International Trade Law (E4)

‫برنامج اإلجازة يف الحقوق‬
International Trade Law

ICL703
By: Wafa Dukmak
2022
Table of Contents
Chapter One: Introduction to International Trade Law ......................................5
Introduction ..............................................................................................6
Definition ..................................................................................................6
History ......................................................................................................7
Lex Mercatoria and Lex Maritima .................................................................8
Free Trade .................................................................................................8
Important Concepts in International Trade. ...................................................9
The Principle of Non-discrimination ...........................................................9
National treatment (NT) ...........................................................................9
Most-Favoured Nation (MFN) treatment .................................................. 10
Anti-dumping Duty ................................................................................ 10
Useful Definitions ..................................................................................... 11
Chapter Two: International Trade Agreements and Organizations .................... 14
GATT....................................................................................................... 15
WTO ....................................................................................................... 15
Advantages and Disadvantages of the World Trade Organization (WTO) ...... 16
Harmonization of International Trade Law .................................................. 17
UNCITRAL ................................................................................................ 18
UNIDROIT ................................................................................................ 18
ICC .......................................................................................................... 19
Chapter Three: The Convention on International Sales of Goods 1980 CISG ....... 23
Unit 3.1: Introduction, Structure and Application ......................................... 24
3.1.1 Introduction .................................................................................. 25
3.1.2 Structure ...................................................................................... 25
3.1.3 Application ................................................................................... 26
3.1.3. Restrictions on the application of the Convention ............................ 27
1
Unit 3.2: Formation of a Contract ............................................................... 31
3.2.1. Formality of contract..................................................................... 32
3.2.2 The offer ...................................................................................... 33
3.2.3 Revocation of an offer .................................................................... 33
3.2.4 Rejection of an offer ...................................................................... 34
3.2.5 Acceptance ................................................................................... 35
3.2.6 Counter-offer and modified acceptance ........................................... 36
3.2.7 Fundamental Breach ...................................................................... 38
Unit 3.3: Performance of Contract .............................................................. 43
3.3.1 Introduction .................................................................................. 44
3.3.2 The Seller’s Obligations .................................................................. 44
3.3.3 Place of Delivery ............................................................................ 45
3.3.4 Time of Delivery ............................................................................ 46
3.3.5 Delivery of Documents ................................................................... 47
3.3.6 Conformity of the Goods ................................................................ 48
3.3.7 The Buyer’s Obligations .................................................................. 50
Unit 3.4: Remedies ................................................................................... 56
3.4.1 introduction .................................................................................. 57
3.4.2 The proviso of no-fault ................................................................... 58
3.4.3 The right to request performance .................................................... 59
3.4.4 Specific performance ..................................................................... 59
3.4.5 The right to fix an additional period for performance (nachfrist) ......... 59
3.4.6 The right to avoid a contract ........................................................... 60
3.4.7 Restitution .................................................................................... 61
3.4.8 The right to suspend the contract .................................................... 61
3.4.9 Damages and foreseeability ............................................................ 62
2
3.4.10 Claiming interest.......................................................................... 63
3.4.11 Mitigation of loss ......................................................................... 63
3.4.12 The buyer’s right to reduce the price ............................................. 64
3.4.13 The buyer’s limited right to refuse delivery ..................................... 65
3.4.14 The passing of risk ....................................................................... 65
Chapter Four: International Commercial Terms (Incoterms®) ........................... 71
Introduction ............................................................................................ 72
4.2 Rules for any mode or modes of transport: ............................................ 74
EXW – Ex-Works or Ex-Warehouse .......................................................... 74
FCA – Free Carrier .................................................................................. 74
CPT – Carriage Paid To ........................................................................... 74
CIP – Carriage And Insurance Paid To ....................................................... 75
DAP – Delivered At Place ........................................................................ 75
DPU – Delivered At Place Unloaded (replaces Incoterm® 2010 DAT) ............ 75
DDP – Delivered Duty Paid ...................................................................... 76
Rules for sea and inland waterway transport: .............................................. 76
FAS – Free Alongside Ship ....................................................................... 76
FOB – Free On Board.............................................................................. 76
CFR – Cost and Freight ........................................................................... 77
CIF – Cost, Insurance and Freight ............................................................ 77
‘Freight Collect’ and ‘Freight Prepaid’ ......................................................... 78
Carriage of Goods ..................................................................................... 79
Contract of carriage by sea ........................................................................ 80
Bill of lading ............................................................................................. 81
Chapter Five: Insurance ............................................................................... 87
Introduction ............................................................................................ 88
3
Marine Insurance ..................................................................................... 89
Payment of premium ................................................................................ 90
Types of marine insurance......................................................................... 90
Types of marine insurance policies ............................................................. 93
Floating policy ....................................................................................... 93
Open cover ........................................................................................... 93
Open cover is an insurance policy in which the insurer agrees to provide
coverage for all cargo shipped during the policy period. Open cover insurance
is most commonly purchased by companies that make frequent shipments, as
the blanket coverage keeps them from having to purchase a new policy each
time a shipment is made. ....................................................................... 93
Voyage policy ........................................................................................ 93
Time policy ........................................................................................... 94
Mixed policy ......................................................................................... 94
Named policy ........................................................................................ 94
Port Risk policy ...................................................................................... 94
Fleet policy ........................................................................................... 94
Single Vessel policy ................................................................................ 94
Blanket policy........................................................................................ 94
Principles of Marine Insurance ................................................................... 95
Chapter Six: Electronic Commerce ................................................................ 99
Introduction .......................................................................................... 100
ICC ........................................................................................................ 102
Useful Definitions ................................................................................... 104
4
Chapter One: Introduction to International Trade
Law
Keywords
Trade, commerce, economy, import, export, goods, products, services,

conventions, treaties, customs, usages, transactions, exchange, commercial,
economic, lex mercatoria, lex maritima, treaty, legislation, organization,
transborder, finance, navigation, economic liberalism, free trade, quality, price,
tariffs, trade protectionism, economic isolationism.
Learning Objectives
1. Define the term international trade law.

2. Distinguish between international trade law, international commercial law and
international economic law.
3. Identify the origins and historical background of international trade law.
4. Define lex mercatoria and lex maritima.
5. Recognize the meaning of free trade.
6. Recall the definitions of key trade terms.
5
Introduction
Trade between nations and the link between trade and economic growth are
neither recent nor novel developments. The existence of trade routes such as the
Silk Route and the Amber Route crossing boundaries and continents, is ample
evidence that international trade is not a recent phenomenon.
International trade is the exchange of goods and services between countries.

International trade was key to the rise of the global economy.
Today’s global economy offers more products and services than were previously
imaginable. With modern technology and advanced shipping methodologies, we
are able to import and export goods and services of all kinds to every corner of the
globe1.
International trade law includes the appropriate rules and customs for handling
trade between countries.
Definition
International Trade Law is a body of legal rules, conventions, treaties, domestic
legislation and commercial customs or usages, that governs international
commercial or business transactions. A transaction will qualify to be international
if elements of more than one country are involved.
The terms International Trade Law and International Commercial Law are often
used as synonyms. However, there is a difference between these two heads.
International commercial law is a body of applicable rules, principles and

customary practices that govern cross-border commercial activities of private
1
https://www.justia.com/international-law/international-trade-law/
6
parties. As such, international commercial law is part of private international law,
while its international trade law counterpart, governing the trade relations
between States, is part of international economic law, which is a branch of public
international law2.
International trade law should also be distinguished from the broader field of
international economic law, the latter could be said to encompass not only World
Trade Organization (WTO) law, but also law governing the international monetary
system and currency regulation as well as the law of international development.
History
The origins of international trade law trace back to the medieval era, and stem
from two separate doctrines: lex mercatoria (the law for merchants on land) and
lex maritima (the law for merchants on sea). Modern international trade law began
shortly after World War II and the negotiation of a treaty to provide a method for
trading goods: the General Agreement on Tariffs and Trade (GATT).
Today, international trade law consists of a body of international legislation, mainly

comprised of international treaties and acts of international intergovernmental
organizations, and new lex mercatoria.
The traditional bodies of law and GATT still serve as the foundation for many laws
governing international trade agreements today.3
2
https://peacepalacelibrary.nl/research-guide/international-commercial-law
3
https://www.justia.com/international-law/international-trade-law/
7
Lex Mercatoria and Lex Maritima
The term Lex Mercatoria (from the Latin for "merchant law"), often referred to as
"the Law Merchant" in English, is generally defined as the body of rules and
principles of international commerce which have been developed by the
international business community itself based on custom, industry practice, and
general principles of law that are applied in commercial arbitrations and affirmed
by national courts in order to govern transactions between private parties, as well
as between private parties and States, in transborder trade, commerce, and
finance.
Lex maritima refers to a body of oral rules, customs and usages relating to
navigation and maritime commerce. Lex maritima was developed in medieval
Western Europe from the ninth to the twelfth centuries as part of a wider,
customary mercantile law, and was administered by merchant judges. The lex
maritima was gradually codified in early maritime law compilations and still
underlies much of contemporary maritime law.
Free Trade
International trade law is based on theories of economic liberalism developed in
Europe and later the United States from the 18th century onwards. Its purpose has
been to foster free trade among nations.
Free trade in this context means that people should be free to buy and sell goods
cutting across national frontiers. In other words, a person should be free to buy a
product from anywhere in the world wherein he can get the best quality at the
cheapest possible price. Similarly, he should be free to sell his product anywhere
in the world at the highest possible price.
8
Under a free trade policy, goods and services can be bought and sold across
international borders with little or no government tariffs, quotas, subsidies, or
prohibitions to inhibit their exchange.
The concept of free trade is the opposite of trade protectionism or economic

isolationism.
Important Concepts in International Trade.
The Principle of Non-discrimination

The principle of non-discrimination has a long-standing history in international
trade relations. It provides that contracting parties to an international trade
agreement shall not treat domestic market actors more favourably than foreign
market actors (national treatment) or differentiate between foreign market actors
from different origins (most-favoured nation treatment).4
National treatment (NT)

National treatment is a concept of international law that declares if a state
provides certain rights and privileges to its own citizens, it also should provide
equivalent rights and privileges to foreigners who are currently in the country.
National treatment is the principle of giving others the same treatment as one’s
own nationals.
4
Diebold, Nicolas F. “STANDARDS OF NON-DISCRIMINATION IN INTERNATIONAL ECONOMIC LAW.” The
International and Comparative Law Quarterly, vol. 60, no. 4, Cambridge University Press, 2011, pp. 831–65,
http://www.jstor.org/stable/41350118.
9
National treatment also applies to imported goods once they enter the market
(they should be treated the same as locally-produced goods), foreign and domestic
services, and to foreign and local trademarks, copyrights, and patents.
Most-Favoured Nation (MFN) treatment

A most-favored-nation clause requires a country to provide any concessions,
privileges, or immunities granted to one nation in a trade agreement to all other
World Trade Organization member countries. Although its name implies favoritism
toward another nation, it denotes the equal treatment of all countries. For
example, if a nation reduces tariffs by 5% for one nation, the MFN clause states
that all WTO members will have their tariffs cut by 5% into that nation.
Anti-dumping Duty
An anti-dumping duty is a protectionist tariff that a domestic government imposes
on foreign imports that it believes are priced below fair market value. Dumping is
a process wherein a company exports a product at a price that is significantly lower
than the price it normally charges in its home (or its domestic) market.
In order to protect their respective economy, many countries impose duties on

products they believe are being dumped in their national market because these
products have the potential to undercut local businesses and the local economy.5
5
https://www.investopedia.com/terms/a/anti-dumping-duty.asp
10
Useful Definitions
Trade (n.): the activity of buying and selling, or exchanging, goods and/or services
between people or countries.
Commerce (n.): the activities involved in buying and selling things. Adjective:
commercial.
Economy (n.): the system of trade and industry by which the wealth of a country is
made and used. Adjective: economic.
Import (v.): to buy or bring in products from another country.
Export (v.): to send goods to another country for sale.
Goods (n.): items for sale.
Services (n.): the particular skills that someone has and can offer to others.
Transaction (n.): an occasion when someone buys or sells something.
Monetary (adj.): relating to the money in a country.
Finance (n.): the management of a supply of money. Adjective: financial.
Tariff (n.): a government charge on goods entering or leaving a country.
Protectionism (n.): the actions of a government to help its country's trade or

industry by taxing goods bought from other countries.
Isolationism (n.): the political principle or practice of showing interest only in your
own country and not being involved in international activities.
11
Exercise 1: Fill in the spaces with the suitable term:
Lex maritima - free trade - international - commercial - exchange
1. International trade is the ------ of goods and services between countries.

2. A transaction will qualify to be ------ if elements of more than one country are
involved.
3. International ------ law is part of private international law.
4. ------ refers to a body of oral rules, customs and usages relating to navigation
and maritime commerce.
5. The concept of ------ is the opposite of trade protectionism or economic
isolationism.
12
References
- https://www.justia.com/international-law/international-trade-law/
- https://peacepalacelibrary.nl/research-guide/international-commercial-law
- Diebold, Nicolas F. “STANDARDS OF NON-DISCRIMINATION IN
INTERNATIONAL ECONOMIC LAW.” The International and Comparative Law
Quarterly, vol. 60, no. 4, Cambridge University Press, 2011, pp. 831–65,
http://www.jstor.org/stable/41350118.
- https://www.investopedia.com/terms/a/anti-dumping-duty.asp
13
Chapter Two: International Trade Agreements and
Organizations
Keywords
GATT, barriers, quotas, tariffs, subsidies, liberalize, WTO, exporter, importer,

trading, dispute, mediation, resolution, protectionism, free trade, globalization,
expansion, impact, multinational corporations, industry, liability, harmonization,
UNCITRAL, UNIDROIT, ICC, business transactions, modernization, legislative,
insolvency, procurement, CISG, intergovernmental, instruments, contractual,
capital, cross-border business.
Learning Objectives
1. Describe the GATT and its development.

