Timing

Group 2

Outline
Definition Timing and Time is of the Essence Clauses Naming the date Delay and Compensation
Excused delay Unexcused delay

I. Definition
Delivery date :
the final date by which the underlying commodity for a futures contract must be delivered in order for the terms of the contract to be fulfilled. Source: www.investopia.com

Why timing is important?

For the exporter: how long to delivery? For the buyer: when the goods are needed?

II. Timing and Time is of the Essence Clauses In theory:

Punctuality is essential Buyer has the right to refuse payment for late delivery.

II. Timing and Time is of the Essence Clauses In commercial life:

A judge may decide that time is not of the essence Late delivery can be bad for the exporter Delivery takes place on the working day after the agreed delivery time Seller has to notify Buyer of the delivery

III. Naming the date

1st stage in negotiating the timing of deal Two steps:

Delivery date Signature date Effective date

Contract is binding and effective Receipt of import and/or export approval Receipt of foreign exchange approval from a central bank Issuance of a letter of credit or bank guarantee Making of a down-payment by the buyer Issuance of an insurance policy Issuance of a certificate of origin Delivery by the buyer of plans, drawings or other documentation.

Contract is binding

IV. Delay & Compensation

1. Excused delay Grace period
Def.: The action of waiving the penalty for a time period of late delivery Advantages: For exporter: receive payment earlier For importer: get the goods on expected time
EG: If delivery is not affected within one month of the agreed delivery date, then the Seller shall pay the Buyer 0.1% of the contract price.

IV. Delay & Compensation

1. Excused delay b) Force majeure
Def.: A French word which means superior power Classification Acts of God : flooding, earthquake, hurricane Social factors : war, riot, strike, crime

IV. Delay & Compensation

1. Excused delay b) Force majeure
Some regulations + The force majeure clause is negotiable + Contracts often regulate the force majeure period => the right of one or both parties to terminate the contract.

 Examples:
If either party is prevented from, or delayed in, performing any duty under this contract by an event beyond his reasonable control, then this event shall not be considered in default and no remedy, be it under this contract or otherwise, shall be available to the other party.

 Examples:
Force Majeure events include, but are not limited to: war (whether war is declared or not), riots, insurrections, acts of sabotage, or similar occurrences; strikes, or other labor unrest; newly introduced laws or Government regulations; delay due to Government action or inaction; fire, explosion, or other unavoidable accident; flood, storm, earthquake, or other abnormal natural event.

IV. Delay & Compensation

1. Excused delay b) Force majeure Three possible outcomes : + Delivery resumes without penalty for the seller. + Buyer notifies exporter that the contract is terminated + Unclear and dangerous situation

IV. Delay & Compensation

2. Unexcused delay a) General principle If one party causes harm or loss to the other, the law will find a way to compensate with either of two remedies:
Decree of Specific performance Compensatory damages

IV. Delay & Compensation

b) Compensatory damages:
Resorting to the court: to set a figure for compensatory damages + Did the loss provable follow from the breach? + Was the loss reasonably close to the breach in the chain of events? + Did the buyer take reasonable steps to keep the loss as small as possible?

IV. Delay & Compensation

- Negotiating a lump-sum

Liquidated damages

Penalties

- Paying damages per day/week/month. No questions asked. - Aim to compensate buyer

- Imposing an agreed (high) penalty - Aim to threaten or terrorize exporter

EG: For each week of late delivery the Seller shall pay the Buyer 0.1% of the contract price.

References
http://www.businessdictionary.com/definition/delivery-date.html http://www.scribd.com/doc/9353914/Import-Export-ContractTerms http://www.investopedia.com/terms/d/deliverydate.asp