Daubia Sales Contract Case Study

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THIRD ISSUE: RESPONDENT has valid grounds for avoidance of the Sales Contract on 7 July 2014 and 9 July 2014
B.CLAIMANT did breach the Sales Contract on 4 July 2014 and 8 July 2014
I. CLAIMANT breached the Sales Contract for the inconsistency between the Sales Contract and the letter of Credit opened on 4 July 2014
1. The CISG applies to the merits of the case at issue
Pursuant to Article 20 of the Sales Contract [Cl. Exh.1, p. 7], “The contract, including this clause, shall be governed by the law of Danubia”. As Danubia is a Contracting State to the United Nations Convention on Contracts for the International Sale of Goods (hereinafter CISG) [R.A., p. 5, para. 18], the Convention applies automatically to the contract despite the fact that one party or both parties do not have their places of business within a Contacting State [1]. Article 1 (1) (b) applies to the merits in the case at issue. Further, subject to the fact that when the CISG applies by law it can supersede otherwise applicable domestic law to the contrary [2Chengwei]. UNIDROIT Principles of International Commercial Contracts 2010(hereinafter UNIDROIT Principles 2010), which is the Contract law of Danubia[PO 2, p. 69, para. 43], cannot be applied directly, but be permitted as a last resort when it is not sufficient[3]. 2. It is CLAIMANT’s essential obligation to pay the price required under the Sales Contract The obligations of the CLAIMANT, as stated in the Article 53 CISG, “The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention”. These obligations are essential for a contract to be sales contract [4]. Pursuant to Article 4 of the Sales Contract, “A Letter of Credit in the amount of US$ 1,350,000 shall be established by the Buyer” [Cl. Exh.1, p. 7], the payment obligation is the issuance of a Letter of Credit complying with the formalities as the Sales Contract requires. In the case at issue, the Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce (hereinafter UCP 600)[Cl. Exh.1, p. 7].Though the Letter of Credit is a separate transaction from the sale or other contract on which is based according to Article 4 (a) UCP 600, the obligations of CLAIMANT to pay the price in a measure required by the special modes of payment agreed in the contract become part of its obligation according to Article 53 CISG[5]. However, the changes of the payment price and the delivery term in the Letter of Credit on 4 July 2014[Cl. Exh.5, p. 11] will result “that a presentation does not comply”, as stated in Article 16 UCP 600, RESPONDENT may be refused to honour or negotiate. Under that circumstance, not only the purpose of the contract is endangered, serious consequences to the economic goal pursued by the parties may also be caused. CLAIMANT’s failure to open the Letter of Credit in a manner conforming to the RESPONDENT’s contractual terms constituted “a fundamental breach of contract”, justifying RESPONDENT’s declaration of avoidance pursuant to Article
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However, it is not sufficient to deal with the problem of computation the deadline of issuance of the Letter of Credit in the case at issue. The Danubia general law of contract is silent on the issue. It does not contain any rules on calculating time limits beyond the adoption of Art.1.12 UNIDROIT Principles [PO 2, p. 69, para. 44]. Under Art.1.12 (3) of this rule, “the relevant time zone is that of the place of business of the party setting the time, unless the circumstances indicate otherwise” while it is RESPONDENT that set the time. As a consequence, the relevant time zone is Mediterraneo Standard Time (hereinafter MST). Further, in Mediterraneo, the day of the occurrence of a triggering event is counted in [PO 2, p. 69, para. 44]. It is 5 minutes late according to the way above calculating the deadline. Since the notice of transport arrived at 00:05 MST on 9 July 2014[PO 2, p. 66, para. 27], while the receipt of the notice of transport is 25 June 2014[Cl. Exh.2, p. 8]. Besides, for the reason that the Letter of Credit was faxed outside RESPONDENT’s business hour [Ans.R, p. 35, para. 15] as well, CLAIMANT breached the Sales Contract for its late delivery of the second Letter of

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