Aug 2019 4 CH2 Part 2 Contract Terms and Conditions

• Name of commodities
• Quantity of goods
• Quality of goods
• Packing and marking
• Price
• Delivery
Terms and • Payment
conditions • Guaranty
• Arbitration
f the agreement• Force major
Mar 2011 Contract for international sales of goods - Terms and conditions 2
Name of commodities
• Other name: commodities, object
of contract
• Clearly define the goods to be
exchanged
• Should be compulsory terms
Aug 2019 Contract for international sales of goods - Terms and conditions 3
Name of commodities
• Root of 3-year ginger ( Rhizoma
Zingiberis) Oct-2009 Crop in Central
of Vietnam
• Vietnamese Groundnut kernels,
North grade I New crop 2010
(Scientific name: Arachis Hypogea L)
Name of commodities
• Vietnamese Long grain rice N24, 5%
broken, Oct/2009 crop in the South
• Honda Dream II Motorcycle assembled
in Thailand in 1998
• Automatic Soldering machine, Model
CI-250BSS, KiKo brand, AC
220V/50Hz, high output 30,000 Units
per hour with standard conveyor speed
0.8m/min
Name of commodities
• Commercial/trade name and scientific
name
• Origin of goods
• Manufacturer
• Brand name and trademark
• Major specifications
• Major uses
• Harmonized system code
Name of commodities
• Harmonization system code of goods
09.10 Ginger, Saffron, Turmeric

(Curcuma), Thyme, Bay leaves, Curry
and other spices
09.10.10.00.00 Ginger
Quantity of goods
• Clearly define Volume/amount of
contractual goods to be exchange
• Be a compulsory terms
Quantity of goods terms
depend on:
• How to measure the quantity
• Which measurement unit to use
• Whether weight of tare is included
• Whether a tolerance is accepted
• Who, Where & When to inspect the
goods & issued final certificate of
weight/quantity
Terms of Quantity
• 10,000 sets of television.
Each set contains a TV, user guide, antenna
and cable.
Methods of
Gross weight Measurement stipulation
vs Net weight Unit
• Gross weight for net: MT 10,000 +/- 5% At
chatterer's option.
Unit of quantity
• Countable
– Single unit
– Collective unit: Dozen, tens, set, bale
• Uncountable:Weights and measures
systems
– Metric system: kg, km, MT
– Imperial System: Pound,
– American system: LT,ST
– Other systems
Unit of quantity
Note:
Unit with the same name could have
different value:
+ 1 metric ton (MT) = 1000kg
+ 1 long ton (LT) = 2,240 pounds
(1,016kg)
(weight ton or imperial ton)
+1 short ton (ST) = 2,000 pounds (907 kg)
(US measurement system)
Unit of quantity
So:
Checking carefully for mutual
understanding of any applied
unit
Clearly define the Units
(especialy the collective units)
to avoid later disputes.
Quantity stipulation
Methods
Fixed quantity stipulation
- 10,000 sets of television
Flexible quantity stipulation
(Tolerance allowed)
- MT 10,000 +/- 5%
Quantity stipulation
Methods
Flexible quantity stipulation
(Tolerance allowed)
•Range of tolerance
•Parties to decide the tolerance
•Price of goods within range of
tolerance
Methods for weight
determination
Gross weight
The total weight of a
commodity, including the
weight of the packaging
or container
Expression: Gross
Mar 2011
weight for net
Contract for international sales of goods - Terms and conditions 16
Aug 2019
Methods for weight
determination
Net weight
Nw=Gw- Tare
• net weight is the weight of the product
alone, discounting the weight of its
packaging;
• tare weight is the weight of the packaging
alone
There are several method to determine tare
weight
Methods for weight
determination
Net weight
Nw=Gw- packing weight
• Depend on weight of which container/
packaging will be discounted, there are
several types of net weight:
– Net net weight: weight of the goods only
– Semi net weight: weight of the goods and
immediate packages
– Legal net weight
Methods for weight
determination
Commercial weight
(100+WTC)
• GTM= GTT X
(100+WTT)
Invoice weight
• A contract import MT 3500 +- 3% of wool
at a standard moisture of 10%.
• The buyer take the delivery of MT 3600 at
18% moisture content
• Whether the seller fully fulfils his delivery
obligations?
Place of weight
determination
–At seller's site (E terms)
–At loading port/place
(F,C Terms)
–At discharging port/place
(D Terms)
Quality of goods
• Clearly define main features and
characteristics of contractual goods to
distinguish the goods from the other one
• Be a compulsory terms
• Be a most complex terms. It require wide
knowledge on technical characteristics of
the contractual goods
Express the quality by checking
the real products
1 As per Sample
2 As it is
3 Inspected and approved
‘As per Sample’ terms
• Sample is an unit of commodity taken out
from the lots and represent the quality of
the whole lots
• Applications:
– it is difficult to standardize/describe the good
– And the quality of goods remain the same
under exterior factors for a long time
Contract for international sales of goods - Terms and conditions

