International Business Transactions

Export sales
‡ Contractual issues
„ What are the terms of the K?
„ What law governs the K?
„ How are disputes to be resolved?
‡ Payment issues
„ How will the buyer in one country get payment
to the seller in another?
„ Use of letters of credit to minimize risk of
nonpayment
‡ Regulatory issues
„ Export controls imposed by the seller’s state
Export sales: contractual issues
‡ What law governs the K?
„ To answer this question, we apply “conflict-of-
laws,” or “conflicts,” rules (known in other
systems as “private international law” rules)
„ Remember that the court addressing an
eventual dispute will apply its own conflicts
rules (the conflicts rules of its state) to
determine governing law
‡ In the United States, conflicts law is state, not
federal, law.
Export sales: contractual issues
‡ What law governs the K?
„ Where could a dispute arising out of this K be brought?
‡ New York
‡ China
„ What are the applicable conflicts rules in those states?
‡ New York’s version of UCC § 1-105
ƒ Notice there’s a different test (Restatement (Second) of
Conflicts § 188) for contracts other than sales of goods
‡ Article 126 of China’s Contract Law
„ Applying those conflicts rules, what substantive law
would we expect to govern the K?
Export sales: contractual issues
‡ Does it make a difference what law
governs this K?
„ As to the enforceability of the invoice clauses
limiting the seller’s liability?
„ As to the rights of the buyer if the seller
tenders non-conforming goods?
„ As to the possibility that the seller’s
performance might be excused?
‡ Remember the professional obligation of
counsel to provide competent
representation
Export sales: contractual issues
‡ What law governs the K?
‡ Simplifying the analysis: the CISG (Convention
on Contracts for the International Sale of Goods)
„ Note the scope of its application
„ Contains substantive contract law
‡ The CISG applies to contracts within its scope
unless the parties opt out.
„ Opt-out clause: “Disputes arising out of or in connection
with this contract shall be governed by the laws of New
York State.”
„ Better: “Disputes arising out of or in connection with this
contract shall be governed by New York Uniform
Commercial Code,” or “…shall be governed by the laws
of New York State, excluding the provisions of the
CISG.”
Export sales: contractual issues
‡ Use of commercial terms
„ Who pays for shipping the goods from New
York to China?
„ Who bears the risk of loss if the goods are
damaged during shipment?
‡ Where does the K address these issues?
„ “FOB” term
Export sales: contractual issues
‡ Battle of the forms: Filanto
„ March: Chilewich sends memorandum agreement
providing for the purchase of shoes in two installments.
It expressly incorporates the terms of the Russian
Contract, including its arbitration clause.
„ May: Chilewich opens a letter of credit in favor of
Filanto. The L/C, a copy of which was transmitted to
Filanto, mentions the Russian Contract.
„ August: Filanto signs and returns the memorandum
agreement, attaching a cover letter that purports to
exclude most provisions of the Russian Contract,
including the arbitration clause.
‡ What law governs this contract?
Export sales: contractual issues
‡ Battle of the forms: Filanto
„ CISG Article 19: “A reply to an offer which purports to
be an acceptance but contains additions, limitations or
other modifications is a rejection of the offer and
constitutes a counter-offer.”
„ No agreement in writing to arbitrate.
„ CISG Article 18: “A statement made by or other conduct
of the offeree indicating assent to an offer is an
acceptance. Silence or inactivity does not in itself
amount to acceptance.”
‡ CISG Article 8(3): “In determining the intent of a party …,
due consideration is to be given to … any practices which
the parties have established between themselves, usages
and any subsequent conduct of the parties.”