Hypothetically, a Seller from South Korea officially registered in South Korea and a Buyer officially registered in Indonesia concluded, dated on
June 1, 2014, a sales contract (S/C), by email, of purchasing 10,000 metric tons of Steel Plate made in China subject to the following, inter alia,
terms and conditions:
1) Trade terms:
USD650.00/M.T.s CFR Jakarta (INCOTERMS 2000)
2) Time of shipment:
Latest 20th/July/2014
3) Terms of payment:
Payable 30 days after B/L date by irrevocable letter of credit (L/C) opened by a first class international bank or the bank accepted by the Seller
and workable L/C upon signature of this S/C in five working days.
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10) Insurance:
To be covered by the Buyer.
11) Arbitration:
All disputes in connection with this S/C or the execution thereof shall be settled through friendly negotiations between two parties. If no
settlement can be reached, the case under dispute may then be submitted to China International Economic and Trade Arbitration Commission. The
arbitration shall take place in Beijing, China and shall be executed in accordance with the Procedure and Rules of Arbitration of the said
Commission. The decision made by the arbitration organization shall be taken as final and binding upon both parties. The arbitration expense shall be
borne by the losing party unless otherwise awarded by the arbitration organization.
12) Force Majeure:
In case of force majeure the Seller shall not be held responsible for late delivery or non-deliver of the goods but shall notify the Buyer by fax
immediately and within 14 days thereafter send registered airmail, if so requested by the Buyer, a certificate issued by the China Council for the
Promotion of International Trade or any other competent authorities.
13) Other terms:
10% of the S/C value as penalty for non-delivery or non-execution of the S/C by both sides.
Factual background:
1. The L/C was opened as agreed accordingly;
2. On June 10, 2014 the Indonesian Government promulgated an Order for steel import prohibition from China with effect starting from July 10, 2014;
3. Upon the preceding Order, the Buyer notified the Seller in the morning at the same day and requested the time of shipment as soon as possible and
asked for the arrival of the goods at destination before July 10, 2014;
4. The Seller agreed in the afternoon, by email, to try to make earlier shipment subject to the prior payment by telegraphic transfer (T/T) in Three
(3) working days and the Buyer shall be liable for chartering a vessel accordingly;
5. And then, the Buyer began to chase for a vessel heading to Jakarta so as to arrive at destination before the said date;
6. However, prior to find the estimated vessel, the Buyer has been hesitating for a week whether it should make the T/T payment since the previous
communication with the Seller;
7. On June 17, 2014, the vessel booked by the Buyer was ready at Tianjin port, China for shipment. The Seller, nevertheless, refuse to deliver the
goods on board because it didn’t get any payment yet by T/T; and
8. After several round of talks eventually, both the Buyer and the Seller failed to reach an agreement thereof. Hence, the proposed shipment has to
be cancelled, as result of which, the following damages thus occurred as below:
a) Dead freight: USD100,000;
b) Demurrage: USD30,000;
c) 10% of the S/C value as penalty;
d) Expenses to hire lawyers by the Buyer.
1) What are the applicable laws specifically governing this Contract and why? (10)
2) What are major legal issues in this case and explain the legal grounds thereof? (20)
3) With regard to the damages, how many items in Paragraph 8 may be supported by the tribunal in case of arbitration subject to the governing laws?
Do the damages include the legal expenses to hire lawyer if the Buyer intends to get a lawyer in China and why? (30)
4) What’s possible attitude of the arbitrators towards Article 13 of this S/C pursuant to the application of CISG, if applicable, and what are the
legal grounds? (20)
5) How to characterize the “Order” enacted by the Indonesia Government, what’s possible consequence and why? (20)
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