Case study: Cotton or not

The German "Bugo Hoss" (B) company situated in a small German town called Mutzingen
needs cotton for the production of shirts. Therefore, a number of cotton mills worldwide
are asked for information about their prices for high quality cotton. It shows that a cotton
mill in the United States of America called "Scarlett Cotton ltd. " (S) is offering best quality
for a reasonable price (3,50 $/m).
On June 16th. "Bugo Hoss" sends a letter to "Scarlett Cotton" saying that "Bugo Hoss"
would like to order 60000 meters of cotton for a price of 3,50 US $ per meter. This letter
reaches "Scarlett Cotton" on June 23rd. The order is discussed at "Scarlett Cotton" on
June 24th. It is decided to sell that material to "Bugo Hoss" for the price suggested in the
letter mentioned above. A fax containing this decision is sent to "Bugo Hoss" June 25 th.
early morning. Nobody realized that on the June 24 th. of late at night a fax of "Bugo
Hoss" arrived at "Scarlett Cotton" stating that due to the fact that the sale of shirts in
Germany was declining the order sent the 16 th. has to be reduced to 30000 meters of
cotton. "Scarlett Cotton" already made arrangements for the production of 60000 meters
of material for "Bugo Hoss". Therefore "Scarlett Cotton" wants "Bugo Hoss" to pay
210000 $ and take delivery of 60000 meters of cotton.

Prof. Dr. Bernd Banke ▪ © 2020

 Questions on the case:

1.) Which laws are going to be applied in that case,

pretending that "Bugo Hoss" could only be sued in
Germany?
2.) Does "Bugo Hoss" have to pay 210.000 $ and take
delivery of 60000 meters of cotton?

Prof. Dr. Bernd Banke ▪ © 2020

 Hochschule Reutlingen
Fakultät: ESB

International Business Law

Prof. Dr. Bernd E. Banke

Mail Delay:

The ,,Silly Prices AG“ (S) is a wholesale merchant located in Stuttgart. On February
28th. ,,Silly Prices“ sent letters to companies all over the Germany they were in
business relations with offering each of them 500 CD players as a ,,special offer for
well known partners“ at a price of 30 € per player. ,,Silly Prices“ had only 2500 of
these players on stock, therefore the letter stated at the end:
,,This offer has to be accepted by your company until March 16th. If it is not accepted
at that date, we will offer these players to other prospective buyers, who might be
interested in that cheap high quality offer!“
One of the companies this letter was sent to, was the ,,Buy good, but cheap!“ GmbH
(B) which is located in Hamburg. After having received the letter of ,,Silly Prices“ on
March 6th., they immediately sent a responding letter to ,,Silly Prices“ ordering 500
CD-players for 30 € each. ,,Buy good but cheap!“ knew that ,,Silly Prices“ had very
good offers in the past. That letter was stamped March 6th.
From March 6th to 16th there was a strike of post employees in Germany. Radio,
Television and newspapers in Germany reported on that strike very detailed.
Because of that strike ,,Buy good but cheap!“'s letter reached ,,Silly Prices“ at March
19th. At that date ,,Silly Prices“ had already sold the players they had in stock, so
,,Silly Prices“ neither sent out the ordered players nor reacted on that order. Two
weeks later the sales manager of “Buy good but cheap!“ called ,,Silly Prices“ and
asked for the delivery of the CD players. He was told that his order had been late and
that due to that fact there was no obligation for ,,Silly Prices“ to deliver. The sales
manager replied that ,,Silly Prices‘ should have informed his company about the
delay and that “Buy good but cheap!“ insisted on the delivery.

The CEO of “Buy good but cheap!“ asks you whether “Silly Prices” is obliged
to deliver the players.
 Hochschule Reutlingen
Fakultät: ESB

International Business Law

Prof. Dr. Bernd E. Banke

Mail Delay (international):

th.
The Silly Prices GmbH (S) is a wholesale merchant located in Stuttgart. On February 28
S sent letters to companies all over the world they had business relations with offering
each of them 500 CD players as a special offer for well-known partners at a price of 30 €
per player. S had only 2500 of these players on stock, therefore the letter stated at the
end:
th.
,,This offer has to be accepted by your company until March 16 If it is not accepted at
that date, we will offer these players to other prospective buyers, who might be interested
in that cheap high-quality offer! “
One of the companies this letter was sent to, was the “Buy good, but cheap! sarl” (B)
th
which is located in Paris. After having received the letter of S on March 6 , B immediately
sent a responding letter to S ordering 500 CD-players for 30 € each. B knew that S had
th
very good offers in the past. That letter was stamped March 6 .
th th
From March 6 to 16 there a strike of post employees in France occurred. Radio,
Television and newspapers all over Europe reported on that strike very detailed. Because
th
of that strike B’s letter reached S at March 19 . At that date S had already sold the
players they had in stock. S neither sent out the ordered players nor reacted on that
order. Two weeks later the sales manager of B called S and asked for the delivery of the
CD players. He was told that his order had been late and that due to that fact there was
no obligation for S to deliver. The sales manager replied that S should have informed his
company about the delay and that B insisted on the delivery.
1. Which laws have to be applied in that case, if S can only be sued in Germany?
2. Does S have to deliver 500 CD players?
Julia Schanz / B. Banke International Business Law Case Study 1

