International Sales Contracts: Key Clauses and Considerations
What is the Contract of Sale?
The contract of sale is an agreement with a lawful object entered into voluntarily by two parties, a seller and a buyer, covering the sale, delivery of goods, and other key clauses. This creates mutual obligations for the parties.
Bilateral vs. Unilateral Contracts
- Bilateral: Each party makes promises to each other.
- Unilateral: One of the parties designs the contract, and the other decides to agree or not.
What is the Honor Clause?
The contract can contain this clause, which states that the parties do not intend to be legally bound unless they express the opposite in the contract.
Can Everybody Redact an International Contract?
No, because the party must have the capacity to contract, such as being of legal age and mentally able. The purpose and form of the contract must be lawful. The parties must intend to create a legal relationship.
Affirmative Defenses
- Mistake
- Incapacity
- Duress (Coercion)
- Undue Influence
- Unconscionability
- Misrepresentation
Written vs. Oral Contracts
- Written contract: It is on paper or a form, and someone signs it. The signer is bound by its terms.
- Oral contract: May also be called a parol contract or verbal contract.
Third Party Beneficiaries
Third-party beneficiaries have been allowed to recover damages for breaches of contracts they were not party to.
All These Figures Are Regulated by a Specific Contract with Its Own Specifications
International Arbitration
International arbitration is a method for resolving disputes arising from international commercial agreements and other international relationships. The parties must decide whether or not to solve their international problems with the help of arbitration or in court. It is very important to write this matter in the contract. The clause is usually at the end of the clauses. Make sure you do not forget to add this information when drafting your agreement.
International Arbitration:
There are many places where we can go when trying to solve disputes by arbitration. It is common to go to Paris because of its strategic position.
Litigation (Court)
When litigation is decided in the contract, the trial must be in one of the countries involved. As exporters, we will have to try to go to trial in our country.
International Sales Contract and Key Clauses
1. Description of Goods
If the goods are not described precisely enough, the buyer may have no recourse should the seller deliver goods that technically meet the contract description but are unsatisfactory for the buyer’s commercial purposes. Exporters would like to define the goods precisely when they are sure of delivering exactly those goods. In other commercial situations,
2. Contract Price
The parties shall indicate clearly the contract currency and the price amount in both figures and words. A provision explaining the method for determining the price should be included in the contract.
3. Delivery Terms
It is advisable to use Incoterms 2020 published by the International Chamber of Commerce as”delivery term” or”shipping terms” Incoterms rules allocate the following between seller and buyer:
4. Time of Delivery
In the contract, the parties should indicate a specific date for delivery (e.g., October 24, 2013) or a period (e.g., November 2013).
5. Payment Conditions
The contract should permit the use of all international payment modes, including at least: payment in advance, open account, documentary collection, and documentary credit (also known as a letter of credit).
6. Documents
The parties should include a clause with a list of documents most commonly required for sellers in international sales contracts.
7. Inspection of Goods by the Buyer
The parties may indicate the place of inspection as well as other details such as the inspection company. The inspection requires the seller to notify the buyer of the availability of the goods for inspection.
8. Retention of Title
The retention of title (RoT) clause is common in international trade. It provides that the seller retains ownership of the goods until the full purchase price is paid and also that the seller may reclaim the goods if the price is not paid. There are several variations of the RoT clause, but two major types can be distinguished:
- The simple RoT clause, under which the seller retains title until the price is paid,
- The extended clause, under which the seller seeks to extend its title to include the proceeds from any sale of goods and any other indebtedness owed to the seller by the buyer.
9. Force Majeure
10. Resolution of Disputes
The parties should have the alternative between arbitration and litigation. In the event the parties opt for arbitration, they should specify the place of arbitration and the language. If the parties opt for litigation as the required mode of dispute resolution, the parties should designate the national or municipal courts in which lawsuits are to be filed.