On 15 January a chocolate retailer in Launceston, Tasmania called Grays’ ordered 900 Swiss chocolate eggs (each in special packaging) from Specialist Goods, an importing company in Adelaide. The agreed price was A$15 per kilogram including the cost of delivery and insurance and the eggs were to be delivered to Grays’ in Launceston at least one week before Easter week commencing on 15 April.
Grays’ paid a cash deposit of 50% of the price to Specialist Goods on 19 January and Specialist Goods then placed an order under Incoterms 2010 CIP Adelaide for the eggs (each in special packaging) with a Swiss chocolate manufacturer called Innisbruck which was well known for both the quality of its chocolate and the cuteness of its packaging. A 30% deposit was paid and delivery in Adelaide was to be before the end of March.
A special packaging item unique to the eggs supplied by Innisbruck was manufactured in Fuzhou China and Innisbruck, needing to ensure sufficient packaging to meet this order, had ordered FOB Shanghai an additional quantity of the packaging in January and expected to receive it early in February. However, it was delayed in delivery and Innisbruck decided to use as many of the packages as it had in stock and to split the order in two; the first shipment of 500 packaged eggs was despatched and reached Adelaide on 5 April and the second shipment of 400 was despatched as soon as the additional packaging arrived from China; it reached Adelaide on 13 April.
Upon arrival of the first shipment in Adelaide the freight forwarder hired by Specialist Goods at first decided to store that shipment and consolidate it with the second shipment for delivery to Grays’ in Launceston. This would follow standard practice for Tasmanian deliveries.
Several days later when Specialist Goods became more concerned about the delay being encountered it instructed the freight forwarder to despatch all of the eggs to Launceston by air as soon as the second batch arrived. This was done but the eggs did not arrive until after Easter, on 19 April due to an industrial dispute at Melbourne where the eggs needed to be transhipped. Unfortunately one package of eggs was left on the tarmac at Melbourne airport and in the hot sun the eggs melted.
The outcome was that –
· The freight forwarder claimed 3 times the freight originally agreed upon; and
· Grays’ rejected the eggs due to the failure to deliver before Easter and the fact that one package of eggs had been damaged in transit;
· Grays’ seeks return of its deposit paid to Specialist Goods and damages for the loss of profit as a result of not being able to sell the eggs at the pre-Easter retail price of A$25 each.
A report which considers the position of each of the parties involved in this scenario and which makes a recommendation as to the remedies available to:
i. Grays’ for the return of its deposit paid to Specialist Goods;
ii. Grays’ for damages for the loss of profit;
iii. The freight forwarder for its increased freight cost;
iv. Specialist Goods for the return of its deposit paid to Innisbruck.
It will be noted that there is a number of factors involved in this scenario – you should first identify the issues which need to be addressed in order to answer the above four questions. Then you should identify the rules, regulations, legislation and cases which might provide guidance in arriving at your recommendations. In your report you may criticise the actions of any of the various participants and advise how better practice might have avoided a problem.