Aug 2019 24
“As per sample” terms
• Seller’s samples: The seller triplicate the
sample
– seller keeps one sample
– buyer keeps one sample
– agreed third party keep one sample
• Buyer’s sample: the seller produce a
counter-sample, triplicate it and give it to
the buyer, seller, agreed third parties
Notes
+ Agreed samples must be signed and sealed, clearly
defined/labeld with sample No, date and place of
sample taking.
+ Sample must be set aside and well preserved until
expiration of claim period
+ Sample should be selected for each separated
contract. Do not use 1 sample for several contracts
at a same time
+ Sample should be free of charge
• Sample should be labeled, with signatures
of both parties, clearly state the name and
number of samples, date of choice,
• Sample should be in good conditions until
the prescription for qualities claim expire
• Samples should be take separately
between different contracts
• Sample should be free
“As per sample”
terms
+ Quality of the goods to be delivered is
similar to/ as per that of the sample No
aaa, dated ddmmyy, agreed by both
parties with signature of the both
parties on each sample. The sample is
made in triplicate, with equivalent
value, kept by The seller, The buyer
and Vinacontrol
As it is
Tale quale, as it is
A contractual expression usually referring to
goods sold, which are acquired by buyers in their
present state of quality, buyers assuming all risk
of subsequent deterioration
Application:
To-arrived goods ( goods to arrive remote
areas)
Sold off goods
Seller’s market
Inspected and approved
The Buyer are required to inspected the
goods before signing the contract. After
signing the contract, the buyer will not be
able to claim about the quality of goods
Application:
Auctions mode
Secondhand goods
Sale at stock
Express the quality by
technical characteristics
4 As per Specifications
5 As per standard and grade
6 Percentage of main/ major content
7 Amount of Derivative extract from the
commodity
8 As per natural weight of the commodity
9 As per technical documents
10 By trade name and brand name
11 As per description of commodity
Quality As per specification
+ Specifications are detailed technical

descriptions of the goods include the
composition, content, purity, strength,
size,etc of the goods
+ Apply to sales contract of
manufactured products.
Quality As per standard and
grade
+ Standard is sets of quality specifications,
and method of production, packing,
inspections of the goods, issued by the
international organization or authorized
government body
+ In most standard, the goods is classified into
different grades/ categories. So it is
necessary to mention to the grade of goods
as well as the standard
Quality As per standard and
grade
Notes:
+ Mention to the standard name,
standard number, issued body and
year of issuance in the contract
+ A copy of standard could be attached
into the contract
+ Standard is a set of collective /
systematic specification. Then the
parties should not mention more other
specifications.
Percentage of main/ major
content
Main/ major content: those element that will change
quality of goods if the content of said element vary
2 types of major content:
- Useful element: mention the minimum content
required.
- Contract also mention the bonus award to seller for
higher content and fine for lower content
- Harmful element: Mention the maximum content
required
Application: raw material, product of agriculture,
aquaculture, mineral.
Amount of Derivative extract
from the commodity
Application: raw material/ semi-product

