fall under any of the exceptions under 26(1)? Was there consent? no. Is there any thing in 26(2)? Does the control adduce adequate safeguards with respect to the protection of the privacy?a)What is consent? If I enter all my information and an offer to read the privacy policy pops up and you say no, is that consent? Does it have to say do you give us your permission? and they have to click yes.?b)Does Pedro have aprivate right of actionagainst an EU company? 198c)All the substantive law still applies. There may be a battle of the forms, but you have to figure out whose law applies. The CISG doesnt require a writing. The only new thing added here is theelectronicpart.16)Problem 4.5 The Bill of Lading: Computers to Caracas, p. 200a)Seller: S&Ab)Buyer: Campeador(1)Contract: 100 El Cid computers, 10k each, C.I.F. (payment against documents). Inspection Certificate by ms. Jimena.c)Carrier: Saragossa Sea Shipping Lines.d)Facts:Three things that go wrong.(i)S&A send both conforming and non conforming goods; forged the Certificate of Inspection; Saragossa loaded the goods but stamped it Shippers Load, Weight, and Count. The bill of lading for the 10 computers is lost and found by Garcia Ordonez.(ii)20 cartons of cheap computers. SA stolen blank bills of lading.(iii)70 cartons of cheap computers, forged the blank bills of lading.e)Part A. Forged Endorsements and mis-delivery, p. 202f)CN: this section will deal with the problem 1, the ten computers.g)English law : Schmitt,, p. 203i)Intl rules relating to Bills of Lading,ii)The Bill of lading is a contract between the shipper and the carrier, but the shipper has little discretion in the negotiation of the terms. However, the shipper is protected against abuse by legislation.(1)By making the bill of lading negotiable, the cargo is made negotiable. The holder of a bill of lading cannot acquire a better title than his predecessor possessed, which means thatwhere a negotiable bill of lading is obtained by fraud and indorsed to a bona fide indorsee for value, the latter does not acquire a title to the goods represented by the bill, while if the same happened in case of a bill of exchange which is regular or its face, and nor overdue or dishonored, the indorsee is entitled to all rights arising under the bill of exchange.h)Carrier: p. 204 The carrier is not responsible for wrongful delivery of the goods against the bill unless heknowsof the defect in the title of the holder. If the carrier delivers the goods to a person who is not the older of the bill of lading, he does so as his peril. The carrier who delivers to someone who is not the true owner is liable to the true owner for conversion of the goods.i)Sze Hai Tong Bank v.Rambler Cycle, p. 204j)A ship-owner who delivers without production of the bill of lading does so at his peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the bill of lading. If he delivers the goods without the production of the bill of lading, carrier is liable in conversion.k)But even a true owner who cannot produce the bill of lading cannot claim the goods.l)They delivered the goods to someone other than the individual identified on the bill of lading, and the indemnity couldnt protect them because they breached their contractual obligation.m)Some foreign countries, such as Venezuala and other South American countries, a consignee may obtain delivery of the cargo without actual tender of the bill of lading.n)Applicable law, p. 205o)Normally, in an action against acarrier, you apply the law of the jx in which the bill was issued.p)But shipments to or from the US is governed by COGSA which requires litigation to be determined by the US COGSA.q)The Pomerene Act applies to ocean bills issued in the US for shipment to a foreign country but not to bills issued abroad for shipment to the US, and it does contain provisions on rights acquired by negotiation.r)Adel Precision, p. 206i)The carrier is the RR which released good to an entity that produced a forged bill of lading, and the RR is trying to get out of it. The Pomerene act places the burden on the carrier.s)There was noproperendorsement on the order bill of lading, accordingly .t)The new version of the Pomeren Act does not contain the properly endorsed but courts have construed it to contain this requirement.u)Application:v)Who is liable for the 10 computers? Thecarrieris responsible to the owner, who is probably the Bank of Valencia. Why is the carrier responsible? Under Pomerene Act, the carrier cannot deliver to someone who is not the bill of lading. The Carrier must deliver the goods to someone who holds the bill of lading which has beenproperly endorsed.w)Part B. Misdescription and disclaimers of Description.x)Law governing the B of Lading contract with regard tonegligent stowageorcare of goodsduring transit.(a)COGSA (based on the Hague rules).(b)Harterfederal state to federal state, or within the U.S.ii)Law governing the transfer or transferability of the bill of lading.(1)Pomerene act: applies only to Bills of lading created in the US.iii)If the bill of lading was written in a foreign country for shipment to the US, which law applies? If written in Australia, then Australian law.iv)Summary: factsseller bought 20 cartons of computers and the carrier signed off on the bill of lading but didnt inspect, and they get delivered but theyre not the right computers. So whos responsible.v)Law: carrier has a duty to do areasonableinspection. And because they did not stamp it Shippers, load, weight and count, there was no disclaimer so the carrier is responsible for misdelivery and misdescription.y)Both COGSA and Pomerene Act.z)MitsuiCogsa and harter both allow disclaimers, but they dont have any legal effect. But Pomerene modifies the legal effect that the bills of lading would otherwise have under the Harter Act and COGSA.aa)TO have a valid exculpatory clause, they must have a valid disclaimer. Shippers load weight and count. Then theshipperhas to load them.bb)ftnt, p. 215.cc)Questions, p. 219:dd)3.