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MediMARE Game - Misleading Incoterm clause

MediMARE GAMES are a series of games related to the project's main issues in order to promote the knowledge and reflection about maritime disputes and mediation.

Misleading Incoterm clause

In this game, the player will be able to think about Incoterms.

Incoterms (International Commercial Terms) are contractual terms elaborated by the ICC and that sellers and buyers incorporate into their international contracts for determining the obligations of the parties regarding the transportation costs and responsibility, where goods will be delivered (and thus where the obligation of the seller ends), insurance and export costs (taxes, declarations and other import and export obligations). The incorrect use of the Incoterms in the contract may lead to mistaken obligations / responsibilities of the Parties. Examples being who bears the risk of loss or damage to the goods while in transit, or who is responsible to pay for international transportation.

Seller, with a place of business in Ecuador, sent proposal to Buyer, with a place of business in Fiji, in which he referred price as “CIF Buyers’ factory”. Buyer accepted the terms of the proposal, which was incorporated into the contract.

When time of implementation of the contract arrived, there was a discussion on the extent of the obligations of the Seller. As a clarification, the Incoterm CIF stands for Cost, Insurance and Freight, and in such terms, the obligations of the Seller finishes when goods are delivered at the port of destiny. There is no CIF Incoterm which would end at the Buyers ‘place of business (or factory), since CIF is a maritime Incoterm. The correct reference in the contract would be CIF Port of Destiny, and it is important to mention the year of publication of the Incoterm, since they are updated to market needs and published periodically. The last Incoterm publication is dated 2020.

So, the parties (who have already been business partners for several years) agreed there was a misunderstanding in the draft of the proposal, and decided to start a mediation procedure to solve this conflict.

In the contract proposed by the Buyer there was not any mention to mediation as a form of solving disputes (or any other form, whatsoever). But the parties, understanding mediation could support them in solving this matter amicably, decided to start a mediation procedure.

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