This report contains the proceedings during the set up of the agreement and the proceedings after the breach of contract between two parties: Trans Trust SPRL versus Danubian Trading co. The agreement was about the sales of 1,000 tons of rolled steel sheets which were supposed to deliver FOB in Antwerpen on 1950. Due to this agreement there got another party involved; the American company S.A.Azur, which was a wholesaler for the manufacturer, S.A. Metallurgique d’Esperance Londoz. Because of the contract, the seller ordered a sufficient amount of steel from this third party. Because of this the seller wanted to confirm this by the hand of a letter of Kredit Bank in Brussels, this was firstly agreed by the buyer. When eventually the buyer refused to do so, the seller sued the buyer on breach of contract.
Since the breach of the contract and the prosecution of the buyer, the case has been investigated by the English Court of Appeal. Throughout this, the court found out that there indeed was a breach of the agreement. The trial judge awarded the seller £3,214 damages, which was the loss of profit suffered by the seller.
We will discuss this case in six parts. In the main section of this report we will discuss the main arguments and reasoning of the parties in this Court Case. Then there is an explanation of reasoning, taken by the court which is an extension of how the court makes the decision and the different court decisions for this case. At the very end we will make links between these views.
When we want to understand the point of the case, we have to understand the agreement and the breach of the contract. This is almost totally based on the letter of Credit. This was required in the contract for the seller, the buyer agreed on this. So to understand this, we first have to comprehend the essence of the letter of Credit. This letter is an instrument which is issued by a bank, or another person, at the request of a customer. This is used very often in international trades, for safety. In this case this customer (account party) was the seller. The letter of Credit thus will ensure that specified amount of money will be paid, by a bank or another person, to the beneficiary party. To define the letter of Credit, we will define the parties who are involved: (1) The applicant is in this case the buyer, Danubian. (2) The beneficiary is the seller, Trans trust (3) Krediet Bank in Belgium, this is the importers bank. Furthermore you will find an advising bank; this will also take care of the papers and advice etc. for the beneficiary. By showing the steps of a letter of credit, it is way easier to understand the essence of it: * The seller and the buyer agrees to use the letter of Credit * The buyer applies with the issuing bank on the letter of Credit * Issuing bank issues letter of Credit to the advising bank * The advising bank gives the letter of Credit to the seller * The certain goods delivered to a carrier
* The Bill of Lading is given to the seller, after the delivery * This Bill of Lading will go immediately to the advising bank * Now the beneficiary gets paid by the advising bank and the Bill of Lading will go to the issuing bank, these will give it to the buyer * The buyer will give the Bill of Lading to the carrier and they will give the goods in return * Then the buyer will pay the issuing bank which will pay the advising bank
The essence of this is simply that the seller and the buyer will get more safety in dealing with expensive goods and contracts. In such a letter of Credit the banks, which will know the parties, will be a solid intermediary. The Uniform Customs and Practices for Documentary Credits govern all the letters of credits. Theoretical...