Normally, the amount of extract is not
depend on the raw material only but
technical factors also. Then this is not a
accurate indicator of quality
As per natural weight of the commodity
• Natural weight of the commodities is
defined as the weight of the products in
one unit of volume
As per technical documents
• Technical documents is all kind of
documents that design the products or
define the qualities of the products, include
of (but not limited to) technical drawing,
user guidance, products features
descriptions
10 By trade name and brand name
11 As per description of commodity
Terms of packaging
• Stipulate the contractual requirement for
packaging of commodities
• It is not a compulsory terms
• It is an important terms that binding the
seller's obligations if the goods is
damaged because of inappropriate
package
Terms of packaging
Main content:
• Methods of stipulating Packing
requirements
• Packaging charges
• Obligation to provide the package.
• Labeling and marking
Methods of stipulating Packing
requirements
• Details requirements:
In the contract, clearly state the folowing
details:
Package capacity
Number of package layers, materials and
design of each layer
Package consolidation for transportation.
Packaging requirements
• Unspecific requirements:
In the contract, only state that the pakaging
is suitable with normal practices for sales
of the goods, and suitable with the mode
of transportations
Packing charge and other
stipulations
+ Normally the packing charge are included in the
price of goods
+ If the contract clearly state then:
- The Buyer should pay all additional packing
charge
- The Buyer should pay a deposit for package
and take it back when the buyer return the
package to the Seller
Obligation to provide the
package
• The seller provide the package
• The seller provide the pakage and the
Buyer return the packge back
• The buyer provide the package in
advance
Marking requirements
• Marking is the written or pictorial
information to instruct the handling,
storage and transportation of the goods
Sample of pictorial marking
(i )
(i )
(i ) ?
(i )
(i )
(i )
Chain here Fragile No Hook Dangerous
This Keep away Keep dry Gravity

side up from heat here
Price terms
Define the contract value, or the amount of

money the buyer have to pay.
+ Be a compulsory terms
+ Change in Price terms might in accordance
with change in Quantity, Quality, and other
obligations
+ Manufacture cost, market price, market
position also lead to change in price terms
Pricing currency
• Pricing currency could be the seller's currency,
the buyer's currency or a currency of a third
country.
• Choice of currency depends on the
– The custom in trading of the contract commodity
– Market position
– Exporter's policy
– Convention signed by both government
How to stipulate the price?
• Fixed price
• Deferred fixing price
• Flexible price
• Sliding scale price
Fixed price
The parties agree on a concrete price in the
contract and do not allow adjusting it during
contract implementation
Applications:
+ General cargo
+ With short time of contracts implementations
+ Less fluctuation markets
+ In case of bidding, auctions, selling at the
commodity exchange
Fixed price
Unit price : USD 500 per MT
Total price: USD 50,000
(fifty thousands USD only)
The price is understood as FOB Haiphong
Port, VSR, as per Incoterms 2000, packing
charges included
Deferred fixing price
• In the contract, the parties do not
agree on a concrete price but
agree only on the rules to
determine the price at time of
delivery
• Fix only time, place and source of
information to determine the price.
Deferred fixing price
• Applications:
– Frame contract
– Highly fluctuated market
• For instance: The price will be fixed
as the price of a similar product in
London metal exchange market at
delivery time.
Flexible price
• In the contract, the parties agree
on a concrete price but also agree
on the rules to adjust the price at
time of delivery if the market price
highly fluctuated
Flexible price
For example:
- Unit price: 250 USD/MT
If the opening price of a similar product in
London metal commodity exchange on
the day of delivery is higher for more
than 5%, the price in the contract shall be
fixed up to it
Sliding scale price
• In the contract, the parties agree on
an initial price. However, the final
price will be determined at time of
delivery, depend on the initial price
and change in price of each
components
• Applications:
High valuable and long-term producing
product.
Sliding scale price
B1 C1
P1= P0 A +B x +C x
B0 C0
P0: Price in the contract
P1: Final price
• A: rate of fixed cost in P0
• B: rate of material cost in P0
• C: rate of labor cost in P0
Discount
• In order to keep good relationship with the
buyer and encourage a larger quantity
purchase
• Reason for discount
- Quantity discount
- Cash discount
- Seasonal discount
- Trade discount (functional discount)
Discount
• Method of discount calculation
- Simple discount
- Chain discount
- Progressive discount
- Bonus/ accummulation discount
Additional stipulations with price
terms
- Unit price and total price
- Basic delivery term
- Packing charge
- Accessory charge
• Place of delivery
• In sale of goods contracts, it is important to
decide whether the seller will deliver the goods
to the buyer or whether the buyer will collect
such goods from the seller's premises. The law
provides that in the absence of contrary
agreement, the place of delivery will be at the
seller's place of business or residence. The date
of delivery should also be agreed upon.
Shipment terms
Shipment period
Place of delivery
Advise of delivery
Mode of delivery
Instruction for delivery
Shipment period
• A period of time that the seller have to
handle the goods to the buyer.
• Concrete delivery time
- September 25, 2009
- September 2009
- 3rd quarter 2009
Shipment period
• Customary delivery time
- ASAP, prompt delivery, etc
• Conditional delivery time
- 10 days after obtaining L/C
- ASAP after obtaining E/L
- Etc.
Place of delivery
• The contract shall point out the
– Place of loading
– Place of unloading
– Place of transshipment (If any)
• To define each of above place, the contract
could state:
– Single fixed place
– Multi fixed places
– Optional places
Place of delivery
• Choosing the place of delivery should
base on
– Transportation methods
– Basic delivery terms
Advise of delivery
• F group: 3 times
- Exporters inform about goods’ readiness
for delivery
- Importers inform about ship arriving time
- Exporters inform about goods’ shipment
• E, C and D group: 1 times
- Exporters inform about goods’ shipment
Advise of delivery
• Contract should clearly state :
– Total number of advise (3 or 1)
– For each advise, state the requirement on period,
form, content of the advise
• With in 48 hours since issuance of B/L, the seller
shall inform the buyer by fax, including the
following details:
– Number of B/L
– Quantity of delivered goods
– Name and registrated number of the transportation
vehicle
– ETD and ETA
Mode of delivery
• Final delivery
The quality and quantity of the goods is final
binding both parties
• Preliminary delivery
Initial evidance that the seller has fullfiled his
delivey obligations
Instruction for delivery
- Total/partial shipment
- Direct transport/ transshipments allowed
- Stale B/L accepted
- Third party B/L accepted
Payment terms
Define how the buyer pay for the goods by
define the following points:
Payment currency
Payment period
Mode of payment
Payment currency
• The same as pricing currency

