International Business Law

Topics: Contract, Contract law, Contractual term Pages: 9 (3054 words) Published: October 18, 2010




BUSA 391 – SUMMER 2010

Prepared For: Professor Leslie Beck
By: Gabriela Popescu
ID: 260224311
June 17, 2010.
Six months ago, Antiques R Us (a Canadian corporation) entered into a contract with Yankee Antiques (an American company) to purchase “a desk used by George Washington himself after his retirement from the Presidency”. The sum of $500,000 was to be paid to Yankee Antiques after 30 days of delivery of the desk. Upon inspection of the desk however, doubts about its authenticity were raised by a third party client. Yankee Antiques has been informed of the situation and refuses to accept the return of the desk and is demanding payment. A strategy has been devised to deal with the situation at hand with two criteria in mind: 1) Yankee Antiques is a valued supplier; all attempts must be made to maintain good relations. 2) Financial strains require that the situation be prolonged as much as possible. -------------------------------------------------

To begin with, it is noted that both Canada (1992) and the United States of America (1988) are party to the United Nations Convention on Contracts for the International Sale of Goods (CISG). Given that there is no mention in the contract of a specific governing law to be applied between the parties, and that both countries are Contracting States of the CISG, the Convention will apply. Firstly, due to the important relationship held with Yankee Antiques, any strategy set out by Antiques R Us will favour conflict avoidance and dispute prevention. Secondly, the contract made with Yankee Antiques stipulates that the transaction is to be for a desk used by George Washington after his Presidency. By law it is the obligation of the seller to deliver goods that are of the quality and description set out in the contract, therefore the validity of the contract between parties is contingent upon the authenticity of the desk. The buyer is given the right to “declare the contract avoided if the failure by the seller to perform any of his obligations under the contract [...] amounts to a fundamental breach of contract,”. Therefore, in the event of the desk being counterfeit, a breach of contract will be triggered and said contract can be deemed null and void. However, such a claim cannot yet be made as there is only doubt that has been raised concerning the issue of authenticity. Antiques R Us Inc. should refrain from making any assumptions about the authenticity of the product simply by relying on statements made by a third party. The level of expertise of this third party is unknown, and the reason for doubt may be unjustified. Keeping in mind the importance in relationship with Yankee Antiques, the cash flow issue of the company, and the uncertainty of the authenticity of the product, it is therefore in the company’s best interest to execute the following strategy: * Remove all doubt by obtaining an expert’s opinion on the authenticity of the goods. * Act on good faith (throughout the entire process).

* Avoid conflict and prevent dispute: maintain agreeable relations with Yankee Antiques whatever the result of the test; aim to resolve the issue without resorting to the use of judicial system. It is noted that it is not in the company’s best interest to attempt resolution by referring the matter to the courts or to arbitration. Such strategies are aggressive and would damage the current business relationship established with Yankee Antiques and could potentially end relations altogether. In addition, costs associated with such a strategy would be too high for Antiques...
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