ACCA LW International business transactions: practice questions with answers

Answer: D. The CISG applies to contracts for the sale of goods between parties whose places of business are in different States (where those States are Contracting States, or where private international law leads to the law of a Contracting State). It excludes certain sales, including goods bought for personal, family or household use (unless the seller did not know and ought not to have known this), sales by auction or on execution, stocks, shares and money, ships, vessels, hovercraft and aircraft, and electricity. Goods to be manufactured count as sales unless the buyer supplies a substantial part of the materials or the contract is mainly for labour or services.

Answer: C. Incoterms are standard trade terms published by the International Chamber of Commerce. They apply only if the parties incorporate them into their contract. Each rule allocates obligations (such as delivery, documents and clearance), risk and costs between seller and buyer. Incoterms do not deal with the transfer of ownership, the price or payment terms, or the remedies for breach of contract; those are governed by the contract itself and the applicable law (for example the CISG).

Answer: A. In Incoterms 2020, DPU replaced the former DAT rule. It is the only rule that requires the seller to unload the goods at the destination; risk passes when the goods, once unloaded, are placed at the buyer's disposal. Under DAP and DDP the goods are delivered on the arriving vehicle ready for unloading by the buyer.

Answer: B. Under the CISG a reply containing additions or modifications is generally a rejection and counter-offer. However, if the additional terms do not materially alter the offer, the reply is an acceptance (on the modified terms) unless the offeror objects without undue delay. The Convention lists terms that are treated as material, including those relating to price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other, and the settlement of disputes. A request to add an order reference to shipping labels falls outside that list.

Answer: A. The CISG is built on freedom of contract. It applies automatically to a contract of sale of goods between parties whose places of business are in different Contracting States, but the parties may exclude its application entirely (for example by choosing a national law and expressly excluding the Convention) or derogate from or vary the effect of any of its provisions. The one limitation concerns form: where a party has its place of business in a State that has made a reservation requiring contracts to be in writing, the parties cannot use their freedom to avoid that requirement.

Answer: D. Incoterms 2020 divide the eleven rules into two groups:

- Rules for any mode or modes of transport: EXW, FCA, CPT, CIP, DAP, DPU and DDP.
- Rules for sea and inland waterway transport only: FAS, FOB, CFR and CIF.

Under FAS the seller delivers when the goods are placed alongside the vessel nominated by the buyer (for example on the quay) at the named port of shipment; risk passes then, and the buyer bears the cost of loading and the main carriage. For containerised goods handed to a carrier at a terminal before loading, FCA is more appropriate than FAS or FOB.