UN Convention on Contracts for International Sale of Goods (CISG) 1980

 CISG was developed by the UN Commission on International Trade Law (UNCITRAL), and
was signed in Vienna in 1980. Came into force as a multilateral treaty on 1/1/1988, after
being ratified by 11 countries.
 As of May 2016, it has been ratified by 87 states.
 Main purpose is to provide a modern, uniform, and fair regime for contracts for the
international sale of goods.
 One of the main benefits of CISG is its unified code of rules and regulations, making
importing and exporting and other facets of international trade easier. Instead of dealing
with the domestic laws for international trade in several foregin countries, companies can
readily apply CISG.
 Sellers can avoid difficulties of reaching agreement with foregin buyers on choice of law
issues as the CISG test will be readily available for compromise.
 Use of the CISG will decrease the time and legal costs otherwise involved in the research of
unfamiliar foreign laws.
 Reduce the problems of proof of foreign law in domestic and foreign courts.

A) Part 1: application of CISG

Article 1(1)(a): place of business are in different States; States are Contracting States; or
Article 1(1)(b): rules of private int law lead to the application of the law of a Contracting State.

Prime Start Ltd v Maher 
Forest Products Ltd
 As to the applicable law, the Court rejected the Plaintiff’s argument that
A British Virgin Islands corporation (Plaintiff) and US corporation
(Defendant) entered into a contract for the sale of wooden products to be
resold to Plaintiff’s client in Russia. Plaintiff also concluded a contract with
another US corporation (Co-defendant) which would provide services
related to quality control of the goods. Plaintiff brought an action against
both US corporations alleging non-conformity of goods and failure to
inspect according to parties’ agreement.
the CISG applied to the merits of the dispute. Not only were the conditions
set forth by Art. 1(1)(a) CISG not satisfied, since neither the British Virgin
Islands nor the United Kingdom are Contracting States, but also
application of the CISG by virtue of international private law rules had to
be excluded, since the USA made a reservation to Art. 1(1)(b) pursuant to
Art. 95. As a result, the Convention could have applied only if the parties
to the contract were all from Contracting States.

Masonville Plastics Ltd v  A British Columbian manufacturer entered into a contract with an Austrian
Kurtz GmbH (2003) subsidiary of a German seller for the sale of a pre-expander and a block
mould to be financed by a lease contract.
 After installation of the equipment, although the buyer had received
assurances that the equipment would produce EPS products compatible
with Canadian testing requirements, the buyer found several flaws in the
blocks produced by means of the seller’s equipment.
 As to the applicable law, the Court rejected the seller’s argument that the
buyer had implicitly agreed to the application of German law. In the
opinion of the Court, the mere fact that the seller’s confirmation of order
stated that delivery was to be carried out according to “General Terms of
Delivery of the [seller]” did not mean that a choice-of-law clause in favor
of German law had been agreed upon by the buyer. Instead, the law
having the closest relationship with the contract was the law of Ontario,
Toronto being the place where the equipment had been installed and put
into operation.

ICC Arbitration Case No. In this case, it was held that a Chinese seller, defendant, sold scaffold fittings to
7531 of 1994 an Austrian buyer, plaintiff. The buyer claimed lack of conformity of the goods
and declared the contract avoided. Subsequently, the buyer sold the goods
and sued the seller for damages; as such goods had been sold only partially
and at a lower price.
The arbitral tribunal determined the CISG to be applicable to the contract in
accordance with article 1(1)(a) CISG.

Germany 25 June 1997 A German seller, defendant, delivered surface-protective film to an Austrian
Appellate Court buyer, plaintiff, for use by the buyer's business partner. The buyer did not test
Karlsruhe the film, which had to be self-adhesive and removable. When the film was
removed from polished high-grade steel products, it left residues of glue on
the surface. Upon being so advised, the buyer notified the seller the next day.
However, this notice was given 24 days after the film had been delivered. The
buyer paid the expenses of removing the glue residue and brought a claim for
reimbursement of these expenses against the seller. The CISG was applicable
under both articles 1(1) (a) and 1(1)(b) CISG.

