NYU Business Law International Sales Contract Discussion

• In January 2019, an international sales contract is concluded between Yannis Beef Co of Latvia and Yara Retailers Plc of Egypt. The contract calls for six instalments, each for: 10 tonnes of prime Latvian beef, EUR 200.000, CIF Abu Qir, INCOTERMS 2010. The times of shipment for all six instalments are fixed. Shipment of the first two instalments is to take place in March and May respectively. The contract of sale calls for the immediate opening of letter of credit facilities confirmed by Latvijas Banka, for the first two instalments. These are duly opened in conformity with the contract. Payment is to be against an invoice, a marine bill of lading, and an insurance policy issued by Lloyd’s of London. The contracts also specifically require Yannis Beef Co to arrange carriage under bills of lading to which the Hague-Visby Rules apply. The goods are shipped aboard MS Shakhti The bills of lading contain inter alia the following clause: “The carrier warrants that he will at all times keep the vessel registered with a recognised classification society. Production of a current certificate of class shall be conclusive evidence that the vessel is seaworthy.” The ship has such a certificate.

The beef is loaded into the refrigeration containers of MS Shakhti, where it is contaminated with residues of cargo previously carried, making the beef worthless. En-route to Egypt MS Shakhti picks up an SOS call from a nearby ship. MS Shakhti deviates from the permitted route to save life and property but finds that it does not have enough room to save the entire cargo of the sinking ship. The captain therefore decides to throw all the beef overboard under the belief that he would make a larger profit by saving the sinking cargo than by delivering the beef. Yara Retailers, is informed of this decision and contacts the confirming bank requesting the letter of credit not be honoured on the presentation of the requisite documents. The next day, Yannis presents conforming documents to the confirming bank.

• Can the buyer or the seller hold the carrier liable for the loss of goods?
• Assuming that confirming documents are presented to the conforming bank – what are the confirming bank’s obligations towards the buyer and the seller?
• What are the advantages of using an irrevocable confirmed Letter of Credit in this scenario?
• Would the Buyer be in a better position if a revocable Letter of Credit had been used?