CHAPTER 1: NEGOTIATING DELIVERY

1. What are 5 steps in negotiating delivery?

 Timing: date of delivery, delay and results of delay.
 Location: place of delivery and alternatives.
 Transport: modes of transport to be used.
 Risk, title and insurance: transfer of risk, transfer of ownership and insurance.
 Terms of trade: Incoterms to be used.
2. When might delivery take place?
It ups to delivery terms.
• The date of dispatch from the factory.
• The date of loading onto ship.
• The date when the goods should arrive in (place).
3. What might be the place of delivery?
Place of delivery is the point at which the exporter passes responsibility for the goods to the
Buyer. Delivery can take place at a number of places between manufacturer’s factory and the
Buyer’s warehouse.
• When the goods are handed over to the carrier.
• When the goods are shipped on board in the exporter’s country.
• When the goods are off-loaded in the buyer’s country.
• When the goods arrive at the buyer’s warehouse.
4. Why is location important?
It is important to the exporter because the date of payment, transfer of risk and ownership
depend on the place of delivery.
5. Why is transportation important?
Because we have to find the appropriate cost and type of transport, have to think of freight, try
to minimize the freight and try to find the best mode of transport.
6. What are modes of transportation?
 Sea transport.
 Air transport.
 Inland transport (by road, by rail, by barge, by mail, or by mixture).
7. Where is the risk often passed from the exporter to the importer?
Risks are transfer from the exporter to the importer at the point of delivery.
8. Where does transfer of ownership take place?
Transfer of ownership take place at any point between the signature of the contract and the
final payment for the goods.
9. How many kinds of delay in delivery?
There are 2 kinds of delay in delivery: Excusable delay and Non-excusable delay.
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10. What is excused delay?
Excused delay is in the grace period and due to force majeure.
11. What events does delivery date trigger?
The delivery date triggers many contract events:
 Exporter fulfills duties under the contract.
 Payment may become due.
 Risk of and title to the goods pass to the buyer.
12. How to fix delivery date?
 To use a straightforward calendar date.
 The certain date after the date of coming into force of the contract.
13. When does the contract come into force?
After all the preconditions have been met.
14. When is a contract binding?
After the signature date (date of execution).
15. When is a contract binding and effective?
After the date of coming into force (effective date).
16. In what kind of contract is a cut-off date set?
A cut-off date is set in fixed-price contracts because if the contract does not come into force
for quite a long time, the price will be unrealistic.
17. How does the date of coming into affect the delivery date?
The delivery date is normally fixed for a certain number of days after the date of coming into
force.
18. What is the grace period?
It is from the delivery date to the beginning of penalty period.
19. What is the grace period used for?
It is used to facilitate early delivery.
20. What can parties do if the force majeure events continue too long?
If the force majeure events continue too long, both parties have the right to terminate the
Contract.
21. What are the 3 outcomes of FM?
 Resumption of delivery.
 Termination of contract (if the force majeure events continue too long).
 Unclear and dangerous situation.
22. What are the two remedies given to the Buyer for any unexcused delay?
 The court may order the exporter to fulfill his obligations, this means issuing a decree of
specific performance requiring the exporter to make delivery as agreed.

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 The court may require the exporter to pay the buyer compensatory damages – a sum of
money that will fully and adequately compensate the buyer for any measurable loss.
23. Which law prefers to award damages?
Common law countries.
24. Which law enforces performance?
Civil law countries.
25. What questions do the courts ask in setting a figure for compensatory damages for
late delivery?
 Did the loss provably follow from the breach?
 Was the loss reasonably close to the breach in the chain of events?
 Was the loss “mitigated” – in other words, did the buyer take reasonable steps to keep the
loss as small as possible?
26. What are liquidated damages?
They are a fair figure, a lump sum to be paid per day (week or month) of late delivery. The
compensation fixed in advance is called liquidated damages.
27. What are penalties?
They are damages to be paid to compensate one party for a loss.
28. Explain the differences between liquidated damages and penalties?
 Liquidated damages:
• Motive: To compensate the buyer fairly for any delay in delivery.
• Enforceable everywhere but subject to increase or decrease in some legal systems.
 Penalties:
• Motive: To terrorize the exporter into punctual delivery.
• Not enforceable in English law or other common law systems.
29. What is quasi-indemnity?
 Motive: To relieve the exporter of liability for delay in delivery.
 Enforceable everywhere but open to challenge as ‘unconscionable’.
30. What notation must a Marine Bill of Lading bear?
The Marine Bill of Lading to be acceptable as a shipping document under a letter of credit
must bear the notation that the goods have been shipped on board a named vessel.
31. How can a marine bill of lading be made into a negotiable document?
Typing he word ‘Order’ in the Consignee box. The shipper must endorse the bill (sign it on
the back).
32. What are clean shipping documents?
There are no notes/free of notes about defects, the goods are in perfect condition.
33. What aspects of the goods does the carrier (the transportation company) inspect?

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The carrier does not inspect the goods themselves, but their packaging and general
appearance.
34. What defects does the carrier note on the face of the bill of lading or other shipping
documents?
If anything is wrong, the carrier notes the deficiency on the face of the bill of lading or other
shipping documents.
35. Which player (exporter or buyer) is responsible for arranging insurance cover?
In deciding who should insure, there are 2 schools of thought.
 The first sees the point of delivery as decisive: up to delivery the exporter insures, after
delivery the buyer insures.
 The second approach lies behind C-terms (CIF, CIP): it is often easier for the exporter to
arrange insurance.
36. Name types of insurance policy?
There are 7 types of insurance policy:
 Tailor-made policy, Floating policy and Open cover.
 Valued policy and Unvalued policy.
 Time policy and Voyage policy.
37. What does a Marine Insurance policy cover?
A marine insurance policy has three variant clauses: Cargo Clause A, B and C.
 Clause A covers anything not excluded.
 Clauses B and C exclude anything not expressly covered.
38. What are 3 variables taken into account when setting up the 13 terms?
 Where along the transportation route delivery takes place.
 What means of transportation is used.
 What costs the exporter might pay after the point of delivery.
39. Identify 4 categories in which the 13 terms are grouped?
 The E-term deals with deliveries at the exporter’s factory.
 The F-terms all concern delivery within the exporter’s country.
 The C-terms involve delivery in the exporter’s country, with extra cost for the exporter
after delivery.
 The D-terms take care of delivery outside the exporter’s country.
40. What are main functions of ocean BL?
 A contract for delivery of the goods.
 A document of title to the goods.
 A receipt for the goods.
41. What are requirement of BL when payment is made by LC?