Case 1: Formation of the contract - Behavioral acceptance

Case:
Argentine buyers negotiate to form contracts with Italian sellers to buy some industrial
machinery. The seller sent the buyer an offer based on a standard form. The buyer has no
opinion on the content of the offer. After that, the buyer signed the offer and sent it to a bank
to apply for credit to the merchant for this service.
However, later, the buyer sued the seller in the Argentinian court because contracts had not
been established. The buyer considers that the offer and acceptance of the offer are not
enough to form a valid contract. Buyer cites article 18 CISG, according to which, silence or
inaction is not considered acceptance of the offer.
Resolution:
Since Argentina and Italy are two member states of the CISG, the court applies the CISG to
dispute resolution. The Court commented that under article 18 of the CISG, silence or
inaction by itself does not constitute acceptance of the offer. In this case, although the buyer
do not officially respond to the seller in writing or orally but the buyer has signed the offer
and send it to the bank; This is the action that the buyer takes in relation to in connection
with payment for goods, and this action means acceptance of the offer in accordance with the
Article 18, paragraph 1- CISG.
In addition, the buyer has some variation in the size of some attachments, but these changes
are not considered to be fundamental amendments or additions to the original offer. So it does
not affect the validity of the acceptance of the offer in accordance with the provisions of
article 19, paragraph 2 and paragraph 3- CISG. Only additional or variable factors related to
pricing, payment and payment, quality, quantity, place and time of delivery, extent of liability
of the parties, settlement of disputes is considered as a fundamental change in the content of
the offer.
With these arguments, the court held that the buyer accepted the offer of the Italian seller.
The court concluded that the contract had been established and could not be dismissed.
Lesson:
First, according to the provisions of article 18-CISG, silence and inaction are not to be
considered as acceptance of the offer. However, the performance of certain acts is considered
as acceptance of an offer, for example in relation to the delivery of goods, the opening of a
letter of credit or payment for example, even if the acceptor does not notify the offeror.
However, Vietnam law regarding contracts has no regulations on this issue. Therefore, when
accepting an offer, you should accept in writing, specifying the contents of the acceptance
and suggestions for correction if yes, avoid the case of behavioral acceptance.
Second, when receiving an offer, if there are opinions contrary to the offer, it is necessary to
consider and make timely and complete amendment proposals. After submitting the offer
acceptance (which contains a number of amendments, supplements) should ask the offeror to
confirm once again that he agrees to amend or supplement it. This will avoid disputes when
the two sides negotiate contracts indirectly through the submission of offers and acceptance
of offers.
Case 2: Contract signing: Flexible pricing terms
The price clause is one of the important terms in the contract. Therefore, enterprises when
signing contracts need to take appropriate precautions to avoid disputes arising from
misunderstandings or disagreements about prices and how prices are determined.
Dispute between French buyer - Fauba Fidis GC Electronique and German seller -
Fujitsu Mikroelektronik Gmbh. Disputes arise during the conclusion of the contract and
relate to the determination of the price of the goods. The dispute was settled in the Paris
Court of Appeal. Article 14 of the 1980 Vienna Convention on Contracts for the
International Sale of Goods (CISG) was applied to settle the dispute.

Dispute developments
Buyer sends an offer to buy electronic components to the seller. In a stipulated tender offer,
the purchase price offered by the buyer may be considered in terms of the decline in the
market price at the time of delivery. Upon receipt of the bid, the seller replied that the
price should be considered in terms of both the rise and fall of the market price at the
time of delivery. Buyer has agreed to this. The goods are sent by the seller to the buyer in
accordance with the purchase offer, but the buyer unilaterally cancels his offer and does
not receive the goods. The buyer considers that such specified price terms are not clear
enough to form a contract between the two parties. Since France and Germany are two
member states of the CISG, the court applies the CISG to settle disputes. The Paris Court of
Appeal cited article 14, paragraph 1 of the CISG, which states that “An offer to enter into a
contract addressed to one or more identified persons is considered an offer if it is
sufficiently precise and indicates the will of the offeror who wishes to bind itself in the
event of such acceptance. An offer is precise enough when it states the goods and sets the
quantity and price explicitly or implicitly or prescribes the factors for determining the
quantity and the price.”
In this dispute, the buyer’s offer stated: the price of the goods is determined according to the
decline in the market price. The buyer has given the basis for determining the price, which is
a reference to the market price at a particular time, the time of delivery. Thus, according to
article 14, paragraph 1 of the CISG, the price terms with the price determined according to
the increase or decrease of the market price are accurate and clear enough. With those
arguments, the court held that if the contract was established between the two parties, the
buyer could not cancel the offer. Buyer must receive the goods and pay for the goods.
Lessons Learned
The “floating” of commodity prices according to the increase or decrease of the market price
is very common in international goods sale and purchase contracts, especially those with long
performance terms, multiple delivery or contracts for which the time of delivery has not been
specified. Those are open-priced contracts that meet the requirements of flexible prices
according to market movements. Legally, this flexibility helps to ensure a balance for the
contract, limit excessive losses for one party when the market fluctuates, and limit
disputes arising.
Vietnamese enterprises also have the habit of determining a fixed price as soon as they sign a
contract. This is a legal point of view, not consistent with modern contract law and
practically, not consistent with the “hot” movement of commodity prices on the market
today. The Vienna Convention and the contract legislation of other countries both accept the
effect of open-price contracts, where the price clause is referenced to the market price.
Therefore, Vietnamese enterprises need to pay attention, in some specific situations, they
must stipulate reasonable and flexible price terms. It is advisable to give an exact initial
price to be able to calculate the profit, but do not forget to adjust the price according to
market fluctuations.

Case 3: Sales of disputed goods

When the parties are having a dispute about the goods, they should not sell the goods because
that way there will be no evidence for complaints or lawsuits. Moreover, the act of selling is
often considered an act of accepting goods.
Dispute between the respondent who is the Singapore seller and the plaintiff who is the
Chinese buyer. The subject matter of the contract is Merbau Indonesia logs. The two sides
argued about the quantity and quality of goods delivered and related inspection records.
However, the dispute resolution process is difficult because the buyer has sold part of the
shipment. The dispute was settled at the China Economic and Commercial Arbitration
Commission. The 1980 Vienna Convention on Contracts for the International Sale of Goods
was applied.

Summary of dispute
On November 10, 1998, the buyer signed a contract with the seller to buy Merbau Indonesia
logs. In the contract there is a clear and specific description of the characteristics of the
goods, unit price, packaging, payment terms and delivery time; regulations on inspection and
assessment, methods of measuring the quantity of goods. The contract also stipulates the time
of appeal and the arbitration clause
After signing the contract, the buyer pays by letter of credit to the seller as specified in the
contract. When the goods arrive at the port of destination, the buyer requests the China Cargo
Inspection Bureau of Guangdong Province to inspect the goods. The inspection report dated
March 2, 1999 concluded that the volume of wood was missing and the cause was due to
inappropriate measurement before shipment. The minutes also concluded on quality
violations, along with 9 photos of the defective condition of the goods.
Based on the Inspection Record, the buyer claims the seller for compensation. The seller
responded to the buyer's claim by sending the buyer a fax stating that if the buyer considers
the goods to be unconformable, the seller is willing to take the goods back and return the
money to the buyer. However, the Buyer did not respond to this fax from the Seller and sold
270 logs without notice. Due to a disagreement between the two parties, the buyer sued for
arbitration on June 4, 1999, asking the seller to compensate for damage.

Defendant's argument
The seller believes that the inspection report does not fully reflect the condition of the goods.
Immediately after receiving the inspection report from the Buyer, the Seller sent two experts
to the Buyer's Company to check the remaining stock in the Buyer's workshop to verify that
the inspection report accurately reflects the condition of goods. Two experts carefully
examined each of the remaining 556 logs. The Seller indicated that the volume of the
remaining timber was more than the Buyer's receipt, and the Seller actually delivered 8.18%
more than the contract. The seller pointed out that the inspection report based on only 9
photos is not enough evidence to prove more than 15% of the goods are defective. The seller
also provides a Certificate issued by the Indonesian Forest Service certifying that the wood
after inspection is of Class A quality suitable for export.

Arbitration decision
The Buyer claims compensation to the Seller for the reason that the goods are missing, but
does not require the Department of Inspection to measure the goods according to the method
specified in the contract. The seller must send experts to the Buyer's country to re-examine
according to the method specified in the contract to show that there is no shortage of goods.
In terms of quality, the referee considered that 9 photos were not enough to demonstrate a
lack of quality. Therefore, the Buyer's assessment of quantity and quality is not enough legal
basis.
In this case, the Seller has shown good faith to the Buyer by accepting the return and
refunding the Buyer. The arbitrator considers that the failure to respond to the Seller's fax is
an act of lack of cooperation and lack of goodwill of the Buyer. Furthermore, while the
parties were arguing over the quantity and quality of the goods, the Buyer still sold 270 logs.
Buyer has failed to notify Seller of its intention to sell. According to Articles 86(1), 88 CISG,
in this case, the Buyer is deemed to have accepted the goods and there is no basis for a claim
for compensation.

