Friday, January 16, 2009

Case of "Mashed Potatoes."

Case of "Mashed Potatoes."

Charles Mash, a British potato dealer, bought Cyprus potatoes from an importer, Joseph Emanuel, while the goods were in Cyprus. When the contract was signed the potatoes were in good condition. But when they arrived in England, they were good only for pig food.Did Mr. Mash have to pay the full price?

While they are described as in good condition when the contract was signed, how do we know they were not designated as pig food to begin with? Unless we can read the contract terms the specific description of this product is unknown. All we know is that Mr. Mash was expecting something better.

Mr. Mash's obligations to pay or not for these pig food products are determined by the contractual governance of transfer of risk or title if not designated under British laws then under the Vienna Sales Convention. Mr. Mash's requirements to pay are dependent not only upon his opinions on the condition of the product but upon the point of his legal ownership which must be specified in the contract:

Risk: At what point did Mr. Mash acquire the products?

Rejection: Has Mr. Mash accepted ownership prior to the point of recognizing that the quality of these products are not as were agreed? That would be foolish.

Price: If Mr. Mash has already taken ownership but refused to pay for these products he may be sued by the Cypriots unless they have blatantly failed to meet contract conditions.

Right of Action: If he has accepted ownership and paid for the potatoes perhaps he may sue for damages. However his success would depend upon well specified conditions and contract terms.

Have these spuds been ascertained prior to purchase? Were specific terms of the contract inclusive of title transfer only at the point of ascertaining that the potatoes were in accordance with specific product description and did this match SGA terms of " identified and agreed upon when the sales contract was made?" This may protect Mr. Mash's interests. Or is that contract unconditional? if it is, Mr.Mash has few options but to pay for the product regardless of its quality. Did the contract include specific mention of consumable quality of these potatoes? If not, Mr. Mash must ante up.

Was Mr. Mash prudent in specific contract details including confirming their state upon arrival or delivery? If not, he must foot the bill. Has Mr. Mash included a delivered on approval or on "sale or return" terms providing security and confirmation of acceptance contingent upon adopting the transaction? If not, he must cover the cost of the product. Under these terms Mr. Mash would protect his interests in a quality product and would secure suitable quality products to permit agreed acceptance of title and risk. Otherwise without such clauses in the written contract Mr. Mash will be required to pay for the sub-standard product.

What warranties or conditions were included in the written contract? What product description is rendered? While many terms are considered implied if they do not specifically describe the grade or quality of potato to be delivered then Mr. Mash has not performed due diligience. Without including conditions to specify the product quality then Mr. Mash may not reject a condition which does not exist. At the same time his seller may have been under the impression that the potatoes were to be used as piggery silage.

Mr. Mash must also be aware that the terms of acceptance of the product determine and rule his obligation to pay for them. If he indicates acceptance of the products prior to inspection he should swallow his losses. If Mr. Mash refuses to pay at that point he will face potentially more than double his losses on the litigation and could be sued for breach of contract which would be a stain on his business records. Did Mr. Mash use EXW, FOB or CIF? If Joseph Emanuel secured payments in advance through some roguery he will laugh all the way to the bank while Mr. Mash cries into his sub-standard spuds for not making enough conditional title transfer and acceptance terms or a foolish contract devoid of ascertaining rights to the delivered quality of his property.

He must pay for his mistakes in that case.

No comments: