Introduction to Law and Corporate Governance
13th January 2012
METALLIA USA/OLYMPIC STEEL PROBLEM PART 2
This problem is the continuation of the business relationship between METALLIA, USA and OLYMPIC STEEL, once the April 14th, 1999 contract for the sale of steel plates had been entered into. The June delivery is about to take place. Payment will be expected.
I) On June 1st, 99, as per the terms of the April 14th contract, METALLIA, USA, is ready to make the first shipment of 5,550 net tons of hot rolled steel sheets to OLYMPIC STEEL, at a price of US $ 1,047,375.
A. What do they say?
The delivery clause states that the June 1999 shipment CIF (Cost, insurance and Freight) duty has been paid and the material has been loaded on the trucks for the port of Sydney. Therefore though Metallia, USA being the seller pays the costs and freight to bring the goods to the port of destination the risk is transferred to Olympic Steel once the goods are loaded on the vessel. For subsequent orders the port of discharge and specifications are yet to be obtained from Olympic Steel. As to payments, Olympic Steel has to pay Net cash within thirty (30) days from date of discharge of transporting vessel, against presentation of the following documents:
I. Seller’s invoice.
II. Seller’s Weight Certificate /Packing List.
III. Certified Mill Test Reports.
IV. Letter from Karl McKeever confirming material is in accordance with specifications as submitted by Buyer. V. Certificate of Origin (Ukraine Republic).
B. What kind of a sale contract is involved here? Why?
Mettallia being a US based company and Olympic Steel an Australian based company, the sale contact involved is a documentary sale. Ownership will be transferred over to Olympic Steel once the ocean carrier receives the goods. The shipper’s (Mettallia) obligation in this case has the responsibility to hand the goods to carrier at a certain in exchange for the negotiable document of title which is needed to negotiate with the buyer (Olympic) after 30 days from discharge of transporting for payment and not necessarily after receiving the goods.
C. What kind of documents are:
Generally required in such contracts?
A document of title, which is a legal, document evidencing the ownership of the goods it represents, needs to be obtained from the carrier and transferred to the buyer (Olympic Steel) in exchange for the payment. The possession and ownership of goods are transferred from Mettalia to Olympic Steel through negotiation and delivery of a negotiable document of title issued by an ocean carrier
* Seller’s invoice.
* Seller’s Weight Certificate /Packing List.
* Certified Mill Test Reports.
* Letter from Karl McKeever confirming material is in accordance with specifications as submitted by Buyer. * Certificate of Origin (Ukraine Republic).
With OLYMPIC STEEL’s agreement, METALLIA has made arrangements with Ecuador Line for the shipping of the merchandise by ocean, from Ukraine to Sydney, Australia. Upon loading the merchandise and sealing the containers, Ecuador Line delivers the following Bill of Lading (BOL) to METALLIA:
What is a BOL?
* A BOL (Bill of lading) is a legal document issued by an ocean carrier to a shipper upon receiving goods for transport. * Detailed list of shipment of goods in the form of a receipt given by the carrier to the shipper consigning the goods.
What does it represent?
It represents a contact between the ocean carrier (Ecuador Line) and Metallia represents bailment. The Bill of Landing (BOL) is the most commonly used document of title in international trade. As a document of title, it acts as an evidence of ownership of goods and indicates that the seller is no longer in possession of the goods and that the goods are in transit towards their destination port.
What are the functions of a BOL?
The BOL serves 3 main...
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