Issue
Issue: Fresh Fruit Inc. (FF) and Beauty Bananas Ltd had formed a contract for sale of goods. The contract was based on the sale of 100 tonnes of bananas in two separate shipments. The contract further stated that the Fresh Fruit Inc. would propose a carrier where Beauty Bananas Ltd. will deliver the goods. The issue of this scenario is to establish if all the obligations of the supplier have been satisfied in the transaction that had transpired between the parties.
Rule: The principles of Common Law, Australia govern the process of shipment of goods from Brisbane, Queensland. A Bill of Lading refers to a documentary evidence of receipt of goods where the carrier gives it to the shipper and contracts on the process of delivery of goods. This has been observed in the case of Thereafter, the legal framework includes common law as it has been incorporated in relation to the international conventions[1]. These conventions define the domestic legislations and law of sea.
Therefore, Incoterms, 2010, generally cover the concept of Bill of Lading along with Carriage of Goods by Sea Act, 1991 and the Hague-Visby Rules. Convention on International Sale of Goods governs the rules and functions of Bill of Lading. The functions of a Bill of Lading are a three-layer process. The primarily is the receipt of the goods that are sold. Secondly, it acts an evidence of the contract formed of a carriage and lastly, it sis that document that determines the title[2]. Such a scenario was observed in the landmark case of
When an international contract of sale of goods are formed, as per Articles 30-37, the seller is vested with a few obligations. The obligations include freight and carriage obligations and timely delivery[3]. However, the seller should deliver these obligations to make sure that the sale of contract is executed between the parties. The parties must therefore carry out the activities considering all the aspects[4].
Application
As observed from the facts of the scenario, it can be stated that Fresh Fruit was acting in the capacity of a buyer whereas; Beauty Bananas Ltd. was the supplier and seller of the Fresh Fruit. The seller will therefore have to follow the principles that are laid down in the Convention on International Sale of Goods. From the situation, it can be said that the contract that was created, provided that Fresh Fruit will have to elect a carrier where the goods will be delivered by Beauty Bananas Ltd. who was the supplier[5].
The date on which the primary shipment was to be sent stated that, the first shipment was to be sent to a designated carrier. On the other hand, due to this the second shipment was put on hold until the date of June 17. After the shipment reached, Fresh Fruit noticed that plenty of dispensaries were present in the products. Therefore, Beauty Bananas Ltd. while delivering the goods to the carrier produced documentary evidence of the entire procedure of shipment.
The Articles 30-37 of the above-mentioned act bind Beauty Bananas Ltd. Therefore, all the responsibilities are confronted by the Convention on International Sale of Goods, which will establish the liabilities as per the performance of the contract that was made by the seller. It has been observed here that when Fresh Fruits received the first shipment, there were discrepancies, which were exposed. Goods were not delivered as per what it was mentioned in the contract[6]. However, the final goods that got delivered were 100 kgs less than what it was stated in the contract[7].
Rule
Thereafter, the second shipment that had arrived, which was also not upto the mark as the quantity was less by 5 tonnes and 2 tonnes out of the received order. Hence, it appeared to be all spoiled. As it have been observed from the agreement, the obligations of the seller was to deliver the goods timely. Therefore, a delivery of goods was given to the carrier and marine insurance. While dealing with the obligations of the seller, the quantity and quality of the products that were delivered as that would cease to exist when the possession has been transferred from the seller to the carrier. This arose because when the goods were sent to the carrier as designated by the buyer Fresh Fruit, the carrier will therefore be charged with the authenticating the quantity and quality of the goods[8].
Thus, this will refer to a situation where the seller checks the quality and quantity. In such a scenario, the contracted goods were delivered to China Fruit Shipping (CFS) by the Beauty Bananas Ltd. This carrier had provided a particular kind of documentary proof that stated that the goods delivered matched with the quantity and quality as it has been mentioned in the contract. Hence, this evidence serves as a receipt of the goods sold, proof of the contract of carriage and the title, which is known as a Bill of Lading as stated in the case of .
The form of documentary evidence is considered to be as a conclusive proof of good quantity or order in maritime or admiralty law. This has been discussed in the case of . The rules of Hague-Visby that have been mentioned in Article 3 lays down an obligation on a carrier to tender this documentary evidence to the shipper when any sort of request is made. Thereafter, the quantity of containers is mentioned in the Bill of Lading as per Article 3(b) of the Hague-Visby Rules[9]. It has been provided on demand and hence can be logically said it can be used as a conclusive proof later.
The Bill of Lading is referred to as prima facie evidence since the goods were as per Article 4 of the Hague-Visby Rules. However, if the contract is sent to the third party that cannot be disputed if any of the discrepancies occur from the same. Thus, when the Bill of Lading was asked for by the shipper and the same was tendered by the carrier stating the requirements mentioned in the transaction. When this Bill of Lading is transferred to a buyer who is considered to be as the third party, it will be treated to be as a safe proof. The Bill of Lading hence states that a seller has a few obligations that were mentioned under the laws, which govern the transaction. Therefore, since the seller was liable for marine insurance, the costs of the goods that have been spoilt and should be borne by the seller.
