International Business Law & Cross-Border Transactions

Welcome to International Business Law & Cross-Border Transactions. Follow Programme Reader 02 — Core Concepts & Vocabulary, then practise in the learning system. Sign in and use the study header to open your authorised course. Select this published lesson. Start Course Tutor with Auto audio on: it teaches continuously, answers a typed question, then resumes. Trade terms. A contract provides: "Price: FOB Nhava Sheva. Payment: by irrevocable letter of credit. Governing law: laws of India. Disputes: courts of Mumbai." Identify the problems. The trade term. It is a sea and inland waterway term, so it is appropriate if the goods are handed over on board a vessel at that port. If the goods are containerised and delivered to a container terminal, risk under that term does not pass until the goods are on board, which leaves the seller bearing risk during a period when it no longer controls the goods. A term designed for container carriage would fit better. The version is also missing, which makes the reference ambiguous. The payment term. Irrevocable is stated but nothing else is. Is the credit to be confirmed, and by a bank in India? What documents will it call for, and can the seller produce them? What is the last date of shipment and the period for presentation? A credit that calls for a document the seller cannot obtain, such as one issued by the buyer, converts the credit into a promise the buyer can break by withholding it. These are contractual terms and belong in the sale contract, not left to the credit to reveal later. The governing law. Adequate, though it should say that it excludes conflict of laws rules, and the parties should consider whether to state expressly that the Convention on contracts for the international sale of goods does not apply, which avoids argument. The dispute clause. This is the serious defect. If the buyer is foreign with no assets in India, a Mumbai judgment will be difficult to enforce where the assets are, since enforcement of Indian judgments abroad depends on the foreign country's law. An arbitration clause with a named seat, institution, rules, language and law of the arbitration agreement would produce an award enforceable under the New York Convention. The clause should be renegotiated even at the cost of some other concession. The redraft therefore changes the trade term to one suited to the carriage, adds the version, specifies the credit in detail, and replaces the jurisdiction clause with an arbitration clause. Ask Course Tutor to explain this step: Is the credit to be confirmed, and by a bank in India? Say what you tried. Pause and try this source task. Why is a document issued by the buyer dangerous in a credit? The source answer is: Because the seller cannot procure it, so the buyer can prevent payment simply by withholding it, which defeats the independence the credit was obtained for. Such requirements should be resisted at the contract stage, where the documents the credit will call for are agreed. Compare your method and result, correct an error, then continue. Use Stop to end Course Tutor.