• Different than pricing currency
- In case of unstable pricing currency
- Need to refer to an exchange rate:
- Official/market rate
- Bid/Ask rate
- Etc.
Payment period
• Immediate payment:
– Payment is made right after/up on delivery
• Advanced payment:
– Payment is made before delivery.
– Consider as the Buyer grand the seller a
commercial credit
• Deferred payment
– Payment is made after a period since
delivery.
– Consider as the seller grand the buyer a
commercial credit
Mode of payment
• Cash
• Deposits instruments
• Remittance
• Open account
• Collection
• Documentary credit
Cash
• Some cash terms:
CWO CBD COD CAD
Advantages:
– Simple process
– No banking fee
Disadvantage:
– Higher risk
– The buyer can take delivery without payment
Deposits instruments
• Bill of Exchange (B/E)
– An unconditional order issued by a person or
business which directs the recipient to pay a fixed
sum of money. The future date may be either fixed or
negotiable. A bill of exchange must be in writing and
signed and dated. It also called draft
• Check
– A note promising to pay money to a named person or
entity
• Promissory note
– document saying that someone owes a specific
amount of money
Remittance
• Definition:
It is a mode of payment, in which the buyers will
ask their bank to transfer the contract’s value to
the sellers’ account at an appointed time.
• It could be:
- Mail transfer (M/T)
- Telegraphic transfer (T/T, T/Tr).
• Applications
- Low value contract
- High credit with each other
Remittance
4: Transferring money to
sellers’ bank
Bank of Exporter Bank of Importer
5:
3: Order bank to
Inform
remittance
to
exporter
Exporter Importer
1: Goods are delivered to the importer
2: Documents are sent to the importer
Remittance
• Advantage
- Simple procedure
- Inexpensive fee
• Disadvantage
- Limitation in Bank role
- No connection between payment and
goods obtaining
Open account
• Definition
It is an arrangement whereby sales are
made with no formal debt contract. The
buyer signs a receipt, and the seller
records the sale in the company's
accounting records.
• Applications
- In counter trade
- In paying service fee.
Open account
• Advantages • Disadvantages
• For sellers • For sellers
- Sale promotion - Risk in payment
• For buyers • For buyers
- Differed payment - Expensive price
- Using profit in sale to - Insecure in quality
pay for buying.
Open account
Collection
• Definition
- The sellers send a B/E to request the bank
to ask money back from the buyers.
• Clean bill collection:
- Request for money in the bill is not
connected with any trade documents
Clean bill collection
3: Send the draft to

