商务英语case_study

case study【Case 1】CIF or Not?An import and export company H in China signed with a British company D a contract on CIF basis, whereby company H exported some light industrial products to company D. There were two special clauses in the contract: (1). “The goods must be shipped to a port in Britain from Shanghai in October 1996; the relevant L/C opened by company D should reach company H by the end of August; company H must guarantee that the loaded vessel arrive at the destination not later than December 1. (2) should the loaded vessel arrive at the port of destination later than December 1, company D is entitled to cancel the contract. If the payment has been made at the time, it must be returned to company D exactly the amount.” After that, in the course of clearing up contract files, a controversy arose in company H about the nature of this CIF contract. Some people held the opinion that the contract was on CIF basis in spite of the two particular terms, giving following reasons: firstly, the contract was signed under the trade term of CIF, which indicated the nature of the contract; secondly, company D made such special requirements only to protect their benefits; thirdly, the contract provided payment by L/C, which was in accordance with CIF terms characteristic of payment against documents. Others believed that according to INCOTERMS 2000, the sellers delivery obligations are fulfilled as long as the seller has completed shipment of goods at the appointed point and handed over to the buyer documents stipulated in the contract and so the seller is not required to guarantee the arrival of goods at the destination. Therefore, this contract was a false CIF contract, as it changed the nature of CIF term by taking physical delivery as a condition of fulfillment. The contract must be renegotiated. Finally, company H reached a common perception and got the two special clauses amended through negotiation with company D. The contract was carried out smoothly.Analysis:Although the contract was concluded on CIF basis, it was not a genuine CIF contract. This case indicates the significance of CIF terms sphere of application. The two special clauses in the original contract not only contradicted with the nature of CIF term, but also disagreed with the practices of international justice and arbitration.First, the original contract not only set a limit to the date of arrival, but also stipulated that the buyer was entitled to cancel the contract or demand back the payment that had already been made. Evidently, the restrictive date of arrival served not as the date of payment, but as a condition of payment. Therefore, legally the contract was not a genuine CIF contract as it made physical delivery a condition of payment.Second, under CIF terms, the risk of loss of or damage to the goods passes from the seller to the buyer when the goods have passed the ships rail at the port of shipment. A contract that expands the buyers risk from the port of shipment to the port of destination is not a CIF contract. According to the provision in the original contract, company H was obligated to refund the payment in case of natural calamities or accidents during the course of delivering the goods, which evidenced that the seller assumed all the risks during the transport.Third, under CIF terms, the buyer must make payment against documents rather than against the arrival of the goods at the port of destination, provided that the seller has fulfilled his delivery obligations and presented the required documents. As per the original contract, whether company H could receive the payment for goods or not depended on buyers receiving on schedule. Although the seller might receive the payment by means of L/C, the payment would be taken back by the buyer if the goods could not duly arrive at the port of destination. Besides, company D could take advantage of relevant L/C clauses that are in accordance with those in the contract to deny the seller the payment for goods. Company H could hardly make a claim for his rights under a normal CIF contract since this contract was the one “in name but not in reality”.【Case 2】CFR & Shipping NoticeAn import and export company in China signed an export contract with an importer in Marseilles, France on drawnwork tablecloth with an amount of USD80, 000, payment by D/P at sight. On the morning of January 8, 1997, the goods were all loaded onto the named vessel. The export salesperson in charge of this contract got so busy that he did not remember to send the buyer the shipping advice until the next morning. Unexpectedly, when the French importer went to the local insurance company to insure the goods, the latter had already learned that the ship suffered a wreck on January 9 and refused to underwrite the goods. The French importer immediately sent a telex saying, “owing to your delayed shipping advice, we are unable to insure the goods because the vessel has been destroyed in a wreck. The loss of goods should be for your account. At the same time, you should compensate our profit and expense losses which amount to USD8, 000.” Soon all the shipping documents sent through the collecting bank were returned to the export company, for the reason that the importer refused to take up the documents. Being a regular client of the exporters, the French importer did not insist on claiming for compensation after the exporter explained his difficult situation and apologized for the whole thing. However, the exporter should learn his lesson from this experience.Analysis:1. Under CFR terms, all the risks, duties and expenses after goods passing ships rail are normally borne by the buyer. However, Incoterms 2000 provides that “the seller must give the buyer sufficient notice”. Here the word “sufficient” refers