2. Recognize the work of the World Trade Organization.
3. Explain the advantages and disadvantages of the WTO.
4. Discuss the need for harmonization of commercial laws.
5. Recognize the organizations involved in the harmonization of commercial laws
including the UNCITRAL, UNIDROIT, and ICC.
6. Explain the work of the UNCITRAL, UNIDROIT, and ICC.
14
GATT
The General Agreement on Tariffs and Trade (GATT), signed on October 30, 1947,
by 23 countries, was a legal agreement minimizing barriers to international trade
by eliminating or reducing quotas, tariffs, and subsidies while preserving significant
regulations. The GATT was intended to boost economic recovery after World War
II through reconstructing and liberalizing global trade.
The GATT went into effect on January 1, 1948. Since that beginning it has been
refined, eventually leading to the creation of the World Trade Organization (WTO)
on January 1, 1995, which absorbed and extended it. By this time 125 nations were
signatories to its agreements, which covered about 90% of global trade.
WTO
Created in 1995, and headquartered in Geneva, Switzerland, the World Trade
Organization (WTO) is an international institution that oversees the global trade
rules among nations. It superseded the 1947 General Agreement on Tariffs and
Trade (GATT) created in the wake of World War II.
The WTO is based on agreements signed by the majority of the world’s trading
nations. The main function of the organization is to help producers of goods and
services, as well as exporters and importers, protect and manage their businesses.
The WTO is essentially an alternative dispute or mediation entity that upholds the
international rules of trade among nations. The organization provides a platform
that allows member governments to negotiate and resolve trade issues with other
members.
15
As of 2021, the WTO has 164 member countries, and 25 “observer” countries and
governments. 6
The Dispute Settlement Body (DSB) is an authority set up under the WTO
Agreement art IV and the Understanding on Rules and Procedures Governing
the Settlement of Disputes (referred to as the DSU). It is responsible for
enforcing the DSU. It may have its own chairperson and formulate procedural
rules for the purpose of implementing the DSU. It is theoretically subordinate to
the General Council, but in fact has the same membership.
The DSB provides general procedures or rules for settling disputes. In broad
terms, the dispute settlement procedures are: consultations, good offices,
conciliation or mediation, and panel proceedings. Panel proceedings are
different from arbitration proceedings. The jurisdiction of a panel proceeding is
compulsory, in the sense that a respondent does not have the power or the right
to block the proceeding once the DSB has accepted an applicant’s request for
setting up a panel. In comparison, an arbitration proceeding, in most cases, will
be based on an agreement of the parties.
Advantages and Disadvantages of the World Trade Organization (WTO)7

The history of international trade has been a battle between protectionism and
free trade, and the WTO has fueled globalization, with both positive and adverse
effects. The organization’s efforts have increased global trade expansion, but a side
effect has been a negative impact on local communities and human rights.
Proponents of the WTO, particularly multinational corporations (MNCs), believe

that the organization is beneficial to business, seeing the stimulation of free trade
and a decline in trade disputes as beneficial to the global economy.
Skeptics believe that the WTO undermines the principles of organic democracy and
6
Mo, John Shijian (2015) International Commercial Law. 6th edition, Australia, LexisNexis Butterworths. P.667
7
Cf. All Answers ltd, 'Advantages and Disadvantages of the WTO for Developing Nations' (Lawteacher.net, January
2022)
16
widens the international wealth gap. They point to the decline in domestic
industries and increasing foreign influence as negative impacts on the world
economy. 8
WTO has rules which favour multinationals. For example, 'most favoured
nation' principle means countries should trade without discrimination. This has
advantages but can mean developing countries cannot give preference to local
contractors, but may have to choose foreign multinationals - whatever their
history in the area is.
Harmonization of International Trade Law

With the increased business between companies in different nations, the plurality
of legal systems and the variations in liability schemes, the need for increased
harmonization of commercial laws has become apparent.
Several international organizations, such as the United Nations Commission on

International Trade Law (UNCITRAL) and the International Institute for the
Unification of Private Law (UNIDROIT), took on the task of addressing various legal
aspects affecting an international commercial contract, such as carriage of goods,
sales of goods, agency, factoring and standby letters of credit using international
conventions as the preferred method for achieving the desired harmonization.
Alongside these organizations, the International Chamber of Commerce (ICC) also

plays a dominant role in ensuring a level of harmonization through the formulation
of rules for incorporation by those engaged in international business transactions.
8
https://www.investopedia.com/terms/w/wto.asp
17
UNCITRAL
A legal body with universal membership specializing in commercial law reform
worldwide for over 50 years, UNCITRAL’s mandate is to further the progressive
harmonization and modernization of the law of international trade by preparing
and promoting the use and adoption of legislative and non-legislative instruments
in a number of key areas of commercial law.
Those areas include dispute resolution, international contract practices, transport,

insolvency, electronic commerce, international payments, secured transactions,
procurement and sale of goods.
The Convention on International Sales of Goods 1980 CISG is considered one of the
greatest achievements of UNCITRAL.
UNIDROIT
UNIDROIT, formally, the International Institute for the Unification of Private Law;
French: Institut international pour l'unification du droit privé, is an independent
intergovernmental organization whose objective is to harmonize international
private law across countries through uniform rules, international conventions, and
the production of model laws, sets of principles, guides and guidelines.
Established in 1926 as part of the League of Nations, it was reestablished in 1940

following the League's dissolution through a multilateral agreement, the UNIDROIT
Statute. As of 2021 UNIDROIT has 63 member states.
UNIDROIT has prepared multiple conventions, but has also developed soft law
instruments. An example is the UNIDROIT Principles of International Commercial
Contracts. Distinctly different from the Convention on the International Sale of
18
Goods (CISG) adopted by UNCITRAL, the UNIDROIT Principles do not apply as a
matter of law, but only when chosen by the parties as their contractual regime.
ICC
The International Chamber of Commerce is the largest, most diverse business
organization in the world. The ICC has hundreds of thousands of member
companies from more than 100 countries with broad business interests9.
It aims to foster international trade and commerce to promote and protect open
markets for goods and services and the free flow of capital.
Because members of the ICC and their associates engage in international business,
the ICC has unparalleled authority in setting rules that govern cross-
border business. While these rules are voluntary, thousands of daily transactions
abide by the ICC-established rules as part of regular international trade.
The Uniform Customs and Practice for Documentary Credits (UCP), International
Standard Banking Practice (ISBP) and International Rules for the Interpretation of
Trade Terms (INCOTERMS) are well-known formulations emanating from the ICC.
9
https://www.investopedia.com/terms/i/international-chamber-of-commerce-icc.asp
19
Useful Definitions
Barrier (n.): something that prevents something else from happening or makes it
more difficult.
Quota (n.): a fixed, limited amount or number that is officially allowed.
Subsidy (n.): money given as part of the cost of something to help or encourage it
to happen.
Liberalize (v.): to allow more freedom in laws, systems, or opinions. Noun:

liberalization.
Insolvency (n.): the condition of not having enough money to pay debts, buy
goods, etc.
Intergovernmental (adj.): between two or more governments.
Instrument (n.): a legal document.
Capital (n.): money that is used for investment or for starting a business.
Cross-border (adj.): between different countries.
20
Exercise 2: Choose the suitable phrase from column 2 to complete the sentence
from column 1.
1 2
1. The GATT was intended to boost a. some of the disadvantages of the WTO.
economic recovery after World
War II…
2. UNIDROIT… b. in the field of international trade law.
3. The WTO is an alternative dispute c. is an independent intergovernmental
or mediation entity… organization
4. The decline in domestic industries d. through reconstructing and liberalizing
and increasing foreign influence global trade.
are…
5. The UNCITRAL is the core legal e. It allows member governments to
body of the United Nations negotiate and resolve trade issues with
system… other members.
21
References
- Mo, John Shijian (2015) International Commercial Law. 6th edition, Australia,
LexisNexis Butterworths. P.667
- Cf. All Answers ltd, 'Advantages and Disadvantages of the WTO for Developing
Nations' (Lawteacher.net, January 2022)
- https://www.investopedia.com/terms/w/wto.asp
- https://www.investopedia.com/terms/i/international-chamber-of-
commerce-icc.asp
22
Chapter Three: The Convention on International
Sales of Goods 1980 CISG
Unit 1: Introduction, Structure and Application
Unit 2: Formation of a Contract
Unit 3: Performance of Contract
Unit 4: Remedies
23
Unit 3.1: Introduction, Structure and Application
Keywords
Contract, multilateral treaty, uniform, adopt, legal system, membership, buyer,

seller, sphere, provision, application, place of business, parties, conflicts rules,
exclude, autonomy, override, restriction, consumer, auction, execution sale,
validity, liability, entry into force.
Learning Objectives
1. Recognize the background of the United Nations Convention on Contracts for

the International Sale of Goods 1980 (CISG).
2. Identify the structure of the CISG.
3. Explain the conditions for the application of the CISG.
4. List the areas where the CISG does not apply.
24
3.1.1 Introduction
The United Nations Convention on Contracts for the International Sale of Goods
1980 (CISG), also known as the Vienna Convention, is a multilateral treaty that
establishes a uniform framework for international commerce. It was adopted by
the United Nations Conference on Contracts for the International Sale of Goods on
11 April 1980 in Vienna, and entered into force on 1 January 1988. As of 2021, the
CISG has been adopted by 94 states representing two-thirds of world trade.
The CISG is rooted in two earlier international sales treaties first developed in 1930
by the International Institute for the Unification of Private Law (UNIDROIT) – the
Convention relating to a Uniform Law on the Formation of Contracts for the
International Sale of Goods (ULF) and the Convention relating to a Uniform Law for
the International Sale of Goods (ULIS) – neither of which garnered widespread
global support.10
The United Nations Commission on International Trade Law (UNCITRAL) drew from
the existing texts to develop the CISG. The resulting text provides a careful balance
between the multiple legal systems and traditions represented by the UNCITRAL
membership, as well as the interests of the buyer and the seller.
3.1.2 Structure
The Vienna Convention is comprised of four parts:
• Part I (Arts 1–13) on sphere of application and general provisions;

• Part II (Arts 14–24) on formation of contract;
10
https://legal.un.org/avl/ha/ccisg/ccisg.html
25
• Part III (Arts 25–88) on obligations of the seller, the buyer, remedies for breach
of contract by seller and buyer, passing of risk and damages; and
• Part IV (Arts 89–101) on final provisions dealing with matters such as
reservations, declarations and entry into force.
3.1.3 Application
The Vienna Convention applies if:
• the parties to the contract have their places of business in different states;
• either both parties to the contract have their places of business in countries
that are members of the Convention, or the Convention is applicable as a result
of the operation of conflicts rules, even though only one or neither party is from
a contracting country;
• and the subject matter of the contract, or the particular issue to be dealt with
by a court of law, does not fall under one of the exceptions to the application
of the Convention, such as those stated in arts 3–5.
The Convention, however, allows parties to exclude or vary the effect of its
provisions. Parties have autonomy to tailor the provisions of the Convention
according to their needs, and to override the effect of those provisions that a party
does not favour, and to exclude the application of the Convention in total if they
so wish.11
11
Mo, John Shijian (2015) International Commercial Law. 6th edition, Australia, LexisNexis Butterworths. P.85-86
26
In an Italian case, Rheinland Versicherungen v srl Atlarex and Allianz Subalphina spa
(CLOUT Case 378), the court took the view that, while the parties are free to exclude
the application of the CISG either expressly or implicitly, a mere reference to
domestic law is not itself sufficient to exclude the CISG. This means that, for art 6 to
operate, the parties must first be aware that the CISG would apply and then intend
to exclude its application. Therefore, the US court has taken a position that any
exclusion of the CISG must be explicit to be effective under art 6.
3.1.3. Restrictions on the application of the Convention

The Convention does not apply to:
• A sale of consumer goods (goods bought for personal, domestic or household

use) if the seller knew or ought to have known that the goods were purchased
as consumer goods: art 2(a).
• A sale at an auction or any sale based on authority of law, such as a sale in
execution of a court order: art 2(b) and (c).
• Sales of stocks, shares, investment securities, negotiable instruments, money,
ships, vessels, hovercraft, aircraft or electricity: art 2(d), (e) and (f).
• Any contract for the processing of goods, or contract for the supply of skills,
labour or services: art 3.
• Any legal issue concerning the validity of a contract or of its terms, even if the
Convention may govern the contract concerned: art 4(a).
• Any legal issue concerning the effect of passing of property under a contract,
even though the Convention may govern the contract concerned: art 4(b).
• The liability of the seller for death or personal injury caused by goods that are
sold under a contract governed by the Convention: art 5
27
• Any contracts or issues if the parties have excluded the application of the
Convention under the CISG art 6.
Examples:
• Oberster Gerichtshof (10 Ob 1506/94, CLOUT Case 190), dismissed an action
brought by a Swiss buyer of a Lamborghini Countach against an Austrian seller
under the Convention.
• In Viva Vino Import Corporation v Farnese Vini Srl, the US District Court, Eastern
District of Pennsylvania, held that the CISG did not apply to the three agreements
in dispute (an exclusive distributorship agreement; an agreement granting the
plaintiff a 25 per cent interest in the defendant; and a sales commission
agreement) because none of them directly involved the sale of goods.
28
Useful Definitions
Contract (n.): a formal agreement between two different people or groups. Verb:
to contract.
Treaty (n.): a written agreement between two or more countries, formally

approved and signed by their leaders.
Uniform (adj.): the same; not changing or different in any way.
Provision (n.): a statement in an agreement or a law that a particular thing must

happen or be done.
Party (n.): one of the people or groups of people involved in an official argument,
arrangement, or similar situation.
Autonomy (n.): the ability to make decisions without being controlled by anyone
else.
Consumer (n.): a person who buys goods or services for their own use.
Auction (n.): a public sale in which goods or property are sold to the person who
offers the most money.
Validity (n.): the state of being officially true or legally acceptable. Adjective: valid.
Liability (n.): legal responsibility for something. Adjective: liable.
Execution sale: a sale under a statutory power made by government officer by

authority of law.
Entry into force: Coming into legal effect of an international agreement, i.e. time
at which an international agreement becomes legally binding for the States that
have signed it.
29
Exercise 3.1: Decide whether the following statements are true (✓) or false (X):
1. The Vienna Convention entered into force in 1980. (-----)

2. Auction and execution sales do not fall within the scope of the (-----)
Vienna Convention.
3. The Vienna convention does not apply unless both parties have (-----)
their places of business in contracting countries.
4. A consumer is someone who buys goods or services the purpose (-----)
of reselling them.
5. The Vienna Convention is not concerned with legal issues (-----)
related to validity of a contract.
30
Unit 3.2: Formation of a Contract
Keywords
Formality of contract, requirement, witnesses, reservation, offer, acceptance,

consideration, proposal, intention, offeror, offeree, bound, expressly, implicitly,
price, effective, withdraw, communication, revocation, inference, reject, lapse,
effective, ineffective, statement, assent, reasonable time, notice, respond,
counter-offer, terminate, modification, quality, quantity, delivery, objection,
freedom of contract, fundamental breach, innocent party, detriment, deprive,
party in breach, foresee, reasonable person, objective, subjective, mental element.
Learning Objectives
1. Identify issues related to formality of contract under the CISG.

