1. What could you have done to avoid getting into this mess?
You are the President, Sole Director and Sole Shareholder of MGT Food Brokers Inc. (“MGT”).
MGT is in the business of buying and selling congealed food products on the international market.
Generally, customers of MGT, either in Canada or elsewhere around the world, request that you
source congealed food products for them. You do this through your wide knowledge of congealed
food packaging companies around the world and by purchasing the required products for MGT’s
account. MGT purchases the products and then resells them to its customer. MGT arranges for the
products to be shipped directly to its customer.
One of MGT’s deals just went sour. On October 15, 2021 you received a telephone call from a
company base in California USA known as HypoAllergenic Foods Products
Inc. (“HypoAllergenic”). HypoAllergenic specializes in selling foods, which are guaranteed not to
have traces of peanuts, insecticides or other substances, which are known to cause allergic
reactions. HypoAllergenic has ordered from you for delivery to them twenty-five (25) containers of
congealed carrots. Deliveries are to be made to HypoAllergenic’s plant facility in Los Angeles,
California. HypoAllergenic has requested one (1) container to be delivered on the last day of each
month for twenty-five (25) months commencing January 31, 2022. The price agreed to per container
is US$150,000.00. An essential condition of the transaction is that the carrots be free of any traces
of peanuts or pesticides. If there are any traces MGT agrees in writing with HypoAllergenic that
HypoAllergenic could immediately cancel the contract with MGT.
Upon receipt of the order MGT immediately contacted Congealed Vegetables Limited. (“Congealed
Vegetables”), a congealed food wholesaler operating out of England, but selling vegetables from
farms around the world, and negotiated to purchase from them the required quantities of congealed
carrots for a price per container of US$100,000.00 DDP Los Angeles, California. The only pertinent
terms and conditions of the written agreement between MGT and Congealed Vegetables are:
a. By no later than November 1, 2021 a letter of credit, in favour of congealed Vegetables,
having the following provisions, will be issued by MGT’s banker, National Bank, Main Branch,
Montreal Quebec:
1. the letter of credit will be for a total amount of US$2,500,000.00;
2. the letter of credit will be irrevocable;
3. the letter of credit will permit twenty-five (25) monthly draws, commencing in
the month of February, 2022 of US$100,000.00 each provided that in each instance the
following documents are delivered to the nominated bank no later than the 15 th day of the
month:
October, 2019
, a. a duplicate original of onboard clean marine bill of lading relating to that
month’s shipment; and
b. an attestation by the carrier that delivery of the container of congealed
carrots had been made to HypoAllergenic on the 1st day of the current month.
4. Each draw is payable on the 22nd of each calendar month commencing February
22, 2019.
b. An arbitration clause, which reads as follows:
“All disputes arising out of work in connection with the present contract shall be
subject to arbitration under the Rules of Arbitration of the International Chamber of
Commerce by 3 arbitrators appointed in accordance with the said Rules. The said
arbitration shall be conducted in English in the Churchill Hotel, London, England.”
c. This contract shall be interpreted and construed in accordance with the laws of Quebec,
Canada. For greater certainty, the CISG will apply.
On October 30, 2021 MGT arranged for the requisite letter of credit to be issued by the National
Bank to congealed Vegetables. In order to persuade the National Bank to issue the letter of credit
MGT had to put up security of CDN$150,000.00. As MGT and you personally were already tapped
out, unknown to your spouse, you persuaded your mother-in-law to put up, as security, her last
CDN$150,000.00, which she kept in cash in her mattress.
On February 1, 2022 HypoAllergenic advised MGT that the first container of congealed carrots had
arrived on January 31, 2022 as required. HypoAllergenic indicated to MGT that it would start to
process the congealed carrots and would be paying for the first container load of carrots by
electronic transfer to MGT’s bank account on February 21, 2022.
Yesterday, February 8, 2022, National Bank telephoned you to tell you that the nominated bank in
England had received all of the documents from congealed Vegetables and that consequently the
National Bank intended to pay congealed Vegetables, via the nominated bank on February 22, 2021.
You assured MGT’s account manager that the requisite US$100,000.00 to cover the letter of credit
would in fact be in MGT’s bank account no later than the close of business February 21, 2019. He
told you that if it were not, the bank would take your mother-in-law’s $150,000.00 which she put as
guarantee.
Today, February 9, 2022 you had your own personal St-Valentines Day massacre. MGT has just
received a written notice from HypoAllergenic advising you that it has discovered traces of peanuts
in the congealed carrots and therefore has decided to:
1. Reject the first container of goods;
October, 2019
, 2. Not make the payment as promised on February 21, 2022; and
3. Cancel the balance of the contract.
After a few telephone calls you have been given to understand the source of the problem.
