Contracts for the International Sale of Goods - Worldnews and PrintCo - Case Study Example

Contract Case Analysis Institution Names Introduction The law of contract comprises of a set of rules that govern the validity content of an agreement and the relationship between two or more parties regarding the sale of goods. Contract law is therefore a promise that the law enforces (Chen-Wishart, 2012). The agreement gives rise to obligations that can be enforced by the law. Hence, in case of breach or infraction of the terms of the agreement, an aggrieved party can seek recourse through the courts. This paper presents a case analysis to identify the elements of a contract. It further examines remedies to fundamental breach as provided for by Contracts for the International Sale of Goods (CISG). Part 1: Elements of a contract The contracts serve to solidify the business transactions between the parties involved. For the contract to be valid, it must satisfy 6 elements, namely offer and acceptance, mutuality, Legality of purpose, consideration, capacity of parties and proper form. A sales contract must have an offer, which has to be accepted (O’Gorman, 2013). In the case scenario, PrintCo sent its representative to Worldnews to make an offer of selling 15 printing presses. Hence, there is an intention to sell the presses on the part of the PrintCo to Worldnews. The contract law further recognises that the offer has to be communicated to the other party before acceptance of the offer (Chen-Wishart, 2012). At the same time, it is crucial that the offeror is made aware of when the offeree accepts the offer since the offer would not be valid until it is accepted. This is indicated when Worldnews agree to buy the 15 presses at $1,500,000. By agreeing, it signifies acceptance. The legality of the offer is also significant to this end. Hence, there has to be unqualified expression of assent on the part of both World news and PrintCo to the terms of the offer. Acknowledging the offer however does not imply acceptance (Cohen, 2009). In the case, PrintCO made unequivocal expression of acceptance on the terms of the offer put across by Worldnews that the contract should include a clause that states that disputes that arise should be arbitrated through New York Law. The two parties further agree to the use the provisions of CISG. There must also be an element of consideration. Consideration refers to the exchange bargained for in anticipation of a promise made. In the case, it refers to the benefits and profits that accrue to both Worldnews and PrintCo. While Printo will get 15 presses, Worldnews is to be paid $1,500,000 for the presses, according to the initial contract. In the case, the consideration can be termed as a ‘valued consideration’ since it can be estimated in terms or monetary value (Owen, 2001). Legality of purpose and Intention to create legal relations are also significant. In the case of legality of purpose, the intent of the contract should not violate the law (Bar & Drobnig, 2004). In the case, the Worldnew looks to purchase legitimate presses from Worldnews. Given that the presses are legitimate items and that PrintCo plans to make payments through a legal tender, the business transaction is legitimate. Hence, the intention to create the contract does not violate the law. When it comes to intention to create legal relations, it can be ascertained that the parties have the intention of creating legal relations. This is since the relationship between PrintCo and Worldnews is commercial in nature. In this case, the courts may assume that the parties are aware of the legally binding nature of their agreement. The capacity of parties to enter into a contract is also a crucial element. The law of contract provides that the parties to contract must be authorised and competent if the contract they enter into has to be valid (MacMillan & Stone, 2012). Accordingly, the parties will be regarded as incompetent when they are minors or if they are of unsound mind or disqualified by the law. In the case, the two parties are competent and authorised. Mutual agreement, or mutuality of obligation, is another critical element identifiable in the case. It describes the mutual assent and understanding of the terms of the agreement. In this case, the parties must consent to the same understanding at the same time and in a similar sense. In the case, the determination of mutuality of agreement is dependent on the objective standards of what Worldnews and PrintCo said and did rather their subjective cognitive state. For instance, the offer and acceptance are clear and explicit. The two parties mutually agreed on the critical terms of the contract (Cohen, 2009). In the case, there is mutual agreement to use CISG in resolving dispute. There is also an agreement that Worldnews will pay PrintCo $1,500,000 for 15 presses. The two parties also mutually agree that the presses should be delivered by February 1st. Proper form and certainty of the subject matter are other essential elements. The contract is made in writing. At the same time, the contract is considered to be legally binding since the terms and conditions are adequately defined to enable understanding of the obligations of the parties (MacMillan & Stone, 2012). In which case, a party to a contract cannot accept the offer to create a contract unless the terms of the contract are reasonably expressed and reasonably certain. The contract clearly states that the forum for any dispute should be arbitrated using New York