Question Arcos Ltd, located in Norwich, UK, are expanding their menu at their restaurant to meet a change in demands from their clients.
They contact Citrus Dealers SAC, based in Peru, looking to purchase a variety of citrus fruit for their new recipes. They agree a contract on the following conditions: Clause 1.1 – Arcos Ltd agree to purchase from Citrus Dealers SAC, 1,000kg of citrus fruit at a purchase price of £5.00 per kg (£5,000) Clause 1.2 –
The margin of contract quantity shall be 3% more or less, any excess or deficiency shall be settled at the market price on date of the bill(s) of lading Clause 2.1 – 1,000kg citrus fruit to be shipped CIF Port of Matarani, Peru, to Port of Southampton, UK Clause 2.2 – 1,000kg citrus fruit to be shipped from the Port of Matarani between November and December 2020 Clause 3.2 – As per bill(s) of lading to be dated between November and December 2020, the bill(s) of lading to be dated when the goods are actually on board.
Date of the bill(s) of lading shall be accepted as proof of date of shipment in the absence of evidence to the contrary Clause 4.1 – Notice of appropriation shall state the vessel’s name, the presumed weight shipped, and the date or the presumed date of the bill of lading Clause 4.2 –
The notice of appropriation shall within 10 consecutive days from the date of the bill of lading be served direct on the buyers or their agent Clause 4.3 – The bill of lading date stated in the notice of appropriation shall be for information only and shall not be binding, but in fixing the period laid down by this clause for serving notices of appropriation the actual date of the bill of lading shall prevail As well as the agreement, Arcos Ltd make it known to Citrus Dealers SAC that they are purchasing the goods to be sold in the wholesale market for human consumption.
Citrus Dealers SAC enter into insurance and freight contracts for the purposes of fulfilling their CIF obligations under the contract with Arcos Ltd. On 10th November 2020, 1,000kg of citrus fruit are successfully loaded aboard the Seas the day. The bill of lading is dated 10th November 2020. On November 21st 2020, the notice of appropriation is tendered on Arcos’ Ltd agent at the Port of Southampton, UK.
The agent immediately rejects the notice for it being out of time. Citrus Dealers SAC tender a second notice of appropriation onto Arcos Ltd on November 24 , with a presumed date of the bill of lading stated as November 16 2020, with 1,000kg of citrus fruit aboard the Knot too shabby.
On November 26 , the documents are tendered on Acros’ Ltd agent. The bill of lading is dated November 18th 2020. On November 18th 2020, citrus fruit had increased in price to £10 per kg due to increased local demand.
The cargo arrives at the Port of Southampton, UK, on December 22 . Acros’ Ltd agent discovers the following upon inspection. He discovers that the quantity exceeds 1,000kg.
The total quantity is 1,050kg. The agent also discovers less than 0.1% of the citrus fruit have been spoilt and cannot be used. Finally, he also discovers that while the citrus fruit is fit for human consumption, the citrus fruit is not fit for use in beauty products, a purpose the goods are commonly used for.
Citrus Dealers SAC are demanding payment of £10,500. Arcos Ltd claim they are only obliged to pay the £5 contractual rate for all 1,030kg of citrus fruit received, and do not need to pay for the remaining 20kg. Advise Arcos Ltd on the following:
1)What law governs their contract with Citrus Dealers SAC
2)Whether Arcos Ltd can reject the documents for containing a different date on the bill of lading to the one stated on the second notice of appropriation
3)Whether Arcos Ltd can reject the goods on the ground that they did not comply with the first and second notices of appropriation, out of time and wrong date on the bill of lading respectively.
4)Whether they can reject the goods on the ground that the goods received were in excess of the quantity contracted for.
5)Whether they can reject the goods on the grounds that less than 0.1% of the goods are spoilt.
6)Whether they can reject the goods on the grounds that the citrus fruit is not fit for the purpose of use in beauty products.
7)How much Arcos Ltd will have to pay if they cannot reject the goods. Whether they should only be obliged to pay £5,150 (£5 x 1,030kg) and not £10,500 (£10 x 1,050kg) or some other amount.
8)What damages or other remedies they will be entitled to exercise whether or not they can reject the goods.Your answer must consider the answer to these questions according to both CISG and UK law. END OF PAPER