(1)not responsible because not responsible for how many and how much they weigh.(2)20 cartons of El Cid. Same.(3)15 cartons delivered. All are operational. But the Bill of lading says 20 cartons. they will be liable because theres no disclaimer.(4)same as c, but ... it would depend on who loaded it. If the shipper loaded it then they are protected by an exculpatory clause(5)i(6)Sancho and Alfonso delivers 20 cartons.....The question is if it would be reasonable for them to inspect. In this case its so obvious.(7)probably even more liable because they had an opportunity to see what was going on.ee)Part C: Forged Bills of Lading, p. 220ff)Three functions of the bill of lading:i)receipt for the goods,ii)document of title to the goods andiii)evidence of contract of carriage.gg)Facts: S & A stole blank bill of ladings, and took the forged bill of lading to the bank. The Campeador pays for them. Whos responsible now for the loss?hh)Bank of Valencia will look it over to make sure all the documents are in order, then take it to campeador. Campeador will pay Valencia, and Valencia will pay the US bank, which will pay Sancho and Alfonso.ii)Law: Pomerene act because it deals with transferability.jj)Campeador will be responsible because no one had endorsed it along the way. Only Campeador endorsed it. Had it been a letter of credit transaction, then each would have endorsed it along the way and the buyer would not be liable.kk)Fort Worth Elevator, p. 222i)F: Tankersley had forged a bill of landing saying he shipped a truckload of wheat to Texas. Here a draft written off on Fort Worth bank account, pay me for it. Then Fort Worth finds that nothing was ever shipped.ii)held, the bank is responsible for the loss because Pomerene had been passed by then. they accepted the obligation to accept it as a genuine bill.iii)How can I get out of any liability for warrantees under the Pomerene: Document acontrary intention.iv)p. 224Unless a contrary intention appears17)Problem 4.6 Selling through distributorships/Agents and the use of countertrade: p. 228a)Facts: Client Sells Sollate, patented in the United States, Mexico and most European nations. He wants to expand into Mexcan market and Russian market. Set up either an indepndentagentor independentdistributor.b)Independent agenttitle remains with seller, based on commission, risk on seller.i)Independent distributortitle passes to the distributor.c)Part A. Sales Agent and distributorship Agreements.d)Folsom, p. 230i)Independent foreign agent: a foreign person who does not take title to the goods, is paid on commission; does not bear risk that the buyer might not pay. Uncertain whether he has power to bind US supplier unless expressly given. he neednt provide storage. Usually more legal problems than an independent foreign distributor. Agency law differs in different countries, some of which cannot be contracted away and is mandatory.e)Independent foreign distributor(agent): buys the companys products and resells them through the foreign distributors network. Takes title, assumes the risk of not being able to resell goods. Must find storage. No power to bind the supplier, because he buys the goods himself.agentdistributorMexico doesnt have this

title remains with sellertitle passes to distributor

risk of no sale remains with sellerrisk passes to distributor

more control (price, distribution)less control (price, distribution)

seller responsible for storagedistributor responsible for storage

can Bind the principal, possiblycannot bind the principal

f)ISSUES: host government laws: antitrust law, labor laws, termination rights and obligations, import (in retaliation, or isolationism) /export (repatriation of profits) restriction.g)Siqueiros, Legal framework for the sale of goods to Mexico, p. 235h)Antitrust in Mexico. A seller residing abroad will not encounter problems with antitrust when selling goods to Mexico, even when exclusive agents or distributors are appointed for certain areas of the country.i)But the seller is subject to the antitrust laws if it enters into agreements with other suppliers of goods, within or outside of Mexico, to restrict the access of products or to gain any other unfair advantage to the detriment of the Mexican consumer.j)What kind of contract do you write if you want to create an independent distributor?k)Contracto innominado.i)One commercial code;ii)Civil code one for every state, plus the federal code.l)Contrato Mediacionhe goes from farm to farm and asks the people if they need a tractor, hands them a catalogue and tells them that if they want anything, they should contact the seller.i)Payment method: finders fee.m)Contrato commissioncloser to an agency relationship. closer to a employee/er relationship. If you call it a commission it will probably be called acontrato de commission. This does give the person power of attorney so he can bind the principal. You can add terms, But by adding terms you might turn it into a different kind of contract, because the Mexican courts dont look at thetitleof the contract.n)Labor law issues: who can we hire?We probably wont be able to hire foreign nationals to work in Mexico. An independent distributor may be an entity and Mexico may say that a certain percentage has to be Mexican owned.o)Termination:p)At will v. causegovt may control this, and what cause is.q)Severancepenalties, inventory, breach penalty, good will.r)Noticemay be established by the govt or the parties.s)p. 241: List of possible bases of just cause:t)Waver of termination rightsusually the govt will not allow a waiver of these rights.u)Part B. Countertrade, p. 243v)Why would I prefer good instead of money? Russia has soft currency, or it lacks hard currency, or the govt wont let it out of the country.i)What goods are you getting?ii)How do you value the goods?w)What is the quality?x)Is there a market for this stuff?y)Danger of dumpingsell product for below the market cost in the home country, antitrust laws prevent you from. so can you sell it for the price you want to sell it for.z)Exchange rate? once you figure out the value, is it in the official rate or the market rate?aa)McVey, p. 246i)Types of Countertrade:ii)Counterpurchase. A private firm agrees to sell products to a sovereign nation and to purchase from the nation goods which are unrelated to the items which it is selling.