Export-Import

Management

Chapter 5: International Sale Contract

Objectives
 Understand structure and characteristics of international
sale contracts

 Understand validity of international sale contracts

 Understand issues of major clauses of international sale

contracts

 Draft major clauses of international sale contracts

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International Sale Contract
Overview
 Definition
 Characteristics
 Governing laws
 Validity
 Content

Export-import sale contract

Basic content

 Name of goods/ Commodity/ Scope of contract

 Quality/ Specification

 Quantity

 Price

 Payment

 Delivery

 Other terms and conditions

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Export-Import Sales Contract
Definition

Contracts for purchase and sale of goods is an

agreement between the parties, according to which the
seller has the obligation to deliver goods, transfer the
ownership of the goods to the buyer and receive
payment, the buyer has the obligation to arrange
payment, receive the goods and the ownership thereof.

What are the characteristics of international sale

contracts?

Export-Import Sales Contract

Definition

 Contracts for the international sale of goods =

Contracts for purchase and sale of goods +
international elements.
 What are the international elements?
 Contracts are governed by national and international
laws -> conflicts resolved by court or arbitration

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Export-Import Sales Contract
Governing laws

 International laws
 General principles, setting legal foundation for Export-
Import Sales Contracts
 Directly govern Export-Import Sales Contracts
 UN Convention on Contracts for the International Sale of
Goods (UN CISG)
 UNIDROIT Principles of International Commercial
Contracts
 National laws
 International commercial practices

Export-Import Sales Contract

Legitimacy of Contracts

 An agreement

 Subjects of contracts

 Objects of contracts

 Content of contracts

 Contract forms

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Export-Import Sales Contract
Contract Structure

 Preamble

 Terms and conditions

 Ending

Export-Import Sales Contract

Name of goods
 Name of goods + trade name/ scientific name

 Name of goods + place of origin

 Name of goods + manufacturer’s name

 Name of goods + brand name

 Name of goods + major specifications

 Name of goods + main use

 Name of goods + HS code

When and how to apply?

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Export-Import Sales Contract
Excercise
 Car

 Shrimp

 Telephone

 Wine

 Chicken

 Jacket

 Ceramic vase

Export-Import Sales Contract

Quality
 Reflects ingredients, property, usage of goods
 Complex to draft
 Include 12 major ways to stipulate

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Export-Import Sales Contract
Quality
 As per sample
 As it is (tale quale)
 As inspected and approved
 As per standard or category
 As per technical documents
 As per specification of goods
 As per density of goods
 As per general customary criteria, e.g. FAQ, GAQ, GMQ
 As per content of essential components
 As per amount of products manufactured
 As per brand of goods
 As per description of goods

Export-Import Sales Contract

Content of Quality Clause
 Define use, content, features, productivity of
goods (use one of/ a combination of the above
methods)
 Inspection of quality
 Place of inspection

 Inspector

 Inspection cost

 Certificate of quality

 How to select appropriate way to define quality?

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Quantity clause

 Unit
 Quantity determination method
 Weight determination method
 Quantity determination location

Quantity/ Volume Clause

Measurement unit

 Countable
 Single
 Collective
 Unaccountable
 Metric system
 English system

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Quantity/ Volume Clause
How to draft quantity clause

 Precise stipulation
 Flexible stipulation
 Tolerance
 Range of tolerance
 Tolerance at seller’s/ buyer’s/ vessel charterer’s option
 Tolerance price
 Exemption rate (franchise): with/without deduction

Quantity/ Volume Clause

How to determine quantity

 Gross weight
 Net weight
 Net net weight
 Semi net weight
 Gross weight for net
 Legal net weight

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Quantity/ Volume Clause
How to determine quantity

 Theoretical weight
 M (mass) = D (density) x V (volume)
 Commercial weight: Weight of goods plus standard
humidity rate

Quantity/ Volume Clause

How to draft quantity clause

 Specify content
 Select the appropriate method to determine quantity
 Inspection of goods
 Place of inspection
 Inspector
 Inspection cost distribution
 Certificate of quantity

