Trading Relationship - The Buyers and The Sellers - Accounting and Finance Assignment Help

Assignment Task:

Scenario 1: 

The Buyers and the Sellers have for many years had an established trading relationship whereby the Sellers buy Ukrainian corn according to a standard specification, cash against documents, on CIF terms incorporating GAFTA 48. The business is usually agreed on the telephone and confirmed by email. All that it is necessary to discuss and agree, on each particular occasion, are the price, the quantity and the delivery period. Usually a confirmation note is drawn up by Sellers, signed by them and sent to the Buyers for signature. The buyers usually sign and return the confirmation note but sometimes do not. 

The following communications take place: 

1. 2 January, email Sellers to Buyers: 

“We can offer you 5,000mt for shipment 15-31 January at US$160 per metric ton CIF your usual destinations.” 

2. 3 January, email Buyers to Sellers: 

“We agree, but is it ok to pay 30 days after BL instead of CAD? If so then we agree but for good order’s sake please send us a full confirmation note.” 

3 January, email Sellers to Buyers: 

“Yes, that is fine’. 

Later that day the Sellers send out a full confirmation note by way of an email attachment. It corresponds exactly with the previous contacts as regards the documents to be presented. It specifies 5,000 metric tons, a price of US$160 CIF “one/two safe Black Sea/Eastern Med. ports”. The shipment period is 15-31 January and payment cash against documents. 

3. 4 January email Buyers to Sellers: 

“Thanks your email. Your confirmation note seems to be in order but we will revert soonest and in any event within tomorrow if we have any comments.” 

4 There is nothing further from the Buyers and on 6 January the Sellers draw up and sign a contract in identical terms to the one they sent by email on 3 January. They send this contract to the Buyers by courier and it arrives in the Buyers’ offices on the afternoon of 7 January. In the meantime the Sellers, on the morning of 7 January have sent the Buyers an email reading as follows: 

“We regret that due to the sharp increase in freight rates in the last few days the freight element of our contract has to be increased by US$5 per metric ton. Please therefore ignore the signed contract we sent you by courier today. We are drawing up a new contract and will send this to you today” 

5 The Buyers respond the same day saying that there is a binding contract and that the Sellers have no right to seek to renegotiate the terms of it.

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