B) Formation of the Contract (art 14-24)

Offer
-Art 14(1): proposal for concluding a contract
-Art 15(1): becomes effective when it reaches the offeree
-Art 16(1): may be revoked if the revocation reaches the offeree before acceptance is
dispatched.
-Art 17(2): when a rejection reaches the offeror.

Acceptance
-Art 18: becomes effective when it reaches the offeror. Not effective if it does not reach the
offeror within the time fixed, or within a reasonable time. - a bit ambiguous
-Art 20(1): guide to interpret the offeror’s time limits for acceptance. Letter/telegram - runs
from the moment the telegram is handed in for dispatch/from the date shown on the letter. If
no date, see the date shown on the envelope.
-Art 20(2): late acceptance is still an acceptance if without delay the offeror orally informs the
offeree that he considers his offer as having lapsed or dispatches a notice to that effect.

Withdrawal of Acceptance
-Art 22: acceptance withdrawn if the withdrawal reaches the offeror before/at the same time
the acceptance would have been effective.

Communication - “Dispatched”, “Reaches”

-Art 24: reaches the addressee when
(1) made orally to him or
(2) delivered by any other means to him personally, to his place of business or mailing address
or
(3) if he does not have a place of business or mailing address, to his habitual residence.
*no provision on “dispatched”
Obligations of the Seller
-Art 30: general obligation, seller must deliver the goods, hand over any doc & transfer
property in the goods, as required by the contract and this convention.
-Art 31: place of delivery, seller has duly performed its duty of delivery when the goods are
handed over to the first carrier. First one constitutes delivery.

Time of delivery
-Art 33: seller must deliver goods
(a) If a date is fixed in the contract;
(b) A period of time is fixed in the contract, at any time within that period unless buyer has to
choose a date; or
(c) Within a reasonable time after the conclusion of the contract.
Handing over of Documents
-Art 34: if seller is bound to hand over the doc, must do so at the time and place and in the
form as stated by the contract.

Conformity of the Goods

-Art 35: as required by the contract unless the parties have agreed otherwise not to conform
with the contract unless they
(a) Fit for the purpose of the similar goods,
(b) Fit for particular purpose made known to the seller at the conclusion of the contract,
(c) Possess the qualities of goods which the seller has shown the model/sample to the buyer,
(d) Contained/package in the adequate manner to preserve and protect the goods.
-seller is not liable under (a) to (d) for any lack of conformity if the buyer knew/couldn’t have
been unaware of such lack of conformity.

Buyer’s remedies
-Art 45: if seller fails to perform obligation, buyer may
(a) exercise the rights under Art 46-52
(b) claim damages under Art 74-77

Obligation of the Buyer

-Art 53: pay the price and take delivery, as stated in the contract.

Payment
-Art 57(1): payment is to be made at the seller’s place of business. (if contract is silent as to the
place of payment)

Seller’s Remedies
-Art 61: if buyer fails to perform obligation, seller may
(a) Exercise the rights provided in Art 62-65
(b) Claim damages in Art 64-77
-Art 62: specific performance
-Art 64: avoidance
Exemptions from Liability
-Art 79: A party is not liable for failure to perform obligations if he proves that the failure was
due to an impediment beyond his control.

Registration of Ships
 Article 2 & 4 of United Nations Convention on Registration of Ships (UNCROS) 1986
- every ship must be registered in a particular National legislation
 There must be a genuine link between the ship and the State in which it is registered.

GENUINE LINK
Geneva Convention of the High Seas (UNCLOS) Article 5:
 "There must be a genuine link between the State and the ship, in particular, the State must
effectively exercise its jurisdiction and control in administrative, technical and social
matters over ships flying its flag."
Protection and Perservation of the Marine Environment (UNCLOS) Article 217:
 Flag states shall:
 Effectively enfore applicable international rules and standards irrespective of where
the violation occurs;
 Prohibit vessels flying its flag from sailing until they can proceed to sea in compliance
with the requirements of international rules and standards;
 Investigate violation of international rules and standards and where appropriate
institute proceedings irrespective of where the violation occured; and
 Provide by laws and regulations penalties of adequate severity to discourage
violations of application intentional minimum rules and standards, wherever they
occur.