Congealed Vegetables obtained the first shipment of carrots from organic growers. However,
because the organic growers did not use pesticides, they frequently rotated their crops. As a result,
some of the carrots that were shipped to HypoAllergenic were from fields where peanuts had been
grown in the previous season.
In order to get your thoughts together on how to deal with this problem, and before calling you
advisors, such as your lawyer, you have decided to put together a memorandum in the form of a
term paper of approximately 3000 words dealing with the following issues:
3. Role of Lawyers
- 2 functions : litigation lawyer and legal advisor. In most jurisdictions, most
lawyers perform both. GB split it : barristers and sollicitors. Some minor roles
too.
- Legal advisor : advice clients, position the client in the best possible way
in event of a dispute.
The best drafters of contracts know who benefits the contract : the judge. So they do
everything
to ensure the positions of the contract are drafted. If a lawyer knows his client is guilty,
he’ll try to negotiate a plea bargain.
In the civil law system, notaries have a law degree. They draft contract like
lawyers but they specialize in special contracts (real estate). Notaries contracts
are special (presomption irrefragable). They are title attorneys : when ones buy a
property, somebody has to go through all
of the deeds against the title of property to see if 1) they are mortgages 2) if it’s the
true owner 3)
if anyone has any rights on the property
Common law: notary public. They act as official witnesses to the signature of
documents. The notary asks for an ID. They didn’t study law.
4. Procedure
- if somebody’s sued, there is a statement of claim to fill. The defendant has to
make up a defense. However, if the suing is heard before the Regie du logement,
a claim has to be filled. But there is no public defense, so there could be surprises.
Each country, jurisdiction have their own rules, formal or not.
The most important delay to know is : how long do you have to sue -> Time limit.
Statute of limitations/prescriptions. It varies for anything. The beginning point of the
action also matters. There are certain delays absolute or relative. Ex : in Quebec, when
a case is started, there is 6 months to get the case for trial. Parties are also required to set
up a schedule. If the defendant doesn’t do it by the deadline it’s ok. But these procedural
delays are a way to remind every parties
at what point of the process we are.
October, 2019
, INTERNATIONAL BUSINESS LAW
CLASS NOTES
By: LESLIE A. BECK
INTERNATIONAL SALE OF GOODS
- Not the only means of export
CONTRACT OF SALE OF GOODS
- means the transfer of ownership of asset in exchange
for the payment of a price
- price usually = money
October, 2019
You are the President, Sole Director and Sole Shareholder of MGT Food Brokers Inc. (“MGT”).
MGT is in the business of buying and selling congealed food products on the international market.
Generally, customers of MGT, either in Canada or elsewhere around the world, request that you
source congealed food products for them. You do this through your wide knowledge of congealed
food packaging companies around the world and by purchasing the required products for MGT’s
account. MGT purchases the products and then resells them to its customer. MGT arranges for the
products to be shipped directly to its customer.
One of MGT’s deals just went sour. On October 15, 2021 you received a telephone call from a
company base in California USA known as HypoAllergenic Foods Products
Inc. (“HypoAllergenic”). HypoAllergenic specializes in selling foods, which are guaranteed not to
have traces of peanuts, insecticides or other substances, which are known to cause allergic
reactions. HypoAllergenic has ordered from you for delivery to them twenty-five (25) containers of
congealed carrots. Deliveries are to be made to HypoAllergenic’s plant facility in Los Angeles,
California. HypoAllergenic has requested one (1) container to be delivered on the last day of each
month for twenty-five (25) months commencing January 31, 2022. The price agreed to per container
is US$150,000.00. An essential condition of the transaction is that the carrots be free of any traces
of peanuts or pesticides. If there are any traces MGT agrees in writing with HypoAllergenic that
HypoAllergenic could immediately cancel the contract with MGT.
Upon receipt of the order MGT immediately contacted Congealed Vegetables Limited. (“Congealed
Vegetables”), a congealed food wholesaler operating out of England, but selling vegetables from
farms around the world, and negotiated to purchase from them the required quantities of congealed
carrots for a price per container of US$100,000.00 DDP Los Angeles, California. The only pertinent
terms and conditions of the written agreement between MGT and Congealed Vegetables are:
a. By no later than November 1, 2021 a letter of credit, in favour of congealed Vegetables,
having the following provisions, will be issued by MGT’s banker, National Bank, Main Branch,
Montreal Quebec:
1. the letter of credit will be for a total amount of US$2,500,000.00;
2. the letter of credit will be irrevocable;
3. the letter of credit will permit twenty-five (25) monthly draws, commencing in
the month of February, 2022 of US$100,000.00 each provided that in each instance the
following documents are delivered to the nominated bank no later than the 15 th day of the
month:
October, 2019
, a. a duplicate original of onboard clean marine bill of lading relating to that
month’s shipment; and
b. an attestation by the carrier that delivery of the container of congealed
carrots had been made to HypoAllergenic on the 1st day of the current month.
