Question 1: Zhang Li, who runs Li's Remedies, a specialised Chinese herbs and medicines business in Anhui

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Question 1:

Zhang Li, who runs Li's Remedies, a specialised Chinese herbs and medicines business in Anhui Province, agreed to sell 100 packets of mixed herbs and berries (Remedy Mix, 200 grams per packet) to Ian Spender in Melbourne, Australia. Ian runs a retail pharmacy in Melbourne. Ian wants to know if Zhang's price FCA Shanghai would be more or less expensive than the contract price for CPT Melbourne. What is the answer? Explain why.

(2 Marks)

Zhang and Ian finally agree on a price for delivery CPT Melbourne (Incoterms 2020). Unfortunately, the journey to Melbourne is an eventful one. While passing off the coast of Papua New Guinea (PNG), the ship (owned by China Shipping) is hi-jacked by armed pirates from the island of Bougainville. The pirates commandeer the ship, and force the captain to sail to Kieta Port, on the Eastern coast of Bougainville. There the ship's crew are forced to unload valuable cargo, including the container of mixed goods containing the Remedy Mix meant to be delivered Ian Spender.

The armed fighters hold the ship and its crew captive for three weeks, during which time several shipping containers were broken into and ransacked. Nearly half of the Remedy Mix packages are torn open, and the contents consumed or ruined. After a ransom payment is made by China Shipping, the pirates finally allow the cargo vessel to continue its journey to Melbourne. Before the ship sets sail, the captain of the pirates warns the captain not to report the incident.

A fearful captain was careful not to report the hi-jacking until after the ship with its crew had safely arrived in Melbourne, just over three weeks late. Only then did the Australian Federal Maritime Police finally receive a report of the incident in early 2023. A copy of the report is sent to PNG Maritime Police in Port Moresby (capital of PNG), but no other action is taken.

Ian Spender is able to collect the remaining Remedy Mix over six weeks later than the expected date of arrival. Because the 'Use-by' date on the remaining packets of Remedy Mix is now only a couple of weeks away, Ian is forced to sell the Remedy Mix at a discount.

When do you think Ian Spender paid for the goods? Can he recover any of the contract price? Explain Why or Why Not.

The shipment of goods departed from a Chinese Port. Which version (if any) of the Hague Visby Rules would you expect to apply to the contract of carriage contained in the China Shipping Bill of Lading. Explain.

Discuss whether Ian Spender can or should sue the carrier for the loss and delay of the powdered milk containers. Can the carrier rely on any defences if action is taken against it?

Regardless of your answer to 3., what is the maximum amount of compensation the carrier would be liable to pay for the loss of and/or delay to arrival of goods under the Hague Visby Rules? Would it make a difference if the number of packets of Remedy Mix (100) had been included on the Bill of Lading?

Contract of Sale between Li's Remedies, Hefei, Anhui Province, China and Ian's Pharmaceuticals, Caulfield, Victoria, Australia.

The Contract of Sale (this Agreement) is entered into on the 3 December 2022.

Under this Agreement 'The Seller', Li's Remedies, Chao Lake Rd, Hefei city, Anhui Province, China, agrees to sell to 'The Buyer', Ian's Pharmaceuticals, 159 Stella Street, Caulfield, 3145, Australia, 'The Goods', being the product known as Remedy Mix, comprising:

Active ingredients: Clematis vitalba (25%) and Ornithogalum umbellatum (25%).

Other ingredients: soy lecithin, rice starch, natural sweeteners.

This Agreement is subject to The Seller's standard terms and conditions.

Price and Payment

The Buyer will pay to the Seller for the goods and all obligations specified in this Agreement, the full and complete purchase price of AUD $50 per 200 gm packet CPT (Port of Melbourne)

The amount of goods to be delivered is 100 (one hundred) packets.

The Buyer agrees to pay 40% of total purchase price in advance by electronic transfer of funds to the Seller's nominated account: Li's Remedies, Chao Lake Rd, Hefei city, Anhui Province, China China BKCHCNBJ10.

The Buyer agrees to pay the remaining purchase price by electronic transfer to the Seller's nominated account within 14 days of the receipt of the Bill of Lading.

Delivery: The Seller agrees to ship the goods within 3 weeks of receipt of advance payment. Goods will be shipped from Shanghai, China to Melbourne, Australia. Please note shipping from Shanghai to Melbourne can take 3 weeks or more. The Goods are sold on CPT Incoterm Standard Terms

Seller Representations and Warranties: The Seller warrants that the goods are free, and at the time of delivery will be free, from any security interest or other lien or encumbrance.

The Seller warrants that there are no outstanding titles or claims of title hostile to the rights of the Seller in the Goods.

Documents: The Seller will provide the following documents:

Transport document: Bill of Lading

Commercial Invoice: Yes

Packing list: Yes

Insurance Document: No

Certificate of Origin: Yes

Certificate of Inspection: No

Cancellation: The Buyer agrees that orders for customised Goods cannot be cancelled or varied following advance payment.

Inspection and Delivery: The Buyer may arrange pre-shipment inspection at own cost. The Seller agrees to notify the Buyer within a reasonable time before shipment that the goods are ready for inspection. The Buyer shall inspect the Goods once received, and shall do so within 3 days after receipt of the Goods. In the event that the Buyer discovers any damages, shortages or other non-conformance of the Goods, the Buyer shall notify the Seller within 5 days after the receipt of the Goods or the date when the Buyer discovers or ought to have discovered the lack of conformity. The notification must specify the basis of the damage, shortage or non-conformance.

All reference to trade terms (eg. FOB, CIF etc) are references to the ICC Incoterms and the version applicable as at the date of the contract.

Conformity of Goods: Goods will be deemed to conform to the Contract despite minor discrepancies which are usual in the particular trade or through course of dealing between the parties, but the Buyer may claim abatement of price as is usual in the trade or through course of dealing with such discrepancies.

Force Majeure: The Seller shall not be responsible for any claims or damages resulting from any delays in performance or for non-performance due to unforeseen circumstances or causes beyond the Seller's reasonable control.

Limitation of Liability: The Seller's liability for lack of conformity of the goods shall be limited to proven loss not exceeding 120% of the contract price. The Seller's liability for delay in production and shipment of the goods, shall be limited to damages equal to 0.5% of the price of those goods for each complete week of delay, provided the Buyer notifies the Seller of the delay.

Amendments: No amendment to this Agreement will be effective unless it is in writing and signed by both the Seller and the Buyer.

Governing Law: The terms of this Agreement shall be governed by and construed in accordance with the laws of the People's Republic of China. For the sake of clarity, the parties agree that the United Nations Convention on International Contracts for the Sale of Goods shall apply to this contract.

Dispute: In the event that there is a dispute arising from this Agreement it shall be resolved through binding arbitration. Binding arbitration shall be conducted in accordance with the rules China International Economic and Trade Arbitration Commission (CIETAC).