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Post 1
International Legal Challenges - Adam Smith
Adam Smith posted Aug 17, 2021 11:24 AM
Question 3 - Colossal should include arbitration agreements in all domestic and international contracts.
Arbitration has significant advantages when dealing in contract disputes. Disagreements are handled
between all parties in a nonjudicial proceeding by allowing a predetermined and objective third party to
hear the dispute and settle it. The arbitration process is outlined by the language written into the
contract, and the arbitrator identified, which allows for confidentiality, efficiency, and cost savings.
Additionally, most of the world's trading Nations agree to enforce arbitral awards in foreign Nations.
(University of Maryland Global Campus, 2021). Arbitration agreements make sense from both a
domestic and international standpoint. It seems to make the most sense internationally if the host
country's government recognizes arbitration agreements and is willing to enforce them legally.
Question 5 - Colossal must make a few considerations before agreeing to provide a Letter of Credit to the
supplier in Edfin. First, we must consider the supplier's perspective as the seller. The seller is in the
country of Edfin, and the buyer is in the United States. The seller assumes all the financial risk in
procuring and shipping the materials to the United States. All of those expenses occur regardless of
whether the goods are received and deemed suitable by the buyer. Should Colossal decide that it does
not want the materials for any reason, the added expense of returning them to Edfin is also on the seller.
If a dispute arises, and it likely will occur at some point, legal recourse will be costly and time-consuming.
From the seller's perspective, it is reasonable that it wants a Letter of Credit.
A Letter of credit is a mechanism designed mainly to aid sellers in payment collection. According to the
International Trade Administration (n.d.), a letter of credit is a contractual commitment by a buyer's bank
to pay once the exporter ships the goods. This assures the seller that they are guaranteed payment
through the buyer's bank once they fulfill their end of the agreement. This is an excellent option for the
seller; however, it appears less appealing to the buyer. Should the goods be damaged during shipping or
end up as a lost shipment, the buyer already paid for the items and has nothing to show for them, which
could be devastating, or if the shipment arrives and after inspection, it is found to be of low quality. The
time, energy, and resources to seek legal recourse now reside with Colossal and occur in the Edfin court
system. A Letter of Credit presents a substantial amount of risk, and recommend against it if at all
possible.
-Adam
International Trade Administration. (n.d.) Methods of Payment: Letter of Credit. Retrieved from
https://www.trade.gov/letter-credit
University of Maryland Global Campus. (2021) International Dispute Resolution. Retrieved from
https://leocontent.umgc.edu/content/umuc/tgs/mba/mba630/2215/learning-topic-list/international-
disputeresolution.html?ou=583187
Response to Adam (Q5):
An export/import letter of credit does not represent a risk for the buyer (Colossal) since the seller can
collect the money only after a verification company has given a report that the merchandise is correct
and that the quantity and quality specified in the contract has been properly satisfied. A letter of credit
does not represent a payment in advance, it is only a bank guarantee, and no bank gives away money for
free. The whole purpose of a LC is to decrease risk for both the seller and the buyer. If the merchandise is
not correct, the seller doesn’t collect any money. Working with LC requires extra effort, but the decrease
in risk is worth it. It is a standard procedure used all over the world when trade is carried out between
different companies.
References
Bank of America. (2021). Global Trade & Supply Chain Finance Services & Management Solutions. Bank
of America Merrill Lynch. https://www.bofaml.com/en-us/content/trade-supply-chain.html
Intertek. (2021). Verification Services in North America. https://www.intertek.com/government/export-
import/verification-services-usa/
Trade Finance Global. (2021, March 24). Letters of Credit (LCs) - TFG 2021 Ultimate Guide & Free Video.
https://www.tradefinanceglobal.com/letters-of-credit/
Post 2
International Legal Challenges Discussion - James Sarro
James Sarro posted Aug 16, 2021 9:06 PM
Last edited: Monday, August 16, 2021 9:10 PM EDT
3. Colossal management also needs to know whether arbitration is a good idea for a dispute resolution
provision for both domestic and international contracts and why
Arbitration is a nonjudicial proceeding designed to settle disputes. The focus here is arbitration of
disputes between two private parties to a contract, which involves the neutral third party (or parties)
acting as a decision maker in the same way that a judge does. It is important to note that arbitration and
mediation are not the same, as mediation looks to try to bring the two disputing parties together, where
arbitration is where the third party is the decision maker. I believe arbitration is a good idea for Colossal
Corporation both internationally and domestically as it allows for outside views to be considered in the
decision process of contracts. This allows for both an efficient and confidential contract agreement. With
a third party being the decision maker it allows the contract being developed to be extremely
enforceable.
2. In a second case, a Colossal subsidiary in Bartan, an Asian country, wants the company to enter into a
sales contract with a subsidiary there, using the UN Convention on Contracts for the International Sale of
Goods (CISG) as the controlling law. The VP needs to know the ramifications of this option and decide
whether it is a good idea.
The U.N. Convention on Contracts for the International Sale of Goods (CISG) was an effort to create a
new international law of sales to apply to international sales transactions. Unless the parties to an
international sales contract identify a specific legal regime that will apply to the contract, the CISG will be
applied to the interpretation of the contract, so long as both of the parties to the contract have their
places of business in a contracting state. Thus, if an international sales contract between a US company
and an Italian company (Italy has signed the CISG) did not provide for the application of particular law,
both a US court and an Italian court would be bound to apply the rules of the CISG to the interpretation
of the contract. If a specific law in the contract apply to the United States, it will have to be honored by
both courts.
CISG also states the standard principle that "damages for breach of contract by one party consist of a
sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the
breach. This means that CISG recognizes consequential damages. Luckily, the laws of CISG are not very
different from common law principles worldwide, like UCC. With CISG, Colossal Corporation will be able
to adopt a standardize international law for their sales transactions.
Thank you,
James Sarro
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References
Business Law: An Introduction, by TheBusinessProfessor.com, Jason M. Gordon & Colleagues has been
adapted with permission from Jason M. Gordon. © Business Professor, LLC.
CISG (Convention on Contracts for the International Sale of Goods), Jan. 1, 1988, 1489 U.N.T.S. 3.
Response to James (Q3):
I agree that arbitration can be very useful for resolving conflicts, as long as the parties involved come
from countries that have signed the arbitration convention ICSID of the World Bank. Sometimes, bilateral
investment contacts also include arbitration clauses, but he problem is that enforcing bilateral contracts
can be hard sometimes. Under normal conditions, it shouldn’t be a problem, but you have to remember
that many Asian counties have unstable governments and political problems can result in countries
denouncing bilateral contracts and there is no way to enforce them. That is why the ICSID Convention is
used by many multinationals since signing contracts generally comply with the arbitration resolutions. All
countries that work with eh World Bank have invested some amount of money in the bank and unless
arbitration resolutions are really large and unfavorable, they will pay.
Q2:
The same applies for the CISG, since not all countries have signed the CISG Convention. A company might
say that they want to use it, but if their country hasn’t signed it, then it is no use. The advantage of using
CISG is that it is similar to common law and the UCC, although it is more flexible. For example. The CISG
doesn’t require contracts to be written, while the UCC requires contracts of more than $500 to be
written.
References
World Bank. (2006). ICSID Convention, Regulations and Rules. ICSID Convention. Published.
https://icsid.worldbank.org/sites/default/files/documents/ICSID%20Convention%20English.pdf
World Bank. (2021, August 4). International Centre for Settlement of Investment Disputes.
https://icsid.worldbank.org/