Violetteinseec Msc International Business The Que

INTERNATIONAL TRADE LAW

M. Violette

INSEEC Msc International Business Management Class 2

ASSIGNMENT CLASS 2

CASE STUDY

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Instructions :

The written memorandum must be submitted by January 19 at noon, on

You are employed by one of the two companies involved in the situation described below. Which company will be indicated to you.

You will have to write a memorandum containing between 1.000 and 2.000 words explaining what you think the legal situation of the company is. You will be careful to present the case in the best light for your company, and with the strongest arguments you can find in favor of your company. It would also be a good idea to try to anticipate the arguments of the other company, and prepare your own arguments to refute them.

There is one important rule to remember: NEVER INVENT NEW FACTS. Stick to what is described here. Ask for clarifications if needed.

You should pay attention to the following:

 what are the legal issues? (i.e. points that can be discussed from a legal perspective)

 for each issue, what arguments can be presented in favor of your company?

 what are the strengths and the weaknesses of those arguments?

 determine which articles of the CISG best support the claim of your company?

 determine which articles of the CISG can be used to oppose the other party’s claim?

To help you in your task, please take note of the following:

1/ in order to simplify things and avoid getting lost in the Convention on International Contracts for the Sale of Goods, only consider the articles that are provided inside of this document (see page 6). Do not refer to other articles, even when they seem relevant.

2/ in order to allow you to go further in the analysis of the articles of the CISG provided, you may use extra material that can be accessed online, and is linked to the articles of the CISG listed below (see page 6 below). It will only be useful to refer to the material you will find there when the legal situation is ambiguous, and, on the face of the text of the CISG, seems to be able to be argued both ways (both in favor of your company, or in favor of the other company). If and when you use what you read online, make sure to make clear references that I can check afterward, for example in a footnote, with a link to the document.

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3/ you do not have to refer to any scholarly writing, but you may do so if you think that would be helpful.

Try to be as organized as possible, break down the case in several different points that you will discuss one after the other.

For each point, start by stating what the problem is, then refer to the law (text of the relevant legislation, for example the CISG, or reference to the Rome I Regulation, etc.), then discuss how the law applies to the facts, and conclude. Ability to present your arguments clearly will be taken into account in final grade.

The pleadings are a summary of your written submission.

The main difference is that you will have to stress the arguments in favor of your company, and you will have to be more more concise since you will not have a lot of time to speak.

Each student in the team must take part in the pleadings.

Each team will have 8 minutes to plead (+2 minutes rebuttal). Defendant will start for 8 minutes, then Claimant will be allowed to speak for 8 minutes. After that, Defendant may speak again for 2 minutes for a quick answer to the arguments of Claimant, and Claimant may speak again 2 minutes to answer to that.

The pleadings should have this structure:

  • very short summary of the facts from the point of view of your company (max. 1 minute)
  • discussion of issues about jurisdiction of the tribunal
  • discussion about the merits of the contract issues
  • Grade will be determined as follows:

     written submission: 50%

     oral pleadings: 50%

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    1/ The facts of the case

    Dubon S.A. is a major building company that is based in Boulogne-Billancourt (France). It specializes in building shopping malls and big commercial outlets, and has been a very successful business (€180,000,000 turnover in 2018). One of its latest projects involves building a supermarket near Lyon. Dubon’s client insists that the new supermarket meet very high energy saving standards, and, for that reason, Dubon has had to design the place in a whole new manner, using modern materials and techniques to reduce energy spending while maintaining building costs acceptably low.

    For that reason, Dubon has elected to install geothermal hybrid heat pumps (GHHP) for the cooling (in summer) and heating (in winter) of the building. The cost of the installation is higher than that of a standard system, but in the long run it should provide savings because of its high efficiency, and it is also “greener” than a standard installation for the same reasons. The client therefore agrees to Dubon’s plans to use GHHP in the building. There is plenty of time to manufacture and install the heat pumps since the building only has to be completed in July of 2020. As long as the heat pumps can be incorporated into the building no later than March 2019, the project will be delivered in time.

    This technology is not very much developed in France yet, so that Dubon SA contacts an American firm, HeatSink Inc., to procure the GHHPs that are needed to complete the works. HeatSink is a small American company based in Seattle, Washington (US), that has been designing and constructing high quality, very efficient heat pumps for the American market for more than 20 years, and has some cutting-edge technology.

    Ms Mercadier, who is the Project Supervisor for the construction of the supermarket at Dubon S.A., gets in touch with Mr Hockett, who is the World Sales Representative for HeatSink in the US. HeatSink does not have representatives in Europe, and most contacts with European clients happen by way of email, except for the initial contact, which is a phone conversation.

    Ms Mercadier inquires about the existence of a model of pumps that would satisfy the needs of Dubon’s client, and the conversation gives her satisfaction. She then enters into an exchange of emails with Mr Hockett to discuss the contract of sale between the two companies (Exhibits 1 to 4 below).

