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Law5ibt International Business Transactions Assignment
Question 1 (This question has 2 parts. Students must answer both parts)
Barry Fashions (BF) is a clothing company based in Melbourne. In May 2015, Barry Smith the CEO of BF attended the International Fashions Fair in Shanghai, China. At the Fair he met Megawati Mohamed the owner of Majahapit Superior Garments Company registered in Indonesia. Barry was impressed with the products of Majahapit. The two negotiated the sale and purchase 15,000 pairs of blue denim jeans. The agreed price in the contract of sale was 2.3million Euros CIF Port Melbourne. Both parties signed the contract.
During the negotiations, Barry offered to write the contract on his laptop. However Megawati noted that her partners in Indonesia would only accept a contract executed on their standard form document. The sales contract did not include a choice of law clause
When the jeans arrived in Melbourne, many of them were found to be poorly stitched, leading to complaints from BF customers. BF therefore refused to pay for the jeans, even though it took delivery of them and sold them to Australian customers, mostly at a heavily discounted price.
In February 2016, Majahapit initiated legal action in the District Court of Jakarta to recover the full contract price.
What is the proper law that may be used to determine the issues between the parties?
Even though it was served with notice of the Jakarta proceedings, BF failed to appear to defend the action before the court. In early March 2016, Majahapit obtained a judgment in its favour for the full contract price.
Majahapit now seeks to register and enforce the Jakarta judgment in the Supreme Court of Victoria. Advise Majahapit and explain (a) the processes for registration of foreign judgments in Australia; and (b) the basis on which a court in Australia would accept or reject a foreign judgment or award.
On Friday 2 January 2015 Solar Toys Australia contracted to sell to Taipei Toys (“TT”), a children’s toys store in the city of Taipei, Taiwan, 250 solar- powered walking crocodile toys. The price was AUD 5,000 for delivery FOB Sydney. Since TT was a first time customer, payment would be by letter of credit.
On 9 January, Solar Toys Australia received advice from Austral Bank that China Bank in Taiwan had issued a letter of credit in favour of Solar Toys as beneficiary. The letter of credit was payable upon presentation of the beneficiary’s bill of exchange drawn on China Bank together with the following documents:
- Commercial Invoice;
- Full set of clean on board negotiable marine bills of lading consigned to order blank endorsed marked freight pre-paid;
- Certificate of origin signed by Australian Customs or its authorized agency;
- Packing list in duplicate.
Austral bank has been authorized to act as advising and negotiating bank.
On Thursday 10 January, the goods were loaded on board the ship and a clean bill of lading was issued. The shipping documents together with a bill of exchange drawn on China Bank were presented to Austral Bank on 14 January. On 20 January Austral Bank indicated that it refused to pay because the documents presented did not conform to the requirements of the letter of credit.
It appears that the problem with the documents is that the bill of lading presented by Solar Toys is marked “Freight Collect” instead of “Freight Prepaid” as required under the terms of the letter of credit. In addition, the certificate of origin presented by the beneficiary is signed by an officer of “Aussie Inspections” without any indication that “Aussie Inspections” has any authority from Australian Customs.
When Austral Bank contacted China Bank to request a waiver of the discrepancies, China Bank refused. The reason for the refusal soon becomes clear – senior executives within TT have absconded with nearly all of the firm’s liquid assets, and the firm has been placed in liquidation.
- Discuss Solar Toys’ rights, if any, in relation to Austral Bank and China Bank.
- If Solar Toys cannot compel the banks to make payment, does it have any rights against anyone else related to this transaction? Discuss.
Article 4(2)(a) of the Hague-Visby rules provides that neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the business management of the ship. This provision is often called the ‘nautical fault defence’. In which of the following situations would the carrier be able to rely on Article 4(2)(a) to escape liability for loss of or damage to goods?
- Three ordinary crew members hired by the carrier and working on the carrier’s ship break into a shipping container belonging to Sweet-tooth Varieties Pty Ltd and consume large quantities of top quality chocolate and nougat.
- The pilot in charge of navigating the ship has had several glasses of wine just before he goes on shift as the ship enters the narrow mouth of Port Phillip Bay. He gives the wrong orders to the engineer and crew members on the main sail of the ship, so that ship is driven onto rocks and a large hole is torn into the side of the ship. Water enters the hold of the ship and much of the cargo is damaged.
- Tom is a seaman who has recently joined a radical sect. Many members of the sect, including Tom, are opposed to the long-distance transport of basic foodstuffs; especially fruit and vegetables that they believe should be grown and consumed locally. Tom joins the crew of a ship that is carrying a load of asparagus and pears from Chile to Australia. On the second day of the journey, he sabotages the engine of the ship so that the trip is delayed for over a month, by which time the food is ruined.
- The chief engineer of the carrier’s ship is addicted to smoking. Near the end of a long shift in the engine-room, she decides she just has to have a cigarette. When she tries to light her cigarette, however, a huge explosion results – the engineer is killed, two other crew members are injured and a hole in the hull of the ship begins to leak so that much of the cargo (bulk dry rice and wheat) is damaged.