Chapter 10

Sales

i.              True or False

1. The United Nations Convention on Contracts for the International Sale of Goods (CISG) deals principally with the formation of contracts and with the rights and obligations of buyers and sellers.

 Answer: True

2. If the seller of goods knows that they were bought for personal, family, or household use, then the sale can be governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG). 

Answer: False

3. The United Nations Convention on Contracts for the International Sale of Goods (CISG) makes illegal contracts unenforceable.

Answer: False

4. Contracts governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG) have to be in writing to be enforceable.

Answer: False

5. According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), a contract is not formed until the offeree accepts the offeror’s offer.    

Answer: True

6. According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), an offer becomes effective only after it reaches the offeree.

Answer: True

7. According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), an offer that promises that it is irrevocable can be withdrawn (nonetheless) prior to its reaching the offeree. 

Answer: True

8. According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), an offer is effective at the time it is dispatched by the offeree.

Answer: False

9. A “fundamental breach,” according to the United Nations Convention on Contracts for the International Sale of Goods (CISG), is when one party substantially fails to deliver what the other reasonably anticipated receiving.

Answer: True

10. According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), if one party elects to avoid a contract, he cannot sue the other party for damages.

Answer: False

11. In common law countries, the remedy of specific performance is regarded expansively. That is, it can include an order to carry out the contract as agreed or an order to purchase substitute goods at the defaulting party’s expense.

Answer: False

12. According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), any documents that the contract requires the seller to turn over at a specific time may be turned over early.

Answer: True

ii.              Multiple Choice

1. The United Nations Convention on Contracts for the International Sale of Goods (CISG) regulates which of the following questions relating to contracts?

a)        The competency of the parties.

b)        The formation of contracts.

c)        The legality of the contract.

d)        The liability of a party for death or personal injury.

Answer: b

2.  A court may use rules of private international law to interpret the United Nations Convention on Contracts for the International Sale of Goods (CISG) if:

a)        the CISG itself does not provide guidance for settling the matter.

b)        the matter cannot be resolved by the application of a general principle derived from the CISG itself.

c)        Both a. and b. must be true.

d)        Either a. or b. must be true.

Answer: c

3.  According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), differences in which of the following contractual terms would constitute a “material difference” that would change an acceptance into a counteroffer?

a)        Payment.

b)        Price.

c)        Quality of the goods.

d)        Any of the above.

Answer: d

4. Seller delivers goods to Buyer that have a defect unknown to either of them.  According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), Seller will not be responsible for the defect if its discovery occurs after more than:

a)        6 months.

b)        1 year.

c)        2 years.

d)        3 years.

Answer: c

5.  X agreed to ship 100,000 bushels of fresh oranges from Mexico to Y in the Ukraine.  Because of exceptionally cold weather, the oranges were damaged while they were being shipped.  Because of a shortage of oranges in the Ukraine, Y, nevertheless, accepted the oranges.  According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), Y can obtain which of the following remedies?

a)        Damages.

b)        Price reduction.

c)        Rescission.

d)        All of the above.

Answer: b

6.  According to the rule known as force majeure, a party is not liable for any damages resulting from his failure to perform if he can show:

a)        that his failure was due to an impediment beyond his control.

b)        that the impediment was not something he could have reasonably taken into account at the time of contracting.

c)        that he remains unable to overcome the impediment or its consequences.

d)        All of the above.

Answer: d

7.  Buyer and Seller enter into an international sales agreement involving goods that are to be delivered at Buyer’s place of business.  Buyer, however, fails to take delivery.  According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), the risk of loss or injury to the goods:

a)        does not shift to Buyer.

b)        shifts to Buyer at the time Buyer should have taken delivery.

c)        shifts to Buyer at the time the contract was signed.

d)        shifts to Buyer only if the goods are actually delivered to Buyer.

Answer: b

8.  According to the United Nations Convention on Contracts for the International Sale of Goods (CISG), if a contract does not specify the place for payment, the buyer is to pay:

a)        at the buyer’s place of business.

b)        at the place delivery is actually made.

c)        at the place where the parties know the goods are located.

d)        at the seller’s place of business.

Answer: d

9. Buyer and Seller entered into an international sales contract governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG).  The contract made no agreement as to the means of transportation or the place for delivery.  Buyer is to take delivery at:

a)        Buyer’s place of business.

b)        the place where the parties knew the goods were located.

c)        the place where the parties knew the goods were to be manufactured.

d)        Either b. or c.

Answer: d

10. The United Nations Convention on Contracts for the International Sale of Goods (CISG) applies to goods which are:

a)        immovable and intangible.

b)        immovable and tangible.

c)        movable and intangible.

d)        movable and tangible.

Answer: d

iii.              Case analysis

1.      Retailer in State A decides to go into the catalog sales business in State B. Both countries are parties to the CISG. Retailer purchases a mailing list from Ace Credit Card Company. The list has the names and addresses of 500,000 persons owning Ace credit cards in State B, and Retailer uses this to prepare mailing labels. John Q. Public receives a catalog addressed to him personally from Retailer. The catalog describes various types of widgets and gives prices for each one. Has the retailer made an offer to sell the widgets? If John accepts, will there be a binding contract under the CISG?

Answer: No.  Under Article 11, an offer must be “addressed to specific persons.”  While the catalogue was addressed to a specific person, mail order retailers ordinarily intend for their catalogs to have as wide a circulation as possible, and they would be happy to have them passed on to others. The phrase “offers addressed to specific persons” actually means “offers restricted to the particular addressees.”

2. On January 1, Seller sent a letter to Buyer offering to sell to Buyer 5,000 widgets for $25 apiece. The letter also stated: “This offer is binding and irrevocable until February 1.” On January 5, prior to Buyer’s receipt of the letter, Seller called Buyer on the telephone and left the following message on the answering machine at Buyer’s place of business: “Ignore my letter of January 1. I have decided to withdraw the offer contained in it.” On January 7, after listening to her answering machine and reading the letter that arrived that same day, Buyer sent Seller the following telegram: “I accept your offer of January 1.” Is there a contract under the CISG?

Answer: The withdrawal was effective.  CISG Article 15(2) states that firm offers may be withdrawn if the withdrawal reaches the offer “before or at the same time” as the offer.  Here the withdrawal reached the offer before the offer, since the recorded withdrawal message was delivered to Buyer’s place of business prior to Buyer’s receipt of the offer.  See Article 24.