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International Business Transactions
University of Toledo School of Law
Barrett, John Q.

International Business Transactions
Professor Barrett
Room 1011
January 10, 2000, MondayINTRODUCTION (Read pp. 1-48)
There is no exam. The beginning of April we will work on a negotiation problem with another student. We will be negotiating a deal and drafting a contract. Contract is 45% of class grade. 55% Memo of why we decided what we did is also required in a memo form. This should explain why we made the deal we did. Can rewrite the contract, but not the memo. At that point the rewrite can be
I.                    The Conduct of Business in the World Community
1)     Commerce or Isolation: The Decision to Trade (p. 2)
a)     Trade Barriers:
(1)   Tariffs: Taxes
(2)   Quotas on the number of imports
(3)   Labeling/Inspection/Emission Standards etc. (Product Standards – hardest to enforce, becomes a major barrier)
b)     Trade Imbalances
(1)   Trade deficits makes a free floating currency devalue. The effect is that goods become more expensive from exporting country whose currency is worth more.
c)      Defaults on Loans to Developing Nations
(1)   Debt for equity swaps (interests in companies and other property were swapped)
d)     Investments Abroad
(1)   Avoids many trade barriers
(2)   Lower production costs
(3)   Investment in the foreign country and transfer of technology and employment of citizens
(a)   Restrictions of pulling assets out of the country
(b)   Restriction of foreign ownership
(c)   Governments nationalize the businesses.
2)     The Actors: The Nations and Institutions of International Trade (p. 12)
a)     Who Are the Foreign Traders? (p. 12)
b)     Non-market Economies and State Trading Organizations (p. 15)
(1)   Socialistic Governments: Control all aspects and like counter-trade (barter)
c)      Dependent, Developing and Advanced Developing Countries. The New International Economic Order and a Law of Development (p. 16)
(1)   Developed Nations, Less Developed Countries (LDC), Newly Developing Countries (NDC), Mature Developed Countries (MDC)
(2)   Growth of Trade Blocks
d)     International Economic Institutions (p. 18)
e)     The Role of Counsel in International Business (p. 22)
(1)   Recognizing and Heeding Cultural Differences Can Be Key to International Business Success (p. 26)
(2)   Danian Zhang an Kenji Kuroda, Beware of Japanese Negotiation Style: How to Negotiate With Japanese Companies (p. 30)
(3)   Robert S. Vineberg, Globalisation of the Legal Profession: Workshop at the Paris Conference (p. 33)
(4)   Detlev F. Vagts, The International Legal Profession: A need for More Governance? (p. 35)
3)     Forms of International Business (p. 41)
a)     Trading Goods Across Borders: Exports and Imports (p. 41)
b)     Licensing Production Abroad (p. 43)
c)      Foreign Investment (p. 45)
January 10, 2000, WednesdayBASIC DOCUMENTS (Read pp. 48-74)
4)     Agreements for the International Trading of Goods (p. 48)
The Basic Transaction: Toys to Greece (p. 48)
a)     Factors to Consider – How is an International Commercial Transaction Different From A Domestic One? (p. 48)
(1)   Sellers Risks:
(a)   Will they get paid
(b)   Shipping costs
(c)   Getting through customs
(d)   TRUST
(2)   Buyers Risks:
(a)   Will they get what they ordered?
(b)   Quality
(c)   TRUST
(3)   Currency / Payment:
(a)   What currency will it be paid in
(b)   How will fluctuations in currency be handled?
(c)   How to protect against unforseen events that can interrupt payment
(4)   Jurisdiction:
(a)   What law applies
(b)   Is there a convention or treaty that deals with this
(c)   What US law may apply
(5)   Risk Reduction:
(a)   Assignment of the forseeable risks of transactions as clearly as possible in the contracts involved. Special language and rules
(b)   Break down large uncertain risks by creating devices which break them down into small measurable risks.
·         The sale contract between buyer and seller
·         The letter of credit contract between buyers bank and seller
·         Bill of lading contract between seller and carrier.
b)     The Sales Contract (p. 50)
(1)   Initial contact is request of price quotation
(2)   Seller sends a pro forma invoice as a quote (offer)
·         FOB: Free on Board: The material is yours once it is put on shipper.
·         Freight charges: FAS is charge that seller would charge to get to port of shipment
·         C & F: Cost and Freight: Cost if seller ships to buyers port.
·         CIF: Includes insurance of material
(3)   Negotiations to reduce risks outlined above
(4)   Documentary Sales is set up in some case: Payment against documents (title of goods) You give payment when documents are given to you.
(a)   Problem is that there is no requirement to pay this way. How do you enforce in another court.
(5)   Purchase Order (Acceptance)
(a)   This could have different terms than pro forma invoice. Is there a modification of the original offer, is this a counter offer instead.
(b)   Counter Offer under UCC keeps terms that are consistent and strikes out different terms and fills in the gaps with UCC standard contracts.
·         International Law is that the terms of the counter offer would apply if Seller performs (They have acquiesced to the counter offer by performance)
·         This is mirror image or common law approach.
(6) Now have a completed contract
c)      The Letter of Credit (p. 55)
(1)   Letter of Credit: If you do certain things, we will pay you.
(2)   Guarantees payment in a way that just a documentary sales does not. Irrevocable v. Revocable letters of credit.
(3)   Banks do this because they are in the local country of buyer and are informed about credit worthiness of buyer.
(4)   Bank opens letter of credit for the benefit of the buyer. They ma

w chosen by the parties will govern the dispute
b)     otherwise, country of closest connection
(a)   Presumed: home base of party making characteristic performance: (What is characteristic performance? Don’t look at payment, look at providing the goods. It is usually where the goods are shipped from according to conventional wisdom)
c)      Validity: Whichever law validates K. One of 3 can probably validate K.
(a)   law that parties chose or,
(b)   where characteristic performance takes place or
(c)   place of contracting,
d)     To which law do these rules point in our case?
(C) Assume action brought in Kansas: Restatement: Conflicts of Law (Second) (1971) (p. 80)
a)     “most significant relationship to the transaction and the parties”: multi-factor balancing test (6 factors, 5 contacts)
b)     Rule of thumb: if place of negotiating and of performance coincide, then presumptively that law
c)      Contacts: what result after weighing?
(a)   place of contracting
(b)   place of negotiating
(c)   place of performance (Is performance where the goods are shipped or paid for)
(d)   party connections
(2)   What terms are included in the contract? (“battle of the forms”)
(A) Kansas law: UCC §2-207 (Battle of the forms) (p. 80)
a)     “additional” vs. “differing” terms
b)     “Materially altering” terms: disclaimer of warranty? Choice of law?
(B) German law: §360 of German Commercial Code (1979) (p. 87)
a)     “mirror image” rule (EEC Approach) , (last shot rule applies if parties perform on any counter-offer) subject to
b)     custom of “order confirmation forms” by merchants, shifting burden to buyer
1)     (Second fact pattern): buyer’s claim for corrosion damage? Seller’s disclaimer?
(1)   Kansas Law:
(A) Contract formed by the writings. Implied warranties: merch’bility or fitness?
(B) Contract formed by conduct.
(2)   German law:
(A) Contract formed by writings.
(B) Contract formed by conduct. (constitutes an acceptance of the last shot rule)
(3)   International law: the Vienna Convention on International Sale of Goods (CISG):
(A) Does the Convention in fact apply as between U.S. and Germany? (p. 29 of Supplement)
a)     Art. 1(1)(a): The CISG applies when the States are Contracting States, or
Art. 1(1)(b): when the rules of private international aw