Note for Vietnamese enterprises

Regarding the inspection of goods at the port of destination as a legal basis for complaints
and lawsuits, the Buyer needs to inspect according to the regulations, standards and methods
specified in the contract. If there is a conflict between the inspection report and the Certificate
of quality and quantity provided by the Seller at the port of departure, it is necessary to
negotiate with the Seller to request the Seller to appoint a representative to be the counter-
inspection (presence on both sides). The record of counter-inspection is binding on both
parties and is the final legal basis for dispute resolution.
In the process of dispute settlement, the parties need to have a cooperative and goodwill
attitude. Each other should be informed of all matters relating to the dispute and should also
respond without delay to the other party's dispute resolution proposals. In this dispute,
Buyer's failure to respond to Seller's proposal for return of goods is considered a lack of
cooperation and will be detrimental to Buyer in litigation before arbitration.
The final note is to keep the status of the disputed goods as evidence to resolve the dispute.
The Buyer may not resell, or put the goods into use, without notice and consent of the Seller.
In this dispute, the Buyer sold about 1/3 of the goods without notifying the Seller. This action
means accepting the delivered goods in terms of quantity and quality.
Case 4: Framework Contract and Vienna Convention
The Vienna Convention (CISG) is often regulated to govern specific contracts, but
framework contracts are not outside the scope of the CISG.
Framework contract is a long-term signed contract containing basic provisions to regulate
the relationship between the parties; before each shipment, the parties will sign specific
contracts with regulations on price, quantity... Defendant - CNH Company (Poland);
Plaintiff: DBGmbH (Germany). High Court of Justice of Poland: the judgment was
pronounced on January 27, 2006.
Dispute developments
Polish seller and German buyer sign a long-term framework contract for the sale and
purchase of refined sand. This is the main ingredient used to produce roof tiles according to
new German technology. The delivery of goods is partially performed, the contract is
terminated. The Polish party has informed Germany that it cannot continue to perform its
obligations. Therefore, Germany was forced to return to the old production technology
using cement instead of refined sand. The German buyer then sued the Polish seller in a
Polish court, asking the defendant to pay damages for termination of the contract in the
total amount of 2,996,750 DEM (German currency unit) including interest.
However, the defendant argued that the Vienna Convention could not be applied to adjudicate
this dispute because this Convention did not govern the framework contract. The defendant
invoked article 14 of the Vienna Convention, which states that an offer to constitute a
contract must contain at least three essential terms: goods, quantity and price.

Court Judgement
The High Court of Justice disagreed with the defendant when the defendant argued that the
CISG did not apply to the framework contracts in international trade. The CISG rules do not
exclude contracts whose performance requires the specification of goods to be delivered in
part. The defendant’s reference to article 14 of the Vienna Convention does not constitute any
valid argument because this provision applies only to the offer and is not intended to be used
to determine the scope of application of the Convention in any case.
Since the seller failed to fulfill his contractual obligations, the buyer must purchase a
replacement. The amount of damages calculated by the buyer is 2,996,750 DEM, which
includes both losses and lost profits due to having to revert to the more expensive old
production method. The claimant calculated damages based on article 75 of the CISG,
whereby the claimant was entitled to claim the difference in price for the volume of cement
purchased for replacement of 120,000 tons. The High Court of Justice held that Article 75
of CISG applied in this case to calculate the amount of damages because Article 75 only
applied when the contract was actually canceled. In this case, the contract is not canceled
but not completed. In fact, the seller partially performed the contract and then declared the
contract termination. From this perspective, the High Court of Justice held that the amount of
compensation should be calculated based on a more objective criterion and not only
based on the replacement price offered by the aggrieved party.
Comments and notes
According to article 1 of the Vienna Convention: “This Convention applies to contracts for
the sale of goods between parties whose places of business are in different States”. Neither
this article nor the Convention as a whole provides a specific definition of a contract for the
sale of goods, but a general description can be drawn from articles 30 and 53: A contract for
the sale of goods falls under The scope of the Convention is a contract between a seller and a
buyer whereby the seller must deliver the goods and transfer title to the goods and the buyer
is obliged to take delivery and pay for the goods.
In the practice of international goods sale, long-term business partners, dealing in large
volumes of goods, often sign framework contracts as the basis for specific transactions.
Thus, the framework contract does not include elements that are inconsistent with the
scope of the Convention.
Therefore, in this case, the court applied the Vienna Convention to adjudicate.
Thus, if Vietnamese enterprises sign framework contracts with foreign partners, it is also
possible to stipulate the applicable law as CISG.
On the other hand, as analyzed above, although the buyer must purchase replacement goods
for the unfulfilled part of the contractual obligations, the purchase price of such
replacement goods is not determined as a criterion for calculating compensation
damages. The Court has not yet provided a specific criterion to determine the amount of
damages claimed, but only stopped at the general conclusion: “The amount of compensation
must be calculated based on a more objective criterion, not based solely on the replacement
cost offered by the aggrieved party”.
Although a contract cancellation statement is required to apply Article 75 to calculate
compensation, in our opinion, Article 75 can still apply in this case. Here, the seller has
clearly been unable to continue with his delivery obligation and has informed the buyer
of it, so the buyer must therefore purchase a replacement. Although the buyer has not
made a declaration of cancellation, Article 75 can reasonably be applied to calculate the
buyer’s loss: the price difference in this case is the actual loss that the buyer has to bear.
If the court flexibly applies article 75 of the CISG, it will increase the safety of the parties in
international trade. The Polish court found that article 75 could not be applied, but also
provided a way to calculate the damage to the buyer that the court considered reasonable. It is
clear that in this case, the buyer has to bear his losses due to the inadequate decision of
the court.

Case 5: Compensation for “lost interest”

When a party violates a fundamental contract causing the contract to be canceled, the
aggrieved party has the right to claim damages. In claims for damages, lost interest is
often controversial. In fact, it is not easy to prove a reasonable loss of interest.
Dispute between Delchi Carrier, S.p.A. (Italy) and Rotorex Corp (USA). Delchi
ordered air compressors from Rorotex to manufacture air conditioners. Rorotex
supplied the wrong air compressor. Delchi canceled the contract and demanded
compensation for lost interest due to insufficient supply
air conditioner for the market so the two sides argued about the amount of
compensation. Dispute was heard in the US Federal Court in New York, judgment
dated 14/7/1994.

Dispute developments
Rotorex and Delchi signed a contract to buy and sell air compressors. These machines
will be used by Delchi to manufacture Ariele brand air conditioners. Prior to the
execution of the contract, the Rotorex seller sent the Delchi buyer a sample
compressor with a copy of the specifications. Rotorex delivered and Delchi paid for
the shipment by letter of credit. However, Delchi later discovered that the shipment
did not match: 93% of the compressors had lower cooling capacity and more energy
consumption than the model and specification. After Rotorex's unsuccessful attempts
to remedy these technical defects, Delchi requested Rotorex to supply new air
compressors in accordance with the specified quality specifications. Rotorex refused.
Delchi declared
announced the cancellation of the contract and demanded Rotolex compensation for
damages, including lost profits. Rotolex did not compensate, Delchi sued Rotolex in a
US court based on the provisions of the 1980 Vienna Convention on contracts for the
international sale of goods.
Delchi claims forfeited interest resulting directly from the defendant's breach,
including the following: Lia 421,187,095 lost due to failure to supply 2,395 Ariele
products to branch companies throughout Europe. 31,310,200 Lia lost due to not
delivering 100 Ariele products to White Company - Westinghouse - Germany.
266,057,772 Lia was lost due to the lack of 604 Delchi Ariele products for delivery in
Italy; and Lia 280,319,840 lost due to not having 653 Ariele products of White -
Westinghouse brand for delivery in Italy; a total of 546,377,612 Lia of lost profits in
Italy.

