CCNP International Contracts 2 — Questions and Answers
Question 1: Under the CISG, which party bears the risk of loss during transit when goods are handed to a carrier for delivery to a buyer in another country?
- The buyer bears risk once goods are handed to the first carrier (Correct answer)
- The seller bears risk until delivery at the buyer's location
- The carrier bears all risk during transit
- Risk shifts only upon the buyer's signature of receipt
Correct answer: The buyer bears risk once goods are handed to the first carrier
CISG Article 67 transfers risk to the buyer when goods are handed to the first carrier if the contract involves carriage.
Question 2: A US company negotiating a contract with a Japanese firm encounters a cultural practice of extensive relationship-building before discussing terms. This practice is best described as:
- High-context negotiation culture (Correct answer)
- Low-context negotiation culture
- Adversarial bargaining
- Positional negotiation
Correct answer: High-context negotiation culture
Japan is a high-context culture where trust and relationships are established before business terms are discussed.
Question 3: Which international treaty governs the recognition and enforcement of foreign arbitral awards in over 170 countries?
- The New York Convention (1958) (Correct answer)
- The Hague Convention on Choice of Court Agreements
- The UNCITRAL Model Law
- The Geneva Protocol (1923)
Correct answer: The New York Convention (1958)
The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards is the primary international instrument for enforcing arbitral awards.
Question 4: In international contracts, a 'hardship clause' is designed to:
- Allow renegotiation when unforeseen events fundamentally alter the balance of obligations (Correct answer)
- Exclude liability for negligent acts by either party
- Specify penalties for late delivery
- Define the governing law of the contract
Correct answer: Allow renegotiation when unforeseen events fundamentally alter the balance of obligations
A hardship clause triggers renegotiation rights when changed circumstances make performance excessively burdensome for one party.
Question 5: When a US exporter uses the Incoterm CIF (Cost, Insurance, and Freight), the seller's obligation regarding insurance is to:
- Obtain minimum cargo insurance covering 110% of the contract price (Correct answer)
- Provide comprehensive all-risk insurance at seller's discretion
- Insure only the portion of the journey within the US
- Leave insurance entirely to the buyer's arrangement
Correct answer: Obtain minimum cargo insurance covering 110% of the contract price
Under CIF, the seller must obtain minimum cargo insurance (Institute Cargo Clauses C) for 110% of the contract value.
Question 6: A contract clause stating 'This agreement shall be governed by and construed in accordance with the laws of England and Wales, excluding its conflict of laws rules' is known as a:
- Choice of law clause (Correct answer)
- Jurisdiction clause
- Arbitration clause
- Severability clause
Correct answer: Choice of law clause
A choice of law clause designates which country's substantive law will govern interpretation and enforcement of the contract.
Question 7: Under the UNIDROIT Principles of International Commercial Contracts, the duty of 'good faith and fair dealing' is:
- Mandatory and cannot be excluded by the parties (Correct answer)
- Optional and may be waived by agreement
- Applicable only during formation, not performance
- Limited to consumer contracts
Correct answer: Mandatory and cannot be excluded by the parties
UNIDROIT Principles Article 1.7 establishes good faith and fair dealing as a mandatory duty that cannot be contractually excluded.
CCNP International Contracts 2
Under the CISG, which party bears the risk of loss during transit when goods are handed to a carrier for delivery to a buyer in another country?