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International Business Law, 2010-2 Case Study Treibacher Industrie, A.G. v. Allegheny Technologies, Inc. Da-yea Kwon 0969007 Hye-jung Min 0969020 Herim Ahn 0969046 Youmee Lee 0969058 Facts Issue I3: R&A I2: R&A I1: R&A Conclusion Background & Facts November and December of 2000 contract Treibacher Industrie (Treibacher) Tantalum carbid (TaC) Price : at prices specified in the contract Quantity : specified quantities in the contract Time : at time specified in the contract REFUSED Consignment(PAY) TDY Industries Inc (TDY) Facts Issue I3: R&A I2: R&A I1: R&A Conclusion Issue 1. Whether TDY has obligation to take delivery of or pay for TDY’s Obligation of payment any TaC that it did not wish to use 2. Whether the term “consignment” should be construed “Consignment” = customary usage according to it s customary usage in the industry. 3. Whether CISG article 9 (2) should be read to mean that, of CISG article agree 9(2) to meaning of unless parties to Meaning a contract expressly no express agreement on a term -> Customary trade usage a term, the customary trade usage applies Facts Issue I3: R&A I2: R&A Issue #3 Issue I1: R&A Rule Conclusion Analysis Whether CISG article 9 (2) should be read to mean that, unless parties to a contract expressly agree to meaning of a term, the customary trade usage applies CISG article 9(2) Meaning of term Customary trade usage AGREE Article Article 9(2) 9(2) : Parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract … a usage of which the parties knew or ought to have known and which in international trade is widely known to … parties to contracts of the type involved in the particular trade concerned. Facts Issue I3: R&A I2: R&A Rule #3 Issue I1: R&A Rule Conclusion Analysis A statue should be construed so that effect is given to all its provisions, so that no part of it will be inoperative or superfluous, void or insignificant Inoperative Superfluous Void Insignificant Effect =>provision Facts Issue I3: R&A Analysis #3 TDY’s Argument CISG article 9 (2) should be read to mean that, unless parties to a contract expressly agree to meaning of a term, the customary trade usage applies. • Expressly unless expressly Customary agreed, customary usage applies Agreed Usage • customary usage takes precedence over Customary the Understanding parties’ Of termunderstanding Usageof the term I2: R&A Issue I1: R&A Rule Conclusion Analysis Counter - Argument TDY’s argument renders article 8(3) superfluous and the latter portion of article 9(1) a nullity • 8(3) 8(3) – “any practices which the parties have established between themselves” • 9(1) 9(1) - “bound by any practices which they have established between themselves” Facts Issue I3: R&A Issue #2 I2: R&A Issue I1: R&A Rule Conclusion Analysis • whether the term “consignment” should be construed according to its customary usage in the industry. Consignment Customary Usage Facts Issue I3: R&A I2: R&A Rule #2 Issue I1: R&A Conclusion Rule Analysis Article 9 (1) “ parties are bound by any usage to which they have agreed and by any practices which they have established between themselves” USAGE PRACTICE BOUND Facts Issue I3: R&A I2: R&A Analysis #2 Issue TDY’s Argument • Unless otherwise agreed, a contract term should be interpreted as its customer Contract Customary usage term Usage • And the customary usage of the term “consignment” in the metal field, as Actual use of TaC experts say, means that no sale occurred unless “Consignment” and until TDY actually used Sale occurs the TaC I1: R&A Rule Conclusion Analysis Counter - Argument According to article 9 (1) if there is an established practice between the parties involved in Customary theEstablished contract it takes precedence Usage overPractice customer usage. • • • And there was an established practice between TDY and Treibacher. For 7 years, TDY has been executing contracts which agreed to buy and sell all TaC from Treibacher on consignment. Also, in 1999, an empirical evidence shows that TDY agreed that it was contractually obligated to purchase all materials delivered from Treibacher Facts Issue I3: R&A I2: R&A Issue #1 Issue I1: R&A Rule Conclusion Analysis • Whether TDY has obligation to take delivery of or pay for any TaC that it did not wish to use TDY Obligation TaC Delivery Payment Facts Issue I3: R&A I2: R&A Rule #1 Issue I1: R&A Rule Conclusion Analysis • One of the general principles of CISG – parties have the obligation to mitigate damages resulting from a breach Parties Obligation Mitigate damages Facts Issue I3: R&A Analysis #1 TDY’s Argument • Applying the customary usage to interpret the term “consignment,” the obligation of TDY to purchase and payment has not occurred, and thus TDY did not breach. • Therefore, TDY does not have the obligation to compensate for any damage that Treibacher insists. I2: R&A Issue I1: R&A Rule Conclusion Analysis Counter - Argument • since the use of the term "consignment" means that TDY has the responsibility to buy what has been delivered, which TDY did not put into action, TDY has the obligation to mitigate the damages caused by refusing to purchase TaC delivered from Treibacher Facts Issue I3: R&A I2: R&A I1: R&A Conclusion Conclusion • Issue Issue33. whether CISG article 9 (2) should be read to mean that, unless parties to a contract expressly agree to meaning of a term, the customary trade usage applies No, it should be read to mean that customary trade usage applies unless there is an established practice • Issue Issue22. whether the term “consignment” should be construed according to its customary usage in the industry. No, the term should be interpreted through subjective approach (i.e. by any practices which they have established between themselves) • Issue Issue11. whether TDY has obligation to take delivery of or pay for any TaC that it did not wish to use Yes, TDY has obligation to purchase all of the TaC specified in the contract and that Treibacher took reasonable measure to mitigate its losses after TDY breaches