the bank of importer
Bank of exporter Bank of importer
2: Send a draft to 5: 4: Send
the bank and ask Payment the draft
the bank to /accept to to the
collect payment pay to get importer
from the buyer the draft
Exporter 1: Deliver the goods Importer

and the documents to
the buyers
Clean bill collection
• Advantage • Disadvantage
- Bank will help to ask - Limitation in Bank role
the money form the - No connection
buyers between payment and
- Simple procedure goods obtaining
- Inexpensive fee
Documentary collection
3: Send the draft and

the documents to the
Bank of exporter import banks Bank of importer
2: Send a draft 5: Payment 4: Send
and the /accept to pay the draft
documents to to get the to the
the bank to draft and the importer
ask the money documents
from the
buyers
Exporter Importer
1: Deliver the
goods to the
buyer
• 5a. Documents against payment (D/P)
• 5b. Documents against acceptance (D/A)
Application:
• Not very high value contract
• Both sides trust each other.
• Advantages • Disadvantages
- Bank will help to ask - There is still a risk
the money from the when the buyers
buyers refuse the goods then
- Create a commitment they refuse to pay,
between payment and too!
goods obtaining.
- Inexpensive fees
Documentary credit
• Letter of Credit (L/C or LC) is a document

issued by the buyer’s bank in the buyer’s
orders, in which the bank promises to pay
the seller a specified amount under
specified conditions
• What is documentary credit
Documentary credit
is a payment method, in which,
•after signing the contract, the buyer shall
ask his bank to open an L/C for the seller.
•After issuance of the L/C, the seller shall
deliver the goods to the carrier,
•and then collect shipment documents and
present them to the bank.
•The bank shall pay the seller if the
documents are in conformity with the L/C
Documentary credit
6: Transfer of doc
Bank of exporter Bank of importer

