Here is a compilation of twenty-four question on contract with their relevant answers.
Q. 1. When a contract is said to have come into force?
Ans. A contract is said to have come into force when, upon receipt of an order, the exporter sends an acceptance in writing in a fixed time as indicated by the importer.
Q. 2. What are the obligations for an import or export license on the trading partners?
Ans. When an export or import license, a foreign exchange control authorization or similar authorizations are required for the performance of the contract, the party responsible for obtaining the license or authorization shall act with due diligence to obtain it in good time.
If either party fails to get the proper licenses and/or authorization in a pre-determined time, than the other party has the right to cancel the contract. If no such period is mentioned in the contract than 3 months will be treated as the period for such actions.
Q. 3. What are the responsibilities of the exporter for descriptive documents and instruction leaflets relating to use and maintenance of the goods exported if they are applicable for the goods?
Ans. The exporter is bound by the contract to supply in a language that the importer can understand the weights, dimensions, capacities, prices, performance ratings and other data included in catalogues relating to the use and maintenance of the goods, the exporter should furnish to the importer free of, not later than the commencement of Guarantee Period.
Q. 4. In the case of consumer goods and consumer durable goods is the price of packing included in the price of the goods?
Ans. The prices shown in the price list/catalogue are inclusive of the cost of packing Unless otherwise specified by the exporter to the contrary at the time of formation of the contract.
Q. 5. For sale of goods when does the risk pass from the exporter to the imports?
Ans. The thumb rule is that the risk passes from the exporter to the importer as agreed between the two parties.
However there are many situations under which the risk shifts from the exporter/seller to the importer/buyer, some of such situations are:
(i) If there is no such indication in the contract, than as per INCOTERM 2000, the contract is treat as Ex-Works delivery. The risk shall pass from the exporter to the importer when the goods have been placed at the disposal of the importer in accordance with the contract.
In this case the exporter will notify the importer, in writing, the date and time for the availability of the goods, in sufficient time so that the importer can collect the goods.
(ii) For cases when the delivery is on “carriage paid to” basis, the risk shall pass from the exporter to the when the carrier takes over the loaded vehicle or craft.
(iii) For FOB or CIF, delivery terms, the risk shall pass from the exporter to the importer when the goods have effectively passed the ship’s rail at the agreed port of shipment,
(iv) For cases involving “Delivered at Frontier”, the risk shall pass from the exporter to the importer when the customs formalities have been concluded at the exporter’s country and placed at the disposal of the importer at border customs exit point.
(v) For all cases where the delivery term includes the word “delivered at the agreed frontier post of importing country or agreed point in the interior of the importing country” the risk shall pass from the exporter to the importer when the importer is required to take delivery of the goods upon their arrival at the agreed destination point.
Q. 6. Under international contracts from which date is the delivery period is counted?
Ans. The contracting parties have to specify such date in the contract, failing which the delivery period shall be counted from the latest date of the contract; or, from the date of the receipt of payment by the exporter.
Q. 7. Is it possible for an exporter to ship out the goods even if the delivery period has expired?
Ans. As per INCOTERM 2000, a grace period of 30 days is given to the exporter to deliver the goods after the expiry of the delivery term under the contract. However it would be better for the contracting parties to specify in the contract for such eventuality.
In case the grace period has even expired than if the reason is attributed to the importer than the exporter has the right to ship the goods, however if it is due to the fault of the exporter without any justifiable reasons, which are not acceptable to the importer, than the exporter cannot ship the goods and if the still ships the goods than the importer has the right of rejection of the goods.
Q. 8. For delayed delivery, beyond the 30 days grace period, does the importer has the right of rejection?
Ans. In case the exporter fails to deliver the goods after expiry of the grace period the importer is entitled to terminate the contract by notice in writing to the exporter. This right extends to the goods delivered and undelivered provided the importer cannot use the goods already delivered without the undelivered goods.
If he can use than the right is limited to the undelivered goods only. Under these circumstances the importer is entitled, to recover payment made both in respect of goods undelivered and undelivered (when he cannot use the delivered goods in the absence of the undelivered goods).
The importer can also, if he wishes so recover any expenses properly incurred in performance of the contract, this is also called “risk purchase”.
Q. 9. When the importer does not take the delivery of the goods at the place and time provided under the contract for any reason other than an act or omission of the exporter, what the exporter can do under such circumstances?
Ans. The importer has to make the payment as provided in the contract as if the goods had been delivered. In such a case, once the goods have been appropriated to the contract, the exporter will arrange for their storage at the risk and cost of the importer and to recover any expenses incurred in performance of the contract and not covered by payments received from the importer.
Q. 10. In case no payment terms are mentioned in the contract, then in which manner it will be made?
Ans. Payment will made as if the contract has been made on Ex-works basis. But in this case the exporter has to notify the importer for such situation due to the contract, and give 30 days period to the importer to take appropriate actions. In case the importer does not respond, than the exporter can terminate the contract and has the right for recovery for any damages caused due to the actions of the importer.
