7. Weaver Mills Co. in Country F contracted to purchase 100,000 yards of jute fr
ID: 1159462 • Letter: 7
Question
7. Weaver Mills Co. in Country F contracted to purchase 100,000 yards of jute from Natural Fiber Co. in Country G at USS 0.64 per yard. Natural delivered 22,228 yards to Weaver at Weaver's plant, but it then informed Weaver that it would deliver no more. Several other of Weaver's suppliers also defaulted, so Weaver was forced to purchase a total of 164,503 yards of jute in the market a month later at a price of USS 1.21 per yard. Weaver then sued Natural for the difference between the market price it had paid and contract price on the 77,772 yards of jute that Natural had not delivered. Both Countries F and G are signatories of the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the parties' contract designated the CISG as the governing law. Must Natural pay the amount Weaver demands?Explanation / Answer
The United Nations Convention on Contracts for the International Sale of Goods (CISG) was formulated in the year 1980 during the vienna round. Its basic aim is to protect the interest of both parties that engage in bilateral trade and involves member countries.
This makes any contract made by the companies of participating countries subject to the laws as provided by the convention. It helps to secure the rights of both parties in case of default by the later. And clearly denotes the rules and by laws by which any party has the right to seek redressal and or compensation for any loss occured due to the other.
Relevance and Purpose-
Purpose:-
The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs.
Importance-
The contract of sale is the backbone of international trade in all countries, irrespective of their legal tradition or level of economic development. The CISG is therefore considered the core international trade law conventions whose universal adoption is desirable.
It provides a careful balance between the interests of the buyer and of the seller. It has also inspired contract law reform at the national level.
The adoption of the CISG provides modern, uniform legislation for the international sale of goods that would apply whenever contracts for the sale of goods are concluded between parties with a place of business in Contracting States. In these cases, the CISG would apply directly, avoiding recourse to rules of private international law to determine the law applicable to the contract, adding significantly to the certainty and predictability of international sales contracts.
Finally, small and medium-sized enterprises as well as traders located in developing countries typically have reduced access to legal advice when negotiating a contract. Thus, they are more vulnerable to problems caused by inadequate treatment in the contract of issues relating to applicable law. The same enterprises and traders may also be the weaker contractual parties and could have difficulties in ensuring that the contractual balance is kept. Those merchants would therefore derive particular benefit from the default application of the fair and uniform regime of the CISG to contracts falling under its scope.
Case Study:-
In the case study as mentioned above, Weaver has sued Natural Fiber co. to an ammount of 77,772 yards of jute which Natural had failed to deliver as part of the contract plus the market difference ( Loss of profit). In this regards the UN CISG has clearly mentioned the rights under section or Article 74. The following is a transcript of the same law.
Article 75 CISG:-
"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable"
Therefore it is clear from the above section that Natural must pay the entire difference ammount. Calculation is as follows.
Cost of Jute Weaver had to buy= Cost per piece * 77,772 units of deficit
=1.21*77,772=94104.12
Additionally it must also pay for loss of profit ie. 0.57*7772 (Difference Between 1.21 & 0.64)=44330
Net ammount payable as per CISG=
"If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable"
Therefore it is clear from the above section that Natural must pay the entire difference ammount. Calculation is as follows.
Cost of Jute Weaver had to buy= Cost per piece * 77,772 units of deficit
=1.21*77,772=94104.12
Additionally it must also pay for loss of profit ie. 0.57*7772 (Difference Between 1.21 & 0.64)=44330
Net ammount payable as per CISG=
$1,38,434Related Questions
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