Can we avoid ‘false friends’ in transnational commercial law conventions? – the case of adequate assurance of performance under the CISG

by Dr Katarzyna Kryla-Cudna, The Law School, University of Bristol

The concept of faux amis (‘false friends’) has been used in the literature to describe terms used in an international convention which seem familiar to an interpreter but which, in fact, are defined differently in the convention to in the domestic legal system the interpreter is used to. Several instances of faux amis have been identified on the basis of the UN Convention on Contracts for the International Sale of Goods (CISG). One major example can be found in the US case of Delchi Carrier SpA v Rotorex Corp., which required an interpretation of Article 74 CISG. This provision states that ‘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.’ The US court understood this rule as a reference to the ‘familiar principle of foreseeability established in Hadley v Baxendale.’ Hadley v Baxendale is the leading English case on remoteness of damage and has also gained recognition in the US. Rather than referring to the preparatory works and other materials examining the specific meaning of the foreseeability rule under the CISG, the court thus reached for an analogy from its own jurisdiction. (more…)

PST Energy 7 Shipping LLC v O W Bunker Malta Ltd: A case on the statutory definition of a sale of goods

By Dr Mark Campbell, Teaching Associate (University of Bristol Law School).

AAEAAQAAAAAAAAZkAAAAJDY3NzMyZTA3LTYzZDEtNGFhNi05ZDFlLWI0YWE0NjZjNGNlYgSection 2(1) of the Sale of Goods Act 1979 (the ‘Act’) defines a sale of goods as ‘a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.’ There are, accordingly, three reasons why a contract may fall outside that definition and, thus, the Act’s jurisdiction. First, there may be no transfer of property in the goods, as in a bailment where there is transfer of possession but not ownership. Second, the transfer may relate to subject matter other than goods: e.g. an assignment of intangible property such as copyright or debt. Third, there may be an absence of money consideration: e.g. a gift or a contract involving goods given wholly in exchange for other goods.

In PST Energy 7 Shipping LLC v O W Bunker Malta Ltd [2016] UKSC 23, [2016] 2 WLR 1193 the UK Supreme Court has recently examined the reach of s 2(1) and, in particular, the requirement for a transfer of property in the goods. The transaction in question involved the supply of bunkers (marine fuel) by O W Bunker Malta Ltd (‘OBWM’) to PST Energy 7 Shipping LLC (‘PST’), the owners of a vessel, Res Cogitans. That agreement contained a retention of title clause. Where goods are supplied on credit terms, a retention of title clause allows the seller to retain ownership of the goods pending payment by the buyer. OBWM had been supplied with the bunkers by its parent company, O W Bunker & Trading A/S (‘OWBAS’), which in turn had been supplied by Rosneft Marine UK Ltd (‘RMUK’). The contract between OWBAS and RMUK also contained a retention of title clause. Physical delivery of the bunkers to the vessel was made by RN-Bunker Ltd, an associate company of RMUK and the supplier to RMUK. The legal proceedings arose following an application for restructuring by OWBAS, an event which would allow ING Bank NV to claim the contract price from PST as assignee of debts owed to OWBM. Concerned that it may not recover the contract price from OWBAS, RMUK indicated that it would seek payment from PST on the basis that RMUK remained the owner of the bunkers. (more…)