2. Explain what forms an offer under the CISG.
3. Discuss the revocation of an offer under the CISG.
4. Indicate how and when an offer is rejected.
5. Describe the manner and time of acceptance.
6. Distinguish between a counter-offer and a modified acceptance.
7. Define a fundamental breach of contract under the Convention.
31
3.2.1. Formality of contract
Articles 11 and 14-24 regulate issues of formality of contract.
Although a written contract certainly has advantages over an oral contract in

securing the interests of contracting parties, art 11 permits contracts to be made
in various forms and states that a contract of sale need not be concluded in, or
evidenced by, writing and is not subject to any other requirement as to form. It
may be proved by any means, including witnesses. A number of contracting
countries made reservations to exclude the effect of this provision.
The Vienna Convention adopts the traditional offer–acceptance framework for

determining the existence of a contract. Consideration, a concept found in
common law, plays no role.12
Example: In a case, decided by the Metropolitan Court of Hungary

(CLOUT Case 143), the Swedish seller sued the Hungarian buyer for the
unpaid price of the goods delivered. The buyer contested the existence of a
valid contract of sale. The court noted that Sweden had made a reservation
against Pt II at the time of ratification, and thus applied the conflict of laws
rules adopted by the Hungarian court in order to determine the governing
law of the case. Subsequently, the court found that the Swedish law was
applicable with regard to the formation of the contract in dispute. Under the
Swedish Act No 28 of 1915, a contract must be concluded in writing. The
court found that the contract in question had, in fact, been concluded in
writing, and thus was valid under Swedish law. On that basis, the court
applied the Convention to find the buyer liable for the unpaid price of the
contract. This approach is reasonable, because it gives due respect to the
reservation made by Sweden against Pt II.
12
Mo, John Shijian (2015) International Commercial Law. 6th edition, Australia, LexisNexis Butterworths. P.102-
105
32
3.2.2 The offer
Under the Convention art 14(1), an offer is a ‘proposal for concluding a contract
addressed to one or more specific persons’. It must be ‘sufficiently definite and
indicate the intention of the offeror to be bound in case of acceptance’.
This means that if a proposal clearly describes the goods and expressly or implicitly
refers to the quantity and price of the goods (for example, making provision for
determining the quantity and price of the goods), the proposal would be sufficient
to be an offer under the Convention if it suggests that the person intends to be
bound by it in case of acceptance.
Article 15(1) provides that the time that an offer becomes effective is the time
when the offer reaches the offeree. It follows that art 15(2) allows the offeror to
withdraw any offer, as long as the withdrawal reaches the offeree before or at the
same time as the offer.
Article 15 should be read together with art 24, which allows the parties to use any
means of communication to make or to accept an offer.
Example: In a case arbitrated by the Russian Federation Chamber of Commerce

and Industry (Case No 309/1993, 3 March 1995, CLOUT Case 139) the
arbitration tribunal denied the existence of any contract of sale between an
Austrian company (the alleged buyer) and a Ukrainian company (the alleged
seller), on the ground that the original offer, made in the form of a telex from
the Ukrainian company, did not contain any information on the price of the
goods.
The parties later agreed by telex that the price of the goods should be decided
10 days prior to the beginning of the new year, but the agreement neither fixed
a price nor provided any rules for determining the price. In addition, the tribunal
held that the Convention art 55, which permits the price of the goods to be
determined according to the relevant market price unless the parties have
agreed otherwise, to be inapplicable because, in the view of the tribunal, the
agreement to determine the price at a later time indicated the parties’
objection to the operation of art 55.
33
3.2.3 Revocation of an offer
Under art 15, an offeror can change his or her mind and withdraw an offer before
the offer reaches the offeree. Under art 16, the offeror can also change his or her
mind and revoke an offer before it is accepted. The general rule for revocation of
an offer under art 16 is that a revocable offer can be revoked at any time before
acceptance, but the revocation must reach the offeree before the offeree
dispatches an acceptance.
Article 24, which allows the use of any means of communication, is also relevant
to art 16. The general rule of revocation does not apply to an irrevocable offer.
Under art 16(2), an offer can be irrevocable either expressly or by implication. An
expressly irrevocable offer contains terms that suggest a fixed time for acceptance
or an undertaking not to revoke the offer before a fixed or determinable time. An
implicitly irrevocable offer is established by an inference of irrevocability drawn
from the circumstances involved; the offeree must have reasonably relied on this
inference.13
3.2.4 Rejection of an offer

If an offer is revoked, the offeror is not bound by it. If an offer is irrevocable, the
offeror is bound by the offer until such time as the offeree has done something
that is not consistent with the offeree’s rights under the offer, the offer has been
rejected, the offer has lapsed, or no contract is formed on the basis of the offer,
for whatever reasons.
A rejection is an indication by the offeree that he or she will not accept the offer.
It can be an express indication of the offeree’s intention to reject the offer; any
13
34
reply to an offer that contains terms substantially different from the offer also
constitutes a rejection to the original offer under art 19.
An offer is terminated when it is rejected. Article 17 provides that a rejection

becomes effective when the rejection reaches the offeror. This implies that the
offeree is able to accept the offer or withdraw the rejection if the acceptance or
withdrawal of the rejection reaches the offeror before the rejection.
3.2.5 Acceptance
Two issues are involved: the manner of acceptance and the time of acceptance.
The manner of acceptance is defined in the Convention art 18(1) and (3). Under art
18, an acceptance can be either a statement or an act of the offeree ‘indicating
assent to an offer’. Article 18 expressly says that silence or inactivity ‘does not in
itself amount to acceptance’. The expression ‘in itself’ in this provision means that
silence or inactivity alone does not amount to acceptance, unless the
circumstances described in art 18(3) occur.
The time of acceptance is set out in arts 18(2) and (3). Under art 18(2), notice of
acceptance must reach the offeror within a fixed time or a reasonable time.
‘Reasonable time’ should be determined by taking into account the circumstances
of the transaction, and the means of communication employed by the offeror
(only). This requires the offeree to respond to the offer in a manner and at a speed
similar to that with which the offer is made. However, a late acceptance may be
accepted at the offeror’s option under art 21.
An acceptance can be withdrawn under art 22 at any time before the acceptance
reaches the offeror. This article is similar to art 15, providing that an acceptance is
35
regarded as having been withdrawn if the withdrawal reaches the offeror at the
same time as the acceptance.
3.2.6 Counter-offer and modified acceptance

Under the Convention, an offeree can respond to an offer in five different ways.
The offeree can respond with:
• an acceptance;
• a modified acceptance (an acceptance with modifications that are not

materially different from the terms of the offer);
• a counter-offer;
• a rejection; or
• silence (no response), which amounts to rejection in most circumstances but

may be regarded as acceptance in special circumstances.
While an acceptance indicates the formation of a contract, rejection terminates

the offer and silence would normally render the offer ineffective.
Article 19 distinguishes between a counter-offer and a modified acceptance. A

counter-offer is a reply that ‘contains additions, limitations or other modifications’
to the terms relating to the price, quality or quantity of the goods, the place and
time for delivery, and the liabilities of the parties. If the terms of the offer have
been materially changed, the reply amounts to a counter-offer. By contrast, a
modified acceptance is a reply containing additions or limitations that do not
materially alter the terms of the offer.
36
art 19(2) gives the offeror an option to reject any additions or limitations
immediately, or to accept them by raising no objection.
Under art 23, a contract is concluded at the moment when the acceptance of an
offer becomes effective in accordance with arts 18, 19(2) and 21.
After the conclusion of a contract, the parties may wish to modify the terms or
terminate the contract by agreement. This frequently takes place in commercial
transactions. The right of the parties to modify or terminate a contract is consistent
with the principle of freedom of contract, and is expressly set out in art 29.14
Example: Article 18(3) is illustrated by a German decision,

Oberlandesgericht Hamm (19U 97/91, 22 September 1992, CLOUT Case
227). In that case, a German buyer offered to purchase a specific type of
bacon from an Italian seller, who responded to the buyer’s offer by
agreeing to sell a different type of bacon. The buyer did not object to the
change. After having accepted four consignments of goods, the buyer
refused to take further deliveries. The court held that, under the
Convention art 18(3), a valid contract of sale had been concluded
between the parties.
14
111
37
3.2.7 Fundamental Breach
The meaning of ‘fundamental breach’ under the Convention can be understood in
two ways:
First, as in most provisions of the Convention, the parties are able to define the
meaning of ‘fundamental breach’ in their contract. This can be done by defining a
situation in which a contract can be avoided as a result of the other party’s breach,
or by defining a situation in which the breach of a term will give the innocent party
the right to terminate the contract.
Second, in the absence of the parties’ own definition of a ‘fundamental breach’,

the Convention art 25 applies. In such cases, the definition of a ‘fundamental
breach’ will be relied upon to determine the operation of arts 49 and 64, which
allow the innocent party to avoid a contract on the ground of a fundamental
breach.
‘Fundamental breach’ is defined in the Convention art 25 as follows:
A breach of contract committed by one of the parties is fundamental if it results in

such detriment to the other party as substantially to deprive him of what he is
entitled to expect under the contract, unless the party in breach did not foresee
and a reasonable person of the same kind in the same circumstances would not
have foreseen such a result.
The criteria for determining a fundamental breach based on this provision are:
First, a fundamental breach is determined by looking at the result of the breach,

rather than the nature of the term breached. A fundamental breach should be
determined by examining whether the innocent party has been ‘substantially’
38
deprived of interests and rights that he or she can legitimately expect to have
under the contract concerned. This means that an objective test, rather than a
subjective test, must be adopted to establish a fundamental breach under the
Convention.
Second, the detrimental effect of the breach must be foreseeable by the breaching
party. This means that a substantial deprivation of the innocent party’s interest
and benefit under the contract does not amount to a fundamental breach if the
party in breach did not foresee or ought not to have foreseen the potentially
detrimental effect of the breach at the time it was committed (or, arguably, at the
time of contract). This qualification introduces a mental element into the concept
of fundamental breach under the Convention.
39
Useful Definitions
Consideration (n.): something with financial value that is given in exchange for
something else.
Intention (n.): something that you want and plan to do.
Offeror (n.): the party who makes the offer.
Offeree (n.): the party who receives the offer.
Expressly (adv.): in a way that is clear.
Implicitly (adv.): in a way that is suggested but not communicated directly.
Notice (n.): information or a warning given about something that is going to

happen in the future.
Withdraw (v.): to take or move out or back, or to remove.
Detriment (n.): harm or damage.
Foresee (v.): to know about something before it happens. Adjective: foreseeable.
Breach (n.): an act of breaking a law, promise or agreement.
Lapse of offer: The termination of an offer as a result of the passage of time, death,
or the non-fulfilment of a condition.
Reasonable time: the amount of time which is fairly necessary, conveniently, to do

whatever is required to be done, as soon as circumstances permit.
Reasonable person: a hypothetical individual who approaches any situation with

the appropriate amount of caution and then sensibly takes action.
40
Freedom of contract: The ability of parties to bargain and create the terms of their
agreement as they desire without outside interference from government.
Innocent party: someone who has been harmed by another.
Party in breach: the party who has caused a breach of any of the terms contained
in an agreement.
Objective standard: a standard that is based on factual measurements, in the