    After the emails were exchanged, HeatSink Inc. prepared the order of 10 heat pumps for shipping. They were packaged, and a freight forwarder took them in charge on November 3rd 2018 (The shipment was not made under an INCOTERM.). At the same time, Dubon SA ordered its bank to pay the two instalments, which was received by HeatSink’s bank. The pumps are delivered on

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    November 30th, when the agreed delivery date was December 1st.

    However, upon delivery, Mr Büchner, the lead engineer of Dubon SA on site, realizes that

    the electrical specifications indicated in the contract are not met by the pumps: the employees of HeatSink Inc. forgot that the power supplies of the machines should be adapted to French power specifications. This technical requirement was made clear in the contract (see Exhibit 4).

    For Dubon SA, the cost of having a French company replace all relevant electrical components and power supply would amount to US$9,000. They require HeatSink Inc. to pay them that amount of money. (see Exhibit 5)

    HeatSink Inc. are sure they can fix the machines more easily, and at a lesser cost. Their engineers estimate that it would cost them between $4,000 and $6,000 to do the repair themselves, on site, in France, all included. Therefore, HeatSink Inc. offer to remedy the defect of the heat pumps themselves. Dubon SA answer they insist on receiving $9,000 (see Exhibits 6 to 9).

    HeatSink Inc. consider that, given more time, they could perform the contract satisfactorily, and that their offer to cure is reasonable. They reject any claim that they would have to pay $9,000 damages.

    Dubon SA need the pumps, and, therefore, they do not want to avoid the contract. They would like to claim damages instead, in the amount of US$9,000 for replacing the power supply.

    HeatSink Inc. introduces an action in court in France. The French court agrees that the proceedings will be in English. HeatSink Inc. consider that the contract is governed by the law of the State of Washington. They ask for the application of the CISG. They want to be given an occasion to cure under article 48.

    Dubon SA considers that the contract is governed by French law. They reject application of the CISG. They refuse to let HeatSink Inc. cure their bad performance, and they want to be paid $9,000 in damages.

    Questions to be discussed before the court:

  • what is the domestic law applicable to the dispute?
  • is the CISG applicable to the dispute?
  • when was the contract formed?
  • under the CISG, art. 35, is there a breach of contract?
  • under the CISG, art. 48, does HeatSink Inc. have a right to cure the lack of conformity? can
  • Dubon SA obtain the $9,000 they are claiming?

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    2/ Relevant articles of the CISG

    (do not use any other CISG article than those listed here)

    Article 1

    (1) This Convention applies to contracts of sale of goods between parties whose places of business are in different States:

    (a) when the States are Contracting States; or

    (b) when the rules of private international law lead to the application of the law of a Contracting State. […]

    Article 14

    (1) A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. […]

    Article 18

    (1) A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance.

    (2) An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. […]

    Article 23

    A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention. […]

    Article 35

    (1) The seller must deliver goods which are of the quantity, quality and description required by the contract andwhicharecontainedorpackagedinthemannerrequiredbythecontract. […]

    Article 48 (see: http://www.cisg.law.pace.edu/cisg/biblio/ziegel6.html)

    (1) Subject to article 49, the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention. […]

    Article 74 (see: http://www.cisg.law.pace.edu/cisg/biblio/knapp-bb74.html)

    Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.

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    Exhibit n°1: Email from Ms Mercadier to Mr Hockett

    Date: September, 18th 2018, 11:31

    From: maude.mercadier@dubon.com To: samuelhockett@heatsink.com Subject: GHHPs for French development

    Dear Mr Hockett,

    I am pleased to accept your quoted price for 10 HS R-230 and their command centre for US$250,000. This is a generous offer you are making, and we would be glad to do more business with your company in the future.

    We would like to pay the price in 2 instalments, as follows: * 150.000$ on the 1st of October

    * 100.000$ on the 1st of November

    Given our schedule, delivery would have to take place by December 1st 2018. Please tell me if that is OK with you.

    Sincerely,

    Maude Mercadier

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    Exhibit n°2: Email from Mr Hockett to Ms Mercadier

    Date: September, 18th 2018, 12:01

    From: samuelhockett@heatsink.com

    To: maude.mercadier@dubon.com

    Subject: Re: GHHPs for French development

    Dear Ms Mercadier,

    I hereby confirm that we would be able to ship the units as soon as the beginning of October. They should be delivered to you before the deadline you indicate.

    Payment in two instalments following your proposition is not a problem. I will put you in touch with Accounting for the details.

    I am glad to see that we have a perfect agreement.

    A copy of the contract is attached. Can you please have it signed by your company’s representatives and send it back to me?

