1a) Whilst it is unfortunate that the useable coal has been reduced by half because of the fire, it

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1a) Whilst it is unfortunate that the useable coal has been reduced by half because of the fire, it is unlikely that the Chinese buyer will be able to seek any remedies against the Australian buyer, AUS STEEL. This is because the contract has specified FOB (Free On Board) which means that the seller has paid for the goods to be loaded onto the ship. In this INCOTERM the risk for those goods is transferred when the goods are loaded. Additionally, the master of the Iron Monarch had issued a clean bill of lading when the goods were loaded. In this situation the risk has been transferred to the carrier and thus the seller is not responsible for the damage that has occurred after the loading of the goods.

1b) Because the risk of the goods has
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However, if the carrier was found to be at fault the possible remedies against them is contained in Article IV s5 ssa of the Hague-Visby rules:
“Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher.”

2) More than likely the Chinese buyer will not be able to demand a refund against the Australian seller. This is because the contract of sale stipulates an irrevocable letter of credit, which means that the letter of credit cannot be revoked or changed without written consent. Also, there is the matter of the fulfilment of the contract. The seller has fulfilled all of its required duties in that it has delivered the agreed amount, in the right quality, of the correct nature and has paid for its safe loading onto the ship with the documents to prove it. The only way the Chinese buyer might have the option to void the contract and seek a refund would be through a breach of contract by the Australian seller, because this has not happened the Chinese buyer will

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