absence of a biased judgement or analysis.
Subjective standard: a standard that asks the fact-finder to determine what the
actor actually believed or actually intended regarding his or her actions.
41
Exercise 3.2: Choose the best answer from the four choices a, b, c, or d to complete
each sentence.
1. The CISG allows (a/an) ------ form(s) of contract.
a. oral b. written c. both a & b d. none
2. The offer must be sufficiently definite and indicate the intention of the offeror
to be bound in case of ------.
a. acceptance b. rejection c. withdrawal d. lapse
3. The general rule of revocation does not apply to (a/an) ----- offer.
a. rejected b. accepted c. irrevocable d. both b & c
4. A ----- is an indication by the offeree that he or she will not accept the offer.
a. acceptance b. rejection c. lapse d. revocation
5. A contract is ----- at the moment when the acceptance of an offer becomes

effective.
a. concluded b. terminated c. void d. cancelled
42
Unit 3.3: Performance of Contract
Keywords
Performance, passing of property, passing of risk, carrier, carriage of goods, agent,

document of title, indorsee, consignees, bill of lading, prevail, obligation, deliver,
hand over, conformity, guarantee, conformity of goods, property, description,
contained, packaged, place for delivery, stock, payment of the price, physical
delivery, constructive delivery, certificate of origin, customs clearance, stipulate,
tender, guarantee, sample, adequate, preserving, protecting, fitness, destination,
examine, non-conformity, defect, payment, price, place of payment, compliance,
formality, take delivery.
Learning Objectives
1. Explain the issues involved in the performance of contracts under the CISG.
2. Identify the seller's obligations under the convention.
3. Decide the place of delivery based on the CISG.
4. Determine the time of delivery under the convention.
5. Discuss rules related to the delivery of documents.
6. Examine cases where the goods do not conform, and learn related rules.
7. Recognize the buyer's obligations under the convention.
43
3.3.1 Introduction
Performance of a contract for the international sale of goods involves the same
issues as performance of a contract for domestic sale. We have to deal with the
duties and rights of the buyer and seller, the delivery of goods and the passing of
property and risk, among other issues. However, in an international sale, the
interests of third parties such as carriers, agents and ‘sub-buyers’ (persons who
obtain a document of title, bill of lading or delivery order from the original buyer
to the contract, such as indorsees or consignees) may be involved.
The CISG only deals with contracts between buyers and sellers from two different
countries. The provisions concerning performance of contracts under the
Convention deal only with the performance of contracts by the buyer or seller.
Therefore, if a contract of sale incorporates Incoterms® 2020, the liabilities of the
parties under such a contract must be interpreted in the combined light of the
Incoterms and the relevant provisions of the Convention. In the case of
inconsistency between Incoterms® 2020 and the provisions of the Convention, the
Incoterms will prevail because the incorporation of an Incoterm should be treated
as an express agreement of the parties to modify the effect of the relevant
provisions of the Convention.
3.3.2 The Seller’s Obligations

The seller has two basic obligations under the Convention:15
• to deliver the goods and documents in accordance with the contract: arts
30–4;
15
44
• and to guarantee the conformity of the goods with the contract: arts 35–44.
For both obligations, the terms of the contract form the basis for assessing whether
the obligation has been appropriately performed. However, certain provisions of
the Convention do impose implied obligations that can be incorporated into a
contract of sale automatically, unless expressly excluded by the parties.
That is why art 30 states that the ‘seller must deliver the goods, hand over any
documents relating to them and transfer the property in the goods, as required by
the contract and this Convention’; and art 35 provides that the ‘seller must deliver
goods which are of the quantity, quality and description required by the contract
and which are contained or packaged in the manner required by the contract’.
3.3.3 Place of Delivery

The place for delivery must be unambiguous and acceptable to both parties. While
the parties can always define the place for delivery in the contract of sale (for
example, by adopting an Incoterm), art 31 sets out the following rules for
ascertaining the place of delivery:
• First, if the contract of sale involves the carriage of goods by sea, land or air,
in the absence of any express agreement the seller is obliged to deliver the
goods only to the first carrier.
• Second, If the contract of sale does not involve carriage of goods, and where
the contract relates to specific goods, or unidentified goods to be drawn
from a specific stock or to be manufactured or produced, and the parties
knew that the goods were at a particular place or to be manufactured at a
particular place, delivery takes place when the goods are placed at the
buyer’s disposal at that place.
45
• Third, in cases that do not fall into the above two situations, in the absence
of any express agreement otherwise, the place of delivery is the place where
the seller had his or her place of business at the time when the contract was
made.
3.3.4 Time of Delivery

Time for delivery determines when the goods pass from the seller to the buyer.
The property and risk in the goods usually pass from the seller to the buyer at the
time of delivery.
The Convention art 33 sets out rules for determining the time of delivery. Three
conditions are stipulated:
• First, if a particular date is fixed by, or determinable from, the contract of

sale, the goods must be delivered on that date.
• Second, if a period of time is fixed by, or determinable from, the contract,

the goods can be delivered at any time within that period, unless
‘circumstances’ indicate that the buyer is to choose a date within that period
of time.
• Third, if a date or a period of time is neither fixed nor determinable in the

contract, the goods must be delivered within a reasonable time after the
conclusion of the contract. What constitutes a ‘reasonable time’ is to be
determined in the circumstances involved, taking into account the nature of
the goods and the customs, usage and practices established in the trade and
by the course of dealings between the parties.
46
3.3.5 Delivery of Documents
The delivery of documents differs from the delivery of goods, because, in most
international sales, goods and documents are delivered separately. The delivery of
documents is often part of the process of the payment of the price. The Convention
art 34 specifically deals with the delivery of documents.
Article 34 states that if the seller is liable to ‘hand over documents relating to the
goods, he must hand them over at the time and place and in the form required by
the contract’. It must be pointed out that the expression ‘hand over’, rather than
‘deliver’, is used in this provision. This suggests that delivery of documents under
art 34 refers to physical delivery, because the phrase ‘hand over’ may not be
capable of including constructive delivery.
Article 34 sets out the requirements for handing documents over, requiring the
seller to hand the documents over ‘at the time and place and in the form required
by the contract’. It may be argued that if the contract of sale does not clearly
specify the time or place for handing over the documents, the seller should have
an implied obligation to hand the documents over at a time and place appropriate
to the terms of the contract.
The Vienna Convention does not list the kind of documents the seller is required
to hand over to the buyer. In international sales, it is usual for the seller to require
certificates of origin, quality, transport documents and other documents required
for customs clearance. The sale contract would stipulate the documents required.
Use of trade terms would also indicate the minimum requirements in respect of
documents to be tendered to the buyer.
47
3.3.6 Conformity of the Goods
‘Conformity of the goods’ has two meanings under art 35. Under art 35(1), when
the parties to a contract expressly describe the quality, quantity, fitness and the
manner or standard of packaging, ‘conformity of the goods’ means conformity with
the terms of the contract.
Under art 35(2), when the parties have not expressly agreed on the matters set out
in art 35(1), or expressly excluded guarantees of the matters specified in art 35(2),
there are implied terms in the Convention to the effect that the goods must be fit
for the purpose for which the goods are acquired; of such a quality as ‘goods of the
same description would ordinarily’ be expected to be; of the same quality as the
sample, if there was a sample; and packed in a reasonable manner adequate for
preserving and protecting the goods. Article 35(2) imposes the implied terms as to
fitness, quality, conformity with sample and adequate packaging upon the seller.
In order to determine whether the goods conform to the contract or the

Convention, the Convention gives the buyer a right to have a fair opportunity to
examine the goods. Article 38 sets out the following rules for examining the goods:
• the buyer is obliged to examine the goods as soon as practicable after the
goods are at his or her disposal in the circumstances concerned: art 38(1)
• when the sale involves the carriage of goods by sea, land or air, the buyer
should examine the goods as soon as practicable after the goods have
arrived at their destination: art 38(2); and
• when the goods have to be redirected or re-dispatched before the buyer is

able to examine them and the seller knew or ought to have known of this,
48
the buyer should examine the goods as soon as practicable after the goods
have arrived at the new destination: art 38(3).
The opportunity to examine the goods is important because the buyer is expected
to discover any non-conformity pursuant to art 35 at the time of examination. If
the buyer fails to discover defects in the goods which should have been discovered,
he or she will be likely to lose the right to rely on a lack of conformity under art 39,
which requires the buyer to give adequate notice of the non-conformity within a
reasonable time after the buyer ought to have discovered the defect.
Article 39(1) requires the buyer to ‘give notice to the seller specifying the nature
of the lack of conformity within a reasonable time after he has discovered it or
ought to have discovered it’. This provision contains the following requirements:
• the buyer must give notice of the discovery of the non-conformity;
• the notice must specify the nature of the non-conformity;
• the notice must be given within a reasonable time after the buyer actually
discovered, or ought to have discovered, the non-conformity; and
• the reasonable time is determined in the circumstances concerned, by

taking into account arts 36 and 38, any common business practices and any
previous dealings between the parties.
49
In a Chinese case, Shen Zhen Fengshen Industry Development Co v Inter Service
Internation France, a court in Wuhan decided that the sales contract between a
French seller and a Chinese buyer contained the CIF Hong Kong terms and thus
the buyer should inspect the goods in Hong Kong. Since the buyer was unable to
provide a copy of the inspection report of Shenzhen Customs, which was the
entry port the buyer must pass through when transporting the goods from Hong
Kong to Mainland China, the buyer was unable to prove that the goods were
defective when delivered at Hong Kong.
For a number of reasons, including the failure to provide the required
inspection report, the buyer was ordered to take responsibility for about 40
per cent of the loss claimed even though a customs report later obtained
from an inland local custom showed inadequate packaging of some of the
goods delivered.
3.3.7 The Buyer’s Obligations

The buyer under the Convention has two basic obligations:16
• to pay the price of the goods; and
• to take delivery of the goods.
Article 54 provides that the buyer’s obligation to pay the price of the goods
includes an obligation to take such steps or comply with such formalities as are
required by the contract, and any laws and regulations to enable the payment to
be made.
Article 55 sets out rules for determining the price of the goods when the contract
fails to fix the price, or to make a provision expressly or implicitly for the
determination of the price. A contract without the price or a provision for
16
50
determining the price is possible because domestic law may have different rules
for the making of contracts.
Article 55 provides a presumed intention of the parties to contract at ‘the price

generally charged at the time of the conclusion of the contract for such goods sold
under comparable circumstances in the trade concerned’, unless the parties have
agreed otherwise.
In a case arbitrated by the Russian Federation Chamber of Commerce

and Industry (Case No 309/1993, 3 March 1995, CLOUT Case 139), the
arbitration tribunal decided that art 55 was not applicable because
the parties had agreed that the price of the goods was to be
determined 10 days prior to the New Year. The said agreement to fix
the price of the goods in the future was regarded by the tribunal as
an intention not to use the market price to fix the price of the
goods under art 55.
Article 57 sets out the following rules for determining the place of payment:
• the parties can determine the place of payment in the contract; in the
absence of any agreement, the place of payment is the seller’s place of
business;
• if payment is made against the handing over of the goods, the place of
payment is the place where the goods are handed over to the buyer;
• if the payment is made against the handing over of the documents, the place
of payment is the place where the documents are handed over to the buyer,
or his or her agent; and
• if the seller’s place of business is chosen as the place of payment either by

the parties’ express intention or their omission, and the seller has changed
51
his or her place of business after the conclusion of the contract, the seller is
liable for the additional costs of making the payment at his or her present
place of business.
Article 59 says that the buyer ‘must pay the price on the date fixed by or
determinable from the contract and this Convention without the need for any
request or compliance with any formality on the part of the seller’.
Article 58 sets out the following rules for ascertaining the time of payment, which
are applicable in the absence of a contrary intention of the parties to the contract:
• if the buyer is not bound to pay the price at a fixed time, he or she must pay
it at the time when the seller places the goods or documents (whichever is
earlier) at the buyer’s disposal in accordance with the contract or the
Convention;
• if the sale involves carriage of the goods by sea, land or air, the seller is
entitled to require the buyer to pay the price of the goods against the
handing over of the goods or documents to the buyer or his or her agent;
and
• in the absence of an agreement between the parties, the buyer is entitled to

have an opportunity to examine the goods under art 38 and is not obliged
to pay the price until the time of examination.
Article 60 sets out the buyer’s obligation to take delivery as follows:
• the buyer is obliged to take over the goods in accordance with the contract
and the Convention; and
52
• the buyer is obliged to do all the acts that he or she is reasonably expected
to do for the purpose of enabling the seller to make delivery in accordance
with the contract and the Convention.
• The buyer’s obligation to take delivery is subject to the seller’s adequate

performance of the contract. For example, art 52 provides that if ‘the seller
delivers the goods before the date fixed, the buyer may take delivery or
refuse to take delivery’. In this case, the obligation to take delivery does not
arise because the seller has not performed his or her obligations adequately.
53
Useful Definitions
Indorsee (n.): The person in whose favor an indorsement is made.
An indorsement on a negotiable instrument, such as a check or a promissory note,

has the effect of transferring all the rights represented by the instrument to
another individual.
Consignment (n.): The delivery of goods to a carrier to be shipped to a designated

person for sale.
Destination (n.): the place where someone is going or where something is being
sent or taken.
Defect (n.): a fault that spoils something or causes it not to work correctly.
Compliance (n.): the act of obeying an order, rule, or request.
Document of title: a legal document that proves that someone owns property or
goods or has the right to take control of it or them
Bill of lading: a detailed list of a shipment of goods in the form of a receipt given
by the carrier to the person consigning the goods.
Physical delivery: actual delivery when the goods are physically handed over by
the seller to the buyer.
Constructive delivery: In constructive delivery the individual possessing the

products recognizes that he holds the merchandise for the benefit of, and at the
disposal of the purchaser.
Certificate of origin: a document declaring in which country a commodity was