Court decisions
Regarding applicable law, the Court stated that the 1980 Vienna Convention on
Contracts for the Sale of Goods (CISG) would apply to the settlement of disputes
because Italy and the United States are parties to this convention. Is it reasonable to
cancel the contract in this case? Here,
The air compressor does not conform to the specification due to its low cooling
capacity and high energy consumption. That cooling capacity and energy consumption
are the basic factors that create the value of an air compressor. This violation makes
buyers unable to fulfill their purpose of producing standard air conditioners that can
be sold in the market. It is therefore considered a fundamental violation under article
25 of the CISG. Delchi therefore has the right to cancel the contract
copper (article 49 CISG).
Regarding the forfeited interest that Delchi claimed, the court found that: under article
74 of the 1980 Vienna Convention, Delchi is entitled to claim interest lost due to
Rotorex's breach of contract; however, the aggrieved party must provide sufficient
evidence to prove reasonable damages. The court considers each item that Delchi
claims as follows:
- Clause 1: The production cost of 1 Ariele unit with a Rotorex compressor is
478,783 Lia. Delchi's average unit selling price to its affiliates in European
countries other than Italy is 654,644 Lira. Delchi pays no commission.
Therefore, Delchi was expecting a sales profit for one Ariele unit to its
European affiliates to be 175,861 Lia (654,644 Lia – 478,783 Lia). Due to
Rotorex's breach of contract, Delchi has not been able to fulfill all 2,395 units
from the orders of the company's branches throughout Europe, with details of
the orders as proof. 421,197,095 lira is profit forfeited. The court considers that
the calculation and proof of this damage is reasonable.
- Clause 2: Delchi's average unit selling price for its branch in Germany – White
– Westinghouse is Lira 799,876. Delchi paid royalties of 7991 Lia per product
to White-Westinghouse. So, Delchi expects the profit per Ariele product from
White -Westinghouse to be 313,102 Lia. Delchi cited an order of 500 units
from White–Westinghouse, of which only 250 were supplied. However, Delchi
only claimed 31,310,200 Lia as the profit that Delchi lost due to not delivering
100 products.
- Clause 3: Italian agents have confirmed that they will order more Ariele
products if Delchi can supply more. The number of Ariele products that can be
reordered is listed in Delchi's summary of expected orders; but according to the
court, this version has no legal value, and is speculative. Therefore, the court
rejected the lost profit in Italy because Delchi failed to provide documents
related to the lost sales in Italy due to the direct breach of contract by Rotorex.
Lessons Learned
To claim forfeiture, the aggrieved party must provide sufficient evidence to prove that
the forfeiture is reasonable and arises directly from the other party's breach. Proving is
not easy because the aggrieved party has to prove income that he did not actually
have. Usually, formal orders, or signed contracts with customers, are considered valid
evidence. Speculative gains that are not proven will be denied compensation.

Case 6: Contract explanation

In many cases, when drafting a contract, the parties use incorrect or obscure terms, leading to
disagreements over interpretation. So, how should these terms be explained? Dispute between
an American company and an Austrian company about the term "consignment" -
"entrustment" in the contract signed between the two parties. The two sides have different
interpretations of the meaning of this term. The dispute was heard in the US Court of
Appeals, Judgment No. 05-13995, pronounced on September 12, 2006.
Dispute developments
The two companies have signed two contracts whereby, the plaintiff - the Austrian
company agrees to sell a quantity of industrial metal powder called Tantalum Carbide
(TaC) to the defendant - the US company, delivered in October and December 2000.
Plaintiff delivered the goods according to two contracts. Respondents paid a portion of
the amount of goods used by the respondent. But on August 23, 2001, the defendant
refused to pay for the part of the goods that he did not want to use of the plaintiff.

The plaintiff had to sell the number of TaCs that the defendant refused to receive at a
cheaper price than the price stated in the contract agreed with the defendant. After
that, the plaintiff filed a lawsuit against the defendant for damages under the two
contracts mentioned above. The two parties argued with each other about the meaning
of the term "entrustment" in the Delivery Terms in the two signed contracts.

Defendant alleges that, under CISG (article 9.2) on the application of custom, a term
in a contract shall be construed in the usual industry sense, unless the two parties
agree to a different interpretation. Respondent has invited experts in the metals
industry to certify that the term “trust” in common industry usage means: No sales
relationship occurs unless or until the respondent actually used the TaC item.
Therefore, the respondent only pays for the reasonable amount of used goods and has
the right to return the unused portion.

The plaintiff again presented documents and contracts previously signed between the
two parties (within 7 years), including the term "Entrustment". Plaintiff proves that the
connotation of the term
which the two parties have recognized in previous contracts, that is: “the respondent is
obligated to pay for the TaC item in each contract, but the claimant will delay the
claim date until the defendant actually uses the original whether TaC”. In essence, this
is still a contract of sale, not a trust contract. Therefore, the defendant is obliged to
receive the goods and pay for the goods, if not to compensate the plaintiff for damage.

Judgment of the Court

The Court relied on articles 8 and 9 of the CISG to explain the meaning of the term
"entrustment" in the contract. Pursuant to Article 9.1 of the CISG, “The parties are
bound by the custom to which they have agreed and by the practices established by
them in their mutual relationship”. Article 8 also states that when interpreting a
contract, it is necessary to take into account all relevant facts, including negotiations,
all facts that the parties have had in their mutual relationship, customs and any other
conduct. later by the parties”.
Business Law
The court found that, in fact, from 1993 to 2000, there was a series of contracts in
which the plaintiff sold heavy metal powder to the defendant. For each such contract,
after the claimant delivers the goods, the respondent stores the goods received from
the plaintiff in a “trusted warehouse” where the products are labeled as the plaintiff's
and separate from other items. . When the materials are put into use, the respondent
will issue a “use report” that lists the amount of materials used. Based on that report,
the plaintiff bills the defendant for the price stated in the contract. The defendant then
pays the bill when it is due. In such contracts, the defendant makes full payment for
the entire amount of goods agreed in the contract. In addition, the Court also cited a
specific evidence that the plaintiff gave as follows: In February 2000, an employee of
the defendant named Mr. Atchley emailed Mr. Hinterhofer of the plaintiff's company,
expressing his wish to return it. unused metal powder materials supplied by the
plaintiff. Mr. Hinterhofer telephoned Mr. Atchey to explain that the defendant could
not return the goods because in the contract the defendant signed to buy all the
materials. Defendant then made no objection. This proves that the respondent clearly
understands the meaning of the term "entrustment" used in the contract as well as the
obligation to pay for all the goods signed in the contract. Therefore, the Court ruled
that, according to the CISG, both parties understood the term "entrustment" to mean
the sale and purchase of goods, but the invoice would be delayed until the materials
were actually put into production. With that understanding, the defendant is obliged to
pay for the quantity of goods signed in the contract with the Plaintiff. The court
decided that the defendant would have to pay the plaintiff an amount of $5,327,042.85
including interest.

Lessons Learned
Contracts should be drafted with the utmost care. Avoid terms that are unclear,
obscure, or have different meanings. This is especially important when enterprises
sign "foreign" contracts with foreign partners. Through this dispute, CISG
demonstrates its effectiveness in resolving disputes from international sales of goods.
The CISG provides principles for the interpretation of contracts in accordance with
international business practice (articles 7, 8, 9 of the CISG), whereby the habit formed
between the parties is a very important factor.

Case 7: Buyer shows signs of violation: Cancellation of contract?

When the buyer shows signs of breach of obligations, the seller has the right to stop
performing his respective obligations. Similarly, when one party has good reason to believe
that the other party will be in material breach of the contract (even though the performance
period has not yet been reached), that party has the right to cancel the contract.
The dispute between the defendant is the US Doll Company and the plaintiff is the Doolim
Company, Korea. The Korean company exported a number of shipments in accordance with
the provisions of the contract, but the American company was late in payment. Therefore, the
Korean company stopped delivering the remaining shipments and canceled the contract with
those shipments. The dispute was settled in the Southern District Court of New York, under
the Vienna Convention (CISG).

Dispute developments
In April 2007, the Korean company Doolim signed a series of contracts with the American
Doll Company to supply about 500,000 women's clothing, including wool pants, skirts and
accessories manufactured to Doll's specifications. In which, about 460,000 garment products
have been branded Doll. According to the contract, Doolim will deliver goods to Doll in 5
times and Doll must pay for each delivery, within 15 days of receiving the goods.
In July and August 2007, Doolim shipped 77,528 garments that Doll ordered for a total
purchase price of $381,026.10. However, until the end of September Doll still has not paid
Doolim. In October, Doolim received a Guarantee Guarantee for Doll's July and August
payment obligations guaranteed by Rosenthal Finance Company (based in New York).
Therefore, Doolim continued to deliver 2 more shipments to Doll in October and November
including 157,092 products with a total purchase price of 659,059.74 USD; bringing the total
value of goods delivered to Doll to be 977,085.84 USD.

On November 21, 2007, Doll paid USD 200,000.00 to Doolim.

But by mid-January 2008, Doll had not made any scheduled installments, so Doolim
suspended the final shipment to Doll.

Referee's decision
According to the agreement between the two parties on the payment term in the contract, Doll
must pay Doolim within 15 days from the date of delivery and must pay for each delivery.
But since the first delivery in July - August 2007, Doll has committed the first violation: until
the end of September, he still has not paid the goods to Doolim. Doll's breach of contract did
not stop here as Doolim continued to deliver the next shipment to Doll in October and
November but received only 20% of the total payment value for the previous 4 deliveries.
Therefore, Doolim did not deliver the final shipment to Doll on November 25, 2007.
According to article 71 of the CISG, “a party may discontinue the performance of its
obligations if it appears that after the conclusion of the contract, the other party will not
perform a substantial part of its obligations because there is a serious defect in the ability to
perform or in the performance of the contract”.
Furthermore, in November 2007, Doll paid Doolim $200,000, less than 20% of the value of
previous shipments. In addition, by the end of January 2008, Doll still failed to pay the
remaining amount of USD 530,000 with due dates of December 14 and 18, 2007 and January
11 and 25, 2008, and neither give any assurance to Doolim that the payment obligation will
be fulfilled. Doll's violation causes substantial damage to Doolim. Therefore, the court ruled
that the violation caused by Doll was a fundamental violation (under article 25). The failure
of Doll Company to pay for goods to Doolim Company is a violation of commitments in the
contract signed between the two parties. Therefore, the seller, Doolim Company, is entitled to
receive a compensation amount of USD 840,085.94.

