Understanding Contracts and Commercial Agreements

Posted on Aug 30, 2024 in Law & Jurisprudence

The Contract

A verbal or written agreement between one or more parties in which people agree to give, do, or not do something or provide some service.

Key Concepts

  • Person: Individuals with personalities who are holders of rights and obligations.
  • Legal Person: Partnerships, corporations, associations, and foundations with legal personality, indifferent to the members.

Classes of Contracts

Contracts can be classified in various ways:

By Their Form

  • Verbal: Agreements made through spoken words.
  • Written: Agreements documented in writing.

According to Legal Regulation

  • Typical: Standard contracts covered by the Civil Code or Code of Commerce.
  • Atypical: Special contracts governed by specific laws, set by the parties, and not adhering to typical contract characteristics.

By Applicable Law

  • Civil: Contracts between private individuals who are not traders.
  • Commercial: Contracts between merchants or entrepreneurs in their business dealings.
  • Administrative: Contracts involving Public Administration.
  • Work Contracts: Agreements between employers and employees.

Depending on the Situation of Force

  • Equal: Both parties discuss and negotiate to reach an agreement.
  • Accession: One party sets the conditions, and the other accepts them.

The Sales Contract

A commercial contract involving the sale of movable goods for profit.

A. Tangible Purchase Agreement

Elements of Sales Contracts

  • Material: The object being sold.
  • Price: The agreed-upon monetary value.
  • Personal: The buyer and seller.

B. Personal Items in the Sales Contract

The individuals involved are the seller and buyer. The Commercial Code prohibits:

  • Minors, even if emancipated, from selling valuable items without parental or guardian consent.
  • Guardians from selling goods under their protection.
  • Public officials from purchasing property they manage.
  • Judges, magistrates, and prosecutors from buying goods under dispute in their court.

C. Obligations Generated by the Sales Contract

Both buyer and seller have rights and obligations:

Seller Obligations

  • Keep and Custody: Maintain the sold item in perfect condition until delivery.
  • Deliver the Thing: Deliver the item at the agreed time and place.
  • Provide Warranty: Offer compensation for eviction and hidden defects. The seller is responsible for clear title and peaceful possession. Hidden defects are those not apparent upon initial inspection. The seller is liable even if unaware of these defects. Complaints about quality or quantity must be made immediately, or within 4 days for packaged goods.

Buyer Requirements

  • Pay the Price: Pay the agreed price at the designated time and place, or upon delivery if not specified.
  • Receive the Goods: Accept the purchased goods.
  • Pay for Transportation: Cover transportation costs unless otherwise agreed.

Special Sales

A. Hire-Purchase

The seller receives partial payment upon delivery, and the buyer pays the remaining balance within a specified period (usually not exceeding 3 months).

  • Retention of Title: Ownership remains with the seller until full payment.
  • Ban on Transfer: The buyer cannot transfer, lend, or attach the item until fully paid.

B. Purchase Square to Square

Goods are transferred from one location to another.

C. Supply Contract

One party (supplier) provides regular, successive supplies of specified goods to another party (receiver) in exchange for payment.

INCOTERMS

  • EXW (Ex Works): Goods are made available at the seller’s factory or warehouse. The buyer bears all costs and risks from that point.
  • FAS (Free Alongside Ship): Goods are delivered alongside the vessel, without being loaded. The buyer assumes all costs and risks from there.
  • FOB (Free On Board): Goods are delivered on board the designated ship or wagon. The buyer is responsible for costs and risks from that point.
  • C&F (Cost and Freight): Goods are delivered unloaded at the destination port. The seller covers costs up to that point, excluding insurance, which is the buyer’s responsibility.
  • CIF (Cost Insurance and Freight): Similar to C&F, but the seller also pays for insurance to the destination port.
  • Franco Domicile: The seller delivers the goods to the buyer’s warehouse.

Leasing Contract

Also known as leasing, it allows companies to use capital goods for a specific period by paying periodic fees.

The Renting Contract

A full-service rental agreement for various assets, including machinery, automobiles, and computer hardware. It does not include an option to purchase the rented assets.

The Factoring Contract

A specialized company manages the collection, financing, and credit guarantees of another company’s client debts. Costs include an administrative fee and interest on financing if required.

Termination of Contracts

Reasons for termination of obligations between contracting parties include:

  • Compliance: Fulfillment of agreed-upon obligations.
  • Mutual Consent: Parties agree to terminate the contract.
  • Unilateral: One party can terminate if the other fails to fulfill obligations.
  • Termination: A party can request termination due to significant harm to their interests.
  • Novation: Replacing an existing obligation with a new one.
  • Remission: Forgiveness of debt.

Order

A request from a professional employer or supplier for a specific product or service.

Ordering Note

Contains the following information:

  • Names of involved parties.
  • Signature of the applicant or authorized person.
  • Identification of buyer and seller (name, address, and tax ID).
  • Order serial number.
  • Dates and broadcast information.
  • Delivery address.
  • Units and description of requested items.
  • Unit prices, partial and total amounts.
  • Delivery date or schedule.
  • Payment terms and conditions.
  • Applied discounts.
  • Means of transport.