manufactured.
54
Exercise 3.3: Fill in the spaces with the suitable term:
Non-conformity – Incoterm – documents – defect – delivery
1. The property and risk in the goods usually pass from the seller to the buyer at
the time of -----.
2. The incorporation of an ----- is considered an express modification of the CISG
relevant provisions.
3. The delivery of ----- is often part of the process of the payment of the price.
4. The buyer is obliged to examine the goods in order to determine cases of -----.
5. A ----- is a fault that spoils something or causes it not to work correctly.
55
Unit 3.4: Remedies
Keywords
Perform, contractual obligation, nachfrist, specific performance, breach, suspend,

anticipatory breach, damages, interest, avoidance, price, delivery, quantity,
instalment sale, defective instalment, proviso, act or omission, misconduct,
termination, promise, enforcement, domestic law, innocent party, breaching
party, notice, fundamental breach, restitution, bound, compensate, substantial,
deficiency, creditworthiness, assurance, foreseeability, loss of profit, cure,
conformity, interest, arrears, accrue, measures, mitigation, reduction, defect,
refuse, passing of risk, liable, transmission, disposition, document of title, sold in
transit, consignee, destination, carriage, disclose, unascertained goods.
Learning Objectives
1. Distinguish the remedies available to the seller and those available to the buyer
under the convention.
2. Explain the party's right to request performance and how it differs from specific
performance.
3. Describe the remedy of fixing an additional period for performance.
4. Define the remedy of avoidance and when it can be used.
5. Discuss cases where restitution is requested and its relation to avoidance of
contract.
6. Identify when the right to suspend the contract arises and under what
conditions.
7. Explain the remedy of damages and its relation to foreseeability.
8. Identify when interest on arrears applies.
9. Explain the parties' obligation to mitigate their losses.
10.Describe the remedies special to the buyer including price reduction and refusal
of delivery.
56
3.4.1 introduction
The seller’s remedies under the Convention can be divided into the following
categories:17
• requesting the buyer to perform his or her contractual obligations under art
62;
• fixing an additional period of time for the buyer to perform (nachfrist) under
art 63;
• requesting ‘specific performance’ under arts 28 and 62;
• declaring the contract avoided under art 64;
• suspending the performance of the contract under art 71;
• avoiding the contract on the ground of an anticipatory breach under art 72;
and
• claiming damages and interest under arts 74–78.
The remedies available to the buyer under the Convention can be divided into the
following categories:18
• requesting the seller to perform his or her contractual obligations under art
46;
• fixing an additional period of time for the seller to perform (nachfrist) under
art 47;
• requesting a court to order specific performance under arts 28 and 46;
17
18
Ibid P. 171
57
• declaring the contract avoided under art 49;
• reducing the price of the non-conforming goods under art 50;
• refusing to take an earlier delivery under art 51;
• refusing to take delivery of a greater (or lesser) quantity under art 52;
• suspending the performance of a contract under art 71;
• avoiding a contract on the ground of an anticipated fundamental breach

under art 72;
• avoiding a contract in proportion to the defective instalments under art 73;

and
• claiming damages and interest under arts 74–78.
3.4.2 The proviso of no-fault

Article 80 is a proviso which says that a seller or a buyer, as the case may be, may
not rely on the other’s breach if the breach is caused by the party’s own act or
omission. Under this provision, one party’s right to rely on the other party’s breach
can be restricted in proportion to the impact of the first party’s act or omission
upon the other party’s breach. This provision is consistent with one of the basic
principles of common law — that one is not allowed to benefit from one’s own
mistake or misconduct.
58
3.4.3 The right to request performance
Both seller and buyer have a general right to require the other party to perform his
or her contractual obligations, unless the innocent party has resorted to a remedy
(such as a suspension or termination of the contract) that is inconsistent with the
exercise of this right; arts 62 and 46.
This right is different from specific performance under art 28, because art 46 allows
the party to make a request to the other party directly.
3.4.4 Specific performance

Specific performance is a contractual remedy in which the court orders a party to
actually perform its promise as closely as possible.
Articles 62 and 63 appear to give the seller a right to request specific performance.
Equally, Articles 46 and 47 allow the buyer to request the seller to perform his or
her obligations under the contract or the Convention.
However, if the seller or buyer seeks assistance from a court of law for specific
performance pursuant to art 28, then the enforcement of his or her right will be
subject to the relevant domestic law. This is because the Convention art 28 makes
specific performance by the order of the court a matter of domestic law.
3.4.5 The right to fix an additional period for performance (nachfrist)

Nachfrist is a German term describing the situation in which the innocent party
sends a final notice to the breaching party requesting him or her to perform the
contractual obligation within a specified period of time.
Articles 63 and 47 serve the same purpose.
59
Article 63 encourages the seller to give a second opportunity to the buyer for the
purpose of ensuring the performance of the contract by the parties themselves.
Article 47 gives the buyer a right to offer an additional period of time for the seller
to perform his or her obligations. This is a right because the buyer is at liberty to
do so: the ‘buyer may fix an additional period of time of reasonable length for
performance by the seller of his obligations’.
3.4.6 The right to avoid a contract

Under the CISG, avoidance is the one-sided right of a party to terminate the
contract by its mere declaration. Avoidance of the contract ‘releases both parties
from their obligations under it, subject to any damages which may be due’. The
CISG has taken into account the often-harsh consequences of a one-sided declared
termination of contract. For this reason, it provides for rather far-reaching and
strict requirements for the remedy of avoidance.
The CISG grants the remedy of avoidance in four different situations:
• first, where the seller has fundamentally breached the contract (regulated
by Article 49);
• second—in a parallel manner—where the buyer has fundamentally

breached the contract (regulated by Article 64); and
• third, in the situation that it is clear and almost certain that either the seller
or the buyer will fundamentally breach the contract (anticipatory breach
regulated by Article 72).
• The fourth situation is the case of an instalment sale. Avoidance with respect
to the single instalment is permitted if a party committed a fundamental
60
breach with respect to that single instalment; avoidance of the contract as a
whole can be claimed where the fundamental breach concerns the whole
contract (Article 73).
3.4.7 Restitution
Rules regarding restitution are set out in the Convention art 81(2), which states:
• A party who has performed the contract either wholly or in part may claim
restitution from the other party of whatever the first party has supplied or
paid under the contract. If both parties are bound to make restitution, they
must do so concurrently. This provision requires the parties to compensate
each other for the work already performed under the avoided contract.
Restitution is also a prerequisite for the buyer to declare a contract avoided. This
requirement is set out in art 82(1), which says that the buyer loses the right to
avoid a contract if he or she is unable to make restitution of the goods delivered.
However, art 83 allows the buyer to claim damages under art 74, regardless of
whether he or she has lost the right to avoid the contract.
3.4.8 The right to suspend the contract

Article 71 allows the seller or the buyer, as the case may be, to suspend the
performance of a contract if the other party appears to be unable to perform a
substantial part of his or her obligations. However, the party's inability to perform
must be supported by one of the following grounds:
• the existence of a serious deficiency in his or her ability to perform;
• the existence of a serious deficiency in his or her creditworthiness;
61
• the conduct of the party in preparing to perform; or
• the conduct of the party in performing the contract.
The party suspending a contract is required to give notice of the suspension to the
other party immediately after the suspension.
The party suspending the contract should stop suspension; i.e., resume the
performance of the contract, ‘if the other party provides adequate assurance of his
performance’.
Note: It necessary to point out that the suspension under art 71

must be reasonable in light of the other party’s breach or
anticipatory breach.
Example: In Mansonville Plastics (BC) Ltd v Kurtz GmbH, the Supreme
Court of British Columbia held that the seller’s delay for delivery was
not justifiable under art 71. The buyer’s delay in opening an LC as
agreed was not lengthy; however, the seller’s delay in delivering the
goods in question was for a period of six weeks. In the opinion of the
court, the seller’s delay was probably justified for two weeks, but was
not reasonable for the next six weeks after the initial delay of two
weeks.
3.4.9 Damages and foreseeability

The seller has a right to claim damages as a remedy under arts 74–8.
• ‘Damages’ under the Convention is defined as consisting of all losses

(including the loss of profit) that flow from the breach;
• The sum of damages is restricted by foreseeability, which means the

breaching party’s ability to foresee the extent of the damage at the time
when the contract was concluded.
62
• The right to claim damages forms a special category of remedy under the
Convention. It is special in the sense that it is always available, even if the
buyer has resorted to other remedies. For example, a buyer may request or
allow a seller to cure any lack of conformity in the goods delivered under
arts 37 and 46–48, but this does not deprive the buyer of his or her right to
claim damages under arts 74–8.
3.4.10 Claiming interest

Article 78 allows the innocent party to claim interest on any payment that is in
arrears. This provision does not expressly state how to calculate interest, failing to
stipulate such matters as the time when the interest begins to accrue and when it
stops accruing. It can be argued, however, that interest should begin to accrue
from the date when the payment becomes due and should keep accumulating until
the date when the payment is made.
This right is independent of the buyer’s or seller’s right to claim damages under art
74. Even if a contract has been performed, the buyer or the seller may still be
entitled to claim interest on the sum that became due before the contract had
been performed.
3.4.11 Mitigation of loss

The innocent party’s obligation to mitigate losses, which has also been regarded as
a right, is stated in art 77 as follows:
63
A party who relies on a breach of contract must take such measures as are
reasonable in the circumstances to mitigate the loss, including loss of profit,
resulting from the breach. If he fails to take such measures, the party in breach
may claim a reduction in the damages in the amount by which the loss should have
been mitigated.
Note: The scope of art 77 goes beyond that of arts 75 and 76. A seller under art
77 must not only resell the goods in a reasonable manner and within a reasonable
time, but also preserve and protect the goods in a reasonable manner. The
reasonableness of the measures adopted by the seller must be assessed
according to the circumstances involved.
Example: in a German case, Oberlandesgericht Dusseldorf (17 U 146/ 93, 14
January 1994, CLOUT Case 130), the court considered the lower prices at which
the shoes were sold were reasonable, because, in the Italian market, most
retailers had filled their stock in August for the coming season, and the demand
for winter shoes was lower than the time when the contract was made. This
means that the nature of the goods, the market needs, the established
commercial practice in reselling or preserving the goods of the same nature, the
buyer’s cooperation in resolving the dispute, and the seller’s capacity to control
and preserve the goods in the circumstances concerned, among other factors,
must be taken into account. The notion of contract promotion and preservation
will certainly be a consideration under art 77.
3.4.12 The buyer’s right to reduce the price

The buyer’s right to reduce the price of the goods in proportion to the degree of
non-conformity or defect in the goods is a special remedy available to the buyer
under art 50. It is different to damages enforced by a court of law because a buyer
is entitled to reduce the price pursuant to art 50 without the assistance of a court.
64
3.4.13 The buyer’s limited right to refuse delivery
Article 52(1) allows the buyer to refuse to take delivery if the goods are delivered
before the agreed date. This provision gives the buyer an option either to accept
or refuse an early delivery.
Article 52(1) provides only one specific ground for refusing to take delivery, which
is delivery before the fixed date. It can thus be argued that if the seller delivers
goods in a lesser quantity than the contract quantity on the date fixed, the buyer
cannot rely on art 52(1) to refuse to take the delivery, even though the buyer has
a right to require the seller to deliver goods in the correct quantity under art 35(1).
In such a case, the buyer’s option would lie in arts 49(1)(a) and 51(2) (avoidance of
the contract), art 47 (giving an additional time for performance), art 48 (allowing
the seller to request additional time) and arts 74–8 (claiming damages).
3.4.14 The passing of risk