Comments and notes

In essence, a contract of sale is a type of bilateral contract. Traditionally, delivery and
payment had to be made at the same time. However, in international trade, in many cases, the
parties must perform their obligations before the assurance of reciprocal obligations occurs.
Article 71 of the CISG has provided a way to overcome the risks when there is a difference in
the performance of obligations between the two parties. The main feature of Article 71 is that
it is not required that an actual breach has occurred, but as long as one party shows signs of
breach of contract, the other party has the right to suspend the performance of its obligations.
In this dispute, Doll's delay in payment is considered a major violation, so Doolim's
suspension of delivery obligations is completely reasonable. This provision of CISG will
avoid Doolim having to continue to deliver the remaining shipments under the contract
without guaranteed payment from Doll.

Unlike the Commercial Law of Vietnam, the CISG allows the aggrieved party to cancel the
contract when there are signs of a breach occurring and that breach must be a fundamental
breach. Thereby, compared with national law, CISG regulates legal issues more carefully and
protects the interests of the contracting parties more.

In international trade activities, the biggest risk for exporters is payment risk. Due to the
characteristics of the contract holders located in different countries, it is often more difficult
to pay for goods. The mistake of Doolim Company that we can draw is that we have too
much confidence in Doll's payment guarantee, even until the last delivery is delayed. Doolim
did not take into account the validity of the payment security guaranteed by Rosenthal
Company to Doll. This is an important note that businesses participating in international trade
need to pay attention to: about the legal status and reputation level of the third party to
guarantee. To limit risks, exporters should ask a third party with a high reputation in the
financial sector to guarantee payment for the importer.

Case 8: Can the L/C amend the contract?

Sometimes, when opening an L/C, the buyer modifies some terms in the contract. As a
payment instrument, does the L/C have the function of modifying the contract?
The contract is signed between the defendant - the buyer is Tay Ninh Trading Company
(VN) and the plaintiff - the seller is DN Ng Nam Bee (Singapore). The contract object is
MSG (Bột ngọt). After the expiry of the L/C, the buyer amends the original L/C, thereby
extending the delivery term. At the end of the original delivery period, the seller
demands to cancel the contract, while the buyer dispatches the ship to pick up the
goods.
The dispute was heard at the Court of Appeal - the Supreme Court of Ho Chi Minh City,
which applied articles 29, 53, and 64.1 of the 1980 Vienna Convention on Contracts for
the International Sale of Goods (CISG) to settle the dispute. dispute resolution.
Dispute developments
Due to quota restrictions, Tan Loc Private Cooperative has signed an entrustment
contract with Tay Ninh Trading Company (State-owned Enterprise - Tanico) to export 300
tons of MSG, worth USD 312,000 under FOB Quy Nhon terms for customers. Singaporean
partner is Ng Nam Bee.
On January 25, 1995, Tanico signed a sales contract with Ng Nam Bee. Accordingly,
payment is made by irrevocable letter of credit, subject to the red condition (50% advance by
the buyer); Delivery time is anytime until 2/28/1995.
On January 5, 1995, Ng Nam Bee issued an irrevocable L/C, red condition, valid until
March 15, 1995. January 21, 1995: the red condition is fulfilled - the buyer advances USD
156,000 to the seller.
On February 28, 1995, the last day of the contract performance period, Ng Nam Bee
submitted an amendment to the L/C, whereby the value of the L/C was extended to April 4,
1995. In the L/C, the Singapore side also postpones the delivery date to March 20.
On March 1, 1995, the bank in Vietnam received an amended L/C and sent it to Tanico
on March 2, 1995.
On March 8, 1995, Tanico sent it to Tan Loc.
Tan Loc, after waiting until March 4, but did not see the foreign buyer receiving the goods,
considered the contract canceled and returned the advance to Tanico for Tanico to send back
to the buyer.
On March 9, 1995, upon receiving the supplemental L/C, Tan Loc announced the termination
of the contract on the grounds that the buyer had violated the delivery time.
On March 10, 1995, Ng Nam Bee sent two certified copies of the ship Hei Hu Quan's arrival
at Quy Nhon port on the night of March 11. On March 13, 1995, the ship arrived at Quy
Nhon port without being delivered.
Ng Nam Bee filed a lawsuit against Tanico for compensation, and said that in the first L/C
there was a clause giving the issuer the right to change the delivery time.
Court decision
The contract specifically stipulates that the parties are not allowed to use evidence
outside the contract. Meanwhile, the acquirer shall base on the provisions of the L/C to
change the delivery term of the contract; where L/C is merely a payment instrument. It
can be seen that the buyer clearly violates the terms of the contract of sale on the use of
extra-contractual evidence.
On the other hand, according to UCP 500, it is found that, under rule 9 paragraph D point I
for an irrevocable L/C, the issuer is not allowed to change the contents unless with the
consent of the issuing bank, Accepting bank, seller. In this case, no action by the seller
shows that he accepts this modification by the buyer.
According to article 29 of the CISG, a contract may be modified or terminated by mere
agreement between the parties. Analyzing the details, it was clear that there was no
agreement between the two parties.
Referring to article 53 of the CISG, we see that the buyer is obliged to pay for the goods
and receive the goods according to the provisions of the contract, but here after 4 days of
the deadline, the buyer has not yet received the goods. According to article 64, paragraph 1
of the CISG, when the buyer fails to perform a certain obligation within the extended
period, the new seller has the right to declare the cancellation of the contract.
Theoretically, 4 days is not considered to have extended the period of performance of the
obligation, but the subject matter of this sales contract - MSG - is a very perishable item, it is
reasonable to cancel the contract. . The court has declared the seller has the right to cancel the
contract and the buyer is responsible for not sending the ship to the port of shipment on time.

Comments and notes

Contract is the most effective document binding on both parties, if you want to amend
the contract, it is necessary to have the agreement and agreement of both parties. It
should be noted that non-contractual evidence such as L/C cannot be contractually
binding.
Contract cancellation is the heaviest punishment when dealing with contract-related
violations. According to the CISG, the seller can only cancel the contract when the
buyer does not receive the goods within the extended period or when the buyer has
committed a fundamental breach of the contract (article 25 CISG). However, if the
subject matter of the contract is perishable goods, the application of the contract cancellation
mechanism may in fact be more flexible in order to limit losses for the parties. Here, the
Vietnamese court considers that MSG is a perishable commodity, so the seller can cancel the
contract immediately without further extension. This decision of the Vietnamese court is
appropriate.
However, Tanico received the revised L/C on March 2, but on March 9, Tan Loc received the
revised L/C. Moreover, when deciding to cancel the contract, the Vietnamese seller
should have notified in writing, avoiding the fact that they continue to send the ship to
Quy Nhon port, that is, to avoid damage to the buyer. Unfortunately, the court did not
address this issue.
This is the first case to record the application of CISG by Vietnamese courts. In fact, in this
dispute, the applicable law is Vietnamese law (specifically, the Economic Contracts
Ordinance of 1989) and the court has applied the CISG as an additional source of law to
further clarify its argument.

Case 9: Cancellation of contract due to delay in delivery

Usually, when the seller is late in delivering the goods, the buyer is not entitled to cancel the
contract, but only to claim damages. However, in certain situations, the buyer has the right to
cancel the contract as soon as the seller is unable to deliver the goods at the end of the term.
Dispute between Diversitel Communications Inc. (Canada) and Glacier Bay Inc. (America).
The American seller does not deliver the goods after the expiration of the period specified in
the contract. The two parties argued over whether the Canadian buyer had the right to cancel
the contract. The dispute was heard in the Ontario Supreme Court of Justice, the decision was
made on October 6, 2003.

Summary of the dispute

The Canadian buyer and the American seller have entered into a contract for the sale of
vacuum insulation systems. In response to pre-existing agreements with the Canadian
Department of Defense for equipment quality and system installation at an Arctic plant, the
buyer fixed a specific delivery schedule.
The buyer had done the payment according to the contract but the seller failed to deliver the
goods within the agreed time. The buyer sued the seller in the Supreme Court of Justice in
Ontario asking for the contract to be canceled. The seller disagrees, arguing that the seller
does not have enough grounds to cancel the contract.

