Claims and Sanctions

A contract defines rights and obligations of the parties involved. In case of breach of Contract the sufferer makes a claim on the party which fails to meet its contract obligations. It is more often the case that it is the Buyer who makes a claim on the Seller. Most often the Buyer makes quality and quantity claims on the Seller. The cause for complaint may be poor quality, breakage, damage, short weight, leakage etc.

Claim Procedure

The Buyer must write a statement of claim and mail it to the Seller together with the supporting documents. Bill of Lading, Airway and Railway Bill, Survey Report, Quality Certificate may serve as documentary evidence. If necessary, drawings, photos, samples are enclosed as proofs of claims. The date of a complaint is the date on which it is mailed.

Claims can be lodged during a certain period of time, which is usually fixed in a Contract. During the claim period the Seller is to enquire into the case and communicate his reply. He either meets the claim or decli­nes it. The Seller has a full right to decline a claim if the goods are disorderly stored, mishandled or misused by the Buyer. If a claim has a legitimate ground behind it the parties try to settle it amicably.

Ways of Settling a Claim

In case of short-weight it is recompensed by a load sent separately or at the time of follow-up shipments. In case of damage or faults, the goods at the Buyer's option can be repaired or rep­laced, all at the Seller's expense. If the goods are missing the Seller must necessarily locate them. Sometimes it is quite a problem as consignments may be lost when transshipped at some intermediate port or if sent at a wrong address. If the goods are not recovered compensation must be paid by the party directly responsible for it.

Sanction against the Seller

If the Seller fails to deliver the goods by the date due, he is penalized. If the delay is longer than 2 months the Buyer has the option of cancelling the Contract altogether but the Seller is to compen­sate for the loss incurred.

Complaints coming from the Seller

The Seller in his turn is entitled to make a claim on his coun­terpart if the Buyer fails to meet his contractual obligations.

The Seller may inflict penalties on the Buyer if there is a de­fault in payment. In an FOB transaction the Seller is entitled to compensation for extra storage expenses if the Buyer's vessel bound to pick up the goods fails to call at the port in time. In a CIF transaction the Seller may claim the demurrage if his own vessel stays idle at the port awaiting unloading.

Assignments

I. Memorise the following words and phrases:

breach of contract	порушення контракту
the sufferer	сторона, яка постраждала
claim	претензія
supporting documents	супровідні документи
statement of claim	позовна заява
survey report	акт огляду
to make/to lodge the claim	висунути скаргу
to meet the claim	задовольнити претензію
to decline the claim	відхилити претензію
to settle the claim amicably	урегулювати претензію по-дружньому
at the Buyers'/Sellers' option	на розсуд покупця / продавця
tranship, transship	перевантажувати (з одного судна на інше)
transshipment, transhipment	перевантажування
penalty	штраф
to penalize	штрафувати
to compensate smb for smth	компенсувати, відшкодовувати
to entitle	уповноважувати
to be entitled	мати право, бути уповноваженим
expenses	витрати, видатки
at someone's expense	за чийсь рахунок
demurrage	простій судна, вагона
Bill of Lading	коносамент
Airway/Railway Bill	авіаційна/залізнична накладна
Survey Report	акт огляду
Quality Certificate	сертифікат якості
to enquire into	розслідувати
legitimate ground	законна підстава

II. Answer the questions:

1. What kind of claims are made by the Buyer?

2. What sort of claims are lodged by the Seller?

3. What is the procedure for making claims?

4. When does the Seller decline a claim?

5. How are claims settled?

6. What are the sanctions against the defaulter?

6.2.8. Sample contracts

Sample Contract 1

Kyiv, December 11, 20…

Firm ............, hereinafter referred to as the "Seller" on the one part, and ……hereinafter referred to as the "Buyer" on the other part have concluded the present Contract to the effect that:

1. Subject of the Contract

Seller shall sell, and the Buyer shall buy the merchandise (FOB Kyiv) .............which quantity, assortment, and quality are indicated in Specifica­tion, Appendix to the present Contract, forming its integral part.

2. Price and Total Cost of Contract

The price for the merchandise supplied in accordance with the present Contract amounts to ……, (FOB Kyiv). The total cost of the Contract shall amount to……

3. Quality of the merchandise

Quality of the merchandise to be delivered under the present Cont­ract shall be in full conformity with the standards in force in Ukraine or with norms of the plants, manufacturing the merchandise and shall be confirmed by manufactu­rer's certificate of quality.

4.Guarantees

The Seller shall guarantee the quality of the delivered merchandise for.....months from the date of the beginning of its operation, but for not more than .. months under favourable conditions of its operation.

5. Dates and terms of delivery

The Seller shall deliver the mer­chandise to the Buyer in dates, indicated in Appendix № to the present Contract.

Delivery of the merchandise under the present Contract shall be effected under the shipping documents, indicated in Appendix № to the present Contract.

The Seller shall notify by cable the Buyer not later than……. days after the ….(vessel's) departure from the Sel­ler's (port) about the shipment of merchandise with indication of…. (data of way­bill or Bill of Lading etc).