The passing of risk is a vital issue in the sale of goods. It determines which of the
parties involved in a contract of sale is liable for losses incurred before the
completion of the contract.
Article 66 deals with the buyer’s duty to pay the price of the contract after the risk
has passed to the buyer. It provides that a buyer who has received the risk in the
goods is liable to pay the contract price even though the goods have been damaged
or lost, ‘unless the loss or damage is due to an act or omission of the seller’.19
Article 67(1) sets out the following rules for passing of risk in the goods to be
transported by a carrier:
19
65
• if the contract does not expressly specify a place of delivery, the risk in the
goods passes to the first carrier for transmission of the goods to the buyer
pursuant to the contract;
• if the contract specifies a place of delivery, the risk in the goods passes to
the buyer when the goods are ‘handed over’ to the carrier at that place; and
• the passing of risk is irrelevant to the seller’s ability to control the disposition
of the goods by holding the document of title over the goods.
In international sales, goods are often sold in transit by the owner of the goods to
buyers (or consignees) who may or may not have places of business in the country
of the goods’ destination. In order to facilitate such transactions, art 68 sets out
the following rules:
• the risk in the goods sold in transit passes to the buyer from the time when
the contract of sale is made;
• the risk in the goods sold in transit may pass to the buyer at the time when
the goods are handed over to the carrier ‘who issued the documents
embodying the contract of carriage’, if the circumstances so indicate; but
the risk in the goods sold in transit does not pass to the buyer if at the time
of the conclusion of the contract the seller knew or ought to have known of
the loss or damage to the goods but did not disclose this to the buyer.
Article 69 deals with the passing of risk in goods that are neither delivered to a
carrier nor sold in transit. This provision states the following rules:
• the risk passes to the buyer when he or she takes over the goods from the
seller;
66
• the risk passes to the buyer when the goods are ‘placed at his disposal’ (in a
deliverable state) in accordance with the contract or the Convention, but he
or she fails to take over the goods as required;
• the risk passes to the buyer at the agreed place ‘when delivery is due and
the buyer is aware of the fact that the goods are placed at his disposal at
that place’, regardless of whether the buyer has taken over the goods as
agreed; and
• the risk in unascertained goods does not pass to the buyer until ‘they are
clearly identified to the contract’ and placed at the disposal of the buyer as
agreed.
Note: It must be pointed out that the above rules can be overridden by the
parties concerned, and that they will certainly be overridden if any of the
Incoterms are incorporated into the contract of sale.
Example: Article 67 was applied by an Argentine court in a case involving the
sale of dried mushrooms by a German seller to an Argentine buyer under the
CFR term: Bedial, SA v Paul Muggenburg and Co GmbH (31 October 1995,
Camara Nacional de Apelaciones en lo Comercial, CLOUT Case 191). In that
case, the cargo of dried mushrooms had deteriorated during the carriage to
Buenos Aires. The court applied art 67 and decided that the risk in the cargo
had passed to the buyer when the cargo was delivered to the first carrier.
While the court’s finding that the risk had passed to the buyer was correct, its
finding that the risk had passed under art 67 was questionable, because the
CFR term has provisions to deal with the passing of risk; on this particular
point, the court incorrectly held that the CFR term does not affect the passing
of risk. In addition, the court incorrectly applied art 67 in a contract
incorporating an Incoterm, because art 67 is meant to operate only when
there is no specific term concerning delivery and passing of risk between the
parties.
67
Useful Definitions
Creditworthiness: the extent to which a person or company is considered suitable
to receive financial credit, often based on their reliability in paying money back in
the past.
Arrears: money that is owed and should already have been paid.
Compensation: money that is paid to someone in exchange for something that has
been lost or damaged or for some problem.
Deficiency: the lack of something that is needed in order to meet a particular
standard or level of quality.
Misconduct: unacceptable or bad behaviour by someone in a position of authority
or responsibility.
Damages: money that is paid to someone by a person or organization who was
responsible for causing some injury or loss.
Restitution: returning to the proper owner property or the monetary value of loss.
Interest: money that is charged by a bank or other financial organization for
lending money.
Anticipatory breach: an action that shows one party's intention to fail to fulfill its
contractual obligations to another party.
Instalment sale: a sale where fixed payments will be made regularly over a
particular period of time.
Sale in transit: an interstate sale effected by transfer of documents of title to goods
when the goods are in movement from one State to another.
Unascertained goods: Goods that are not specifically identified at the time a
contract of sale is made.
68
Exercise 3.4: Choose the suitable phrase from column 2 to complete the sentence
from column 1.
1 2
1. fixing an additional period of time a. may not rely on the other’s breach if
for the other party to perform… the breach is caused by the party’s
own act or omission.
2. The proviso of no-fault says that a b. the one-sided right of a party to
seller or a buyer… terminate the contract by its mere
declaration.
3. The right to request performance c. is always available, even if the buyer
is different from specific has resorted to other remedies.
performance…
4. Under the CISG, avoidance is… d. is a remedy available to both seller
and buyer.
5. The right to claim damages… e. because it allows the party to make
a request to the other party directly.
69
References
- https://legal.un.org/avl/ha/ccisg/ccisg.html
LexisNexis Butterworths. P.85-86
- Ibid P. 171
70
Chapter Four: International Commercial Terms
(Incoterms®)
Keywords
ICC, trade council, transactions, practitioners, uncertainties, interpretations,

practices, tasks, costs, risks, obligations, charges, seller, buyer, modes of transport,
premises, load, unload, clear, export, import, carrier, carriage, destination,
insurance, loss, damage, minimum cover, protection, duty, customs formalities,
vessel, quay, barge, port, shipment, on board, procure, freight, invoice, bill of
lading, unimodal transport, multimodal transport, shipper, shipowner, charterer,
freight forwarder, custody, binding, document of title, receipt, ownership, cargo,
Learning Objectives
1. Identify what Incoterms are and provide background information.

2. Distinguish the rules used for different modes of transportation.
3. Describe the seller's and buyer's obligations embedded in each of the terms.
4. State the difference between 'freight collect' and 'freight prepaid' in
international freight.
5. Discuss issues related to carriage of goods.
6. Explain the components of a contract for carriage by sea.
7. Define the function of a bill of lading in carriage of goods.
71
Introduction
The Incoterms or International Commercial Terms are a series of pre-defined
commercial terms published by the International Chamber of Commerce (ICC)
relating to international commercial law. They are widely used in international
commercial transactions and their use is encouraged by trade councils, courts and
international lawyers.
The Incoterms rules are accepted by governments, legal authorities, and

practitioners worldwide for the interpretation of most commonly used terms in
international trade. They are intended to reduce or remove altogether
uncertainties arising from the differing interpretations of the rules in different
countries. As such they are regularly incorporated into sales contracts worldwide.
A series of three-letter trade terms related to common contractual sales practices,

the Incoterms rules are intended primarily to clearly communicate the tasks, costs,
and risks associated with the global or international transportation and delivery of
goods.
Incoterms inform sales contracts defining respective obligations, costs, and risks
involved in the delivery of goods from the seller to the buyer, but they do not
themselves conclude a contract, determine the price payable, currency or credit
terms, govern contract law or define where title to goods transfers.
“Incoterms®” is a trademark of the International Chamber of Commerce,

registered in several countries.20
20
https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/
72
The ICC published the first Incoterms® rules in 1936. The Incoterms rules were
amended in 1953, 1967, 1976, 1980, 1990, 2000, and 2010, with the ninth version
— Incoterms® 2020 coming into effect from the 1st of January 2020.
The IncoDocs chart displays Incoterms® 2020 in an easy-to-understand format. The

chart states each Incoterms® and explains the obligations and charges that are
accepted by the seller and the buyer.
https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide/
73
4.2 Rules for any mode or modes of transport:
EXW – Ex-Works or Ex-Warehouse

• Ex works is when the seller places the goods at the disposal of the buyer at
the seller’s premises or at another named place (i.e., works, factory,
warehouse, etc.)
• The seller does not need to load the goods on any collecting vehicle. Nor
does it need to clear them for export, where such clearance is applicable.
FCA – Free Carrier

• The seller delivers the goods to the carrier or another person nominated by
the buyer at the seller’s premises or another named place.
• The parties are well advised to specify as explicitly as possible the point
within the named place of delivery, as the risk passes to the buyer at that
point.
CPT – Carriage Paid To

• The seller delivers the goods to the carrier or another person nominated by
the seller at an agreed place (if any such site is agreed between parties).
• The seller must contract for and pay the costs of carriage necessary to bring
the goods to the named place of destination.
74
CIP – Carriage And Insurance Paid To
• The seller has the same responsibilities as CPT, but they also contract for
insurance cover against the buyer’s risk of loss of or damage to the goods
during the carriage.
• The buyer should note that under CIP the seller is required to obtain
insurance only on minimum cover. Should the buyer wish to have more
insurance protection, it will need either to agree as much expressly with the
seller or to make its own extra insurance arrangements.
DAP – Delivered At Place

• The seller delivers when the goods are placed at the disposal of the buyer
on the arriving means of transport ready for unloading at the named place
of destination.
• The seller bears all risks involved in bringing the goods to the named place.
DPU – Delivered At Place Unloaded (replaces Incoterm® 2010 DAT)

• DPU replaces the former Incoterm® DAT (Delivered At Terminal). The seller
delivers when the goods, once unloaded, are placed at the disposal of the
buyer at a named place of destination.
• The seller bears all risks involved in bringing the goods to, and unloading
them at the named place of destination.
75
DDP – Delivered Duty Paid
• The seller delivers the goods when the goods are placed at the disposal of
the buyer, cleared for import on the arriving means of transport ready for
unloading at the named place of destination.
• The seller bears all the costs and risks involved in bringing the goods to the
place of destination. They must clear the products not only for export but
also for import, to pay any duty for both export and import and to carry out
all customs formalities.
Rules for sea and inland waterway transport:
FAS – Free Alongside Ship

• The seller delivers when the goods are placed alongside the vessel (e.g., on
a quay or a barge) nominated by the buyer at the named port of shipment.
• The risk of loss of or damage to the goods passes when the products are
alongside the ship. The buyer bears all costs from that moment onwards.
FOB – Free On Board

• The seller delivers the goods on board the vessel nominated by the buyer at
the named port of shipment or procures the goods already so delivered.
• The risk of loss of or damage to the goods passes when the products are on
board the vessel. The buyer bears all costs from that moment onwards.
76
CFR – Cost and Freight
• The seller delivers the goods on board the vessel or procures the goods
already so delivered.
• The risk of loss of or damage to the goods passes when the products are on
board the vessel.
• The seller must contract for and pay the costs and freight necessary to bring
the goods to the named port of destination.
CIF – Cost, Insurance and Freight

• The seller delivers the goods on board the vessel or procures the goods
already so delivered. The risk of loss of or damage to the goods passes when
the products are on the ship.
• The seller must contract for and pay the costs and freight necessary to bring
the goods to the named port of destination.
• The seller also contracts for insurance cover against the buyer’s risk of loss
of or damage to the goods during the carriage.
• The buyer should note that under CIF the seller is required to obtain
insurance only on minimum cover. Should the buyer wish to have more
insurance protection, it will need either to agree as much expressly with the
seller or to make its own extra insurance arrangements.
77
Example: in Fleming & Wendeln GmbH & Co v SanofiSA/AG, the parties to
an international contract for the sale of Russian/Ukrainian black sensed
crop 1997 agreed in their contract that the price was to ‘be fixed for each
shipment latest 15 days prior delivery period FCA (Free Carrier)
Russian/Ukrainian Region in railcars on a calculated parity to the FOB Black
Sea market or CIF Rotterdam market on proposal of brokers involved in
[the] contract’. The statement suggested that the parties had agreed to
deliver the goods in FCA terms, but to determine the price for each delivery
by referring to either ‘FOB Black Sea market’ price or ‘CIF Rotterdam
market’ price, suggesting that not only FCA can be used for the carriage of
goods by railways, but also that Incoterms, in particular FOB and CIF, are
convenient references for determining prices.
‘Freight Collect’ and ‘Freight Prepaid’

Freight Collect and Freight Prepaid are common terms used in International
Freight.
It is very important to understand the difference. It is basically a statement of who

will be paying for all the international freight charges.
If you export your goods on ‘Freight Collect’ terms (EXW, FCA, FAS and FOB are all
Freight Collect terms) that means that the importer (your buyer) will ‘collect’ and
pay all of the freight charges on their side, you will not have to pay any freight at
all.
If you are the exporter and sell the goods on CFR, CIF, CPT, CIP, DAP, DPU or DDP
terms, this means that you will pay for the freight charges (‘Freight Prepaid’ – you
will pre-pay the freight charges). These are linked to the selling terms of your
invoice, if you are selling your goods on ‘FOB’ terms (Free on Board) then you are
only covering the costs to get the goods loaded on board the vessel. All charges
thereafter will be charged to the receiver of the goods (consignee) – so it will be
78
Freight Collect. These freight terms are stated on the Bill of Lading, the document
issued by the shipping line or freight forwarder.
Carriage of Goods
Incoterms® deal with the responsibilities of parties performing a contract of
international sale based on carriage by sea, air or land, or a combination of these
means. When carriage of goods involves only one mode, it is called ‘unimodal
transport’. When it involves two or more modes, it can be regarded as ‘multimodal
transport’.
The difference between unimodal and multimodal transport is of significance in

two ways:
• first, it indicates the complexity of modes of transport used in any particular

contract of sale; and
• second, the parties’ responsibilities differ, depending on the mode of
transport.
In addition, different modes of transport are subject to different international

conventions and customs. In the absence of an accepted international convention
or custom, the relevant domestic laws, when available, may apply to different
modes of transport.
The modes of transport can be classified as follows:
• carriage of goods by sea;
• carriage of goods by air;
• carriage of goods by land, including carriage by railway and carriage by road;
• carriage of goods by inland water; and

79
• multimodal transport of goods.
Contract of carriage by sea

Carriage of goods by sea is the most popular means of transportation across the
world, largely because it is the only economic and feasible way to carry goods from
one continent to another. In comparison, air carriage is much faster, but also much
more expensive, than sea carriage.
Contract of carriage by sea is a contract entered into between a shipper (who may
be a seller, a buyer, or an agent of the seller or the buyer) and the carrier (who
could be a shipowner, a charterer of a vessel, or their agent or a freight forwarder),
for the purpose of transporting goods from one place to another by sea.21
Such a contract has the following characteristics:
• it is made between a ‘shipper’ and a ‘carrier’;
• it is a contract for providing the services of transporting goods;
• it involves the transport of goods by sea either partly or entirely; and
• it often involves the transport of goods from one country to another.
21
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Bill of lading
A bill of lading can be described as a legal document or shipment receipt by or on
behalf of the carrier and issued to the shipper acknowledging that goods, as
described in it, have been shipped in a particular vessel to a specified destination
or have been received in the ship owner’s custody for shipment.
The bill of lading therefore is a legally binding document which provides the carrier
and the shipper with all the information necessary for the accurate processing
of shipment goods.
It has three main functions.
• Firstly, it is a document of title to the goods described in the bill of lading.