Analysis and decision of the Court

With respect to applicable law, the Court stated that the 1980 Vienna Convention on
Contracts for the Sale of Goods (CISG) would apply to the settlement of disputes because
Canada and the United States are both parties to this convention. In order to consider whether
the contract can be canceled, the Court referred to article 25 of the CISG: “A breach of
contract committed by one of the parties is fundamental if it results in such detriment to the
other party as substantially to deprive him of what he is entitled to expect under the contract,
unless the party in breach did not foresee and a reasonable person of the same kind in the
same circumstances would not have foreseen such a result.”
The court held that the delivery schedule was fixed in the contract and this was an extremely
important factor for the buyer. This is because equipment supplied by the seller will have to
be installed in a short period of time in the Arctic. The Arctic summer is very short so if the
seller is slow to deliver the equipment, the buyer will not be able to install the equipment
under the agreement with the Canadian Department of Defense and as such, the buyer will
not achieve his or her goals in the contract with the seller. The seller is also aware of that
importance because in fact, the seller already knows that the equipment supplied by the seller
will be installed in the Arctic subject to prior agreements between the buyer and the
Department of Defense of Canada. As a result, the seller has breached a fundamental
contractual obligation.
With the above argument, the Court declared that the buyer has the right to cancel the
contract (according to article 49, paragraph 1-CISG), to recover the amount paid to the seller.

Comments and lessons learned

This precedent is a prime example of how delay in delivery constitutes a fundamental breach
of contract. In principle, in the international sale of goods, the seller’s delay in delivery
usually does not constitute a fundamental violation, if the goods can still be used by the buyer
for his purposes after that. However, in the above case law, and in some other cases that have
been summarized from trial practice (seasonal goods, delivery deadline is a specific date, the
buyer has informed about the urgent need of the goods). When the time of delivery is an
important element of the contract, the buyer has the right to cancel the contract when the
seller is unable to deliver the goods within the agreed period.

Case 10: Dispute over change of goods

Is delay in receiving goods considered a fundamental breach of contract? How to compensate
for damage when the buyer has to buy a replacement? Those are disputes resolved through
the Vienna Convention to which Vietnam is a member.
In May 1996, a French buyer ordered from a Spanish seller 860,000 liters of pure orange
juice. The contract stipulates that the goods will be delivered in batches from May to
December. Under a contract amendment agreed to by both parties, the two parties agreed that
the September shipment will be delivered at the end of August. When the seller will reduce
the price of the goods to the buyer. At the August delivery time, the buyer did not receive the
goods. However, by September, the buyer asked again
delivery. On September 3, the seller announced that there was no more orange juice for
delivery. Because the seller did not deliver the goods, the buyer had to find another supplier
with a higher price and refused to pay for the previous shipments. Buyer has provided
purchase invoices from 2 other companies with additional costs.
The seller sued the buyer in Romans Commercial Court. The court ordered the French
company to pay for the goods on the grounds that the seller had the right to postpone the
performance of his obligations because the buyer delayed receiving the goods. Buyer
appealed at Grenoble Court of Appeal.
Buyer argued that the lower Court had failed to uphold the provisions of the 1980 Vienna
Convention on contracts for the international sale of goods, in particular articles 25, 63, 64 in
its award 16, according to Accordingly, the buyer understands that: “If the seller wishes to
cancel the contract, he must reasonably require the buyer to perform his delivery obligation
and give a reasonable additional period to perform the obligation to take delivery of the
goods. ". The seller does not deliver the goods when requested by the buyer,
That is a breach of contract. The seller emphasized that the buyer's delay in receiving the
goods caused storage problems and forced the seller to concentrate the orange juice.
to ensure that the pure orange juice is not spoiled and therefore cannot continue to be
delivered.
Court decisions
Pursuant to Article 1.1- CISG, since the buyer and seller in the dispute have their place of
business in the countries that are party to the Convention (France and Spain), the Court of
Appeal applies the CISG as the source of dispute resolution law. To determine whether the
seller has the right to cancel the contract, the Court considers whether the buyer has
substantially breached the contract. The original contract stipulates that delivery is in
September. Delivery at the end of August is the seller's proposal to amend the contract, and is
accepted by the buyer. The Court found that, in
In the original contract, in the revised contract as well as when the buyer was late to receive
the goods, the seller never mentioned that the orange juice was not stable and needed to be
concentrated again if it arrived later.
August. For buyers, late August delivery is simply commensurate with a financial gain. The
buyer cannot understand that a delay of several days in receiving the goods is considered a
fundamental breach of contract under Article 25- CISG. Furthermore, the court also found
that the purchaser's replacement order up to December 1996 was subject to pure orange juice
of the 1996 season, indicating that the seller's concentrate of orange juice immediately when
Buyers who are late to receive the goods are not convinced. Thus, the seller should have
extended a reasonable additional time for the buyer to receive the goods, if the buyer does not
receive the goods within this additional time, the seller can cancel the contract. Here, the
seller canceled the contract without grounds. Articles 74, 75 - CISG allows the buyer to claim
damages for the difference between the contract price and the replacement purchase price.
According to the above arguments, the Court of Appeal: Annulled the decision of the first-
instance court. Deciding that the seller has breached the contract, must compensate for the
difference in the replacement purchase price for
the buyer (according to Article 75 of the CISG).
Comments and notes:
In this dispute, the seller argued that it was reasonable for him to preserve the goods,
especially the goods in this case were perishable goods, but the preservation by concentrating
the goods changed the subject matter of the goods. Contractual product is pure orange juice.
In particular, the seller fails to notify and give reasons for the need to do so when the buyer is
late to receive the goods. As such, the buyer cannot foresee such damage, the buyer
understands that he
be granted a reasonable additional period for performance of the contract pursuant to Article
63- CISG.
Thus, the predictability of damages to the offending party is emphasized by the CISG (in
Articles 25 and 74). Vietnam's law does not have similar provisions, so Vietnamese
businesses need to pay attention
in order to protect their interests. Article 75 of the CISG provides for a very common case in
practice, which is the case when
The seller does not deliver the goods, resulting in the buyer having to purchase a
replacement.

Case study 11: Calculation of damages

One of the difficult and controversial issues in disputes is the calculation of the amount of
compensation that the infringing party must pay to the aggrieved party. In order to
successfully claim compensation, the parties need to pay attention to a number of basic
principles.
Dispute between a French company (buyer) and an Italian company (seller). Because the
goods delivered by the seller do not conform to the contract, the buyer cancels the contract
and claims damages. The two sides argued over the amount of compensation. The dispute
was heard at the Court of Appeal in the city of Rennes (France), the judgment dated May 27,
2008. The 1980 Vienna Convention on Contracts for the International Sale of Goods (in
particular articles 25, 35, 47, 49, 75 and 77) was applied to settle disputes.
Dispute developments
The French company has signed a number of contracts with the Italian company to buy bra
pads for the production of swimwear with a total quantity of 17,600 pairs. Goods are
delivered to a Tunisie company for processing. During processing, the buyer discovers that
the bras do not conform to the quality requirements specified in the contract and returns the
goods. On November 3, 2003, the Italian seller offered to repair the goods and to deliver the
appropriate goods within five weeks. However, the seller failed to perform the repair of the
goods during the said period. On 11/12/2003, the buyer announced the cancellation of the
contract and demanded compensation from the seller 32,490 euros, including the following 2
amounts:
1. Cost of producing a batch of swimwear in Tunisie from substandard bra pads: eur 16,290
(1800 shirts x cost 9.05 eur/shirt)
2. Damage (due to price difference) when purchasing replacement breast pads. The buyer's
company, in December 2003 had to order 16,200 pairs of breast pads urgently from another
supplier T and because of the urgent purchase and no negotiating position, it had to accept a
price 1 euro higher than the price. at the contract price, resulting in a loss of €16,200.
The Seller objected to the aforementioned indemnifications and considered them
unreasonable.
Judgment of the Court:
The Court held that the contract was governed by the 1980 United Nations Vienna
Convention on Contracts for the International Sale of Goods (CISG) because both France and
Italy were parties to this Convention.
The Court applied articles 25, 35, 47 and 49 of the CISG to assert that in this case, the buyer
has the right to cancel the contract because the seller has committed a fundamental breach of
the contract and is unable to repair the goods within the period during which the buyer has
extended it further.
Regarding the amounts claimed by the buyer, the court argued as follows:
Clause 1: According to the correspondence between the parties during the dispute settlement
process, at the time of discovering the non-conformity of the goods, only 860 pairs of breast
pads had been put into production. However, it took 3 days for the buyer's company to stop
the production of swimsuits in Tunisie, increasing the number of swimsuits produced to
1800. The Court referred to article 77 of the CISG regarding principles Accordingly, the
aggrieved party must apply reasonable measures based on specific circumstances to limit the
loss caused by the breach of contract.
The court held that, in this case, the buyer should have acted more quickly to mitigate the
damage. Moreover, the cost of producing a swimsuit (9.05 eur/shirt) calculated by the buyer
is not reasonable because the average labor cost to produce a swimsuit in Tunisie is much
lower than in France, only about 1 eur /shirt. With these arguments, the Court held that the
buyer could only claim damages in the amount of 3,000 euros.
Paragraph 2: In consideration of damages resulting from the purchase of a replacement, the
court applies article 75 of the CISG: When the contract is cancelled, and if in a reasonable
manner and within a reasonable period of time after cancellation, the buyer has purchased
replacement goods or the seller has resold the goods, the claimant may claim the difference
between the contract price and the replacement purchase or resale price. When comparing the
contract prices for a pair of bras of 0.93 and 0.98 euros and the replacement purchase price of
1.98, the court found that the price difference was too large and unreasonable. The Court
found that the purchase of substitutes therefore did not meet the requirements of
reasonableness set forth in article 75 of the CISG. Therefore, this damages was dismissed by
the court.
The court ruled that the buyer only claimed 3,000 euros, not 32,490 euros.
Lessons Learned
This dispute shows that, in order to successfully claim compensation, the aggrieved party
must adhere to the following two very important principles:
First, the principle of loss limitation. Accordingly, the party claiming compensation for
damage must apply reasonable measures to limit losses. In this case, the French buyer could
reasonably have been able to limit the damage by immediately stopping the production line
upon discovery of the nonconformity of the goods.
Second, the principle that damages must be reasonably calculated and justified. This principle
does not allow the parties to inflate their losses unreasonably and unreasonably. In this
dispute, the court relied on the price of goods, labor costs as well as the market price to
determine that the damages calculated by the buyer were unreasonable, unobjective, and
inconsistent with reality. .
Both of these principles are recognized by the commercial contract law of Vietnam (Articles
302 and 305 of the Commercial Law 2005). Thus, the principles of compensation claim of
VN and CISG are quite compatible and therefore, Vietnamese enterprises can refer to
disputes about CISG to draw lessons for themselves.

