You may assume that all contracts are subject to English Law and that English courts have sole jurisdiction.
Chen bought a large quantity of brown sugar ‘CIF Portsmouth’ from Li. Li was delighted with the sale and the goods were already on their way to China. The bills of Lading showed Li as the shipper.
While the goods still in the ship on their way to China Chen agreed to sell the goods CIF to Xu, ‘cash against documents’ in China. A few days later Xu was talking to Wang about delivery times when he mentioned quite casually that he had previously bought goods from Li and would never have anything further to do with Li.
Wang was worried because though that there might be a dispute when Xu discovered that Li had been the shipper and that this might delay unloading in china. Li contacted Chen and suggested Chen should send the three bills of lading to the carrier’s office in Pekin town. And Wang will take them round to Chen and arrange for payment to be made to Chen’s bank in London. Chen gratefully agreed. Wang quickly printed off three new bills of lading which named Chen as the shipper.
Wang arranged to meet Xu two days after the goods had been unloaded. At the meeting Wang offered one bill of lading to Xu and asked for payment.
Question 1 (40% of the marks available for this assignment)
Can Xu reject the bill of lading and refuse to pay?
Xu decided to accept the Bill of lading and paid the purchase price which Wang credits to Chen’s bank. Xu then discovered that Li had been the shipper. At the meeting with Wang Xu had noticed when Chen had examined the bill of lading that although the bill named Chen as the shipper it also stated ‘‘Goods received from Li’’ and shipped on board in apparent good order and condition”.
What claims does Xu have and what are Xu’s remedies?
End of assignment.
Mark Plan
Question 1.
Marks will be given for a description of the key duties of the seller CIF.
Explanation that there is no absolute duty on the seller to ensure that a bill of lading arrives before the goods and that in the absence of agreement to the contrary a purchaser is not entitled to all the bills in a set. Better students are expected to point out that what today might be regarded as taking reasonable steps to ensure a Bill arrives as soon as practicable and that since modern banking practice requires all bills in a set it may be that the 19 century cases should be ignored and/or there might be an implied term in the contract that all bills must be provided.
Question.2
The duty of a seller to provide an accurate bill of lading should be discussed (possibly mentioning Findlay case). There should be some discussion of Kwei Tek Choa. Better students will note that remedy in damages does lie where if there were no error on the bill of lading the buyer would have had to accept it. The only case they will know involves misdating and not ‘switch bills’ so probably only the better students will spot that P did not make it a term of contract that Li should have nothing to do with the goods so that had the original bill been presented he would probably have had to accept it. Truly exceptionally students may engage with the academic discussion about whether there is a right to damages in the circumstances. I would expect good students to mention that it may be that a purchaser cannot rely on an error which is discoverable on the face of the Bill of lading applying Panchaud Frères case.
I will mention ‘switch bills’ as such in the lectures but student’s will be aware that very probably any amendments to a Bill of lading without the consent of the carrier and or persons who owned it will render the bill invalid. Credit should be given for students to discuss this point. Exceptional students may point out improperly amended bills of lading may cease to be bills of lading at all so far as the law is concerned. Consequently X may have been entitled to reject the improperly amended bill on the ground that it is no Bill of Lading at all.
Students may note that Wang is acting on behalf of the carrier and the carrier may therefore be responsible for what he has done under the rules of agency.- Students may spot that the carrier is probably liable for the tort of deceit but others may see this as the breach of contract issue – if well-argued we should give credit for this. However, if we ask what the buyer suffers through the deceit we can see that answer is nothing. He would have had to accept the bill in its original form unless the argument that it wasn’t a bill of lading at all is successful.
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