• Secondly, it is a receipt for the items being delivered.
• Finally, the bill of lading sets out the terms and conditions agreed for the
transport of goods.
When the goods are shipped, the physical ownership of the goods is passed from
the exporter to the carrier. At this point, payment may not yet have been received
by the exporter.
This makes the bill of lading a critical part of the transaction. This allows the
exporter to turn over ownership of the products to the carrier, giving the exporter
indirect control of the goods during the transport process.
The bill of lading is evidence of the contract of carriage, it is not the contract of
carriage itself. That contract between the carrier and the shipper is created when
the goods are loaded on board the ship and will therefore already exist before the
bill of lading is issued.
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If the cargo were to be damaged before issuing the bill of lading, the shipper will
be able to claim under the contract of carriage as if the bill had been issued. As
between a carrier and a consignee, the bill of lading will be the actual contract of
carriage.
Example: The leading fraud case is Glyn Mills Currie v. East and West India Dock,
1882, in which three original bills of lading were issued for the same shipment.
These were marked “First”, “Second” and “Third”. The consignee indorsed the
“First” bill of lading to a bank for a loan. When the ship arrived at the
destination, the goods were discharged to a dock company. The consignee
presented the “Second” bill of lading and delivery orders and the goods were
delivered by the dock company to parties named in the delivery orders. The
bank brought an action against the dock company for the tort of “conversion”.
(“Conversion” is a civil wrong committed by a person who deals with goods that
do not belong to him in a manner that is inconsistent with the rights of the
lawful owner who is deprived of the use and possession of the goods.)
The dock company was not liable. Its duties were to deliver the goods to the
first person who presented an original bill of lading. The same duty would lie on
any carrier. Regarding the set of three “originals” it was picturesquely said in.
the House of Lords:
“Now if there were only one part of the bill of lading the process … would be an
extremely simple one. The bill of lading would be the title deed, and whoever
came to the shipowner or to the master of the ship and demanded delivery of
the goods, in whatever right he claimed whether as the original consignee or as
a person coming by order of the consignee … all that the master of the ship
(who is not a lawyer and has not, perhaps, a lawyer at his side) would have to
say is, ‘Where is your title deed? Produce it’. If he had not a title deed the master
would be entitled to say ‘I will not deliver these goods to you’. . .
But the confusion, the difficulty and embarrassment have arisen from there not
being.., one title deed, but there being more than one, in this case, three parts
of the title deed, that is to say of the bill of lading … For whose benefit is it that
there are those three parts? Certainly not for the benefit of the shipowner, or
for the benefit of the master. To them the presence of three parts of the bill of
lading is simply an embarrassment. It is for the benefit of the shipper or of the
consignee…”
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Useful Definitions
• A carrier is a person (either natural or legal) who undertakes the responsibility
of transporting goods from one place to another under a contract of carriage,
against the payment of freight. Parties may define the meaning of ‘carrier’
themselves in a contract of carriage or a bill of lading.
• A shipper is a person (whether legal or natural) who is a party to a contract of
carriage with a carrier.
• A consignor is a person or a company that is responsible for initiating and
organising a shipment. A consignor could be a seller or an exporter
• The consignee is the entity who is financially responsible (the buyer) for the
receipt of a shipment. Generally, but not always, the consignee is the same as
the receiver.
• The ship owner is simply the owner of the ship carrying the cargo. Sometimes
the ship owner will be the “carrier,” of the cargo and the person responsible for
any loss or damage.
• A freight forwarder is an agent who acts on behalf of shippers to arrange the
transportation of goods. A forwarder does not move the goods but acts as an
expert in the logistics network.
• A charterer is the person or company that hires a ship for the transportation of
cargo. The contract between the shipowner and the charterer is called a charter
party.
• Cargo consists of bulk goods conveyed by water, air, or land. In economics,
freight is cargo that is transported at a freight rate for commercial gain. Freight
also means the money paid for transporting goods.
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• The owner of the cargo would literally mean the owner of the freight. This could
be an individual or an organization that has paid for the cargo under a legal
contract.
• Vessel: a large boat or a ship.
• Quay: a long, usually stone structure beside water, where boats can be tied up
and their goods can be loaded or unloaded.
• Barge: a long boat with a flat bottom, used for carrying heavy objects.
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Exercise 4: Decide whether the following statements are true (✓) or false (X):
1. Incoterms define when risks and title to goods transfer from seller (----)
to buyer.
2. EXW, FCA, FAS and FOB are all Freight Collect terms. (----)
3. In a contract of carriage, the shipper is usually the shipowner or (----)
freight forwarder.
4. Unimodal transport involves more than one mode of transport. (----)
5. The bill of lading is a legally binding document. (----)
85
References
- https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/
86
Chapter Five: Insurance
Keywords
Hazards, voyage, perils, the insured, assured, insurance policy, underwriter,

insurer, indemnify, indemnity, marine insurance, aviation insurance, cover,
tender, GATS, dispute, shipping, risky, vessel, cargo, maritime adventure,
Premium, freight, charterer, hull, insurable interest, mortgagor, floating policy,
unascertained, open cover, lot, consignment, voyage policy, time policy, named
policy, port risk policy, fleet policy, blanket policy, good faith, proximate cause,
Contribution, compensation, policyholder.
Learning Objectives
1. Define insurance and discuss related questions.

2. Distinguish marine insurance and where it applies.
3. Identify the importance of the payment of premium in an insurance contract.
4. List the different types of marine insurance.
5. Compare and contrast hull and cargo insurance.
6. Discuss the different types of marine insurance policies.
7. Recognize the principles of marine insurance.
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Introduction
In international sales, goods are normally insured against the hazards they are
likely to encounter during the voyage from the seller's country to the buyer's
country. In the event of loss or damage to cargo due to perils of the voyage, the
insured will be able, depending on the terms of the insurance policy, to recover his
losses from the underwriter or insurer. In other words, under an insurance
contract, the insurer undertakes to indemnify the insured (assured) against future
losses/damage to goods caused by specific circumstances, such as fire,
earthquakes and theft.
The question of what type of insurance needs to be obtained to cover the cargo –
for example, marine insurance, air cargo insurance – depends on the mode of
transport agreed on by the parties in the contract of sale. Where parties have
concluded their contracts on cost, insurance and freight (CIF) and free on board
(FOB) terms, goods will be transported by sea and will, therefore, be covered by a
marine insurance contract.
The question of who is responsible for affecting the insurance is dependent on the
contract terms. A CIF contract requires the seller, at his expense, to obtain
insurance cover for the voyage and tender the policy to the buyer, along with the
bill of lading. In an FOB contract, there is no legal requirement to obtain insurance
cover on the part of the buyer or the seller. The buyer, however, would be well
advised to obtain insurance if he wishes to cover himself against losses or damage
while the goods are on the high seas.
Insurance itself is a form of service covered presently by the General Agreement

on Trade in Services (GATS) and domestic contract law. GATS requires WTO
88
members to liberalise their domestic service markets. Domestic laws regulate the
operation of various insurance contracts, as well as rights and obligations of the
contracting parties.
It is crucial to note that although there are various domestic laws regulating
insurance contracts, an insurance policy itself is essentially a contract; insurance is,
by nature, a contractual arrangement. This means that the rights and liabilities of
the insurer and insured can be themselves determined in the contract concerned.
Therefore, the specific contract in question is crucial for determining the parties’
liabilities in any dispute arising from an insurance contract.
In United Mills Agencies Ltd v R E Harvey, Bray & Co [1952] 1 TLR 149, the goods
were insured under an open cover, but the period when the goods were in the
warehouse of the packers was not included. The goods were destroyed by fire
while in the packers’ warehouse. The insurer was not liable for the loss. This
case suggests that an insurance contract is the same as an ordinary contract, in
the sense that the rights or duties of the parties are determined by the terms
of the contract.
Marine Insurance
Marine insurance is perhaps by far the oldest form of insurance, because shipping
marked the beginning of significant development for worldwide international
trade.22
Shipping has been a highly risky business for both vessel owners and cargo-owners.
The need to find some way to minimise the risk for all parties involved in maritime
adventures offers an opportunity and attraction for the development of marine
22
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insurance, which has become an independent industry associated closely with
shipping and international trade.
Marine insurance refers to a contract of indemnity. It is an assurance that the

goods dispatched from the country of origin to the land of destination are insured.
Marine insurance covers the loss/damage of ships, cargo, terminals, and includes
any other means of transport by which goods are transferred, acquired, or held
between the points of origin and the final destination.
Payment of premium
Premium is an amount paid periodically to the insurer by the insured for covering
his risk. In an insurance contract, the risk is transferred from the insured to the
insurer. For taking this risk, the insurer charges an amount called the premium.
Premium is payable against the issue of the policy, unless the parties have made
other arrangements.
The duty of the assured or his agent to pay the premium and the duty of the insurer
to issue the policy to the assured or his agent, are concurrent conditions, and the
insurer is not bound to issue the policy until payment or tender of the premium.
Types of marine insurance

The purpose of marine insurance is to insure against risks incidental to the sea
carriage of goods and shipping itself. Generally speaking, the risk can be divided
into three categories: risk in the cargo, risk in the vessel and risk in the freight.
• The risk in the cargo may be borne by the cargo-owner or anyone interested
in the safety of the cargo.
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• The risk in the vessel may be borne by the vessel owner or anyone interested
in the safety of the vessel.
• The risk in the freight is normally borne by the carrier who can be a vessel
owner or a charterer, or sometimes by anyone who has some interest in the
successful completion of the voyage.
Different insurance policies can be offered to cover different types of risk and the
risk to different types of subject matters.
Broadly, insurance contracts can be classified into two categories: cargo insurance
and hull insurance.
Since there is a close connection between the safety of the vessel and the
completion of a voyage, the risk in the freight is covered as an optional subject
matter under the hull insurance contract.
• A hull insurance contract is an insurance policy on the safety of the vessel

covered. A shipowner or other person who has an insurable interest in a ship
(for example, the mortgagor of the ship) may take ‘hull insurance’ against
the general risk that may occur to the ship. This person may also insure
against loss of income (freight insurance) and liability to any third parties,
which may arise from a marine adventure.
It is believed that the oldest policy of marine insurance was a hull

insurance, issued to an Italian vessel, the Santa Clara, for its
voyage from Genoa to Majorca in 1347.
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• A cargo insurance contract is a contract to ensure the safety of the cargo
carried by a sea-going vessel. Different insurers may offer different policies
and thus the risks and types of loss covered under different policies vary
depending on their terms.23
George Kallis (Manufacturers) Ltd v Success

Insurance Ltd
[1985] 2 Lloyd’s Rep 8
Connection between contract of sale and marine insurance
Facts: George Kallis was the Cyprus buyer of a cargo of denim from the Hong
Kong seller — Wantex Traders. The denim was sold under the CIF term, and paid
by two letters of credit. The credits expressly prohibited transhipment. Wantex
Traders obtained a bill of lading stating that the goods were shipped on board
the ship Ta Shun, but the goods were in fact not so shipped. The goods, which
were supposed to have been shipped on the Ta Shun, were insured with Success
Insurance, covering the period from warehouse to warehouse against all risks
and damages caused by external causes. Wantex obtained payment under the
credits by submitting a false bill of lading in August 1976. Wantex then shipped
and transshipped the goods on the vessel Intellect to Cyprus. The Intellect
caught fire and the goods were damaged. George Kallis claimed a total loss
under the policy, but the insurers refused to pay on the ground that the goods
were not carried by the ship Ta Shun. The Court of Appeal of Hong Kong decided
in favour of the insurers. George Kallis appealed to the Judicial Committee of
the Privy Council.
Decision: The Judicial Committee held in favour of the insurers. George Kallis
failed because the policy covered goods to be carried by the Ta Shun, but the
damage occurred on board the Intellect.
23
522
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Types of marine insurance policies24
Floating policy
A floating policy is a policy of fixed value on unascertained subject matters that fit
the description of the policy. Under a floating policy, the insurer undertakes to
indemnify, under the terms of the contract, any losses or damages incurred in
relation to the prescribed subject matters. The assured is normally protected
(insured) after he or she makes declarations, pursuant to the terms of the contract,
to the insurer as to each specified voyage or transaction.
Open cover
Open cover is an insurance policy in which the insurer agrees to provide coverage
for all cargo shipped during the policy period. Open cover insurance is most
commonly purchased by companies that make frequent shipments, as the blanket
coverage keeps them from having to purchase a new policy each time a shipment
is made.
Voyage policy
A specific policy can be taken for a single lot or consignment only. The exporter
needs to purchase insurance cover every time a shipment is sent overseas. The
drawback is that extra effort and time is involved each time an exporter sends a
consignment. With open policies, on the other hand, shipments are insured
automatically.
24
https://www.dripcapital.com/resources/blog/marine-insurance-meaning-types-benefits
93
Time policy
Time policy in marine insurance is generally issued for a year’s period. One can
issue for more than a year or they may extend to complete a specific voyage. But
it is normally for a fixed period.
Mixed policy
Mixed policy is a mixture of two policies i.e. Voyage policy and Time policy.
Named policy
Named policy is one of the most popular policies in marine insurance policy. The
name of the ship is mentioned in the insurance document, stating the policy issued
is in the name of the ship.
Port Risk policy

It is a policy taken to ensure the safety of the ship when it is stationed in a port.
Fleet policy
Several ships belonging to the company/owner are covered under one policy.
Where it has the advantage of covering even the old ships.
Single Vessel policy

