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| Abstract | ||||||||||||||||||
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| Due to a quota restriction, a SOE company had agreed with another company to export a certain quantity of monosodium glutamate f.o.b. Quy Nhon (Vietnam) to a Singapore partner of the latter.). This contract contained a merger clause precluding the use of extrinsic evidence. Before delivery the Singapore buyer, in compliance with the sales contract, issued a letter of credit and paid a 50% down-payment. The buyer, however, on the last day contractually agreed for the delivery, prolonged the validity of the letter of credit and, in the same letter of credit, postponed the date of delivery of the goods. The seller declared the contract avoided for breach of the buyer's obligation to take delivery. Some days later the vessel provided for by the buyer to take delivery of the goods arrived at Quy Nhon but the goods were not delivered. The buyer commenced a legal action against the seller claiming damages and alleging that the first letter of credit contained a binding provision according to which the buyer had the right to change the date of shipment.
The Court rejected the buyer's claim by applying Arts. 29, 53, 61(3) and 64(1) CISG and found that the buyer had breached its obligation to take delivery according to the contract terms. The Court stated that the merger clause contained in the sales contract prevented the buyer from using extrinsic evidence such as the letter of credit, which is an instrument of payment that must be consistent with the contract terms and cannot prevail over them. The clause contained in the letter of credit entitling the buyer to change the date of shipment was to be considered an offer to modify the contract which was rejected by the seller and therefore was not binding. The Court held that the seller was entitled to declare the contract avoided for breach of the buyer's obligation to take delivery (Art.64(1) CISG) and that it had acted reasonably since monosodium glutamate is a very delicate substance that could have deteriorated in the case of prolonged storage. |