Purpose of Registration of Ships

1. Determination of admiralty jurisdiction - jurisdiction over a vessel on the high seas resides
exlusively with the state to which the vessels belong.
2. Possession of a national character.

Flag of Convenience
 Refers to registering a ship in sovereign state different from that of the ship’s owners.
 Registered under flags of convenience can often reduce oeprating costs or avoid the
regulations of the owner’s country.
 Vessel owner will find a nation with an open registry - nation that allows registration of
vessels owned by foreign entities.
 To take advantage of reduced regulation, lower administrative fees, greater numbers of
friendly ports.

Definition of vessel
 S.2 of Merchant Shipping Ordinance 1952
 Includes ship/boat or any other description of “vessel” used in navigation.
 Include vessel used in navigation NOT propelled by oars.

Steedman v -Plaintiff was riding a jet ski in the vicinity of Brighton Pier when he was involved in a
Scofield collision with a speed boat. The collision was caused by the negligence of the first
defendant while acting as servant or agent of the second defendant.
-The defendants contended that the law states that “no action shall be maintainable
to enforce any claim against a vessel or her owners in respect or loss to another vessel
or damages for personal injuries suffered by any person on board her caused by the
fault of the former vessel….”
Issue: whether a jet ski considered a vessel for the purpose of navigation?
Ans: No.

The Gas Float -A boat-shaped gas float, moored in tidal waters to give light, was held not to be a
Whitton ship for the purpose of salvage.
-Lord Hersell said, “It was not constructed for the purpose of being navigated. It was
in truth, a lighted buoy or beacon. The suggestion that the gas stored in the float can
be regarded as cargo carried by it is more ingenious than sound.”

Ship Registration in Malaysia

 Administered by Marine Department of Malaysia by 5 ports of registry.
2 Types:
a) Traditional = Part IIA of the MSO
1. Malaysian citizen or
2. Malaysian-incorporated corporations where:
i. The principal office of the corporation is in Malaysia
ii. The management of the corporation is carried out mainly in Malaysia
 iii. The majority (51%) of the directors are Malaysian citizens and the majority of
the shareholding of the corporation are held by Msians free from
trust/obligation in favour of non-Msian.
b) International (MISR)
1. Attracts individuals and foreign shipping companies to register ships through Labuan
without the need to comply with the Msian majority shareholding requirement.
2. Ships will carry a Msian flag and are considered as Msian ships.
3. Speific requirement = Part IIC of the MSO

What is Msian Ship

 S.2(a): under Part IIA of MSO
 S.11 of MSO
 S.12: consequences of not registering ship
 S.59(2): only ship registered in Msia is entitled to fly Msian national ensign.
 S.65KA: liability on contravening the prohibition on domestic shipping.
 S.61 & 65: guilty for hoisting Msiain flag when it is not a registered Msian ship
 S.62: concealing ship to be of Msian registration is guilty of an offence.
 S.58A: terminable certificate of registry for small ships.

Effect of Registration
1. Public law:
a) Granting of nationality and the right to fly the national flag.
b) Subjections of the vessel of the State’s jurisdiction for the purpose of safety
regulations, crewing and discipline on board, pollution matters.
c) Privileges to engage in maritime activities within the territorial waters of the flag state.
d) The right for naval and political protection, as well as the right of the flag state to
utilize the ship’s services in war situations.
2. Private law
a) Provide prima facie evidence of the title and ownership
b) Protecting the title and the ownership rights
c) Preservation of priorities between individuals holding security interests over the ship,
such as mortgages.

The Bineta Registration of ship has dual effect. It gives an entitlement to all the privileges,
 but an owner cannot, by failing to register, evade duties cast on such vessels.
Apart from the public matters, registration is also important as proof of title.
The ship was sold by the seller to the buyer who did not pay the purchase
price even though he registered him as the new owner. The seller managed to
sell the vessel to a third party who successfully sought a court declaration that
he was the rightful owner.

