1. In this dispute, which country’s law would apply, that of the United States or of Germany?

When international commercial disputes must be settled under the laws of one of the countries concerned, jurisdiction is generally determined in one of three ways:

(1) On the basis of jurisdictional clauses included in contracts
(2) On the basis of where a contract was entered into
(3) On the basis of where the provisions of the contract were performed.

2. If the case were tried in U.S. courts, who do you think would win? In German courts? Why?

You would most likely want to assume that the U.S. business would win in the U.S. court and vice versa, however, I would like to think that courts and more importantly judges, would be non biased and look at the facts. If the German business could prove that they did indeed lose income over the purchase compared to other goods they may have grounds for suit. Mediation and arbitration are usually best in these scenarios where they would meet in the middle at $500 and settle the dispute.

3. Draw up a brief agreement that would have eliminated the following problems before they could occur:

a. Whose law applies.

The most clear-cut decision can be made when the contracts or legal documents supporting a business transaction include a jurisdictional clause. A clause similar to the following establishes jurisdiction in the event of disagreements:

“That the parties hereby agree that the agreement is made in Ohio, USA, and that any question regarding this agreement shall be governed by the law of the state of Ohio, USA.”

b. Whether the case should be tried in U.S. or German courts.

The courts of United States will have exclusive jurisdiction to adjudicate any dispute arising under or in connection with this Agreement.

c. The difference in opinion as to “customary merchantable quality.”

'Merchantable' is a word that has fallen into disuse. It encompasses functional fitness. Satisfactory has a wider definition with a broader spectrum of qualities.

A good clause would be:

Supplier warrants the material furnished hereunder: (a) to be free from defects in title, labor, material, or workmanship, (b) to conform to applicable specifications, drawings, samples or other description given, (c) to be suitable for the purpose intended, (d) to be of merchantable quality and further warrants that material of Supplier’s design will be free from defects in designs.

Then to go into detail of what it expects “Merchantable Quality” would consist of.

4. Discuss how SRC may be at work in this case.
The SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions. Both the American Business and German should have realized that there may be differences in delicacies from country to country and proper discussion should be made as to the expectations. Ethnocentrism is the notion that people in one’s own company, culture, or country know best how to do things. The American Business now knows next time to give an exact description of what is being sold.