International Business Transactions Outline
I. Conflicts of Laws
Q is whose law should be applied to the K?
Restatement, Conflicts of Law (1971)
§188. Law Governing in Absence of Effective Choice by the Parties
§6 Choice of Law Principles
Conflicts Rules:
i. Exception – NY, London, and main commercial cities can always be the jdxn
2. So when the parties are disputing as to which law applies, in the absence of choice, usually the law that will govern will be the state where the suit is filed.
3. Most Significant Relationship Test: When applying §188 – must go thru each of the factors and determine the jdxn of which party will have the most significant relationship.
4. When applying §6 – Rule of Thumb:
1. Cts will apply the law of their own jdxn – b/c the only way to apply the law of a foreign country would be to bring in an expert on that law –
a. but this too time consuming, and
b. costly
5. So usually can avoid doing the Restatement factors – b/c they usually come out even.
6. Even the L/C is a K, so if there is no law that is selected – then can apply these principles.
Characteristic performance similar to restatement and tends to favor S’s place of business.
II. Wars and Frustration of Purpose
Ocean Tramp Tankers Corp v. V/O Sovfracht (Eugenia)
Issues
1. whether the charterers, by allowing the Eugenia to go into the canal on Oct.31 was a breach of the war clause.
2. whether the charter party was frustrated by the war.
If it should happen, in the course of carrying out the K, that a fundamentally different situation arises for which the parties made no provision, so much so that it would not be just in the new situation to hold them bound to its terms – then the K is at an end.
Test: A situation must arise which renders performance of the K a thing radically different from that which is undertaken by the K. Was there a fundamental change in the circumstances relevant to the performance of the K that it is just and reasonable that the parties should be relieved of their obligations? Must do:
Have the parties foreseen this difficulty? Construe the K and see whether the parties themselves provided for the situation that has arisen
a. Yes? – K governs and the parties must perform and nothing can suspend this. No Frustration
b. No? – Then, has the situation become fundamentally different from when K was entered into. Compare new situation with old situation for which they did provide. How different?
i. Fact that it has become more onerous, more time consuming or more expensive for one party b/c than he had imagined isn’t frustration or impracticable.
1. need to have either:
a. Force Majeure
b. Govt Regs
c. Things that make performance really dangerous, ie War.
ii. Must be unjust to hold the parties bound
1. Parties contemplated that this could happen – Forseeability
2. Here, the trip of 138 days would become one of 156 days – not that different.
3. Suez Canal was the customary route – but not the only one.
4. Doesn’t rise to Frustration
III. Letters of Credit
Buyer who has arranged a L/C has 4 types of problems:
Parties may disagree whether the docs submitted conform or not
Buyer’s bank may pay the L/C even though improper docs are presented
Buyer’s bank may wrongfully dishonor the L/C
Buyer’s bank may be told that the Seller has breached the K by sending nonconforming goods before it pays the docs.
When payment is made by a L/C – there are 2 different transactions: Independence Principle
K of underlying sale b/n B and S
K b/n B’s Bank and S.
Even if S breaches, S is entitled to the money and Bank is obligated to pay. B can then go after S.
Uniform Customs and Practice for Documentary Credits (UCP) promulgated by the International Chamber of Commerce (ICC) – not really law, rather customs of the industry. They do make decisions. Some include:
a commercial invoice describing the goods as “secondhand” when it did not appear on the credit is nonconforming and unacceptable
a commercial invoice stating the brand name of the goods, when brand name was not on the credit is conforming
risk of loss of docs in the post passes from beneficiary to the applicant when docs consistent with credits are presented to the bank designated by the issuing bank.
JH Raner & Co, Ltd. v. Hambros Bank
Bank refused to honor l/c b/c the invoice st
ion to the parties – then cannot select that jdxn
A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.
When there is no such directive, the factors relevant to the choice of the applicable rule of law include:
a. The needs of the interstate and international systems,
b. The relevant policies of the forum,
c. The relevant policies of other interested states and the relative interest of those states in the determination of a particular issue,
d. The protection of justified expectations,
e. The basic policies underlying the particular field of law
f. Certainty, predictability, and uniformity of result, and
g. Ease in the determination and application of the law to be applied.
The rights and duties of the parties with respect to an issues in contract is determined by local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under §6.
In the absence of an effective choice of law by the parties, the contacts to be taken into account in applying the principles of §6 to determine the law applicable to an issue include:
a. The place of contracting, (and signing)
b. The place of negotiation of the contract,
c. The place of performance,
d. The location of the subject matter of the contract, and
e. The domicile, residence, nationality, place of incorporation and place of business of the parties.
i. The contacts are to be evaluated according to their relative importance with respect to the particular issue.
If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as provided by…