Formalities of Registering a ship under MSO 1952

 S.16 - 24

Sale of Ships**
 SOGA 1957 - a ship is a chattel and is also considered as part of goods.
 S.4: a contract of sale of goods is a contract whereby the seller transfer transfers or
agrees to transfer the property in goods to the buyer for a price. There may be a
contract of sale between one part owner and another.
 Formation of contract
 1. negotiation stage
 2. inspection
 3. conclusion of contract

A. Negotiation Stage
a) When deposit to be paid - 10% in security
b) Fundamental term = condition
c) Breach = forfeiture of deposit

The Ranger [1970] Sale of a vessel by plaintiff to defendants under contract requiring first
defendants to pay deposit into joint account of plaintiffs’ agents and first
defendants. Second contract of subsequent sale of vessel by first
defendants to second defendants. Second contract cancelled because of
late delivery of vessel. First contract wrongfully repudiated by first
defendants. Plaintiff claim for release of deposit.

B. Inspection Stage
 a) By buyer
b) When vessel is dry docked
c) Classification Society - NGO that establishes & maintains technical standards for the
construction and operation of ships and offshore structures.
i. Acts as “Puspakom” of the ships
ii. Produces license of fitness

Morning Watch [1990] -Normally appointed by a seller

-It centered round whether Lloyds owed a duty of care not to cause
pecuniary loss to persons other than the owner of Morning Watch who
were likely to rely on a Lloyds survey. Morning Watch had been surveyed by
a Lloyds surveyor who issued an Interim Certificate to owners who then
advertised her for sale, saying she had "passed current special survey".
-The buyers, to whom the Interim Certificate was not shown, claimed the
survey was negligent.
-Acknowledging lack of precedent as to whether a classification society
surveyor owes a duty of care not to cause pecuniary loss by survey to
persons other than owners and that Lloyds accepted that it foresaw that
purchasers might be influenced by the classification status of a vessel when
deciding on purchase, Phillips J (as he then was) held (at 557) that the
foreseeability test was satisfied as the surveyor knew that his survey was
being done for purposes of sale.

Nichalaus [1996] Cannot have 2 conflicting reviews.

C. Conclusion Stage
a) Passing of risk when property is passed

Seath & Co v Moore The risk of loss might pass before delivery, but the ownership would not
pass until delivery was made.

Shipbuilding**
Shipbuilding contracts
 Parties should aim to reach agreement on each of the main commercial issues before
formal contractual documentation is prepared.
 Possibly by the Buyer and Builder entering into a non-building form of letter of intent.
 Standard form are AWES and SAJ
  SAJ = Shipbuilders’ Association of Japan
 AWES = Association of European Shipbuilders and Ship Repairers.

Specification
 Most important
 Spares and equipment to be provided with the ship
 Technical issues
 Other matters that are likely to affect the specification:
 Intended use of the ship = commercial/non-commercial
 Trading patterns
 Classification required & classification society appointed
 Choice of flag & flag state requirements.

Contract Price
 Price agreed will be fixed
 Builder will bear the risk of any increased costs of construction.
 Builder may seek provision for the price to be varied in certain circumstances:
 Variation in the cost of core construction materials
 Exchange rates, price in USD but expenses likely to be incurred in local currency.

North Ocean Shipping A letter of guarantee was jointly and severally provided by three Greek
Co Ltd v Hyundai individuals to the Korean shipbuilders to guarantee payment by a Liberian
Construction & Co Ltd ship-owner for the construction of a ship. The letter stated that the guarantors
would “irrevocably guarantee the payment in accordance with the terms of the
shipbuilding contract all sums due or become due by the ship-owner to the
shipyard.”
Under the terms of the shipbuilding contract, the shipbuilders could cancel the
contract, retain money already paid and to claim for damages in the event of a
default in the payment of the second installment. There was such a default and
the shipbuilders cancelled the contract in accordance with the shipbuilding
contract.