(1)Then he has a certain period of time, 3 to 5 years. Three contracts: one to sell the jets, one for the goods in return, one for the protocoliii)Compensation(buyback)a private firm will sell equipment, technology, or even an entire plant to a sovereign nation and agree to purchase a portion of the output product from the use of the equipment.(1)Period of time is much longer than in counterpurchase.iv)Switch tradingwhen you get a third party to take over your obligation. EX: Romania agrees to buy 100k, Brazil agrees to buy 100k, but Brazil only buys 70k worth, and Romania has no more goods it wants. So they finds a switch trader who finds Guatemala who wants Romanian goods. So Brazil will sell it to Guatemala at a 30% discount.18)Chapter 5: Financing the Intl sale of Goods, p. 25519)Problem 5.1 Letter of Credit and Electronic communication: Gold Watch pens for France.(1)Shady (beneficiary)(2)UCC, p. 1024, 5-107, definitions, 5-102; Adviser, confirmer, nominated person, issuer.(3)The letter is sent from BNP (issuer) to Metro (adviser, confirmer) bank. This is the letter of credit contract.(4)Ship LCD lighters and watches.(5)fixed letter of credit: certain amount of time after presentation. It can become exhausted, either from the time passing or the amount being paid. 256:(6)sight letter of credit: must pay on sight.(7)General letter of credit: allows(8)Special instructions:(9)258: Please add yourb)mistake in the description: ICD. Now BNP is refusing to pay because the documents are not conforming. If they dont conform and BNP pays then BNP is responsible.c)Autonomous principle: The documents are autonomous, and banks may refuse to look at anything else, if the documents dont conform, then they will refuse to pay.d)ON September 25, BNP received a telex from Metro that the credit had been used. Did they use isin time? yes. But had it been the 26, then it would not have been valid.e)Which date should control? When the beneficiarypresentsto the confirming bank? UCC 5-108the issuers rights and obligations. Comment 1. p. 1027.i)Beneficiarys presentation of documents. The key date is when the beneficiary presents the documents.(1)Notice requirementreasonable time, not more than 7 business days. How much time does the issuer or confirmer have to notice: maximum of 7 business/banking days, but sometimes shorter than 7 days. 7 days is not a safe harbor. UCC 5-108(b),(a)reasonable time no greater than 7 days. an issuer has areasonable timeafter presentation but not beyond the 7th business day to honor or reject. Comment 2, p. 1028, What is a reasonable time is not extended to accommodate an issuers procuring a waiver from the applicant. See also UCP 14(c)(the issuing bank may in its sole judgment appeach the Applicant for awaiver of the discrepancy).(b)But under the UCP. 13 UCP, p. 268 .. but this is not a safe harbor either, but 14(e) says that if the bank fails to act in accordance with this shall waive their right to object. P. 265 The preclusion applies if the bank fails to give the prompt notice or fails to give notice for more than seven days after the beneficiary presents his documents. The bank that delays examining the documents for more than a reasonable time will escape the preclusionas long as it notifiesthe beneficiary promptly after it finally decides not to accept the documents and does so within the 7 days.(2)Requirement that all discrepancies be presented at the same time. You have present all the discrepancies at one time. UCP 14(d)(2).p. 269 Such notice must state all discrepancies of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is retuning to them, to the presenter.ii)Why do you only get one bite at the apple?iii)The UCC does not require you to do it all at once. But case law might require it. p. 266. By formally placing its refusal to pay on one ground, the defendant must be hel to have waived all others.Bank of Taiwan.iv)So BNP will be precluded from the objections raised on October 6th.20)Whos at risk here?Does Metro need to go to Galleries and tell them of the discrepancy? no. Because they look only to the documents.a)If they honored the LC and pay Shady, can they force Shady to take the goods back.b)Metro is claiming that it was conforming, because their letter of Credit said ICD.c)But: p. 270: art. 16 UCPbanks assume no responsibility in the transit of the messageor other errors arising from any transmission.d)If they are both banks and theyre both not responsible then whos responsible?i)Confirming letter. Schmitthoff, p. 280: Telex instructions: Probably BNP is in trouble for not sending aconfirmingletter of credit like they should have under Article 12 of the UCP. Art. 12 provides that the issuing bank should make it clear in the telex that it considers the confirming letter as operative. If this is the intention, then works such as full details to follow or words of similar effect should be inserted into the telex or , better still, the telexk should state the the mail confirmation will he the operative credit instrument or operative amendment.21)But Galleries (applicant) might be responsible, under art 18, 16.22)Conformity:23)Slavish conformity not required.The UCC 5-108, comment 1. Substantial performance is not enough. Strict compliance does not mean slavish conformity to the terms of the letter of credit.i)Strict compliance is measure by standard practice.Id.ii)Standard Banking Practices. UCP Article 13, p. 283: Compliance shall be determined by international standard banking practices.b)Under the autonomy principle, the Bank should look only to the documents and not at the underlying transaction.24)Some spelling errors are ok, p. 1027, of the UCC 5-108 Comment 1 3d para; and Hanil Case, p. 277 When its aclear typographical error.a)Hanil Case, p. 274: the(1)Letter of Credit Sun Jin;(2)Actual beneficiary SunJun.b)Policy: It is too cumbersome.c)Can we look to the UCC? Yes, because the UCP is not a law.25)Application: LCD and ICD might be an obvious typographical error.a)But banks dont have to have special knowledge.b)Rayner, p. 262:(1)Letter of Credit: Coromandel ground nuts.