Mail Delay (CISG)

“Buy good but cheap” % “Silly Prices” on delivery of 500 CD‐Players

As it was stipulated in the case, the company “Silly Prices” (S) offered a special deal of 500 CD
players at a price of 30 US $ per player to various companies including “Buy good, but cheap”
(B). The offer stated at the end that the offer had to be accepted until March 16th. However,
due to a mail delay, the acceptance reached S on March 19th.
Since the case is between a wholesale merchant in Singapore and a company located in
Australia, and no German court is involved, no German law will be applied.
Since the two countries involved are contracting States, the CISG will be applied according to
the Art. 1 (1)a of the CISG.
According to Art. 30 of the CISG, the seller must deliver the goods, hand over any documents
relating to them and transfer the property in the goods, as required by the contract and this
Convention.
The prerequisite for this affirming this is a sale contract are 2 declarations of intentions (offer
and acceptance).
The letter of S sent on February 28th stating the offer of 500 CD players at a price of 30 US $
per player is according to Art. 14 (1) and (2) of the CISG an offer since it stated the good,
quantity, price, time span, seller and buyer. This offer became effective according to Art. 15 (1)
when it reached the buyer on March 6th.
According to Art. 18 (1) of the CISG, the acceptance of an offer is a statement made by the
buyer indicating assent. B accepted the offer by sending a letter on March 6th. However,
according to Art. 18 (2) of the CISG, the acceptance of an offer becomes effective only if it
reaches the seller within the time span he has fixed or within reasonable time of no time is
fixed. In this case, due to a strike from the 6th to the 16th the letter reached S on March 19th,
three days after the deadline. Since the response didn’t arrive within stipulated time, the
acceptance shouldn’t be taken into account.
However, based on Art. 21 (2) of the CISG the late acceptance is deemed to have been effective
as an acceptance. Therefor the following prerequisites have to be fulfilled:
A letter or other writing containing a late acceptance shows that it has been sent in such
circumstances that if its transmission has been normal it would have reached the seller in due
time, unless, without delay, the seller orally informs the buyer that he considers his offer as
having lapsed or dispatches a notice to that effect.
In the case given the accepting letter was sent on March 6th which is shown by the post date
stamp. It shows that under normal circumstances the acceptance would have reached the
offeree in time since for this distance a transport of maximum 3 to 4 days is normal. Finally the
offeror gave an information after two weeks on a request of the offeree only. That definitely is
not fulfilling the prerequisite of giving notice “without delay”.
Therefore, since the acceptance of B would have reached S in due time under normal
circumstances, the acceptance is valid.
So since the offer and acceptance are valid, just like the contract, S is obliged to deliver the
players to B according to Art. 30 of the CISG.
 Hochschule Reutlingen
ESB / IB
International Business Law
Prof. Dr. B. Banke

Group 1 / 5 Case:

The American Car dealer C sold 1500 Toyota cars to various car dealers in Australia.
Due to a misconstruction the breaks of these cars did not work correctly and caused
accidents.
The German tourist T having rented one of these cars on his holidays in Australia
had a serious accident because of the malfunction. He had to be treated in an
Australian hospital.
T wants to sue the car dealer C for damages and wants to know which laws a
German Court would apply in his case.
 Hochschule Reutlingen
ESB / IB
International Business Law
Prof. Dr. B. Banke

Group 2 / 6 Case:

The Swiss wholesale merchant S sold 20 tons of frozen mussels from New Zealand
to a German sales company (G). Due to the fact that these mussels had a content of
cadmium which was too high to get a permission to sell them in Germany, the
contracted was declared void.
Now G wants the repayment of price which already was paid suing S in Germany.
Which laws will be applied?
 Hochschule Reutlingen
ESB / IB
International Business Law
Prof. Dr. B. Banke

Group 4 / 8 Case:

Rotorex (R) a Company producing pumps and compressors is situated in the state of
New York (USA). R delivered 10.800 compressors to the company “Climate Tech”
(C) a producer of air conditioners in Germany. Since C could not pay the
compressors immediately, a retention of title clause was established in the contract
between R and C.
C was not successful and fell into insolvency before having paid for the compressors.
Now R wants the compressors back and is about to sue the insolvency administrator
in Germany.
Which laws will be applied?
 Hochschule Reutlingen
ESB / IB
International Business Law
Prof. Dr. B. Banke

Group 3 / 7 Case:

The US-tax consultancy company Buzz Hamilton (B) is working for a German car
manufacturer Baimler Denz (D). On June 29th one of the consultants realizes that it
was forgotten to deliver D´s tax declaration in due time (30th. Of June).
Since he cannot get in contact with D, he files the declaration to the US authorities in
time (June 29th shortly before midnight) without having had an order to do so from D.
Now he wants to sue D for his fees in Germany. Which laws will be applied?