Q. 11. What are the importer’s rights of rejection?
Ans. The importer is entitled to reject goods that do not conform to the contract. But the importer has to give sufficient time to the exporter to rectify the problem, if he fails than the importer can ship back the goods to the exporter at exporter’s risk.
Q. 12. In case of international business does the “guarantee” protects the rights of the importer?
Ans. Yes, the goods so exported are covered under explicit or implicit guarantee for a specific period. If the importer finds during this “specific period”, the goods are not giving rated performance as offered by the exporter due to faulty design, materials or workmanship, he can ask the exporter for free replacement, or repair the defective goods at the site of the importer, or, send the defective goods or parts back to the exporter at exporter’s risk for repair. During all these exercises the importers is not expected to incur any expenditure, if he does so, than the exporter has to reimburse him.
Q. 13. If the importer suffers injury or damages on account of using exporter’s goods, can he claim for damages?
Ans. Yes the importer can claim for damages provided the exporter has been found guilty of gross misconduct.
Q. 14. In the case of a cargo claim explain the role of the B/L and seaway bill?
Ans. A third-party endorsee of a bill of lading may, in a cargo claim, rely conclusively on the description of the goods in a bill of lading where as in the case of the seaway bill the evidence is only considered as prima facie evidence.
Q. 15. Name the common international rule that apply to both the negotiable and non-negotiable transport documents?
Ans. The Hamburg Rules 1978 apply to all contracts for the carriage of goods by sea, other charter parties and thus include contracts covered by negotiable as well as non-negotiable transport documents.
Q. 16. What is the difference in the evidentiary effect for a third party for a document whether it is negotiable or not?
Ans. Both documents are basically an evidence of the contract. The negotiable transport document represents the title over the goods and can be made out “to order” for the purpose of re-sale of goods or for their pledging as security in respect of L/C finance, financing banks and third party importers rely on negotiable BL details to a much greater extent than exporter who is involved in a log-term relationship where the non-negotiable B/L serves primarily as a transport document only.
Q. 17. Do you agree or disagree with the following statement, give your justifications?
Ans. “Any international or national law compulsorily applicable to bills of lading shall also apply to the seaway bill and that as between carrier and consignee, the seaway bill shall be conclusive evidence of the receipt of the goods as described in the document.”
Q. 18. Please justify the following statements as true or false with brief explanation.
Ans. (a) Straight bill of lading and seaway bill are the same,
(b) Seaway bill is not negotiable document,
(c) A seaway bill is evidence of contract, but not a document of title,
(d) A B/L consigned to a named party and marked “non-negotiable” is a straight bill”,
(e) No “originals” are issued in the case of seaway bills,
(f) A ‘Straight’ bill of lading cannot be issued to order; it has to be issued to a named consignee, and
(g) A straight bill of lading cannot be transferred by endorsement.
Q. 19. What is a Marine Bill of Lading?
Ans. A marine bill of lading confirms that the contracted goods have been loaded on board the specified vessel for carriage to the named destination as required in the sale contract. It is also called the Shipped Bill of Lading.
There are two types the “Order Bill of Lading” which is a negotiable document and has the financial powers, the other is the Straight Bill of Lading which is only a document but without any financial power unless otherwise specified in the contract.
Q. 20. What is a bill of exchange?
Ans. It is a letter issued by the exporter to the importer for the payment of the contracted goods. When a bill of lading is included with this letter the importer cannot take custody of the goods until he releases the payment.
Q. 21. Differentiate between a “Clean Bill of Lading” and “Clean on Board Bill of Lading”.
Ans. CBL: Confirmation by the carrier that goods received for loading on board the vessel and are apparently in good condition.
COBBL: It confirms that goods have been loaded on board the vessel and that they are without any physical damage.
Q. 22. What is a “document of Title?”
Ans. It provides exclusive control of the goods. It has to be presented to obtain goods delivery from the carrier. If made out as in the negotiable form, the rights inherent in the document may be transferred by delivery of the document, with any necessary endorsement.
Q. 23. What is a “Negotiable Document of Title?”
Ans. This document is used when: sale of goods in transit is required, if documentary security is required by banks or buyers, if financing is required. The physical presence of this document is essential and need to be transferred to the final consignee. Unavailability of this document by the time the vessel carrying the goods is ready to discharge the cargo at destination attract heavy penalty.
Q. 24. Field survey (Case study).
Search the relevant papers on the use of electronic alternatives to traditional transport documents and writ a paper based on your study, highlighting:
(a) Advantages,
(b) Problems,
(c) Solutions, and
(d) Future scenario.
Ans. UNCITRAL, Model Law on Electronic Commerce, adopted 1996; UNCITRAL, Model Law on Electronic Signatures (2001); UNCITRAL. Preliminary draft convention, (https://www(dot)uncitral(dot)org.); UNCTAD Report on Electronic Commerce and International Transport Services; European Commission Directive on Electronic Signatures 1999/93/EC of 13 December 1999; Electronic Commerce: Legal Considerations, UNCTAD/SDTE/BFB/1, www(dot)Ainctad(dot)org; CMI Rules for Electronic Bills of Lading (www(dot)comitemaritime(dot)org); @Global Trade Secure Payment and Trade Management System; e-UCP-ICC.