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Preparing an International Sale Contract
The start-up of export or import operation requires
the consent of the two parties ( buyer and seller ). This agreement takes
shape generally by means of a sale contract, which aims at dividing the expenses
and risks between the seller and the buyer. The drafting of this contract
is of prime importance, for, it facilitates the trade and exchange and especially
avoids disputes. The international sale contract is governed by different
rules having the objective of harmonising and facilitating international trade
and exchange.
Vienna Convention | Incoterms | Contract | General Conditions of Sale | Acceptance | Contractual Clauses | Services
Vienna Convention
The
Vienna Convention, developed under
the aegis of United Nations, regulates international trade and exchange of
merchandise. Signed in April 1980, it counts today 57 signatory countries.
It is applied exclusively in the case of problems linked with formulation
of a contract of sale and regulates the duties and obligations of contracting
parties. Taking into account the problems posed by the choice of duty applicable,
the said convention allows the choice of a neutral right. The application
of Vienna convention depends entirely on the willingness of the two parties.
The companies can either exclude it totally or apply it partially. As a matter
of fact, the companies desiring to develop an international activity, must
take cognizance of the legal system in the target country and the Vienna Convention.
Incoterms
The Incoterms are trade acronyms which regulate
the problems relating to international logistics and to the transfer the property
rights in merchandise. They allow distribution of expenses and risks in the
onward journey of the goods from the seller to the buyer. The Incoterms constitute
today the basis of the rules of international trade.
Contract
In order to prepare the contract, it is necessary
that the two parties are in absolute agreement. The agreement between the
contracting parties depends on the offer price, general condition of sale
and acceptance.
Offer price and pro-forma invoice
The commercial offer is the basis of sale contract. It has to be firm, clear
and without any ambiguity. An offer price is based on a written document and
must be drafted in a language perfectly understood by the client.
The pro-forma invoice is the document which gives
shape to the trading offer. It is considered as a rate schedule which determines
the general outline of the sale. The pro-forma invoice includes all the elements
found in a trade invoice and affords to the buyer to take cognizance of specifications
relating to the offer. Finally, if everything is normal, the contract must
define legal relationships between the two parties, and that is the aim of
the general conditions of sale.
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Contents of the pro-forma invoice
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Parties to the contract
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- Write the exact references of contracting
parties along with, if possible , the name of respective representatives
of the two companies.
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The aim
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- To prepare a detailed discription of the
product or service, with all the technical aspects and the details
of packing (volume, weight, and packing)
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Transport Modalities
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- To determine the Incoterm, mode of transport
and the precise period required for delivery
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The price
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- The price must be detailed (unit price
etc.) , firm and final , in order to avoid any misunderstanding. The
buyer and the seller must define at this point of time the mode and
period of settlement of bills.
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General Conditions of Sale
The general conditions of sale allow the companies
to define the legal frame work of their trade relations. The general conditions
of sale are specific to each exporter. They define the duties of the buyer
while allowing him to defend his own interests.
The general conditions must be written down in
a clear manner and free from equivocation. They are written down either in
the language of the country of the buyer, or in English. The exporter must
go to the essential and give emphasis on the most important points such as
price, conditions of payment, period of delivery and modalities connected
with settlement of legal disputes.
The buyer must take cognizance of general conditions
of sale before signing the contract. Otherwise, they would be considered legally
ineffective.
In fine, one must know that some countries lay down general conditions of
purchase. As a general rule, they oppose the conditions of the seller. In
that case, the two parties must negotiate and analyse the general conditions
from legal point of view governing the contract. Every buyer who would not
have denounce the general conditions of sale is supposed to have accepted
them and would only have the general conditions of purchase for being able
to oppose them.
Acceptance
Acceptance of an offer constitutes an agreement with the client and allows
finalisation of the sale contract. The contract assumes concrete shape only
at the time when the offer is followed by its acceptance. So long as it has
not been accepted, the offer can be withdrawn. An acceptance must be transmitted
in a written form so that the seller obtains a certain guarantee and a proof
in case of legal disputes. In that precise case, acceptance takes the form
of a trade bill or a trade contract.
Oral acceptance is not advised due to the fact that there is no proof available
unless the contract is simple and is executed by persons who are loyal and
of good faith. In spite of any thing, written confirmation is always recommended.
One has to pay attention in the case of legal dispute to the acceptance by
telex or fax which does not constitute sufficient proof. Companies also have
recourse to typical contracts for formalising the agreement between two parties.
Typical contracts are practical means but, the only inconvenience is that
they cannot be negotiated. The surest means is to prepare tailor -made contracts
for each client by preparing two documents: on one hand general conditions
of sale and on the other hand special conditions for the client.
Contractual Clauses
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Parties to the contract |
- Identifying parties to the contract (buyer/
seller): name of the companies their Head Offices addresses, detailed
addresses and the names of respective representatives.
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Nature of the contract |
- Defining aim
of the contract (product or service)
- Describing technical aspects, quantity, volume,
weight and eventually mode of packing, as the buyer can communicate
his requirements.
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Prices and modes of payment |
- Specifying price in EURO or foreign exchange
(risk of exchange rate being included)
- Price is accompanied by Incoterm determining
distribution of expenses on transport, custom duty, insurance and the
time of transfer of property.
- The price of merchandise will be defined ( unit price and total price).
- Provide for a code of settlement which gives
a maximum security to the seller.
- Down payment of advances guaranteeing the order.
- In case of documentary credit, the seller
notes the opening demand.
- In fine, if law permits, a cause for reservation
of propriety can be inserted into the contract.
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Modalities of transport |
- Specifying the mode of transport consistant
with nature of merchandise, destination and security.
- Depending on the Incoterm, respective obligations
of the contracting parties are stated.
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Modalities of delivery |
- Specifying date, place of loading and delivery.
- Defining details according to the date of
contract coming into force: respect for delivery period is one of the
major obligations of the seller. One must provide and impose in advance
penulties for delay.
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Force majeure |
- Indicating the force majeure
for unforeseeable events. In principle, one should avoid accepting the
case of force majeure resorted to by the seller to the extent to which
he does not impose it.
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Guarantees |
- Defining the obligations of the two parties
in regard to guarantee Ex: guarantee of restoring advance for the seller.
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Juridiction in case of legal dispute |
- Specifying the law applicable
to the settlement of legal disputes.
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Language |
- Specifying language of the
contract, which must be mastered by both the parties. However, attention
has to be paid to the problems of translations.
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Services
Emporiki-Trade proposes you on estimate models
of International contracts in english of
agent, of distribution, or sale, knowing that in any case you must validate
your projects of the contracts through professionals.
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