(2)Bill of Lading : CRS.(a)(universally understood in the nut business to mean coromandel.)c)It is quite impossible to suggest that a banker is to be affected with knowledge of the customs and customary terms of every one of the thousand of trades for whose dealing he may issue letters of credit.d)But its thebankwho decides whether its an error or not. Bankers dont have the time to review all the underlying details.26)This is afixed credit-- it willexpire. Thebuyeris concerned with the expiration. Shady has a certain amount of time to comply. If Metro say theres a problem with this, shady will be able to reform it. But the time is running out.27)Terms: p. 256:a)Standby letter of Credit: its a guarantee of performance. If I am doing construction. This is a mirror image of the letter of credit in the documentary sale transaction, Because now theapplicantis the seller, not the buyer.b)Im selling my services to Guatemala. If I, the construction company, breach my duty to build the plant, Guatemala can go to the bank and collect. In the normal documentary sales transaction .... what must you present to collect? You wnt them to present come document that is certified....but many standby letter of credits dont require much documentation, also a suicide letter of credit.c)Revolving letter of credit. Progress payments. I get the first stage of the project done.28)Problem 5.2 Enjoining Payment of Letters of Credit for Fraud, p. 292a)Exception to the autonomy principle. Originated in the Cardozo dissent: I dissent from the view that if the issuing bank chooses to investigate and discovers thereby that the merchandise tendered is not in truth the merchandise which the documents describe, it may be forced by the delinquent seller to make payment of the price irrespective of its knowledge. But theres a difference between fraud and breach of warranty.b)Policy:i)good: it prevents someone from perpetuating a fraud.ii)Bad: it allows the buyers to get out of their contract, it would slow down the international business process every time a buyer raises, but the letter of credit places the risk of fraud on the applicant/buyer, so why should we let him get out of the contract?29)Our client has just learned that the seller is sending him junk and wants to stop the bank from honoring the letter of credit.a)First: has it happened before or after the LoC has been negotiated. If it has already been negotiated with a holder in due course, youre out of luck. UCC 5-109:30)You can call the bank and ask them not to honor it. But the bank may not listen to you because theyve already made a contract with the seller in Seoul. It will probably depend on how much money and business you do with them.31)Mid-Americas case, p. 29332)I: Issue even if a letter of credit contract requires the UCP, apply UCC in cases of fraud because the UCC is the gap filler, art. 5.a)Measure of Fraudmaterial fraud: 5-109only material fraud by the beneficiary will justify an injunction against honor. Material fraud means fraud that so vitiated the entire transaction that the legitimate purposes of the independence of the issuers of the issuers obligation can no longer be served. Courts must look to the underlying contract.33)In the Little John hypo, the bank will probably not stop payment on its own initiative.34)Dolan, p. 304: The LC should be rapid and inexpensive, and if this exception is allowed it sort of defeats that purpose.35)Fraud by the beneficiary (seller). Smith, p. 307,-American Accord. Where does the fraud lie and who has to commit the fraud for the buyer to invoke the exception.The American Accord[English case] says it has to be thebeneficiarys/sellers fraud. Could this fraud exception to the established principles of documentary credits law be expanded to encompass the fraudulent acts ofthird partiesas well as those of the seller? No.a)USA: UCC 5-109even if there is a third party forgery or fraud.i)Fraud in the transaction, only the beneficiarys fraud will invoke the exception.ii)Fraud in the documents, then anyone can enjoin.(1)When bank must honor, despite fraud, UCC 5-109a1(a)holders in due course, banks have to pay, because theyre innocent. But if hes not a holder in due course, go to para 2.(2)paragraph 2 the bankmayhonor or dishonor.b)Dangers in honoring or dishonoring?: p. 308 If a bank refuses to pay against documents which are in fact genuine, although the bank honestly believed them forged, it has no defense to the sellers action for wrongful repudiation.i)good faith means honesty in fact. This is a subjective test.c)So the bank may tell the applicant to go to the court and get an injunction and make me stop payment, because it doesnt want to be liable.36)UCC 5-109(b)the court can only enjoin if the court finds the following:i)the relief is not prohibited under the lawii)a beneficiary, issuer, or nominated person who may be adversely affected is adequately protected [i.e., requiring the asking party to put up a bond] against that it may suffer because the relief is granted.iii)on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or fraud.b)Clean credit(a suicide credit)this is very hard to prove fraud because theres no documents. See comment 3. p. 1032.c)While the risk is on theapplicant, he can protect himself by having anindependent inspection certificate. But the banks are not in the business of adjudicating fraud, all they should have to look at is in the documents.37)Banco Santanderp. 