Case 12: Price adjustment in the contract

In the international purchase and sale of goods where prices fluctuate greatly, the parties
should include a clause on price adjustment in the contract. Otherwise, when the price
changes, it will easily lead to disputes.

Steel sale contract between French company (Scafom International BV) - the seller and
Dutch company (Lorraine Tubes S.A.S) - the buyer. The dispute arose when the market price
of steel increased by 70%, causing the two parties to disagree on the price adjustment in the
contract. The dispute was resolved at the Court of Cassation of Belgium, No. C.07.0289.N,
June 19, 2009. The contract is governed by the 1980 Vienna Convention on Contracts for the
International Sale of Goods (CISG) and the UNIDROIT Code of Conduct for International
Commercial Contracts.

Price dispute

The Dutch buyer has signed several contracts with the French seller for the delivery of steel
pipes. After that, steel prices suddenly increased by 70%. The contract does not include a
price adjustment clause. The seller thinks that it is difficult due to the increase in steel prices
and asks to renegotiate the contract price. However, the buyer does not accept and wants the
seller to deliver the goods at the contract price because the contract does not have a price
adjustment clause.

The first court acknowledged that an unforeseen increase in price had resulted in a serious
imbalance and that continued performance at the contract price would damage the seller,
unless the seller had the right to renegotiate the price. The Vienna Convention does not
specify how to handle difficult situations that seriously unbalance contractual obligations.
However, the Belgian Court of Appeals pointed out that the fact that article 79(1) of the
Vienna Convention explicitly provides for force majeure as an exoneration event does not
mean that it completely excludes valid difficulties and possibility of price renegotiation as the
case is pending. First, in the view of the court, an unforeseen change such as the case under
consideration could constitute an event of exoneration under article 79(1) of the Vienna
Convention. Second, the court recalled that under articles 7(1) and 7(2) of the Vienna
Convention, the convention was supplemented by the general principles from which it was
derived, while also emphasizing the principle good faith in the performance of the contract.
The Court decided to apply the UNIDROIT Principles on international commercial contracts
to complement the Vienna Convention. According to article 6.2.2 of these Principles, one
party may request the other party to renegotiate if events occur that substantially alter the
balance of the contract (such circumstances are referred to as hardship hardship. - temporarily
translated as difficult situation). Moreover, the principle of goodwill in international business
also requires the parties to cooperate to overcome difficulties in the process of contract
performance.

With the above arguments, the Belgian Court of Appeal held that the seller has the right to
request renegotiation of the price and dismiss the buyer's claim.

Lessons Learned

In international goods sale and purchase contracts where the subject matter of the contract is
goods with highly volatile prices with elusive trends, or contracts with a long performance
term, the parties should have a clause on the terms of the contract. Adjust the price to avoid
damage to the seller and buyer as well as possible disputes. Although there is no provision in
the contract for price adjustment, when the price of goods fluctuates too much (in case of
hardship), the parties should have good faith in renegotiating the price in order to re-
determine a reasonable price. ensure the interests of both parties, maintain a good business
relationship.

The theory of hardship is a new theory in international commercial contract law. Although
this theory originates from Common law countries and has not been recognized in many civil
law countries, the practice of dispute settlement shows that many courts and arbitrators have
applied this theory to the fair handling of disputes. , ensuring the legitimate rights and
interests of both parties in the sale and purchase contract, especially in today's complex
international business environment.
Case 13: Fundamental breach of contract
When one party breaches the contract and that breach is a fundamental breach, the other party
has the right to cancel the contract. The practice of disputes in international business shows
that it is not easy to determine what is a fundamental violation.

Disputes between the Buyer are companies of Argentina and Hungary, the Seller is a
company of Russia. The buyer sues the seller for a fundamental breach of the contract for not
delivering the goods as committed. The Seller believes that the Buyer has fundamentally
violated the contract because of late payment. The dispute was heard at the Zurich Arbitration
Council, the decision was made on 31 May 1996. The 1980 Vienna Convention on Contracts
for the International Sale of Goods (hereinafter referred to as CISG) has been applied.

Summary of dispute

Since 1991, the Russian seller (a government organization) has entered into several contracts
for the sale of aluminum to a number of buyers with business offices in Argentina and
Hungary (the buyer). Deliveries are made on time until the seller's company transfers
ownership to a private Russian company. The company immediately announced it would no
longer make deliveries. During the subsequent correspondence between the two parties, the
buyer noted that they would suffer heavy losses if the goods were not delivered on time. The
seller issues an invoice stating the specific amount to be paid by the buyer for many previous
shipments. The seller believes that the buyer's delay in payment for the previous shipments
leads to a fundamental breach of the buyer's obligations, so the seller has the right to refuse to
perform the contract. The buyer offers to negotiate to resolve the dispute, but the seller
refuses. The buyer sued the seller to arbitrate for damages arising from non-delivery.

Referee's decision

Regarding the seller's breach of the delivery obligation: The arbitrator ruled that the seller's
cessation of delivery resulted in a breach of the seller's obligations under article 30 of the
CISG. Furthermore, the re-seller expressly refuses to perform the delivery obligation, which
renders the seller's breach a fundamental breach under article 25 of the CISG and, therefore,
the buyer is entitled to declare the cancellation of the contract. contract without extension for
the seller (under CISG article 49.1.a).

Breach of payment by the buyer: In order to consider whether the buyer's breach of his
obligation to pay under the contract of partial delivery constitutes a fundamental breach, the
arbitrator cited article 73.2 CISG, “If a party fails to perform an obligation in respect of any
shipment that gives the other party good cause to believe that there will be a material breach
of future delivery, then they may declare the cancellation of the contract for such futures.”
The arbitrator argued that there was no evidence to show that the buyer was unable or
unwilling to perform his payment obligations, because in fact, the buyer was still able to pay
and still wanted to negotiate with the buyer. the seller on the continuation of the contract
performance. Furthermore, the seller has not extended the payment and therefore cannot
claim cancellation under CISG 64.1.b. The arbitration only added that the seller's refusal to
negotiate with the buyer was against the principle of good faith. With the above arguments,
the arbitrator ruled that the buyer was entitled to damages for his actual loss (including
storage costs and financial costs incurred as a result of the stoppage of delivery). under article
74 of the CISG.

Lessons Learned

Firstly, if it is not for force majeure, the seller should not self-declare to stop performing the
contract, otherwise, the seller's breach will be considered a fundamental breach and the seller
will have to pay damages. damage to the buyer caused by the seller's breach of contract.
Second, if the seller wants to attribute the buyer's fundamental breach of the contract, there
must be valid grounds and proof. In case of late payment by the buyer, which is not
considered a fundamental breach, the seller does not have the right to immediately cancel the
contract. The seller must extend the buyer a reasonable period of time to perform the
obligation. If the buyer still fails to pay within this period, the seller has the right to cancel the
contract and claim damages (Article 64 CISG).

Third, the seller should not refuse to negotiate with the buyer to resolve the dispute. This
represents the seller's unwillingness and lack of cooperation and contradicts the principle of
good faith and honesty in international trade. This will be a disadvantage for the seller in the
process of complaints and lawsuits.