to both “sufficient” content and “sufficient” time. The latter means the seller must give the shipping notice in a timely manner to allow sufficient time for the buyer to effect insurance of the goods. The later the seller sends the shipping notice, the less time the buyer has to insure the goods. In this case, the buyers failure to send the “sufficient notice” led to his loss of both goods and money. On the other hand, if the seller had informed the buyer immediately after shipping the goods, the buyer would have insured the goods in time at the local insurance company. In that case, the insurance company would have assumed its liability for compensation even if the accident had happened prior to the buyers effecting insurance as both the buyer and the insurance company were ignorant of the accident. Thus, it can be seen how important it is to send the shipping advice to the buyer in time under CFR terms. That is why shipping advice is often referred to as “insurance notice” in trade practices.2. When CFR terms or FOB terms are used in combination with payment by collection, the buyer may cover the goods against “sellers interest risk” before exporting the goods to counteract the buyers failure to effect insurance or the buyers refusal to retire the documents. Had the seller in this case covered the shipment against the said risk, the loss would have been somewhat mitigated.【Case 3】CFR & Goods QualityA French company imported a batch of wheat on CFR basis. The contract provided that the landing quality of the goods should be taken as final. However, when the goods arrived at the destination, the import quarantine bureau detained the goods as they had found that the goods contained a great deal of bacterium forbidden to enter the country. Unfortunately, the goods were consumed by a fire while in detainment. A dispute broke out between the buyer and the seller. AnalysisUnder CFR terms, the buyer should bear all the risks after the goods have passed the ships rail and been loaded on board. However, should the seller be held responsible for any default before that point?In this case, it was the seller who should assume the risks. The reason is that although this was a CFR contract, the seller breached it by delivering the goods which failed to meet the quality standard provided in the contract. This fundamental default has caused the detainment and then the loss of the goods. Therefore, while the risks had been transferred to the buyer, the sellers default returned the risks to the seller.Of course, under CFR contract, when the sellers default is not fundamental, the buyer should bear all the risks for any loss of the goods at the port of destination. Meanwhile, the seller should make due compensation to the buyer as per the contract and relevant laws. 【Case 4】The buyer delays the sending of the vessel under FOB.Company A in China signed a contract on FOB basis to export wheat to Company B in Africa. It was contracted that shipment should be made in four lots. The shipping clause ran as follows: “the vessel nominated by the buyer should reach the port of shipment within eight days before the date of shipment. Otherwise, any of the sellers loss or damage thus incurred shall be borne by the buyer.” The contract also specified, “The buyer must give the seller a notice of vessel name and the estimated date of arrival by telecommunication five days before the vessel arrives at the port of shipment.” During the course of fulfillment, the first three lots were shipped smoothly according to the contract. However, the buyer was slow to send the vessel for the last shipment. In reply to Company As repeated urges, company B said that they were unable to book shipping space because of shipping companys busy schedule and asked for postponing delivery for two months. Company A replied as follows: “according to the contract, you are bound to send the vessel to pick up the goods. In case of any difficulties in this aspect, we may allow you to delay the shipment on condition that you make a compensation which amounts to USD200, 000.” Finally, the bargain of compensation was settled at USD150, 000 and company B was allowed to delay vessel sending for two months. Analysis:Under FOB terms, it is the buyers obligation to arrange for delivering the goods. With reference to INCOTERMS 2000, “the buyer must contract at his own expense for the carriage of the goods from the named port of shipment.” It also provides that “the buyer must give the seller sufficient notice of the vessel name, loading point and required delivery time”. If the buyers vessel fails to arrive at the port of shipment duly, or fails to accept the goods, or stops loading ahead of the schedule specified in the contract, all the risks and loss of and damage to the goods are to be borne by the buyer as of the appointed date for delivering the goods or the expiry date of the time limit. It was learned later that during the implementation of the last shipment, the international market price of wheat dropped drastically, which greatly influenced the sales of company B who then attempted to cancel the delivery of the last shipment by hanging it up. However, company A made good use of INCOTERMS explanation for FOB terms and protected its own interests through proper means. 