310: when you assign your rights, the person you assign them to has all the rights and obligations. When you start drifting from the outline on p. 70, youre going to be in danger. What did they fail to do here? require a negotiable draft. [see, p. 68 Negotiable draft]. This was fatal because had the bank paid for a negotiable instrument, then Santander would not in paying that negotiable instrument be subject to the obligations of the person they bought it from. But they did pay the beneficiaries but not with a negotiable instrument. They paid the beneficiary at a discount in exchange for the assignment, the took subject to the fraud.a)Korean Law: p. 316: if there is any indication of fraud the bank has thedutyto investigate.38)5.3 Standby letters of credit:Electronics to Israel, p. 319a)FACTS: Israel is the beneficiary, and it can collect if there is a breach. Not an absolutely clean letter of credit, but almost because all they have to do is present asight draft. Unlike a normal letter of credit, which requires all kinds of documents, with a standby letter of credit, you only needone piece of paper.b)Standby letter of credit: issued by theseller(of services), guaranteeing performance.c)URDG: Art. 20, p. 327: contains a very distinctive rule requiring the beneficiary (buyer) to present with his demand a statement that the principal is in breach, and the respect in which he is in breach.d)Defense: Can SpaceCom (seller) stop the bank from paying this? p. 324: An injunction will be issued only if there ismanifest abuse, and irrefutable proof of it. Courts will be very reluctant to enjoin this behavior.e)What should it do in the future?: get an independent third party to certify the breach. (See last article, p. 349-50); put more stuff in it. The problem is that you might not be able get the other side to go along with all this.39)Which Law applies?, p. 323a)UN Convention of Independent Guarantees and Standby letters of credit: this applies whenever the two parties are in the Contracting States.i)parties canopt outof it, art. 1.1. p. 328.(1)Limitationchoice of law provisions.But even if you opt-out of the convention, you cant opt out of thechoice of law provisions, under arts. 21 and 22. Art 21 says freedom of choice (but neither Israel and US are parties to this)b)Art. 1-105 UCC:i)Its not clear whether the contract provides for a choice of law. If they didnt than you apply UCC 1-105, the reasonable relation.ii)If it were done in Israel? it would probably be the ECE characteristic performance. But it will probably be in Israel.iii)Apply UCC 5-109(Fraud and Forgery): Is the underlying transaction materially fraudulent? Has Israel committed a material fraud? see end of comment 1 which requires, nocolorableright,no basis in fact, etc.40)What does Israel have to do? Allege a clear and substantial breach. This breach was clear, but was it substantial? it was only four days.a)Case lawIslamic Republic of Iran, p. 336: The govt is overthrown, there is question whether the current Iranian govt will honor the contract. Bell just stopped, at which time Iran tried to collect.Held, the mere repudiation of a contract is.i)Caulfied test, p. 338, and HANDOUT. If you cant show irreparable harm then you dont need injunctive relief.b)Caulfield Test. Showing of possibleirreparable injuryandeither(1)(1)probable successon the merits or(2)(2) sufficiently serious questions going to the merits to make them a fair ground for litigation and abalance of hardshipstippingdecidedlytoward the party requesting the preliminary relief.c)Because theres no relief at law, no money damages, to SpaceCom (seller) has to show irreparable harm.i)Application: their credit would be shot, it couldnt meet its payroll.ii)The risk of signing the suicide credit is that it will be called justly, or because of fraudiii)Mere loss of money means theres a remedy at law. p. 348but if loss of money is the only risk, then there is a remedy at law, unless theres a risk of bankruptcy. But here there no danger of insolvency right now, but there might be when the 15k is called.(1)Danger of bankruptcy.d)American Bellthis is just a breach of contract, no irreparable harm. There is therefore an adequate remedy at law.e)Comment 3 &4 of 5-109: Comment 3: Courts should be skeptical of the claims of fraud by one who has signed asuicide, or clean credit and thus granted a beneficiary the right to draw by mere presentation of a draft. Comment 4: this standard is very high, and the burden remains on the applicant to show, by evidence and not mere allegation, that such relied if warranted.f)Public interests, p. 346: risk of fraudulent demand. It would go against public interest to allow the bank to not honor these easily.Harris Corp.g)Banks are worried about losing their reputation and credibility, if they fail to honor the letter of credit.h)Arms length negotiation. p. 341: Bell was a sophisticated multinational enterprise well advised by competent counsel, entered into these arrangements with its corporate eyes wide open.American Bell.i)This is was Comment 3 deals with, that court should be skeptical of claim of fraud by one who has signed a suicide letter of credit and thus granted the beneficiary the right to pay by mere presentation of a draft.i)This was not a bad deal forj)p. 338: Bell falls back on the contention that it is without any effective remedy in Iran because of xenophobia but they haven shown that they have no remedy at law in the US. Even though a judgment in the US would not be held up in Iran, if the Iranian company has assets in Iran they could get those.41)Harris Corporation,a)Harris was supposed to deliver some radio transfers and was short; because of the war they were