law and that CISG should be used in resolving dispute. It is is also stated that Worldnews will pay PrintCo $1,500,000 for 15 presses to be delivered by February 1st. PART 2: Side Arguments and Types of remedies Both parties agreed to use Contracts for the International Sale of Goods (CISG). A critical provision of CISG is Article 25 on fundamental breach. The upshot of fundamental breach is avoidance of contract. Article 25 allows one of the parties to a contract to ‘avoid a contract’ in case the other party commits a fundamental breach. Worldnews On analysis of the case, there is fundamental breach of contract. First, PrintCo has delayed in sending the shipment to Worldnews. The contract stated that the presses must be delivered on February 1st. In addition, when the goods finally arrive on February 5th, one of the machines was damaged. Based on these breach, an appropriate breach would be avoidance of ‘avoidance of contract.’ According to Article 25 of CISG, a breach of contract by a party to a contract is regarded to be fundamental if the party’s actions results to detriments that can significantly deprive the other party what it expects to get from the contract. Further, Article 49 allows Worldnews to avoid the contract if PrintCo has committed fundamental breach in performing his obligations as indicated in the contract (Killian, 2001). This means that Worldnews may avoid the contract on grounds that PrintCo failed to deliver the presses by February 1st even after demanding for an extra charge of $300,000. Additionally, Article 52 of CISG allows the buyer to avoid the contract if the goods do not conform to the standards agreed in the contract. Such a case would be viewed to be a fundamental breach. In the case, one of the presses delivered to Worldnews is badly damaged. This also gives Worldnews grounds to avoid the contract since PrintCo has, in this case, committed fundamental breach. PrintCo PrintCo has a right to remedy or cure. Additionally, the company can ask for additional time to perform. In this regards, PrintCo stands to be granted Nachfrist Period to replace the damaged press so long as there will be no unreasonable delay. Article 46 allows PrintCo to replace or substitute the product if it is damaged or does not conform to the reasonable standards the buyer anticipates. Worldnews’ case would fail to meet the breach test. The breach test follows two criteria. First is the substantial detriment, where the contract may be avoided when the goods are not what the buyer expects as indicated in the contract. According to Article 25, a breach of contract by a party to a contract is regarded to be fundamental if the party’s actions results to detriments that can significantly deprive the other party what it expects to get from the contract. However, this is when the party in breach did not foresee the detriment (Killian, 2001). The second is therefore where the party in breach is held to be in violation of contract if he could have foreseen the detriment. In the case however, there are two differing stances. While the first criterion is met, the second is not. For instance, PrintCo could not have foreseen the circumstances that led to the delay and damage of the presses. Printco’s supplier had gone on strike one month before the delivery date causing disruption to its operation. This contributed to the delay. Second, PrintCo had informed Worldnews of the likely delay in delivery. Third, the bank refused to acknowledge Worldnew’s Bill of Lading because of an error. In using the letters of credit, the seller maintains the right to demand to be paid by the bank that is under the letter of credit once the goods are shipped to the buyer and once the seller presents the documents demanded by the letter of credit (Moses, n.d.). The detriment in question could not have been foreseen. Hence, the foreseeability rule does not apply as (DIFC, 2005). Conclusion Despite both Worldnews and PrintCo satisfying the elements of a valid contract, failure on the part of the latter to deliver the presses in conformity with the terms of contract amounted to breach of contract. In resolving the conflict through CISG, the case cannot be considered as a fundamental breach, since it has failed to pass the breach test. Hence, a remedy-oriented approach is crucial. In addition to being unforeseeable, the delays in delivery were beyond PrintCo’s control. Additionally, PrintCO gave timely notice that the presses would delay. On balance of opinion, PrintCo has a right to remedy and can ask for additional time to perform. References Bar, C. & Drobnig, U. (2004). The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study. European Law Publishers Chen-Wishart, M. (2012). Contract Law. London: Oxford University Press Cohen, G. (2009). “Interpretation and Implied Terms in Contract Law.” John M. Olin Law and Economics Research Paper Series No. 2009-12 DIFC. (2005). Law of Damages And Remedies Difc Law No. 7 of 2005. Dubai International Financial Centre MacMillan, C. & Stone, R. (2012). Elements of the Law of Contract. Londong: University of London Killian, M. (2001). CISG And The Problem With Common Law Jurisdictions. J. Transnational Law & Policy, 10(20), 217-243 Moses, M. (n.d.) The Irony of International Letters of Credit: They aren't Secure, but They (Usually) Work. Bank Law Journal, 479-496 O’Gorman, D. (2013). "Redefining Offer in Contract Law," Mississippi Law Journal 82(6) 1050, 1096 Owen, K. (2001). Law for Non-law Students. Sydney: Cavendish Publishing, Read More