    Sincerely, S. Hockett

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    Exhibit n°3: Email from Ms Mercadier to Mr Hockett

    Date: September, 20th 2018, 14:39

    From: maude.mercadier@dubon.com

    To: samuelhockett@heatsink.com

    Cc: service_juridique@dubon.com; compta@dubon.com Subject: GHHPs for French development

    Dear Mr Hockett,

    I am pleased to attach a copy of the signed contract in this email. A paper copy will be delivered to you by postal mail within a few days.

    We are looking forward to receiving the heat pumps.

    Sincerely,

    Maude Mercadier

    [attachment: Dubon_HeatSink_Contract.pdf]

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    Exhibit n°4: Extracts from the contract

    [Dubon_HeatSink_Contract.pdf]

    Contract of sale between Dubon S.A. and HeatSink Inc.

    Article 1

    This Contract of sale is made between HeatSink Inc. (hereafter: the Seller) and Dubon SA (hereafter: the Buyer)…

    Article 19

    […] The Seller guarantees that the Machines by him manufactured and delivered, as per this Contract, will conform to French regulations, including but not limited to security standards, electrical standards, and regulations made for the protection of the environment. […]

    Article 23

    In case of a dispute relating to any aspect of this contract, its validity, it shall be finally settled by the courts of the French Republic, in Paris (France).

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    Sincerely,

    Exhibit n°5: Email from Ms Mercadier to Mr Hockett

    Date: November, 1st 2018, 10:09

    From: maude.mercadier@dubon.com

    To: samuelhockett@heatsink.com

    Subject: Re: Re: GHHPs for French development

    Dear Mr Hockett,

    I am very pleased to say that we seem to have received the shipment.

    However, our engineers have determined that the GHHPs received do not confomr to contractual specs.

    We have determined that the heat pumps you have delivered do not conform to French power supply standards. As they are, they cannot be connected to the power grid, and are therefore useless to us.

    Our engineers have determined that a small modification of the machines will be necessary to be able to operate them in France. There is a French company that we have worked with in the past and that we trust can do the modification. Their price for this operation is $9,000. We are hereby requesting that you pay this price in damages to us, so that we can contract with them.

    Maude Mercadier

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    Exhibit n°6: Email from Mr Hockett to Ms Mercadier

    Date: November, 4th 2018, 10:21

    From: samuelhockett@heatsink.com

    To: maude.mercadier@dubon.com

    Subject: Re: GHHPs for French development

    Dear Ms Mercadier,

    I am very sorry this specification problem occurred. This part of the order was fulfilled by an employee who was but recently hired, and was improperly supervised.

    We deeply apologize for this inconvenience. This accident does not reflect the high quality standards HeatSink sets in manufacturing its products.

    We would like to offer a different solution from the one you suggested in your email of Nov. 1st. We have built those machines, and we are best equipped to modify them.

    We will fly the parts and two of our technicians to France immediately, to work on those modifications you mentioned.

    The technicians could arrive on site on November 6th, in two days. It would take them 3no more than 2 days to replace all the parts that need to be replaced.

    We will take care of all the expenses. You will need to pay nothing. I hope this solution will meet your approval.

    Sincerely, S. Hockett

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    Exhibit n°7: Email from Ms Mercadier to Mr Hockett

    Date: November, 5th 2018, 10:09

    From: maude.mercadier@dubon.com

    To: samuelhockett@heatsink.com

    Subject: Re: Re: GHHPs for French development

    Dear Mr Hockett,

    I am very sorry to have to reject your offer.

    We need the replacement to be done quickly. We trust the French company we want to hire will do the job in less time.

    Please order your bank to transfer the $9,000 needed to repair the mistake made by your employee.

    I trust that you understand this is the best solution, from a business perspective. Sincerely,

    Maude Mercadier

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    Exhibit n°8: Email from Mr Hockett to Ms Mercadier

    Date: November, 6th 2018, 11:02

    From: samuelhockett@heatsink.com

    To: maude.mercadier@dubon.com

    Subject: Re: GHHPs for French development

    Dear Ms Mercadier,

    I insist our solution is the best. It is far less expensive for us to make the repair ourselves, than to pay your company $9,000.

    Our technicians on site will make sure everything is in order before leaving. This way you have a guarantee the machines will give you complete satisfaction.

    Sincerely, S. Hockett

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    Exhibit n°9: Email from Ms Mercadier to Mr Hockett

    Date: November, 8th 2018, 15:03

    From: maude.mercadier@dubon.com

    To: samuelhockett@heatsink.com

    Subject: Re: Re: GHHPs for French development

    Dear Sir,

    Thank you again for your offer. Again, I must refuse, and insist you give us the $9,000 we need. As long as the payment is not made we cannot hire the repair company and make the needed modifications.

    If you delay much longer we will have to ask for damages to compensate the fact that the works have been delayed because of your failing to deliver properly functioning heat pumps. If we cannot meet our deadline with our client, we will have you pay any penalties we are required to pay ourselves.

    Yours sincerely, Maude Mercadier

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