In single vessel policy only one vessel is covered under marine insurance policy.
Blanket policy
In this policy, the owner has to pay the maximum protection amount at the time
of buying the policy.
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Principles of Marine Insurance
Principle of Good faith - Parties demand absolute trust on the part of both; the
insurer and the guaranteed.
Principle of Proximate Cause - How the actual loss or damage happened to the
insured party and whether it resulted from an insured peril. Proximate cause is the
definitive and adequate cause of loss.
Principle of Insurable Interest - Any object presented as a marine risk and the
assured covering the insurance of goods should have legal relevance.
Principle of Indemnity - An insurance policy should not provide compensation to

the policyholder that exceeds their economic loss. The parties can't buy insurance
to gain profits. If they do, they won't get more than the actual loss.
Principle of Contribution - Sometimes, the risk coverage for goods has more than
one insurer. In such cases, the amount has to be fairly distributed amongst the
insurers.
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Useful Definitions
Hazard: something that is dangerous and likely to cause damage.
Voyage: a long journey, especially by ship.
Peril: great danger, or something that is very dangerous.
The insured, also assured: the person, group of people, or organization that is
insured in a particular agreement.
Insurer: a person or company that insures someone or something.
Underwriter: a person or company that sells insurance policies.
Indemnity: protection against possible damage or loss, or the money paid if there
is damage or loss. Verb: indemnify
Premium: an amount of money paid to get insurance.
Charterer: a person or company that rents a plane or ship.
Insurable interest: an economic stake in an event for which a person or entity

purchases an insurance policy to mitigate the risk of loss.
Mortgagor: a person or organization that borrows money from a bank in order to

buy a property.
Policyholder: a person who owns insurance for a car, home, etc.
96
Exercise 5: Fill in the spaces with the suitable term:
Premium - floating - contract - indemnify - freight
1. Under an insurance contract, the insurer undertakes to ------the insured against

future losses.
2. An insurance policy itself is essentially a ------.
3. ------ is an amount paid periodically to the insurer by the insured for covering
his risk.
4. The risk in the ------ is covered as an optional subject matter under the hull
insurance contract.
5. A ------ policy is a policy of fixed value on unascertained subject matters that fit
the description of the policy.
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References
- https://www.dripcapital.com/resources/blog/marine-insurance-meaning-
types-benefits
98
Chapter Six: Electronic Commerce
Keywords
Transmit, data, funds, formalities, legislation, electronic transactions, non-

discrimination, functional equivalence, technology neutrality, electronic
signatures, electronic contracting, transferable documents, instruments, bill of
exchange, cheque, promissory note, warehouse receipt, authentication, single
window, paperless, digital trade, artificial intelligence, data transaction, digital
platform, digital assets, dispute resolution, security interests, insolvency, open
network, public key, biometric, GUIDEC,
Learning Objectives
1. Define electronic commerce and the challenges it creates.

2. Recognize the efforts made by different bodies to organize electronic
commerce.
3. Discuss the ICC's work on international guidelines for e-commerce.
99
Introduction
E-commerce (electronic commerce) is the buying and selling of goods and services,
or the transmitting of funds or data, over an electronic network, primarily the
internet.
The advent of electronic commerce has challenged, and will continue to challenge,
the validity of formalities in personal and commercial documentation. Recently,
there has been a steady movement throughout the world to address the issues
pertaining to global electronic commerce through legislation.
The historical, and currently perceived, function of formalities has an important

effect on their adaptability to electronic commerce. Virtually every nation has at
least looked into the question, resulting in a variety of approaches.
Amongst these are the work of UNCITRAL in its Model Laws on Electronic
Commerce and Electronic Signatures rules, the European Union Directives on the
subject, work done at the Organization for Economic Cooperation and
Development (OECD), alongside the initiatives from international organisations,
such as the ICC.25
UNCITRAL has prepared a suite of legislative texts to enable and facilitate the use
of electronic means to engage in commercial activities, which have been adopted
in over 100 States.
The most widely enacted text is the UNCITRAL Model Law on Electronic Commerce
(1996), which establishes rules for the equal treatment of electronic and paper-
based information, as well as the legal recognition of electronic transactions and
25
Carr Indira, Peter Stone (2018) International Trade Law, 6th Edition, Abingdon, Oxon; New York, NY: Routledge.
P. 106
100
processes, based on the fundamental principles of non-discrimination against the
use of electronic means, functional equivalence and technology neutrality. The
UNCITRAL Model Law on Electronic Signatures (2001) provides additional rules on
the use of electronic signatures.
The United Nations Convention on the Use of Electronic Communications in

International Contracts (New York, 2005) builds on pre-existing UNCITRAL texts to
offer the first treaty that provides legal certainty for electronic contracting in
international trade.
Most recently, the UNCITRAL Model Law on Electronic Transferable Records (2017)
applies the same principles to enable and facilitate the use in electronic form of
transferable documents and instruments, such as bills of lading, bills of exchange,
cheques, promissory notes and warehouse receipts.
In 2019, UNCITRAL approved the publication of Notes on the Main Issues of Cloud
Computing Contracts, while continuing work towards a new instrument on the use
and cross border recognition of electronic identity management services (IdM
services) and authentication services (trust services).
Significant work in cooperation with other organizations has also been conducted
in the field of legal aspects of single windows and paperless trade facilitation.
The results of joint work with United Nations ESCAP in that field include the online
Readiness Assessment Guide for Cross-Border Paperless Trade.
Recent advances in information and communications technology and the

emergence of new technologies in digital trade pose new legal questions.
Accordingly, UNCITRAL continues its efforts to legally enable emerging
technologies such as artificial intelligence, data transactions, digital platforms and
101
digital assets, including in connection with other areas of work such as dispute
resolution, security interests, insolvency and the international transport of goods,
as well as, more generally, digital trade.
ICC
The ICC set out to work on international guidelines for e-commerce on the open
network.
This resulted in the publication of General Usage for International Digitally Ensured
Commerce (GUIDEC) in 1997 and a subsequent document GUIDEC II in 2001. It
provides a statement of best practices for adoption by businesses to promote trust
in e-commerce by focusing on issues, such as authentication devices, certification
policies, public key certificates and record keeping.
The General Usage for International Digitally Ensured Commerce (GUIDEC) has
been drafted by the International Chamber of Commerce (ICC) Information
Security Working Party, under the auspices of the ICC Electronic Commerce
Project. The ICC Electronic Commerce Project is an international, multidisciplinary
effort to study, facilitate and promote the emerging global electronic trading
system.26
Existing ICC Commissions participating in the Electronic Commerce Project include

the commissions on Banking, Air Transport, Maritime and Surface Transport,
Computing, Telecommunications and Information Policies, Commercial Practices,
Financial Services and Insurance to provide a globally comprehensive approach to
implementing digital commerce.
26
Carr Indira, Peter Stone (2018) International Trade Law, 6th Edition, Abingdon, Oxon; New York, NY:
Routledge. P. 114
102
The principal objective of the GUIDEC is to establish a general framework for the
authentication of digital messages, based upon existing law and practice in
different legal systems.
In so doing, the GUIDEC provides a detailed explanation of principles, particularly

as they relate to information system security issues, public key cryptographic
techniques and emerging biometric capabilities. It also provides succinct standard
practices or recommendations relating to secure authentication and processing of
digital information.
Example: In the landmark ProCD case, the Seventh Circuit Court of Appeals
held that the defendant was bound by the terms of the shrink-wrapped
license prohibiting commercial use of the software. The license was only
inside the box but there was a notice on outside referring to the license. The
Court held that by using the software after opening the shrink wrap, the
defendant had manifested assent to the contract as is required under the
Uniform Commercial Code.
This precedent has been extended to the Internet and clickwraps in a series
of cases. In Hotmail Corporation v. Van Money Pie, Inc. the court upheld the
validity of a clickwrap agreement that prohibited the use of Hotmail e-mail
accounts for transmitting unsolicited mass e-mail. In Groff v. America Online,
Inc. the court upheld a forum selection clause contained within AOL's
clickwrap user agreement. See also Caspi v. The Microsoft Network
(upholding forum selection clause in Microsoft Network subscriber
agreement which the user was required to click "I agree" next to the
scrollable window containing the agreement.)
103
Useful Definitions
Electronic transactions: the sale or purchase of goods or services conducted over
computer-mediated networks.
Electronic signatures: symbols or other data in digital form attached to an
electronically transmitted document as verification of the sender’s intent to sign
the document.
Electronic contracting: a contract that is formed electronically, such as over the
Internet or by email.
Authentication: the process or action of proving or showing something to be true,
genuine, or valid.
Artificial intelligence: the theory and development of computer systems able to
perform tasks that normally require human intelligence.
Data transaction: the transactions of the organization and includes data that is
captured, for example, when a product is sold or purchased.
Public key: a cryptographic key that can be obtained and used by anyone to
encrypt messages intended for a particular recipient.
Biometric: relating to or involving the application of statistical analysis to biological
data.
Non-Discrimination: treated equally, this ensures that data messages have legal
validity.
Media and technology neutrality: This ensures that the use of electronic
technology does not result in unequal treatment of transactions because of the
platform on which they are concluded.
Functional equivalence: The development of rules applicable to electronic
communications to facilitate e-commerce by adapting existing [paper-based
environment] legal requirements.
104
References
- Carr Indira, Peter Stone (2018) International Trade Law, 6th Edition, Abingdon,
Oxon; New York, NY: Routledge. P. 106
Oxon; New York, NY: Routledge. P. 114
105
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_the_International_Sale_of_Goods
112
Glossary of Terms
anticipatory breach
arrears
artificial intelligence
assured
auction
authentication
autonomy
Barge
Barrier
bill of lading
biometric
Capital
Cargo
carrier
certificate of origin
charterer
Commerce
commercial
compensation
Compliance
Consideration
consignee
consignment
113
consignor
constructive delivery
consumer
Contract
creditworthiness
Cross-border
data transaction
defect
destination
Detriment
document of title
economic
Economy
electronic contracting
electronic signatures
electronic transactions
entry into force
execution sale
Export
Expressly
Finance
financial
Foresee
foreseeability
Freedom of contract
114
Freight
freight forwarder
functional equivalence
Goods
Hazards
Implicitly
Import
Indemnity
Indorsee
Innocent party
Insolvency
instalment sale
Instrument
insurable interest
Insured
Insurer
Intention
Intergovernmental
Isolationism
Lapse of offer
liability
liberalization
Liberalize
Monetary
mortgagor
115
non-discrimination
Notice
Objective test
Offeree
Offeror
parties
Party in breach
Perils
physical delivery
place of business
policyholder
Premium
Protectionism
provision
public key
Quay
Quota
Reasonable person
Reasonable time
Services
ship owner
shipper
sold in transit
Subjective test
Subsidy
116
Tariff
technology neutrality
Trade
Transaction
treaty
unascertained goods
Underwriter
uniform
Validity
Vessel
Voyage
Withdraw
117

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International Trade Law (E4)

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‫برنامج اإلجازة يف الحقوق‬

International Trade Law

By: Wafa Dukmak

Trade, commerce, economy, import, export, goods, products, services,

1. Define the term international trade law.

International trade is the exchange of goods and services between countries.

International commercial law is a body of applicable rules, principles and

Today, international trade law consists of a body of international legislation, mainly

The concept of free trade is the opposite of trade protectionism or economic

Important Concepts in International Trade.

The Principle of Non-discrimination

National treatment (NT)

Most-Favoured Nation (MFN) treatment

In order to protect their respective economy, many countries impose duties on

Import (v.): to buy or bring in products from another country.

Export (v.): to send goods to another country for sale.

Goods (n.): items for sale.

Transaction (n.): an occasion when someone buys or sells something.

Monetary (adj.): relating to the money in a country.

Finance (n.): the management of a supply of money. Adjective: financial.

Tariff (n.): a government charge on goods entering or leaving a country.

Protectionism (n.): the actions of a government to help its country's trade or

Lex maritima - free trade - international - commercial - exchange

1. International trade is the ------ of goods and services between countries.

- Diebold, Nicolas F. “STANDARDS OF NON-DISCRIMINATION IN

INTERNATIONAL ECONOMIC LAW.” The International and Comparative Law

GATT, barriers, quotas, tariffs, subsidies, liberalize, WTO, exporter, importer,

1. Describe the GATT and its development.

Advantages and Disadvantages of the World Trade Organization (WTO)7

Proponents of the WTO, particularly multinational corporations (MNCs), believe

Harmonization of International Trade Law

Several international organizations, such as the United Nations Commission on

Alongside these organizations, the International Chamber of Commerce (ICC) also

Those areas include dispute resolution, international contract practices, transport,

Established in 1926 as part of the League of Nations, it was reestablished in 1940

Quota (n.): a fixed, limited amount or number that is officially allowed.

Liberalize (v.): to allow more freedom in laws, systems, or opinions. Noun:

Intergovernmental (adj.): between two or more governments.

Instrument (n.): a legal document.

Cross-border (adj.): between different countries.

Unit 2: Formation of a Contract

Unit 3: Performance of Contract

Contract, multilateral treaty, uniform, adopt, legal system, membership, buyer,

1. Recognize the background of the United Nations Convention on Contracts for

• Part I (Arts 1–13) on sphere of application and general provisions;

3.1.3. Restrictions on the application of the Convention

• A sale of consumer goods (goods bought for personal, domestic or household

Treaty (n.): a written agreement between two or more countries, formally

Uniform (adj.): the same; not changing or different in any way.

Provision (n.): a statement in an agreement or a law that a particular thing must

Liability (n.): legal responsibility for something. Adjective: liable.

Execution sale: a sale under a statutory power made by government officer by

1. The Vienna Convention entered into force in 1980. (-----)

Formality of contract, requirement, witnesses, reservation, offer, acceptance,

1. Identify issues related to formality of contract under the CISG.

Although a written contract certainly has advantages over an oral contract in

The Vienna Convention adopts the traditional offer–acceptance framework for

Example: In a case, decided by the Metropolitan Court of Hungary

Example: In a case arbitrated by the Russian Federation Chamber of Commerce

3.2.4 Rejection of an offer

An offer is terminated when it is rejected. Article 17 provides that a rejection

3.2.6 Counter-offer and modified acceptance

• a modified acceptance (an acceptance with modifications that are not

• silence (no response), which amounts to rejection in most circumstances but