unable to ship the rest, and Iran makes a call on the letter of credit.b)Is there irreparable injury? because they couldnt get adequate remedy in an Iranian court. This argument was rejected by theAmerican Bellcourt. But what makes this different? We negotiated for the release of hostages, and set up an American Iranian claims tribunal, which meant that any one having claims against Iran must take that claim to the Iran US claims tribunal. The US passes a law that prevents US citizen against Iran in a US court. How does it have the right to do this? Because of the sovereignty issue, you cant sue a sovereign as an individual, so the US is actually representing the person. Thats why they said that theydo meet the irreparable testbecause they dont have remedy in the Iranian or US courts.c)Harristries to argue that because of theforce majeureclause, the contract went away as well as the standby letter of credit contract. The court rejects this because they are two separate contracts. The banks were not parties to the underlying contract, only the letter of credit contract.d)Here, the bank was now an institution of the govt and NIRT was an institution of the govt and there was collusion.42)11.1 Resolution of International Disputes:Televisions everywhere, p. 115143)PART A: What forum is available if the parties do not choose one?a)First: What statute grants jurisdiction to a particular court?b)CN: this chapter introduces us to whether a court has jx over an individual over their courts. Does the US have jx over foreign parties. Second issue is forumnonconveniens. Even if a court has jx it may dismiss the case.44)Lancelot-US Corp. incorp Delawarei)Place of incorporation.Barcelona Traction, 1180: Is it a Canadian corp because incorporated in Canada or Belguim because it was mostly owned by Belgian. Belgium was claim that its nationals had been harmed by the govt of Spain. Held, Canada is the only nation that can raise a claim, thus the place of incorporation.ii)Where a significant portion of the stock is owned.Restatement: p. 1181iii)Main site of corporation. Courts in other nations dont look where it is incorporated but where the main site of the corporation.45)Lancelot v. Banco Lago/Pellinorea)Issue 1: Contract for sale of TV: Banco Lago is the issuing bank and it refused to honor the draft, because Pellinore asked them not to. (Lancelot will try to sue Pellinore and Banco Lago and probably in the US because its cheaper).i)Jurisdiction over Pellinore. Can I get personal jx over Pellinore? Look at the States Long arm statute, use Wisconsins for Massachusetts. Pellinore has virtually no contacts with the state, so we might have to sue in Spain.(1)Tag jxnot apply to corporations.when theyre physically present in the state and you serve them. If I just happen to be vacationing in Massachusetts. But this doesnt apply to corporations. p. 1162. If it did then it would work if an officer went there. But theres no other way to get jx over Pellinore.ii)Jurisdiction over Banco Lago. p. 1173:Van Schaack. If the bank induces conduct in this state ... therefore we can get jx over them. So theres a possibility . ButVan Schaakwas a real estate case dealing with real estate in Colorado. this might give you some leverage to bring Banco Lago to the tableiii)If there is jx, should the court take jx? Is there a forum non conveniens. TheGilbert Test:(1)Private interests: p. 1167(i)the relative ease of access to sources of proof(ii)availability of a compulsory process for securing the attendance of uncooperative witnesses(iii)costs of obtaining the attendance of witnesses(iv)possibility of viewing the relevant premises(v)other practical problems which will allow the trial to be easy, expeditious,(vi)enforceability of a judgment if obtained.(2)Public interests:b)Is there an adequate alternate forum. Initially in determining whether to dismiss a case on the basis of fnc, a district court must find that there exist anadequatealternate forumfor the litigation.i)cause of action recognized.What is adequate alternative? Where the law is recognizes the cause of action and the statute of limitations has not run. But the Defendant must also beamenable to processii)PiperScotland didnt recognize strict liability.Heldit doesnt have to be thesamecause of action, just an adequate cause of action.seep. 169. Negligence is46)Arthurs Estate v. Lancelot47)Issue 1: Did Arthur ever deal with Camelot? No, the only way to get with Camelot you have topierce the veil.a)But the warranty came directly from Camelot, and they contracted with Sony to do the repairs. Look ati)Wisconsin statute, art 5(a). What facts might lead us to do veil piercing? The only assets of Lancelot are a leased one room office and some leased furniture, and some leased space in a warehouse where sometimes goods will be stored for two or three days awaiting shipment. So there is some contact but does it survive the constitutional test?b)Intl Shoe does it offend traditional notions of fair play and substantial justice? Is there purposeful availment? There appears to be.c)But isminimum contactsis not sufficient, whichBerger Kingestablished, bottom p. 1160, it is a factor, the second part if whether it comports with fair play and substantial justice. But the best argument isVolkswagen, say Im selling in NY, I shouldnt have to be responsible for the unilateral acts of the plaintiff. But the warranty says in the United States. The warranty is the strongest argument. If Camelots subsidiary is suing in NY, how would you show minimum contacts, and minimum contacts that would also be fair and substantial justice?d)Veil piercingneed fraud. So there has to be veil piercing, but for this you should have fraud, and theres no real evidence of fraud. If you dont have veil piercing and you dont have minimum contacts, then you have nothing. If Lancelot is a branch, then you could they say they are conducting business in the US.e)But if Arthur buys it in NY and then brings it to Wisconsin,Volkwagaenwill prevent Arthur from hailing Camelot into court there.f)But it still has to meet the fair play and substantial justice part.g)Forum nonconveniens. p. Wisconsin, p., 1155 Stay of proceedings to permit trial in the foreign forum. If Camelot moved for f.n.c., it has to firstconsentto jx in another forum, you will subject yourself to the jx of the alternate forum. Then its left up to the discretion of the court.Gilbert test: 1) is there an adequate alternative forum. 