Laslty, it can be concluded stating that all the obligations of the seller have been noticed under all the different laws that cover such kind of a contract of sale by sea. Hence, the seller will therefore be accountable to pay the costs for the goods insured, that were spoilt. It has also been observed that no kind of responsibility will occur for the quantity of goods that were sold and Bill of Lading therefore acts as the documentary evidence.
Application
Question 2:
Issue: The related issue of this scenario is to establish the liabilities of the Carrier in relation to the supplier who was Beauty Bananas Ltd. and the bank, which was nominated with respect to the statues that govern the Uniform Customs and Procedures.
Rule: As it has be defined earlier, a Bill of Lading acts a conclusive proof of the contract of carriage and the quantity and quality of the goods were shipped already as it have been proved in the case of. However, this refers to a situation where any kind of Bill of Lading that is treated to be tendered is usually when a cargo of goods is executed by a shipper to the carrier[10]. Thus, it will be considered to be a valid kind of quantity and quality of goods.
While dealing with the international sale of contracts, a bank generally gives approval for the purpose to forward the payments in relation to an assurance of another bank. The reason for this is to assure the bank for making the payments as per the total amount when the project is completed[11]. When this is approved, it is usually referred as the letter of credit. Nominated bank is when the payments are made by the bank. Therefore, the bank indemnified the bank that is nominated and is known for issuing bank and this particular bank has an account as well.
The account obtains an approval for a letter of credit. Hence, this will help in allowing the issue of the bank to reload the nominated bank so that the credit is extended through funds for obtaining approvals. While making transactions, as per the international law, it will associate a letter of credit that is administered and regulated by the Uniform Customs and Procedures. UCP 600 is the latest form of the Uniform Customs Procedures. Other related parties and nominated banks are helped by the Uniform Customs Procedures.
It therefore acts as that code, which helps in making sure that the international trade is facilitated devoid of all the frivolous disputes. Thereafter, there are fraud exceptions of UP 600 that does not include the existing liabilities from the parties[12]. For comprehending the existing implications of the fraud, the exceptions that is embodied in UCO 600 as the independence principle.
The concept that is embodied is to make sure that the banks can issue the letter of credits are protected as per the cases on non-payment. In such cases, disputes have arisen from the actual contract that was warranted in the letter of credit. Therefore, in such cases, the parties associated with the contract have to deal with a dispute and hence the same kind is brought for adjudicating the nominated bank, as it would not get any sort of payment. This payment is given for the credit, which is extended up to a particular time, which would be considered reliant to a particular constructive order that have been passed on behalf of either of the party[13].
Therefore, if either of the parties failed to gather then the same will lead to a full loss for any kind of nominated bank. Hence, there was an assistance for all the banks that are nominated in these certain circumstances where the Uniform Customs and Procedures (UCP 600) prescribes the independence principle. Further, this principle discusses about the letter of credit, which states that the nominated bank must be paid that particular amount of credit that they had forwarded[14].
The protective rule helps in making sure that the repayment for the nominated bank is based on the independence principle. Thus, this particular principle can therefore be diminished if there is a determination of fraud. Therefore, this will be called an exception of fraud. While dealing with the cases of fraud, the party who is a part of the agreement must be directly liable to make sure that the payments are received by the nominated bank[15]. In the case of fraud exception, it must be established that all the necessary documents should be submitted to the issuing bank which will not make it feel obligated.
Application: As per the facts of the case that have been mentioned above stated that the carrier will not be able to be liable or responsible for the goods that have been damaged due to the process of refrigeration. It was thereafter observed in this scenario that 3 tonnes were damaged because these problems. Hence, it can be said that the sellers Beauty Bananas Ltd. being the sellers will not be compensated by China Fruit Shipping. A cargo was also missing as well as there were damaged cargos. Thus, in this situation, a letter of credit played a significant role as the part of the transaction for producing finances. The Bill of Lading on the other hand stated that the cargo remained to the quality and quantity that were already mentioned in the agreement of sale.
This situation made them do a process of investigation. For this process, the seller was issued and the Bill of Lading was illegally obtained from China Fruit Shipping. Hence, when the issuing bank sent the letter of credit, it contained all the documents that were based on these illegal activities. The documentary evidence acts as the proof for taking care of this situation. According to the provisions of the Uniform Customs and Procedures (UCP 600), the mentioned principle of independence will therefore not be applied. This is because the term fraud prohibits the process of the independence principle. It however establishes the necessary and particular rights for the transaction. Hence, it can be stated that China Fruit Shipping is bound to compensate the nominated bank for the amount that have been provided already.
A contract was therefore entered into by both the carrier and the seller. In this case, the seller will not be held liable for any sort of damage that has been caused to the goods because of the refrigeration problems. Therefore, the carrier will be bound to reimburse the seller for the discrepancies that were delivered to the buyer.
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