Chapter 7: Inspection, Claim, Arbitration and Force Majeure Abstract: This chapter mainly introduces inspection, claim, arbitration, force majeure and related knowledge in international merchandise trade. Section 1: Inspection of the Goods Section 2: Claim Section 3: Force Majeure Section 4: Arbitration

Section 1: Inspection of the Goods 1 ． The meaning of Inspection  The buyer’s right to inspection: if the buyer gives up his reasonable opportunity to examine the goods, it means he also gives up the right to reject the goods.  Case analysis:

2 ． The time and place of inspection (1) To make inspection in the export country 1. To make inspection at the factory 2. To make inspection at the port of shipment Notice: the above two methods denies the buyer’s reinspection right, so they are disadvantageous to buyer. (2) To make inspection in the import country 1. To make inspection at the port of destination 2. To make inspection at user’s residence Notice: Those two methods are in favor of buyer because the seller should be responsible for the quality and quantity of the goods.

 (3) To make inspection in the export country and make reinspection in the import country  (4) To make inspection at the port of shipment to take shipped weight as final and make reinspection at the port of destination to make take landed quality as final.

3. Commodity Inspection Institution  Commodity Inspection Institution  Commodity Inspection Institution in our country u China Commodity Inspection Bureau u The main duties of the inspection bureau: – Making Legal Inspection – Supervision and Administration – Authentic Attesting Business

4. Inspection Certificate The inspection certificate is a written document issued by the commodity inspection institution, bearing witness to the result of inspection. C Kinds of Inspection Certificate C Functions of Inspection Certificate

Section 2: Claim 1. The laws of different countries on Breach of Contract 1. Regulation of Britain law  Breach of Condition and Breach of Warranty 2. Regulation of American law  Material Breach of Contract and Minor Breach of Contract 3. Regulation of “Convention” (Article 25)  Fundamental Breach of Contract and Non- Fundamental Breach of Contract 4. Regulations of “China Contract Law” (See chapter 6, 7)

Target of the claim  Claim from buyer or seller  Claim from carrier  Claim from insurer Common claim and possible responsibility analysis in international trade business:  Case analysis1:  Case analysis 2:

（ 1 ） Discrepancy and Claim Clause 1. Claim Foundation 2. Period of Claim  Appointed deadline for claim  Legal deadline for claim 3. Methods of handling claim Claim Clauses In the Contract

(2) Penalty Clause or Liquidated Damage Clause  Applied occasion of this clause  The nature of penalty  “China Contract Law ”on penalty 4. Penalty clause of the deposit （ 1 ） The meaning of deposit  Note: Deposit is different from the advance payment （ 2 ） The function of deposit clause (Penalty clause of the deposit) （ 3 ） Precautions of using deposit clause  If both penalty clause and deposit clause are stipulated, damaged side can only select one (article 116 of "contract law ").

Section 3: Force Majeure 1. The meaning of Force Majeure (1) Preconditions of force majeure  Notice: Market risk, commodity price fluctuation, and exchange rate variation can't be regarded as force majeure incidents.  Force majeure is free from liabilities.

2. Force Majeure Clause (1) The nature and range of force majeure  There are three ways to stipulate force majeure clause: 1. In a summarizing way 2. In a specified way 3. In a comprehensive way

(2) Treatment of force majeure events  There are two kinds of force majeure consequences: First, the rescission of the contract; Second, postpone fulfilling the contract.  Case analysis: (3) Force majeure incidents’ inform and certificate

Section 4: Arbitration 1. Arbitration is an important way of settling disputes （ 1) Amicable Negotiation （ 2 ） Conciliation （ 3 ） Arbitration 1 、 The definition of Arbitration  Two parties reach a written agreement that they will submit the disputes which can’t be settled through amicable negotiations to the third party for arbitration whose decision is final and binding. 2 、 Characteristics of Arbitration （ 4 ） Litigation

The arbitration agreement eliminates the jurisdiction of the court over the relative case 2. The forms and functions of arbitral agreement (1) The form of arbitral agreement  Arbitration Clause or agreement in advance  Submission or agreement afterwards  If agreement in advance is not accordance with agreement afterwards, subject to agreement afterwards.  Those two kinds of arbitral agreements have equal legal effect (2) The function of arbitral agreement

3. Arbitral Proceeding 1.The plaintiff’s application 2.The formation of arbitral tribunal 3.The hearings 4.The award-making 4. Admit and execute arbitral award  The most important international convention is the “Convention of New York 958”, our country joins in this convention in 1987.

5. The stipulation of arbitration clauses (1) Place of arbitration (2) Arbitration authority (3) Arbitration rules (4) Effectiveness of award (5) Arbitration expense bearing The award is usually final and has the force of law binding upon both parties.

6. Clause forms of arbitral C 1. Clause form arbitrated in our country C 2. Clause form arbitrated in the country of defendant C 3. Clause form arbitrated in the third country

Summary C This chapter has introduced each clause about prevention and treatment of disputes in merchandise contract, including inspection, claim, force majeure and arbitration, etc. C Key point of this chapter: Inspection clause, claim clause, force majeure clause and arbitral clause C Difficult point of this chapter: Force majeure definition, similarities and differences between arbitration and lawsuit

Questions of this chapter  1, when the accident of the claim happens, how to clear and definite claim target?  2, what’s the penalty clause of deposit?  3, what are the conditions of force majeure?  4, what are the form and function of arbitral agreement?