2) weigh the private interest and public interest concerns.h)Where is the manufacturer? In Canada.i)Might the court demand that the US party submit to jx in the foreign court if the suit is dismissed?j)Do US citizens have an absolute right to sue in US courts? Courts usually want US citizens to sue in a US court. ThePipercase is an example of this. i)Despite the presumption in favor of a US citizens choice of a US forum there are circumstances in which courts have dismissed such cases on fnc.ii)Parties who engage in international transactions should know that when their foreign operations lead to litigation they cannot expect always tot bring their foreign opponent s into a US forum and every reasonable consideration lead to the conclusion that the site of the litigation should be elsewhere. p.1169Bay Chem.p. 116948)Fabrique Breton v. Lancelot,a)After they made the contract, the French govt placed high tariffs and decreed that all TVs go to one port.b)Why do they want to sue in the US? Maybe because we allow for more depositions, greater damages, class action, jury trials.c)Is there jx over Camelot.? The only way is veil piercing. But if it does succeed in piercing the veil . .. argue fnc, that most of the transactions occurred in France. How many US citizens are involved in this case? Camelot is Canadian, and Fabrique is French, so argue that this case doesnt belong in a US court. But do we want to argue Forum Nonconveniens? it can only be granted if the moving party agrees to be subject to the alternative jx. you dont want to follow french law. So you probably want to be in Canada. But you have to look at the law. So you may not want to move for fnv, becaue then you have to agree to the alternative forum. You might want to simply arguelack of jx.d)Princethemost suitable forumapproach is disadvantageous to the plaintiff, as inBhopal.We should adopt Australian which means it had to be oppressive, vexatious or harassing in the US. This allows us to hold multination corporations from getting away with stuff in other countries. They might be less likely for the corporations to do this if they know they will be subject to lawsuits in the US.49)International Tribunals: p. 1177a)Suing before the ICJ: only States can sue before the ICJ. They could petition the federal govt to take the case up for them, but this is extremely unlikely. They have to feel it is important enough to get involved.50)11.2 Choice of Law and choice of Forum Clauses:Dolls to Europe, p. 1185a)Governing law:b)Choice of Law.i)Convention on the Law Applicable to contractual obligations(p. 1056 supp):(1)art. 3 (choice of law). Para 1. basically says that there are no limitations onwhichlaws can be chosen. But para 3 places a limitation on freedom of choice, such as mandatory rules, (i.e. COGSA).(2)EX: English buyer, American Seller, agree to apply German law. Buteverything is relatedto England. Even though the contract says apply German law, since everything is related to England, the mandatory rules of England will apply.(3)Art. 4. (absent a choice--most closely connected; characteristic performance)(4)Article 7. Mandatory Rules(5)Art. 7(1)when applying under this convention the law of a country (even a third country), effect may be given to the mandatory rules of the law of another country with which the situation has aclose connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable.(6)Art. 7(2)the law of the forum a may have the mandatory rules which the court must follow. So, and USA Court will apply COGSA even if the contract calls for the Hague-Visby rules.ii)UCC 1-105: The limitation on choice of law is that it has to have areasonableorappropriate relationship.iii)Restatement (Substantial relation)51)Choice of Forum.a)Brussels convention(Convention on Jx and Enforcement of Judgements in Civil and Commercial Matters), art. 17 (p. 1064, supp).i)Article 17. only one of the parties has to be a resident of a contracting party. If none of that parties are members of a contracting state thenb)Bremenforum selection clauses are prima facie valid, absent compelling reasons not to give the clause full effect, such as fraud, undue influence, or overweening bargaining power, or a seriously inconvenient forum.i)Carbon Blackagreements in advance of controversy whose object is to oust the jx of the courts are contrary to public policy.ii)Bissoexculpatory clauses may violate public policy, but the case dealt with entirely domestic waters.c)Carnival Cruisea reasonable forum selection clause in a form contract could be upheld. Florida is not too remote alien forum. But what then is a seriously inconvenient forum. This was an adhesion contract. What if the clause said litigate in Panama? It probably would have had a different result. But if it said Montreal, then it would be reasonable.d)Caldaspermissive clauses. Corim buys Cloverdale from Carr. Corim sells Cloverdale to Caldas threes days before they owned it. Both Carr and Caldas sues Corim. Corim says that there was a forum selection clause saying that the(1)Laws and courts of Zurich are applicable.e)Corim says thatBremensays that a forum selection clause is prima facie valid. There are exceptions, but this isnt one of the exceptions. But there is a difference between mandatory and permissible forum selection clauses. Here it just says that the law and courts of Zurich are applicable, but