On appeal to the HOL, the guarantors contended that the effect of the
cancellation of the contract by the shipbuilders destroyed their rights to
recover under the second installment payment and replaced it with a remedy
 in damages.
HOL: not persuaded and held that the notice of cancellation of the contract by
the shipbuilders did not affect the ship-owner’s liability for payment of the
second installment as it was a liability arising before the rescission. Hence, the
guarantors remained liable to pay the second installment under the guarantee
for the ship-owners’ default in payment that installment.

Payment
 First instalment of the purchase price will be payable before construction starts.
 Subsequent instalments will then become due following completion of particular stages of
construction with a final instalment due on delivery.
 Shipbuilding contract will include a liquidated damages provision setting out the agreed
damages payable to the Buyer as a result of any delay in delivery of the ship / result of its
failure to comply with certain aspects of the specification.
 Advantage of including such clause:
 Buyer will not be required to prove its loss in order to claim the liquidated damages
referred to; and
 The Builder will not be liable for unlimited loss which it will not be able to quantify or
insure against.

Risk & Title

 Title pass to the buyer upon:
 completion
 Payment of the delivery instalment

Re Blyth Shipbuilding & Dry Bearing in mind the hybrid nature of a shipbuilding contract,
Docks Co Ltd even if the ship is uncompleted, the property in it (but not the
materials which have not been appropriated to her) may, in
some circumstances, pass to the buyer, if the parties have
clearly stipulated it in the contract.

Ship’s Class
 A Classification Society acceptable to the Buyer should be utilised and the exact class
notation required should be clearly set out as part of the specification.
 Builder normally covers the costs of the Classification Society during construction.
Remedies of Builder
 If the buyer cannot fulfill the payment, the builder may:
 Exercise his possessory lien;
 Resell as a result, exercising his lien;
 Exercise a common law right of stoppage in transit; and
 Sue for the price
 Refusal to accept delivery will entitle the ship builders to claim for the usual damages

The Diana Prosperity [1976]
-A Japanese tanker company planned to build 50 tankers of
80,000 tons each, to be delivered from 1975, and to obtain
financing for the construction, it granted time charter for the
first vessel to the defendant company. The vessel was
sub-chartered to the plaintiff company.
-The relevant charter contained the following clause: “. . . to
be built by Osaka Shipbuilding Co. Ltd. and known as Hull no.
354 until named and shall have a deadweight of about 87,600
tons.”
-The vessel was actually constructed in another yard at
Oshima and not in Osaka as the shipbuilders could not handle
vessels above 45,000 tonnes. The Oshima yard was 50%
owned by the Osaka shipbuilders.
-The vessel Diana Prosperity was due to be delivered on Apr.
1, 1976, but the plaintiff company refused to accept delivery
on the ground that the vessel they had chartered had been
built by a different company.
-At the Commercial court, Mocatta J.,who used to be a
competent admiralty lawyer decided that the plaintiff
company and the tanker owners were not entitled to refuse
delivery.
-His decision was upheld by the Court of Appeal. Lord
Denning, MR, said: “… the description "built by the Osaka CO.
Hull No. 354" could not be regarded as a strict condition
precedent which was to be exactly fulfilled and it was
sufficient that the vessel to be delivered would be in
substance the vessel described in the charters.”

Remedies of Buyer
A) Seek specific performance
 a) S.57 SOGA

Behnke v Bede Shipping -It was a sale of a very old ship, but refitted with new boilers
Company [1927] and an engine to comply with German regulations. The sale
was confirmed with a telegraphic acceptance by the sellers’
brokers. The sellers tried to sell the vessel to other interested
parties, but their revocation came after acceptance. The seller
refused to provide instructions regarding the payment of
deposit and repudiated the contract with the buyer.
-The German buyers brought an action against the sellers,
seeking a court declaration that there was a binding contract
and a Court order for a specific performance of the contract.
-The Court held that the contract was enforceable and
ordered a specific performance.

B) Sue for non-delivery