Development of International Trade has led to the need for international rules to govern contracts. The United Nations Convention on Contracts for the International Sale of Goods (1980) (“the Convention” for brevity) was adopted and ratified by many countries in order to ensure uniform interpretation of contractual terms and conditions. The present case deals with a contract between two traders living in different countries through this essay the laws that govern their contract will be explored. No contract can exist in a vacuum without being governed by a law that seeks its application in the domestic law.
All contracts should be governed by some law either domestic or international. It has been the case that when private international law governs a contract then there is a possibility of conflict. The conflict arises due to the dilemma in the minds of the Court as to which law should be made applicable. It has been seen that There are two possibilities in such situations, the first where the contract is silent on the domestic law and second where the contract stipulates the law that governs it. Where the contract does not mention the law governing it, a conflict of law can arise.
In such conflict situations, the Australian law clearly states that the law of the State having the closest connection to the contract will apply or in the alternative the International Law being the Convention will apply. (Zeller 1999 : 1). In the present case we can see that the Australian Law governing sale of goods, the Sale of Goods (Vienna Convention) Act 1987, incorporates the provisions of the Convention. According to s. 6 of the Act, ‘the Convention prevails in cases of dispute between the two’. Hence it can be safely concluded that Article 1 (1) of the Convention is applicable to such contracts.
The rule of application being that ‘the States should be Contracting States, or where they are not then their rules of private international law should lead to application of law of a Contracting State’. In the present case both Germany and Australia are contracting States and hence this contract is governed by the Convention (Uncitral 2006). Article 14 of the Convention states that there is no specific format for contracts, it could be oral or in writing. All contracts should essentially contain clear details of the contracting parties, the offer that is made by one and the proper acceptance of the offer by the other.
Further, contract should be for sale of goods for money between parties living in different States. In the present case, there is a clear contract between Digit and Bildia for purchase of motors but it is not clear whether the same was in writing or oral. Assuming that it was in writing the next important thing is to identify the terms of contract that would best suit both parties. The facts state that it was the first time that Digit was importing machinery whereas Bildia had more experience in the area of sea carriage and thus agreed to handle the entire transportation process.
It can be inferred that this contract would be similar to Delivered Ex Quay Contract. Here the seller agrees to deliver the goods to the destination specified by the Buyer and also agrees to bear the entire transportation cost, customs duties, clearance of customs import and other such duties and taxes that are payable. The buyer would only be responsible for insurance of the cargo and other such incidental costs. Having determined the law applicable to the contract, it is important to understand whether there has been any breach of contract from the parties. The contract terms suggest that the parties had agreed to pay through installments.
The Convention specifies that intention to perform plays a very important role while determining breach in such contracts. In the present case, it can be seen that the buyer paid the deposit but did not pay the first installment. Digit later went on to pay the installment only after rearranging the payment schedule and after that stopped payment. From these facts, it can be inferred that there was no intention on the part of the buyer to pay for the goods sold. It can be argued by Digit that as the goods were not in good condition when it was delivered he need not pay for the goods.
However, the facts reveal that the buyer had complete knowledge of the damage caused to the goods and yet chose to pay the first instalment without notifying the seller about the damage and by doing so the buyer has waived his rights to cancel the contract. The risk of the property has passed on to the buyer from the minute he takes delivery and possession of the same. The Convention very clearly mentions that where the delivery has been taken by the buyer and the buyer has had reasonable time to verify the quality and exactness of the goods delivered, he cannot cry foul later and has to pay for the goods.
Non-payment would mean non-performance of contract by the buyer for which the seller can seek legal remedies. Applying the provisions of Article 64 of the Convention to the present case we can see that the seller, Bildia, has given extra time for the buyer Digit, to pay for the machines, However, Digit has not paid even during the extra period and hence Bildia can sue Digit for fundamental breach of contract arising out of non payment.