this didnt preclude any other forum. They could have said must apply and no other laws should apply.f)COGSA, p. 1205does not directly address forum selection clauses, but 3(8) provides that any clause ... in a contract of carriage relieving the carrier or the ship from liability for loss or damage or in connection ...or lessening such liability otherwise than as provided in this chapter, shall be null and void.i)Vimar,p. 1208theres an arbitration clause, they tried to bring it in federal court. They said that theres no jx because it should go to arbitration. It potentially limited the liability of the shipper because it said to apply Japanese law. The forum selection clause might lessen the liability also because the foreign forum will also be more difficult, there are practical difficulties of litigating abroad, and the possibility that the foreign court would apply foreign law and not COGSA. the third concern is that the foreign court would not apply COGSA they way that USA courts would. But this number three is the weakest argument, becausePipersaid only that there only had to be anadequateremedy. So just the possibility that the Japanese court might not apply it the ....ii)Does the VIMAR serve as a precedent fromUNDUSSA. Vimar did try to overrule Undussa, because Undussa was a forum selection case, not a arbitration case.g)Undussa, p. 1206, shipping from Belgium to San Fran, with a forum selection clause in Norway, for an amount of $2,600. But the Supreme Court is purporting to overrule this.h)Bonny, p. 1210: Arbitration forum selection clause. This involved a mandatory USA rule, the Securities Act, which says that you cannot waive this law. We have serious concerns that Lloyds clauses operate as a prospective waiver of statutory remedies for securities violations. By including the anti-waiver provisions in the securities laws, Congress made clear that the public policy of these law should not be thwarted. ....Pipersays you dont need the exact remedy. We are satisfied that several remedies in England vindicate plaintiffs substantive rights while not subverting the US policies. Plaintiffs can bring a claim of fraud.52)Arbitration choice of law: p. 1214a)Choosing national law:i)anarbitratornormally faces the following choices:(1)the law of the seat of arbitration, the national law of the arbitration,(2)the national law of the parties,(3)the law of the place where the contract was concluded,(4)the law of the place where the contract must be performed,(5)the proper law of the contract.53)Facts: Three contracts54)Transaction no. 1.a)Buyer/seller. Theres a German party, so apply the Brussels Convention. This contract will be governed by the laws of Germany.b)Carrier. Is it a Liberian, English, Monocan citizen?Barcelona Tractionsays that its a citizen of wherever it is incorporated, but another case says whenever a significant amount of stock is owned. Where may Talking Toys Sue Gluck? Germany, but where else would a suit be sustained? What if I want to sue in the USA? Will the choice of law be respected by the USA Courts? Gluck could file a motion for lack of jx because the contract says apply the laws of jx. I may not want to file a motion for fnc because then I have to submit to jx somewhere else. How could you get this court not to recognize this choice of law? ArgueBremen, 1192such clauses are prima facie valid and should be enforced unless shown by the resisting party to be unreasonable under the circumstances. So I have to prove that the part of the contract that says German law should apply is unreasonable. Unreasonableness is set out on 1193: fraud, undue influence, or overweening power.i)Bremen. Zapata wanted to take the rig to Italy, so they hired a towing company. Unterweser gets caught in a storm and they tow it back to Louisiana. Unterweser files a motion to dismiss for lack of jx and fnc because the contract has a forum selection clause saying any dispute should be decided in England. The US Supreme Court says that the court has to apply the clause and dismiss so it can be tried in England. Ct reasons that the contract was made with an arms length transaction.(1)Exculpationclauses, p. 1193are contrary to public policy, under theBissocase, because there is a strong public policy in the forum to discourage negligence. Supreme Court says that the exculpatory clause should be enforced because we dont know if it is reflected in the price. SoBissoonly applies to US waters and this was an international business transaction.c)Is there a permissive law or mandatory? Saying the laws of the Republic Liberia shall apply? SeeCaldas(laws of Zurich are applicable not mandatory). You could argue either way.d)Multimodal carrier: p. 122. not negotiable.55)Choice of law Clausesa)Which law will the German Court look to? The EE Convention on the Law applicable to Contractual obligations (art. 3freedom of choice)b)USA court will look to the UCC 1-105, and the Restatement.56)Will Choice of Forum Clauses be Respected by Courts?a)Analysis of choice of forum clauses must begin by noting that questions may arise in two entirely different contexts. p. 1189.i)Onethe chosen forum may raise an issue as to whether that court will accept jx over the action. (German court will have to ask whether it should take jx,)ii)Twoif it is not the chosen forum will a non-chosen forum accept it.b)US Approach?BremenForum selection clauses are prima facie valid unless unreasonable.c)German approach?Brussels Convention. art. 17. Is the agreement in writing, is there a prior trade or custom.d)If suit is filed in German courte)If T&T tries to bring it in US Court? do we take it?i)apply Bremen: Prima facie valid. is there some countervailing reasons: fraud, freely negotiation, undue influence, over-reaching bargaining power, unjust, neutral forum with experience? But reasonableness is limited byCarnival.57)Transaction No. 2. T&T and Poupeea)Choice of Forum analysis