4. Each draw is payable on the 22nd of each calendar month commencing February
22, 2019.
b. An arbitration clause, which reads as follows:
“All disputes arising out of work in connection with the present contract shall be
subject to arbitration under the Rules of Arbitration of the International Chamber of
Commerce by 3 arbitrators appointed in accordance with the said Rules. The said
arbitration shall be conducted in English in the Churchill Hotel, London, England.”
c. This contract shall be interpreted and construed in accordance with the laws of Quebec,
Canada. For greater certainty, the CISG will apply.
On October 30, 2021 MGT arranged for the requisite letter of credit to be issued by the National
Bank to congealed Vegetables. In order to persuade the National Bank to issue the letter of credit
MGT had to put up security of CDN$150,000.00. As MGT and you personally were already tapped
out, unknown to your spouse, you persuaded your mother-in-law to put up, as security, her last
CDN$150,000.00, which she kept in cash in her mattress.
On February 1, 2022 HypoAllergenic advised MGT that the first container of congealed carrots had
arrived on January 31, 2022 as required. HypoAllergenic indicated to MGT that it would start to
process the congealed carrots and would be paying for the first container load of carrots by
electronic transfer to MGT’s bank account on February 21, 2022.
Yesterday, February 8, 2022, National Bank telephoned you to tell you that the nominated bank in
England had received all of the documents from congealed Vegetables and that consequently the
National Bank intended to pay congealed Vegetables, via the nominated bank on February 22, 2021.
You assured MGT’s account manager that the requisite US$100,000.00 to cover the letter of credit
would in fact be in MGT’s bank account no later than the close of business February 21, 2019. He
told you that if it were not, the bank would take your mother-in-law’s $150,000.00 which she put as
guarantee.
Today, February 9, 2022 you had your own personal St-Valentines Day massacre. MGT has just
received a written notice from HypoAllergenic advising you that it has discovered traces of peanuts
in the congealed carrots and therefore has decided to:
1. Reject the first container of goods;
October, 2019
, 2. Not make the payment as promised on February 21, 2022; and
3. Cancel the balance of the contract.
After a few telephone calls you have been given to understand the source of the problem.
Congealed Vegetables obtained the first shipment of carrots from organic growers. However,
because the organic growers did not use pesticides, they frequently rotated their crops. As a result,
some of the carrots that were shipped to HypoAllergenic were from fields where peanuts had been
grown in the previous season.
In order to get your thoughts together on how to deal with this problem, and before calling you
advisors, such as your lawyer, you have decided to put together a memorandum in the form of a
term paper of approximately 3000 words dealing with the following issues:
3. Role of Lawyers
- 2 functions : litigation lawyer and legal advisor. In most jurisdictions, most
lawyers perform both. GB split it : barristers and sollicitors. Some minor roles
too.
- Legal advisor : advice clients, position the client in the best possible way
in event of a dispute.
The best drafters of contracts know who benefits the contract : the judge. So they do
everything
to ensure the positions of the contract are drafted. If a lawyer knows his client is guilty,
he’ll try to negotiate a plea bargain.
In the civil law system, notaries have a law degree. They draft contract like
lawyers but they specialize in special contracts (real estate). Notaries contracts
are special (presomption irrefragable). They are title attorneys : when ones buy a
property, somebody has to go through all
of the deeds against the title of property to see if 1) they are mortgages 2) if it’s the
true owner 3)
if anyone has any rights on the property
Common law: notary public. They act as official witnesses to the signature of
documents. The notary asks for an ID. They didn’t study law.
4. Procedure
- if somebody’s sued, there is a statement of claim to fill. The defendant has to
make up a defense. However, if the suing is heard before the Regie du logement,
a claim has to be filled. But there is no public defense, so there could be surprises.
Each country, jurisdiction have their own rules, formal or not.
The most important delay to know is : how long do you have to sue -> Time limit.
Statute of limitations/prescriptions. It varies for anything. The beginning point of the
action also matters. There are certain delays absolute or relative. Ex : in Quebec, when
a case is started, there is 6 months to get the case for trial. Parties are also required to set
up a schedule. If the defendant doesn’t do it by the deadline it’s ok. But these procedural
delays are a way to remind every parties
at what point of the process we are.
October, 2019
, INTERNATIONAL BUSINESS LAW
CLASS NOTES
By: LESLIE A. BECK
INTERNATIONAL SALE OF GOODS
- Not the only means of export
CONTRACT OF SALE OF GOODS
- means the transfer of ownership of asset in exchange
for the payment of a price
- price usually = money
October, 2019
