Chapter 4

International Trade Contracts

Instructor: Binh Do
Contracts can be complicated
 What is a Contract?

 Contract: A contract is a meeting of minds between

two persons whereby one binds himself, with respect
to the other, to give something or to render some
service.
 Concepts

 Contracts for Sale of Goods: The sale contract for good is a

specific or general contract for sellers to transfer the
ownership of goods to specified buyer in return for a
specified sum of money.

 International Trade Contracts: are more complex in nature

because they are subject to the laws of both contracting
parties’ countries, asking the task of contract
implementation more difficult and often calling for dispute
settlements.
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 Characteristics of
International Contracts
 The contract’s parties have head-offices in different countries.

 Goods – the objectives of the contract have to move away from

national borders.

 Currency for payment can be one or both sides’ foreign

currency

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Characteristics of
International Contracts
 Freedom of contract: The parties are free to enter into a
contract and to determine its content.

 No form required: Nothing in Principles requires a contract to be

concluded in or evidenced by writing. It may be proved by any
means, including witnesses.
 Binding character of contract: A contract validly entered into is
binding upon the parties. It can only be modified or terminated
in accordance with its terms or by agreement or as otherwise
provided in Principles.
 Conditions for effective contracts

 The subjects of the contract are buyer and seller –

they must have legal status.

 Goods under the contract is the sale of goods permitted

under the provisions of law

 International trade contract must contain the main

provisions of laws.

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 CONTRACT No …
Place, Date …
Form of Between: Name: …
Address: …
International Tel: … Fax: … Email: …
Represented by …
Trade Hereinafter called as the SELLER
Contract And: Name: …
Address: …
Tel: … Fax: … Email: …
Represented by …
Hereinafter called as the BUYER
The SELLER has agreed to sell and the BUYER has agreed to buy the commodity
under the terms and conditions provided in this contract as follows:
Art.1: Commodity:
Art.2: Quality:
Art.3: Quantity:
Art.4: Price:
Art.5: Shipment:
Art.6: Payment:
Art.7: Packing and marking:
Art.8: Warranty:
Art.9: Inspection:
Art.10: Force majeure:
Art.11: Claim:
Art.12: Arbitration:
Art.13: Other terms and conditions:
… (Loading terms/loading and discharging rate; Performance Bond, Insurance;
Penalty) 9

For the BUYER For the SELLER

 Part 1: Clauses in
International Trade Contracts

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 Art1. COMMODITY

 Request write exact name of goods & describe in detail

to avoid confusion that may arise disputes.
 Understand list of goods referred to in international trade ,
in production and in international practice
 There are 6 ways to name the commodity of goods
Art1. COMMODITY
(1) Commercial name, normal name and Scientific name

(2) Commodity name together with local production

 (3) Commodity name together with name of manufacturer

 Art1. COMMODITY
 (4) Commodity name together with specifications of goods

 (5) Commodity name together with the use of goods

 (6) Commodity name together with the code of goods

 Combine multiple ways

  01-05  Animal & Animal Products
Harmonized  06-15  Vegetable Products
System Codes  16-24  Foodstuffs
(HS Code 2017)  25-27  Mineral Products
 28-38  Chemicals & Allied Industries
 39-40  Plastics / Rubbers
 41-43  Raw Hides, Skins, Leather, & Furs
 44-49  Wood & Wood Products
 50-63  Textiles
 64-67  Footwear / Headgear
 68-71  Stone / Glass
 72-83  Metals
 84-85  Machinery / Electrical
 86-89  Transportation
 90-97  Miscellaneous

http://www.foreign-trade.com/reference/hscode.htm
 1. COMMODITY (cont)

Commodity: Vietnamese white rice long grain, crop 2010,

10% broken
Commodity: Frozen black Tiger shrimps (Pennnues
Monodon)
Commodity: UREA FERTILIZER
Origin: Indonesia
Specification: Nitrogen 46% min

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Art 2. Quality or specification

 Samples  
 Standards  
 Specification of goods  
 Trademarks  
 Technical Documentations
 Cargo density
 The status of goods
 The description of goods
 …
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Art 2. Quality or specification
The quality or specification of goods is determined
based on:
 (1) By sample
 The quality of goods is determined based on the quality
of a few commodities, known as samples
 Cons
 The accuracy is not high .
 Applied to the standard item no or hardly standardized

