Essay on Managing Contract Issues

2021-06-06 19:38:08
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962 words
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Harvey Mudd College
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Essay
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Before an international sales contract is drafted, it is imperative for the involved parties to understand and anticipate contextual challenges that may arise as far as interpreting clauses subject to relevant sales codes is concerned. One such code is the CISG (Contracts for the International Sale of Goods) that has from time to time sparked debate and controversy in the manner different parties interpret contracts. Examining many cases in the legal arena suggests that drafting commercial contracts and negotiating them can be a complex task, often requiring extra care not only in the language used but also how contextual terms and conditions are laid out. Against the backdrop of the implied complexity, this paper discusses some possible clauses (of a contract) that might put a company at risk if not adequately scrutinized before signing the contract. It also explains contract formation under the Uniform Commercial Code. Last yet important it discusses the major issues in a selected case.

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For a firm that procures parts and services from various states, various clauses may pose risks since whereas some states allow particular agreements, others have statutes that limit or prohibit them altogether. For instance, indemnity clauses encountered in the context of harmless' or indemnity agreements that find application in controlling the distribution of liabilities and possible losses (hence identifying which party should take liability and pay) pose a potential risk. They should be thoroughly scrutinized and comprehended before the contract is entered. Examples of indemnity clauses/forms include broad form, intermediate and limited form. For broad form, the entire risk would be transferred (from clients) to the firm, irrespective of fault. It would not matter who is responsible for the loss; the firm bears all liability. This kind of unconditional broad or blanket' transfer of risk (of loss) to the firm would require extra scrutiny as the magnitude of loss is unpredictable. Perhaps setting the limit of loss that could be wholly transferred to the firm would be a good way to minimize the risk.

Concerning intermediate form, the firm would take liability for damages or losses wholly or partly (in whole or part) brought about by the client. Under this particular clause, the firm would be liable and as such carry 100% of the burden even if its fault in the damages was a mere 5%. Sufficient scrutiny would be required as there could be instances where the client is almost solely to blame (for damages). This clause magnifies the possibility of controversy as even determining the percentages of each party's fault could be an up-hill task.

The clauses looked at above draw attention to the Uniform Commercial Code that was put in place to harmonize the law governing commercial transactions. How are contracts made according to this Code? Imperatively, it must be understood that a general principle in the context of contract law is that for a contract to be made an offer must be made by one party (to another party), and the other has to accept that offer. Article 2 of the Uniform Commercial Code covers contracts in the context of sale and purchase of goods and clearly sets out the rules concerning offers and acceptances (White et al., 2012). The rules are flexible as they are meant to facilitate commercial contracts even when statutes might vary from one state to another.

The named section clearly states in the beginning that a contract for the sale of goods may be made in any manner sufficient to show agreement' (White, & summers, 2010). Here, the UCC suggests that away from formal offers and acceptances (written or oral), it recognizes any form of conduct by the contracting parties that suggest or shows that indeed they are in agreement. Further, it recognizes those contracts formed through computers, referred to as electronic agents' in legal language. Interestingly, contracts can be formed even when there is no specific or definitive instant that the contracting parties reached an agreement. It also allows contract formation even in the absence of particular contact terms. For instance, in the intermediate form examined earlier, a contract can be formed even when the percentages of fault for the firm or client have not been specified.

One case that evidences the seriousness of contract issues is that of MCC MARBLE CERAMIC CENTER, INC. v. CERAMICA NUOVA D'AGOSTINO, S.P.A (The USA, 1998). It was heard in the United States Court of Appeals, Eleventh Circuit on June 29, 1998. The seller was sued by the buyer for breach of contract while the seller raised counterclaims seeking to be compensated for nonpayment. After summary judgment had been offered for the seller, the buyer appealed. The court was to determine the parties' subjective intent under Contracts for the International Sale of Goods as well as weigh the parol evidence. The appeals court applied CISG to infer that the legislation precluded summary judgment and application of parol (The USA, 1998). What could each of the companies done during the signing of the contract to avoid litigation? MCC could have made it clear, either orally or in writing, that it did not intend to be bound by the terms and conditions contained on the reverse page of the contracting firm. On the other hand, D'AGOSTINO could have notified MCC of the terms and conditions on the reverse side so that by being aware of them (hence entering the contract) it would be bound.

References

U.S.A (1998). MCC-Marble Ceramic Center Inc. v. Ceramica Nuova D'Agostino S.p.A. Retrieved 23 February 2017 from http://www.unilex.info/case.cfm?pid=1&do=case&id=337&step=FullText

White, J. J., & Summers, R. S. (2010). Uniform Commercial Code. St. Paul, MN: West, a Thomson Reuters business.

White, J. J., Summers, R. S., Hillman, R. A., & West Group. (2012). Uniform commercial code. St. Paul, MN: West, a Thomson Reuters business.

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