【Case 5】A Chinese international trade company exported a batch of walnut to England on the basis of CIF London.As it was a seasonal commodity,it was stipulated in the contract that the covering L/C should reach the seller before the end of September.The seller guaranteed that the vessel would reach the port of destination not latter than December 2.If the vessel reached the port of destination later than that day,the buyer was entitled to cancel the contract.In case the payment had been made,the seller should return the payment to the buyer .Then,where do you think the crux lies in this case?Analysis:The Chinese should be responsible for the loss. As per the clause of CFR term,the exporter is responsible for notifying the shipping details ASAP and the importer can arrange the insurance in time.If the notify delayed and cause the loss without insurance covering,the expoeter must bear the loss.In this case, the crux lies is the date of reaching the destination.Because it is normal for vessel delay on sea shipment.The seller cannot control the shipping times on the sea.So the L/C should amend for the reach time,instead of the departure time.【Case 6】A Chinese export company has carried on business relations in printed cotton piece goods with a West African client for many years. In the course of transactions, the client often supplies samples of designs and assortments, in accordance with which the export company produces the printed cotton piece goods. In early 1991, the export company unexpectedly received a letter from a French firm, which thought certain designs of the export printed cotton piece goods fell under his patent, and thus the company had infringed upon the French firms right of patent. The French firm asked the company in question for damages. Do you think the demand of the French firm was reasonable? Why?AnalysisItem 1of Article 42 of the CISG state that “the seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware,” and Item 2 of the same Article continues that “The obligation of the seller under the preceding paragraph does not extend to cases where:at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or the right or claim results from the sellers compliance with the technical drawings, designs, formulae or other such specifications furnished by the buyer.”In this case the Chinese company had not known anything about the patent at the conclusion of the contract; therefore it is not responsible for any claims for infringement of the intellectual rights.【Case 7】Company W receives an irrevocable sight L/C from abroad. When preparing to ship the goods according to the stipulations of the letter of credit, Company W suddenly gets a notice from the Opening Bank saying that the Applicant has become bankrupt. Then how will Company W deal with this case? Why?AnalysisCompany W can insist on the Issuing Banks effecting payment in correspondence with the relevant international business customs and practice. Article 9 of the UCP600says, “An irrevocable Credit constitutes undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and conditions of the Credit are complied with”This Article clearly indicates that the Issuing Bank bears the first responsibility for payment if the documents presented are in compliance with L/C stipulations. In this case the Issuing Bank cannot escape its liability for payment on excuse of the Buyers bankruptcy.【Case 8】A ship started on its voyage after loading, but in the course of the journey a fire broke out during transit in Hold A, which had been loaded with stationary and tea. The caption ordered his crew to pour water on the fire. It was found out, after the fire was extinguished, that part of the stationery had been burned, the remainder and all the tea had been soaked through. Then, what were the natures of the respective losses? What risk would you have covered if you had wanted to be compensated for the losses?AnalysisThe loss to the stationary pertained to particular average, while the loss to the tea was a partial oneThe insurance company will have compensatedfor the losses if the goods had been insured against FPA【Case 9】The ABC Company exported a consignment of silk. As the shipping marks in the relevant L/C were not clear, the person in charge thought that the L/C did not stipulate the shipping marks and those stated in the L/C. The buyers therefore, refused to pay for the documents. However, after negotiation, the buyers agreed to pay only when the ABC Company had reduced the original prices by 10 percent. What lesson can we learn from this case? AnalysisThe most important lesson we can learn is that, it is essential for the exporter to present document in accordance with the stipulations of the revelant L/C. In this case, finding the shipping marks illegible on the L/C, the export salesman in the ABC Company, instead of asking the buyer for clarification, decided the shipping marks himself. This constituted discrepancy between the documents and the L/C. Article 14 of theUCP500clearly indicates,“When the Issuing Bank authorizes another bank to pay, incur a deferred payment undertaking, accept draft(s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credit” It is clear that the documents presented must be in conformity with the stipulations in the L/C.【Case 10】A certain Shanghai export company offered to sell certain commodities to an American company on August 10.The buyer replied on August 6 that he had accepted the offer, but asked the Shanghai Company to take 2% off each of the prices of the offer. On August 7, the Shanghai Company cabled no reduction. On August 8, the American Company sent back a cable including complete acceptance of the offer of August 1. Because the prices of commodities in question were rising on the international market, the Shanghai Company did not cable any reply. Then was there any contract made between the sellers and buyers? Why?AnalysisNo, no contract is concluded because an offer becomes null and void after its being counter-offered.【Case11】In 1990, a certain export company of China sent a group of businessmen to the United States for purchase of equipment. In New York both parties reached an oral agreement on such items as specifications, unit price, and quantity. Upon leaving, the group indicated to the other party that, whe