Case 14: Force Majeure

If a party encounters force majeure and violates the signed contract, it will be exempt from
liability. However, in practice, sometimes it is not easy to determine whether an event is force
majeure or not. Dispute between an Austrian company (seller) and a Bulgarian company
(buyer). The seller sued the buyer to arbitrate to demand compensation from the buyer for
damage caused by the buyer's failure to open the letter of credit (L/C). The buyer believes
that he does not open the letter of credit because of force majeure. The two parties argued
about the force majeure event cited by the buyer. The dispute was adjudicated at the Paris
International Arbitration Center, ruling No. 7197/1992.

Summary of the Dispute

In 1990, the seller and the buyer entered into a contract to export goods according to the
form. The parties agree to pay by opening letter of credit before a fixed date and that the
goods must be delivered under DAF terms (Incoterm 1990) at the Austrian-Bulgarian border
four weeks after the opening of the credit. The buyer fails to fulfill his obligation to open a
letter of credit within the period specified in the contract and for a period further extended by
the seller. The seller sues the buyer for arbitration, demanding compensation for damages
arising from the buyer's failure to perform the contract. The buyer countered and argued that
the letter of credit was not opened because the Bulgarian Government had ordered the
suspension of payment of foreign debts. This is a force majeure event and therefore, the
buyer is completely exempt from liability, not having to pay damages.

Arbitrator's Judgment
The arbitrator held that the contract was governed by the 1980 United Nations Vienna
Convention on Contracts for the International Sale of Goods (CISG) because both Austria
and Bulgaria are parties to this Convention. The arbitrator referred to article 54 of the CISG,
whereby the buyer is obligated to pay for the goods, including taking measures to comply
with the procedures required by contract or law in order to make payment possible. goods
payment. The arbitrator held that the Bulgarian Government's request to suspend payment of
foreign debts was not a case of "force majeure" that prevented the buyer from opening a letter
of credit. According to article 79, paragraph 1 of the CISG, a force majeure event is an
obstacle beyond the control of the parties, which the parties did not foresee at the time of the
conclusion of the contract and which the parties could not avoid or overcome. consequences
of this event. In the above dispute, the Bulgarian Government's order to suspend payment of
foreign debts is an objective event, beyond the control of the buyer. However, that suspension
was announced at the time of signing the contract. The buyer must therefore have foreseen
that such suspension would make it difficult to open a letter of credit. As such, the event is
not "unforeseen". Furthermore, the buyer could not in fact prove that the failure to open the
letter of credit was a consequence of the suspension. With those arguments, the arbitrator
ruled that the event cited by the buyer was not a force majeure event, so the buyer is not
exempt from liability but must compensate the seller for non-performance.

Lessons Learned
A force majeure event can normally be understood as an objective occurrence that the
breaching party cannot control, cannot foresee and cannot avoid, despite taking all necessary
measures in its ability to do so. permitting capacity. Force majeure events can be natural
phenomena (storms, cyclones, floods, thunder, drought, earthquakes, tsunamis, volcanic
eruptions...) or social events (wars, vandalism, strikes, government bans...) and other cases as
prescribed by law. Thus, in order to be recognized as a force majeure event, that event must
meet three conditions: First, this must be an "objectively occurring event", ie occurring
without depending on the will of the party. will of the parties to the contract. Second, this
must be an “unforeseen” event. Third, the incident occurred "irreparable" despite taking all
necessary measures. In the case of the above dispute, the buyer's fault is that although he
knew in advance about the payment problem due to the Government's regulations, he did not
clearly notify the seller to find an appropriate solution. for the payment. The lesson for the
parties to the contract is that when an unexpected event is encountered, it is necessary to
promptly notify the partner to find an appropriate solution to limit the impact of that event on
the performance of the contract. avoid relying on it as a force majeure event without taking
reasonably necessary action. Furthermore, when encountering a force majeure event, it is
necessary to urgently collect documents and evidences to prove the force majeure event as
well as to prove the influence of that event on the performance of contractual obligations.

Case 15: Repair Offer

When receiving the seller's offer, if the buyer has any changes or additions, it will not be
considered as acceptance of the offer. However, if such amendment or supplement does not
fundamentally change the original offer, the contract is considered to have been established
between the two parties.
Dispute between Chinese seller and Swedish buyer. Received the offer at the FOB price of
the seller, the buyer accepts the offer, but deletes the content "not accepting chartering over
20 years old" and changes the "freight prepaid" to "freight will be paid according to the
contract" rent a ship". The two sides argue whether the buyer's response is considered
acceptance of the offer or not? The dispute is settled by the China International Economic
and Commercial Arbitration Commission (CIETAC) and applying the Vienna Convention
(CISG).

Summary of the Dispute

On June 5, 2000, the seller offered 10,000 MT of rapeseed with a standard of over 38%
protein, less than 12.5% moisture. On June 7, 2000, the buyer received an offer letter and
asked the seller to fax the contract and L/C terms to the buyer. On June 9, the seller faxed the
contract, but the buyer deleted "not accept chartering ships over 20 years old" and changed
"freight prepaid" to "freight to be paid according to the charter contract" in the original
contract. , then sign, stamp and fax it to the seller.
On June 14, the seller faxed the buyer's representative office in Hong Kong, stating that on
the grounds that the buyer had arbitrarily modified the contract, the seller could not confirm
this contract. On June 22, the seller sent a letter to the buyer saying that the contract is invalid
and the L/C is no longer valid.
Since the seller refuses to perform the contract, the buyer must purchase a replacement at a
higher price from Company C, Singapore. Thus, the buyer has to pay 150,675 USD more
than the contract with the seller.

Referee's decision
The buyer considers that the changes in the content of his response to the offer do not affect
the basic content of the offer; but the seller thinks that is the key to conclude the contract has
not been formed. According to article 19 of the CISG, paragraph 2: “… a response that tends
to accept the offer but which contains additional or other terms that do not substantially alter
the content of the offer is to shall be deemed to have accepted the offer unless the offeror
immediately made no oral objection to such differences or communicated his objection to the
offeree. If the offeror fails to do so, the subject matter of the contract shall be the text of the
offer with the amendments stated in the acceptance of the offer.
Considering two changes in the buyer's offer response, including the deletion of "not
accepting chartering over 20 years old" and the change of "freight prepaid" to "freight to be
paid under the charter party" in original contract, not under the relevant additional or
modified elements that fundamentally change the content of the offer. Under the terms of
delivery in the contract of FOB, Incoterms 2000, the buyer's changes in terms of the age of
the vessel and the payment of freight do not substantially change the content of the offer
letter, nor increase the liability of the buyer. seller. In addition, the seller is late in notifying
his rejection of the change in the buyer's response. According to paragraph 2 of article 19 of
the CISG, the seller's refusal to change in
Buyer's response must be made "immediately". Therefore, the seller in this case has deemed
to accept such changes. Therefore, the Arbitral Tribunal decided that Contract No. SF0610 is
valid for both the seller and the buyer.

Lessons for Vietnamese enterprises

The result of the dispute was the failure of the Chinese seller, and the amount of damages for
the buyer amounted to thousands of dollars. This loss comes from the lack of understanding
of Chinese enterprises when participating in the international commercial playground.
Although China has acceded to the Convention
Vienna, but it is clear that the Chinese seller did not understand the content of the convention,
so he acted inconsistently with the provisions of the convention. From the lessons of Chinese
enterprises in this dispute, Vietnamese enterprises need to be aware that, when entering into
international goods sale and purchase contracts, the issue of legal research is extremely
important. . Contracts for the sale of goods involving foreign elements are often more
complicated in terms of the source of the governing law, so businesses need to know what
sources of law their contracts will be governed by: international law or the national law of the
client country, and which source of law is preferred for best preparation. Article 396 of the
Civil Code of Vietnam requires acceptance of the offer to accept the entire content of the
offer without accepting any amendments, while the Vienna Convention allows for changes in
the acceptance of the offer. goods without changing the basic content of the original offer
does not affect the contract.
Thereby, we see the flexibility of the Vienna Convention in regulating issues related to
contracts for the sale of goods.
Vietnamese enterprises may be familiar with the provisions of the Vietnamese Civil Code
and are at risk if they impose such regulations on international sales contracts.

