The case under discussion is devoted to the problem of plaintiff’s loss of profit of $15,000. The case details are as follows, the plaintiff, Dutch gas reseller and German company negotiated with an Australian company about gas delivery.
The sides agreed to transfer the gas of the amount of 3,000 tones at price $381 per tone. But after the conversation and when the plaintiff tried to agree on the place of gas delivery the defendant refused from the deal. German gas reseller had to sell this gas to another company for lower price. Dutch gas reseller demands to cover the loss referring to the breach of contract (August, Mayer, & Bixby, 2009).
This case has already been considered by the court and by the court of appeals and the decision was in favor of plaintiff. However, the defendant did not want to pay back and appealed to the Supreme Court. To consider the risks of the seller and buyer in this situation, it is important to refer to the international law which regulates the issue. Thus, United Nations Convention on Contracts for the International Sale of Goods should be considered.
Thus, according to the Convention, the risks are transferred to the buyer “when he takes over the goods or from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery, whichever comes first” (United Nations, 2010, p. 40). The outcome of the contract breach may be seen, a seller suffered losses and the buyer has to cover those, according to the CISG, which applies a risk of loss on the buyer.
To make the situation clear, the explanation to the following aspects should be implemented. The buyer did not receive the letter of credit because of the personal fault. Defendant’s obligation about the statement of the place where the gas was to be loaded was not fulfilled.
However, the contract was breached not because of the absence of the letter of credit in general. Generally, the defendant breached the contract as the US supplier refused from delivering propane to Belgium. Still, the plaintiff notified the defendant in advance about the inability to load gas on the territory of the USA.
Thus, the defendant was notified about this aspect and it is not the seller’s fault that the contract was breached. As the contract was based on international law, it is important to state that “the seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods as required by the contract” (United Nations, 2010, p. 9).
The buyer failed to mitigate the loss as having breached the contract they did not offer any particular decision to prevent seller’s losses. Anyway, considering the situation, it should be stated that the risks cannot be avoided, however, they may be reduced to minimum. Dwelling upon the risk minimizing procedures, it is impossible to miss the written agreement. The contract has always been the main document which regulated the debating issues between the sides.
An arbitration clause in the contract is one more way for reducing the risk of being accused in losses suffered by the opposite side. The US companies in this case are protected from being sued by the foreign rules, which may be different from the US ones. Product liability should be prevented by means of identifying and quantifying “potential legal problems and prevent or minimize the risk of their occurring and also to be prepared to deal with them if they occur” (Ross, 2010, n.p.).
The consideration of the United Nations Convention on Contracts for the International Sale of Goods (United Nation, 2010) is one more way for reducing the risks connected with losses. It should be mentioned that one of the problems concerning the natural gas case study is the failure of the sides to have a written contract. Having the conversations over the telephone and some documents to be faxed, the companies failed to sign a contract with all the changes and agreements.
Having appeared at the court, the sides have proven that the absence of the written contract was one of the main failures. Looking at the case, it should be stated that the international law differs from the US one. The seller won the case because in accordance with the CISG, all the responsibility is transferred to the buyer, which is the case. There are some exceptions, but they are not considered in this case.
In conclusion, t should be stated that the case under discussion devoted to the risk of loss has occurred due to the number of failures which had been admitted while negotiations. Those risks could be avoided if the written contract was signed up or the arbitration clause inserted in the contract. Therefore, the absence of any of the mentioned details made it possible to consider the case under the international law which supported the seller and considered the case in its favor.
August, R., Mayer, D., & Bixby, M. (2009). The natural gas. In International Business Law: Text, Cases and Readings (pp. 553-557). New Jersey: Pearson.
Ross, K. (2010, August 25). Product liability risk management. The Hennepin Lawyer. Retrieved from http://www.productliabilityprevention.com/images/HCBA-Product_Liability_Risk_Management_Aug2510_.pdf
United Nations. (2010). United Nations Convention on Contracts for the International Sale of Goods. Retrieved from http://www.uncitral.org/pdf/english/texts/sales/cisg/CISG.pdf