BUYERS ADVICE FAQ Important question asked of SMICE are selected for publishing online in where parts are edited and disclosures of events and names are not fully made apparent. End buyers and perhaps all trader should take note of such question and the answers given in the simplest form, for purpose of education. FRUSTRATION OF CONTRACT: 18/12/2011 Question: We went to the port to collect goods ordered from the USA. Goods arrived 4 weeks late due to wharf strike at port of loading . Are we able to claim “Frustration of Contract.” Answer: Frustration for what? You have the goods , you have accepted the goods, and I assume you have paid for the goods. Frustration occurs when on conclusion of contract a very apparent differing situation has come into effect. If you signed a contract in where the supplier is now insisting on matters not addressed in the contract, that will result in a very different deal than entered into is typically a frustrating event. WHAT IS DEAD FREIGHT?: 5/1/2012 Answer: If an exporter , supplier or his agents fails to load the ship in where he has already made carriage arrangement - the ship owner is able to still “claim freight’- or the difference of such , even if another shipper is found to takes up the ‘free space’ on board the ordered vessel, in where the freight value is lower than the first agreed upon carriage rate. COULD AN OFFER BECOME A CONTRACT : 6/1/2012 Question: In 2011, after 3 month of negotiations, we accepted an offer for the purchase of goods from an African intermediary, but changed our mind 12 days later after reading the contract. The seller is now stating (threatened) we are in breach of contract , a contract which we did not accept nor signed. Are we liable? Answer: It depends, without looking at the offer its hard to tell. If during negotiations lets say, you indicated to put the supplier under pressure of a particular delivery date in where the supplier has told you that they will start preparing the goods for export ASAP once a the offer is signed , and the offer is very well defined- just like what was negotiated upon verbally prior, or via e-mail - What needs to be addressed is if the offer and pre advice prior to acceptance of such indicates that a meeting of minds did form, in where both parties intended to enter into a contract to legally bind each other. The actual contract could have said to be ‘made’ upon acceptance of the offer, if such acceptance does not infer that the “acceptance of the offer is subject to final contracts.” The merit of the deal has to be looked at intently and to the intentions of parties entering into a binding situation. A well defined offer, depending of the goods apparent could be construed as a ‘contract’ once acceptance has been indicated, hence one should not accept an offer unless they intend to become legally bound to perform . An agreement in law may not amount to be a contract, in where all contracts may bear elements of an agreement- The contract is enforced by laws, and ‘agreements’ on the other hand may not. Six elements must be apparent to infer that a contract is in force, hence if the very same 6 elements are found on an accepted offer, such may be suffice to be enforced just like a contract, even though the term ‘offer” might be apparent. WHO PAYS FOR CERTIFICATE OF ORIGIN: 9/1/2012 The buyer seeks such then the supplier will secure such to which the charge is applied on the invoice as a debit against the buyers account.The Certificate of origin even if offered by a supplier and such is accepted by the end buyer issuance expense is for the buyer. The COO is not an export document it’s a delivery presentation document and its a customs import requirement in most countries. ONCE GOODS ARE INSPECTED: 9/1/2012 The buyer may physically inspect loading of ordered goods (if allowed) but to do so means the right of rejecting goods because of damage /quality, once such arrives at port of unloading may no longer be a course available to the end buyer. That is why independent inspectors are used- to inspect goods impartially at port of loading. THE TERM ‘BOND’ Vs ‘GUARANTEE.” 9/1/2012 The term ‘bond’ is not even a word found in legal definition without added reference to it’s application I.e. Bail Bond, Bonded Warehouse, Chemical bond, Certificate bond. The application specified defines the attributes of the bond. “Performance bond” thus can mean many things. The terms ‘Bond’- to stick, adhere, hold fast. The terms ‘guarantee’ on the other hand has specific meaning. A conditional type of obligation. Attributes of the the condition enforces the obligation. Hence the guarantor gives a promise to the entity being ‘guaranteed’ a specific obligation, so much so that in effect if a supplier gives a ‘promise’ to a beneficiary (the intermediary) the intermediary passing the guarantee to its end buyer may find that the supplier is not obligated nor required to honour the guarantee to the end buyer as it was his ‘promise’ which was given to the ‘intermediary’ and nobody else. Hence the type of instrument sought allows the guarantee to be passed to another by virtue of the rules associated to the instrument and not the guarantee made. Simply obtaining a ‘personal guarantee’ therefore is a guarantee made to the beneficiary- in where the beneficiary will benefit from such in the event of the default. The intermediary in effect issues his own personal guarantee to his end buyer on contract (LDD) or use the virtues of the rules applied to the financial instrument to only ‘endorse’ the guarantee to another. Buyer often seek a P.G but often do not understand that the goods are charged accordingly with the added cost of such. SMICE offers a ©LDD instead of a P.G to keep values of goods as low as possible (Late Delivery Discount) in where the invoice bears deduction of any late deliveries by ensuring a LDD discount is applied to the goods at DLC collection time. EVIDENCE OF PRODUCT: 9/1/2012 It would be very easy to provided a bit of paper purporting to be evidence of goods being offered but such evidence cannot be relied upon to mean anything. There is no valid example nor reason to provided evidence of product because in the real sense, it can’t be effectively given until the goods are loaded specifically for the buyer in where inspected endorsed samples are taken from such goods , and sent to the buyer. The buyer must obtains evidence of HIS goods ordered which cannot happen for weeks after payment and contract are secured and sealed. No shipment can be loaded until payment is first secured weeks or month in advance of such. Evidence of “supplier” is not evidence of product. If a seller like FTN exporting and associated agents spends a great time and effort to source product for buying, then discloses the supplier after contracts are signed, may cause the buyer to breach the contract to deal with the supplier directly. What’s left - FTN exporting has to initiate legal action for breach of contract which may takes years to hear at great cost. Breach the contract intentionally to even obtain the small gains SMICE might make on such a deal. Hence if disclosure of a supplier is given, it’s given after conditional financial instruments are secured. Such instrument are worthless to FTN exporting because without the presentation of delivery documents , the DLC cannot be collected upon. FTN secures goods from a supplier , but such goods are not exclusively held and are often subject to validity period . A supplier to FTN could sell such goods to another entity attempting to do buy such , now gives a specific reasons on why no ‘evidence’ will be surrendered until all the paper work and payments are secured. The seller such as FTN exporting will face fraud charges for offering goods which do not exist at the time such were offered now defines that serious consequences will immediately become apparent if a contract is signed for the supply of goods which do not exist. The Bank will also cancel a DLC once such fraud becomes apparent as the delivery date will come and go , indicating that the seller did not have supply when the offer was made. Hence by making an offer to sell , A seller like FTN is assuring and guaranteeing that real product is genuinely offered . 3/3 BOL IN TRIPLICATE: 9/1/2012 One set of the BOL in triplicate copy marked original is the minimum Bank presentation document, not 3 sets in triplicate. ICPO, BCL, LOI: 9/1/2012 International type of dealings must not use inappropriate, unworkable, risky and non enforceable procedures. A buyer who enters into a transaction in where terms such as LOI, ICPO, BCL are apparent is entering into a high risk transaction, open to all sorts of legal problems and failed performances. Laws of one state or country must not be applied Extra territorially to a import export transaction applied in another country. FTN Exporting has said as much for many years . ICC had also stated the same a few years back. Note: In all of FTN formal studies , applied over a 25 years, no bank , delivery nor international trading laws mention or use such flawed unworkable terms. Buyer must not accept such terms when considering such transactions.