You are the vice president of sales for DownPillow International, Inc., a U.S. manufacturer of bed pillows. The raw materials needed for making pillows are all sourced from suppliers overseas. Your firm purchases feathers from exporters in China who maintain large flocks of geese and ducks for breeding and cotton ticking and other textiles from mills in Germany. Every year you show your products at the International Bed Show in New York. This year, a delegation of Japanese buyers, representing several well-known Tokyo stores, showed interest in your best quality pillows. The president of your firm expressed interest in these contacts because although Americans use the same pillow for long periods of time, the Japanese are fastidious about their bedding. You followed up with samples, product, and pricing information. After several discussions and months of correspondence, you now expect to receive your first overseas orders.
You are to meet with legal counsel next week to discuss this opportunity. What questions might you want to ask about entering a sales contract with a Japanese buyer? If a buyer shows interest in purchasing large quantities, should you consider a visit to the buyer's Tokyo office? What would you accomplish? Should your attorney conduct negotiations there for you?
If you and your buyer agree to put your agreement in writing, what terms might the document contain? Your customers want assurances that their pillows will be made of the finest white goose down, with less than 10 percent feathers. What assurance will you be able to give them regarding product quality and specifications? What factors might influence the selection of a choice of law clause? Do you think your lawyer will insist on a force majeure clause? Can you suggest some of the things Down- Pillow might want in its clause? If you anticipate having several accounts in Japan, and each of them will be sending in purchase orders for each order, will you need a confirmation form? Will your attorney recommend that you develop a standard form to use for confirming all export orders? How will this form differ from the form you use for domestic shipments? What kind of provisions should it have?
How might negotiating your supply contracts with the Chinese differ from dealing with German textile mills? You have some concern about making sure that the quality of the down from China remains consistent. What will assure you that you will receive goose down and not duck down? What other precautions should you take? The German mill wants you to mail in or fax your orders. Your lawyer recommends that certain terms be put into your purchase order form. What might they be? Your purchase order states that the seller is liable for consequential damages for late shipment. The mill's confirmation states that "the liability of the seller is limited to the replacement of returned goods." In the event of a dispute, which will prevail under U.S. law? Under German law? Under the CISG?
Your contract with the Japanese buyer specifies that the CISG is to govern the transaction. Your pillows arrive in Japan and the buyer discovers that they contain only 13 ounces of down instead of the full 16 ounces of down as promised. You admit the error and want to resolve the problem. However, the buyer has just been offered the same quality pillow at considerably lower prices from a firm in Taiwan and wants to cancel the contract. Discuss the rights of each of the parties under the CISG.