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Pricing

 Currency

 Price determination method

 Discount

 Regulations regarding price

International Sale Contract

Pricing & Currency

 Selection of currency determined by

 Parties’ agreement
 Customary

 Pricing determined by
 Fixed price
 Future price (deffered fixing price)
 Flexible price
 Sliding scale price

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International Sales Contract
How to define Price
Content of a fixed price article
 Price currency
 Unit price: include the Incoterms rule applied
and charges (not) included
 Total price: in number and in words
 Discount (if any)

International Sales Contract

How to define discount
Types of discount
 Trade discount
 Cash discount
 Quantity discount

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International Sales Contract
How to define discount
 Simple discount
 Chain discount
 Progressive discount
 Bonus

Pricing
Stipulations in Pricing clause

 Unit price is required

 Determine discount (if any)
 Clarify what price is comprised of
 Include Incoterms
 Unit price: USD 200/ MT, FOB Saigon Port, Incoterms 2000
Total amount: 100MT x USD200/MT = USD 20.000.00
Say: US Dollars twenty thousand only

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Payment

 Payment currency
 Payment time
 Payment location
 Payment method

International Sales Contract

Payment Clause

 Payment currency
 Payment currency is the same as price currency
 Payment currency is not the same as price currency

 Payment time
 Payment before delivery/ at the same time as delivery/
after delivery (or combined)
 One-off payment/ payment by installments
 Payment made by Telegraphic transfer/ Collection/
Letter of credit, etc. or combined

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International Sales Contract
Content of a payment by L/C article

 Type of L/C
 Beneficiary/ Applicant
 Payment currency and value of L/C
 Issuing bank/ Advising bank
 Time of opening/ Effective period
 Honor by: sight payment, deferred payment,
acceptance or negotiation
 Set of documents

International Sale contract

Payment schedule
 Advanced payment

 Why use advanced payment?

 When advanced payment should be used?

 Immediate payment

 Deferred payment

 Why deferred payment is used?

 When deferred payment is used?

 Combination of various payment time

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Delivery

 Delivery schedule

 Delivery location

 Delivery method

 Notice on delivery

 Guidance on delivery

International Sales Contract

Time of delivery
 Specific time of delivery

 On a specific date

 No later than/ Before a specific date

 In a specific period of time

 Unspecific time of delivery

 Prompt delivery

 Conditional delivery

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International Sales Contract
Place of delivery
 Place of delivery is determined based on
 International commercial terms
 Means of transport
 Intentions of parties in the contract

International Sales Contract

Place of delivery
 Content of place of delivery
 Place/port of loading
 Place/port of discharge
 Methods to denote
 Single port/ Multiple ports
 Specified port(s)/ Optional port(s)

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International Sales Contract
Delivery Clause
 Notice of delivery
 Number, time and content of notice
 Parties’ liability subject to failure of notice
 Customary: single notice (C, D), triple notices (F)
 Shipment advice
 Transshipment (not) allowed
 Partial shipment (not) allowed
 Stale B/L (not) accepted
 Loading/ Unloading advice (if necessary)

Delivery
Notice of delivery

 Before delivery
 Seller informs Buyer that goods are ready for delivery
or date of delivery
 Buyer informs Seller necessary information for
sending goods or details of vehicle/ship carrying
goods
 After delivery
 Seller informs Buyer about status and result of
delivery

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 International Sale Contract
Commercial Arbitration
 Arbitration agreement determining use of arbitration
and declining court jurisdiction should be clarified in
contracts
 Governing law
 Forming arbitration committee:
 each party selects one arbitrator, these two arbitrators
appoint a third arbitrator to be head of arbitration
committee
 Sole arbitration: both parties select an arbitrator to solve
the case

 Arbitration award is final

Điều khoản chung (General Condition)

 This contract is made in Hochiminh City as of 4 April 2007 in four

(04) copies, each party keeps two (02) copies of equal value.
This contract is valid from the signing date to 6 June 2008.
 Article 12. General Conditions
 By signing this contract, previous correspondence and
negotiations connected herewith shall be null and void
 This contract comes into effect from signing date, any
amendment and additional clause to these conditions shall be
valid only if made in written form and duty confirmed by both
sides
 This contract is made in six (06) English originals, each side
keeps three (03) originals.

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