Australian Computing Systems

Issue:

Australian Computing Systems (ACS), the seller has a contract with Chinese Textile (CT), the buyer to supply 5 custom-built computers and 3 custom-designed software programmes. However, CT brought up complaint against ACS that out of two units' computers was damaged during the delivery on sea from Melbourne to Tianjin. Moreover, the second programme was found that defective and corrupted the first programme. CT would like to understand its contractual rights before reaching any agreement with ACS to settle the above issue.

Review of contract's terms

In order to examine the contractual rights on behalf of CT before proceeding litigation action, it is necessary to determine the governing law of this contract. First, the main factor in determining which governing law applies is by looking at the contract itself. Under the terms of sales of goods contract, both parties, Australia Computing Systems (ACS) and Chinese Textile (CT) has expressly agreed that the governing law would be subject to the law of Victoria, Australia. In this case, the law of Victoria, Australia would be enforced in this contract. This includes the Goods Act 1958 (VIC) and the Convention on International Sale of Good (CISG). According to Section 5 of Sale of Goods (Vienna Convention) Act 1987, the provisions of the Convention have the force of law in Victoria due to Australia is one of the signatories of Vienna Convention and adopted the law into its Act since 1987. This implies that all the states and territories of Australia have incorporated the CISG into their state and territory law. In other words, the CISG is part of Australian law. As for Goods Act 1958 (VIC), the domestic law will also apply by filling out the gap in certain laws that was not covered under the CISG.

In accordance to Article 2 of CISG, the sales of customized computers and softwares are for commercial purposes. For that reason, it is not categorized under excludable goods and classify under commercial goods.

Seller and Buyer's Obligation

To determine whether there is a breach in the contract by the seller, it is necessary to look at the obligations of both buyer and seller under the provision of CISG. In this case, 2 out of 3 units custom-built computers had badly damaged during the transportation from Melbourne to Tianjin, ACS (seller) may have breached Article 35 of CISG. According to this article, ACS has an obligation to deliver goods in conformity of the contract to CT (buyer). This implies that the computers were not fit for the purpose as CT purchased the computers for its new factory operation but it is now unable to utilize the hardware. Also, the computers shall be shipped no later than 1st June 2010 but due to the strikes at Melbourne Port, the goods were not shipped until

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