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ACCA Applied Skills · Corporate and Business Law (Global) · Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms

Jarrow Ltd (contracting state A) agrees to build and install a complete production line for Kestrel Ltd (contracting state B). Kestrel will supply none of the materials. The contract states the price for manufacturing and delivering the machines, and Jarrow's obligations are mainly to manufacture and supply the goods, with a minor amount of installation. Which statement is correct under the CISG?

The CISG applies because contracts to manufacture goods count as sales unless the buyer supplies a substantial part of the materials, and the seller's obligations here are mainly supplying goods, not labour or services.

  1. AThe CISG cannot apply to any contract involving manufacture
  2. BThe CISG applies only if Kestrel supplies the materials
  3. CThe CISG applies because contracts for goods to be manufactured are treated as sales, unless the buyer supplies a substantial part of the materials, and it does not apply where the preponderant part of the seller's obligations is labour or servicesCorrect
  4. DThe CISG applies to the installation services but not to the goods

Explanation

Contracts for goods to be manufactured or produced are sales unless the buyer supplies a substantial part of the materials. The CISG does not apply where the preponderant part of the seller's obligations is labour or other services. Here the main obligation is supplying goods, so it applies.

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