Case bonus:
Case:
Plaintiff entered into a contract to purchase 500 tons of steel from the defendant under C&F
Karachi terms. The contract stipulates that the goods are loaded on board departing from "any
port of Europe" and by "any sea route" at the option of the defendant<Seller>. However,
about a month after the contract was signed, the plaintiff <Buyer> sent the respondent a
request of
Pakistan repurchaser under which "the goods must be carried by ship on the regular route" to
Karachi. The accused forwarded these new requests to the carriage intermediately, stating
"request route: vessel regular route, going directly to Karachi".
Unfortunately, the ship chartered by the defendant's transport intermediary did not reach
Karachi. This vessel started from Anvers with the steel sold to the plaintiff, stopped in
Rotterdam for a few days and then went to Dunkerque for unloading about 12,000 tons of
sugar carried on board. However, this ship was unable to leave the port of Dunkerque
because the ship owner's creditors confiscated it for auction after all goods on board
including those sold to claimant have been unloaded down and stored in accordance with the
decision of the Chief Justice of the Dunkerque Commercial Court.
Due to not receiving the above steel, the Pakistani buyer of the plaintiff decided to cancel the
contract with the plaintiff. Plaintiff notifies the defendant that the defendant is liable for all
damages because the ship has failed to go directly from Anves to Karachi and makes it clear
that to minimize damage the plaintiff will try to arrange with Pakistani buyers. The settlement
ended with the plaintiff compensating the Pakistani buyer. And also to reduce damages, the
plaintiff has resold the said shipment with the consent of the defendant, the defendant also
voluntarily buys 3/5 of these items.
The plaintiff requested the Arbitral Tribunal to compel the defendant to pay compensation for
all damages suffered by the plaintiff consists of:
● The difference between the contract price and the price that the plaintiff would have
received after having to resell the goods at Dunkerque,
● The amount paid to the Pakistani buyer,
● Dunkerque costs,
● Shipping costs for new buyers,
● Travel costs to Karachi.
The Plaintiff also requested that damages in USD and French Franc be converted to Belgian
Franc in accordance with the exchange rate prevailing at the time of payment or on the date
the claimant is required to make such costs due to the contract not being performed.
Defendant denied the claimant's claim and argued that in C&F sales contracts all risks
occur after loading the goods on board the ship is the responsibility of the buyer and the
contract between the plaintiff and the respondent does not include the applicant must
hire a train that goes directly to Karachi. Furthermore, the defendant argued that the
plaintiff was only entitled to claim damages for the difference between the contract price and
the selling price to the Pakistani buyer. Defendant also argued that the conversion in USD,
French Franc are only required at the time of enforcement of the award.
Damage calculation:
According to the defendant, the amount of damages that the plaintiff can be compensated for
is limited to the difference between the price the plaintiff paid the defendant ($457,000) and
the price at which the plaintiff resold the goods to the Pakistani buyer ($461,866.02) or
$4,866.02, the other damages claimed by the plaintiff stemming from a different cause other
than the cause cited.
This argument of the defendant is unacceptable.
Due to the failure to respect the provisions of the contract and the fault in the goods being
subjected to the risks that the buyer tried to avoid, apply Articles 1150 and 1151 of the Civil
Code, the seller must bear all foreseeable damages of direct and immediate
consequences of non-performance.
In the particular circumstances of this case, taking into account the buyer's requirements for
the direct route of goods, foreseeable damages as a direct and immediate consequence of non-
performance covers only loss of profits due to failure to deliver the goods to the Pakistani
buyer, but also includes damages from the plaintiff ‘s need to compensate the costs incurred
by the Pakistani buyer in vain and from the fact that the goods had to be unloaded at
Dunkerque as well as the discounts the plaintiff had to make when resell the shipment with
the defendant's approval to avoid increased damages.
Plaintiff first demanded the difference between the price that the plaintiff should have
sold to the Pakistani customer and the price actual resale at Dunkerque plus discounts.
This claim is justified for the reasons outlined above.
However, from the documents in the file, the price that the plaintiff sold to the Pakistani
buyer did not come to $461,866.02 but $459,015.67 because the plaintiff accepted a
$2,850.35 discount.
The selling price at Dunkerque is 340,867.03 USD. So the loss in this section is
$118,148.64.
Regarding the damage that the plaintiff must compensate the Pakistani buyer after reaching a
friendly agreement, this damage includes interest on opening amount of Letter of Credit for
payment of goods calculated for the period from 4th July year 1985 to October 1, 1985, that
is 23,892.19 USD and the costs that the Pakistani buyer had to pay for completion of credit
documents, import license fee, insurance fee and interest on the total of the above fees,
i.e. is $21,225.54 USD.
The total loss of 45,117.73 USD is completely justified.
Plaintiff also has a right to ask for reimbursement of the costs the plaintiff had to make to
invite a representative to settle the claims of Pakistani buyers, i.e. 93,378 Belgian Francs.
The costs in Dunkerque are also completely justified, including those paid to the agency to
seize the goods carried out, unloading and auctioning and other related costs totaling
122,340.16 French Francs, as well as shipping costs for new buyers are 50,414.17 French
Francs and 186,668 Belgian Francs
Regarding the date of conversion of damages in French Francs and USD to Belgian Francs,
the Commission on the Nature of Compensation regulates the damage for non-performance is
that the Plaintiff must be brought back to the state in which the plaintiff would have be in that
state if the defendant properly performs the obligations he has committed.
To achieve this goal, it is not possible to convert into Belgian Franc any foreign currencies at
the rate of exchange on the date of signing the Contract nor on the date the respondent pays
the plaintiff damages. On the contrary, damages need to be converted at the conversion
rate applicable on the date on which the Plaintiff suffered damages for which the
defendant was liable.
Interests on the amount of compensation that the plaintiff is entitled to will be borne by the
defendant from the 21st October 1985, the date on which the plaintiff claimed the defendant,
less expenses incurred by the plaintiff after date - interest on these expenses is calculated only
starting from the date of actual expenditure.
The arbitrator emphasized, for the conclusion of the contract of carriage, the obligations of
the C&F seller are the same as the CIF seller's obligations. However, it would be incorrect to
assert that: "C&F sellers have the obligation to transport or have another person transport the
goods under the agreed terms of carriage between the seller and the buyer at the seller's
expense, but all risks during the transportation of the goods
Resolution:
Although the conclusions in the judgment about the seller's error in the contract of carriage
are indisputable, the analysis in the judgment on the relationship between the parties in the
C&F contract of sale still has some inaccuracies. As the arbitrators have emphasized, for the
conclusion of the contract of carriage, the obligations of the C&F seller are the same as those
of the CIF seller. However, it would be incorrect to state that: "The C&F seller is obliged to
transport or have another party transport the goods under the terms of carriage agreed
between the seller and the buyer at the cost of borne by the seller, but all risks during
maritime transportation are the responsibility of the buyer from the time the goods are loaded
on board the ship.
It is true that in C&F and CIF sales contracts, the buyer is responsible for all risks from the
time of loading the goods on board the ship, but the seller is also not obliged to ask another
entity to transport and even less obliged to carry it himself. In practice, the seller's obligation
in this case is limited to entering into a contract for the carriage of the goods at the seller's
expense for carriage, under the usual conditions, by the usual route by a vessel normally used
for the carriage of the type of goods subject to the contract. Article A(2) INCOTERMS
stipulates this very clearly. Article 39 of the Law of January 3, 1969 similarly reflects
international practices in this area: "In a CIF contract of sale, the seller is obliged to sign a
contract of carriage and to load the goods on board the vessel as well. such as insuring the
goods against risks in transit".
Thus the seller is deemed to have fulfilled his obligations in relation to the carriage from the
time the conditions of the contract of carriage that this person signed without any objection
from the buyer; not contrary to international practices as well as specific provisions in the
sale and purchase contract. Conversely, if the seller signs a contract of carriage with
unusual conditions, and the performance of that contract leads to damage to the buyer,
he must be responsible for such damages.
However, the Arbitral Tribunal was not necessarily mistaken in asserting that "the
consequences of the carrier's improper performance of the contract of carriage... are the
responsibility of the buyer". This conclusion is also true in cases where the carrier performs
an obligation of the buyer for the benefit of the buyer.
Regarding the buyer's requirements in relation to the carriage, it can be asserted that they are
perfectly reasonable. In fact, it is true that in C&F and CIF contracts, the buyer is only a third
party to the contract of carriage, but the buyer is not completely indifferent to the terms of the
contract of carriage because the buyer is the bear the direct consequences of the performance
of the contract of carriage and the risks associated with such carriage.
In this case, it is clear that the seller was at fault in signing a contract of carriage that
did not comply with the agreement between the two parties. However, this defect is not
the cause of all damages claimed by the buyer.
It can be seen that the award of the arbitrators did not accept this view. According to the
arbitrators' argument, if the seller's fault was the cause of the damage, it was the sole cause
because, as the Arbitral Tribunal emphasized, it was a predictable loss and direct.
But is it certain that damage will not occur in case the transport company operates the
Anvers/Karachi direct route? Can the ship be detained when it calls for technical reasons?
This is a question that only the arbitrators can decide. The theory of risk, embodied in
international trading practices and especially in Incoterms, leads to similar conclusions.
Regarding Interest on Damages compensation
One might be surprised how easily the Arbitral Tribunal was able to award the buyer interest
on the amount of compensation. In fact, it has become a principle that, contrary to overdue
interest, interest on the amount of damages is only charged if the obligor has intentionally
delayed payment in bad faith causing a loss. separate damages due to delay (Article 1153 of
the Civil Code). But here it is clear that the arbitrators did not pay much attention to the "bad
faith" of the seller. In this award, the primary concern of the arbitrators is to fully compensate
the victim of a contract error. However, if the arbitrators took such an approach, why not
decide that the interest on the amount to be indemnified should be calculated from the date on
which the damages commenced. Also according to this principle, it is not possible to
calculate the amount of interest on the amount of damages beginning on the date of award,
but the interest must start from the time of suffering the damage.