5: Collect 2: Transfer the L/C
3: 1: Ask his
and bank to open
Transfer 7: Payment to
present a L/C
the L/C get the
trade
documents document
Exporter Importer
4: Goods’ delivery 8: Receipt the goods
Carrier
Documentary credit
• 5a: At sight L/C, paying at seller’s bank
• 5b: At sight L/C, paying at buyer’s bank
• 5c: Deferred L/C, paying at buyer’s bank
Documentary credit
L/C classification
• By term • By validity
- At sight L/C - Revocable L/C
- Usance L/C - Irrevocable L/C
+ Confirmed L/C
+ Without recourse
L/C
Documentary credit
• Advantages
- Safe payment mode for both side
- Promoting bank roles
• Disadvantages
- Expensive fee
- Complicated procedure
- Document based payment
Information required in L/C
terms
• Type of L/C
• Opening bank, advising bank, confirming
bank, negotiating bank
• Applicant, beneficiary
• Currency & amount
• Opening period, effective period, shipment
period, presentation period, money
transfer period
• Document required
• Payment shall be made in USD by an
Irrevocable L/C at sight opened within 15
days after signing of this contract at HSBC
Singapore payable from B/L date for the
full amount of the contract value in favor of
the seller through Vietcombank, Cau giay
Branch, upon presentation of the following
document
• 2/3 original,clean, on board B/L
• Commercial invoice in triplicate
• Packing list in triplicate
• Certificate of quality issued by the
manufacture
• Certificate of origin issued by the
authorizedorganization
• 1/3 to order of the opening bank B/L and
transport documents sended by DHL
Claim
Definition:
A claim is an event that one party to a dispute asks
the partner to compensate a damage caused
by his contract violating.
• Sellers used to be claimed by late delivery,
wrong quality or quantity of goods, unsecured
packing, etc.
• Buyers used to be claimed by wrong payment,
late in sending ship to receive goods…
Claim
Claiming documents
- Notice of claim
- A copy of contract
- A copy of B/L
- Shipment documents (C/Q, packing list, etc)
- Inspection documents
Claiming period
It depends on:
• Character of the goods
• Type of claiming
• Relationship of both sides
• Geographical distance
• Rules and custom
Buyer's rights and obligations
- Preserve a primitive state (a status quo)
- Send notice to sellers on time
- Help the sellers to check the goods by
themselves
- Getting a batch of insufficient goods is not
a reason for refusing the other
Seller's rights and obligations
- Response promptly
- Take their suggestions seriously
- Cooperate with the buyers to find a
suitable solution.
- But the sellers should not settle the
claiming if it is out of claiming period
Guarantee
Definition
• A promise or an assurance, especially one
given in writing, that attests to the quality
or durability of a product or service in a
guarantee period.
- General guarantee
- Mechanical guarantee
- Performance guarantee
Guarantee period
depends on:
• Character of the goods
• Relation between both sides
Beginning point:
- Arriving date State in the contract:
- Using date - By a time period
- Mixture - By a number of
product
Buyer's right and obligations
- Follow the seller’s instruction
- Inform the seller promptly of the problem
- The buyers are not allowed to repair the
goods by themselves unless the sellers
don’t repair it on time
Seller's right and obligations
• Repair the goods promptly
• Extend the guarantee period by the
repairing time
• But the sellers will be exempt if :
- The goods are depraved in fragile parts
- The buyers don’t follow the instruction
- The equipment are made by buyers
design
Arbitration
Definition
• Arbitration is a legal technique for the resolution
of dispute outside the court, wherein the parties
to a dispute refer it to one or more persons (the
"arbitrators", "arbiters" or “arbitral tribunal"), by
whose decision (the “award") they agree to be
bound.
• It could be:
- Institutional arbitration
- Ad hoc arbitration
Advantage of arbitration
- With highly technical subject matter, experts can
be appointed as arbitrators
- Arbitration is often faster than litigation in court
- Arbitration can be cheaper and more flexible
- Arbitral proceedings and an arbitral award are
more confidential
- Arbitration awards are easier to enforce in other
nations than court judgments (New York
Convention 1958)
- Arbitral awards are final
Disadvantages of arbitration
- The awards' are not coercive

- Parties can waive their rights to access the
courts to decide the case
- Arbitration decision cannot be easily
overturned
Arbitration procedure
• Conciliation by themselves
• Arbitration agreement
• Setting arbitration tribunal
• Mediation
• Choosing applicable law
• Both sides providing evidences
• Judgment
• Award implementation
Force Majeure
Definition
Force Majeure is a common clause in contracts,
which essentially frees both parties from
liability or obligation when an extraordinary
event or circumstance beyond the control of
the parties, prevents one or both parties from
fulfilling their obligations under the contract.
• ICC rules: a force majeure should be:
- Unforeseeable
- Irresistible
- Relevant to contract
Type of force majeure:
- By time:
• Short term (<6 months)
• Long term (>6 months)
- By reason:
• Natural force majeure
• Social force majeure
Right of the interest party
• Extend the contract implementation time

by the time of the force majeure and the
time for overcoming it!
• If the time is too long, the party could be
free of contract liability without any
penalty
Obligations of the interest
party:
• Inform about the force majeure within 48
hours
• Attest it within 7 days with a confirmation
of a local organization.

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Aug 2019 4 CH2 Part 2 Contract Terms and Conditions

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• Name of commodities

09.10 Ginger, Saffron, Turmeric

Contract for international sales of goods - Terms and conditions

+ Specifications are detailed technical

Application: raw material/ semi-product

Chain here Fragile No Hook Dangerous

This Keep away Keep dry Gravity

Define the contract value, or the amount of

• The same as pricing currency

3: Send the draft to

Exporter 1: Deliver the goods Importer

3: Send the draft and

• Letter of Credit (L/C or LC) is a document

• What is documentary credit

Bank of exporter Bank of importer

4: Goods’ delivery 8: Receipt the goods

- Using date - By a time period

- The awards' are not coercive

• Extend the contract implementation time

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