 Quality of goods must be as counter sample which is

marked with signatures of both sides

 Quality of goods must be correspond/

according to sample
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(1) By samples

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 (2) By Standard or category
Standards are the regulations on quality assessment, methods of
production, processing, packing, goods inspection by the competent
authority regulations

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Cà phê nhân Buôn Mê Thuột, vụ mùa
2004, hạng đặc biệt TCVN 4193:2001

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 (3) By Specification
Specifications are technical specifications related goods such as power , size ,
weight... These specifications reflect the quality of the goods

Specification:
Mainboard ECS 845GV-M3 – Socket 478
CPU Intel Pentium 4 Processor – Socket 478
DDRAM 128MB – Bus 333
FDD 1.44MB
HDD 40.0 GB
Monitor 15 inch Samsung SyncMaster
Medium Tower Case ATX ROBO
Keyboard PS/2 ROBO Multimedia 22

Mouse PS/2 ROBO Optical Scroll

CD Rom 52X
 (4) By Trade marks
Trade marks are symbols, pictures, letters ... to
distinguish the goods of this producer to others

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 (5) By technical documents
• Technical documents show the specifications of the goods, including
operating manuals, assembly ...
• Technical documentation must turn into a inseparable part of the
contract

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(5) By technical documents

The quality is pursuant

to the technical
document herein as
attached which has
been approved by the
buyer and is an integral
part of this contract

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 (6) By content of mainly material
Specified percentage of a certain ingredients/material in goods.
2 types:
Content of useful material: specified minimum content (%)
Content of un-useful material: specified maximum content (%)

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 Examples:
Vietnam rice
Specification: White Long Grain Rice 5%
broken
Vietnam Coffee Bean: + Broken: 5.0% max
Grade 2 - 5%
+ Moisture: 14% max
(max 5% blacks and + Damaged kernels: 1% max
broken, max 1%
+ Yellow kernels: 0.5% max
admixture and pods,
max 1% excelsa beans, + Foreign matters: 0.1% max
+ Paddy kernels: 15 seeds/KG max
max 13% moisture,
+ Chalky kernels: 7.0% max
95% above 5mm.)
+ Immature kernels: 0.2% max
+ Red kernels: 2% max
+ Milling degree: Well milled and polished
Example: Fertilizer import contract
Specification
Nitrogen 46% min
Moiture 0.5% max
Biuret 1.0% max
Color white

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 (7) By Natural weight
 Natural weight is the natural weight of cargo in unit that reflects the
physical properties, impurities proportion of goods
 Often used in combination with the described method

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 (8) Inspected and approved
This method is also called “inspected and approved method” (“đã xem
và đồng ý”)
The commodity was inspected and approved by the buyer.
The buyer has to receive goods and pay the money

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 (9) By commodity status - (tale quale)
This method is also called “as is sale/ arrive sale method” - có thế
nào, giao thế ấy”. The seller has to delivery the goods but is not
responsible for the quality of the product
Apply in some cases:
Market belong to the seller
Auction
Sales to the ship

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 (10) By Description
 Outlined the characteristics of shape, color, size, utility ...
of the product.
 Applied to all products that we can describe and often used
in combination with other methods

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:
(11) Based on familiar standard

When buying and selling agricultural products and raw

materials that difficult standardized the quality, we often
use some familiar standard such as: FAQ, GMQ
•FAQ (Fair Average Quality)- Phẩm chất bình quân khá
•GMQ (Good Merchantable Quality)- Phẩm chất tiêu thụ tốt

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Art 3. QUANTITY

Đơn vị tính số lượng

Phương pháp quy định số lượng
Phương pháp quy định trọng lượng
Địa điểm xác định số lượng

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 Đơn vị tính
Đơn vị tính: cái, chiếc, hòm, kiện…
Đơn vị theo hệ đo lường (metric system): KG, MT
Đơn vị theo hệ đo lường Anh, Mỹ:
Đơn vị đo chiều dài: inch, foot, yard, mile
Đơn vị đo diện tích: square inch, square yard
Đơn vị đo dung tích: gallon
Đơn vị đo khối lượng: long ton, short ton, pound
Đơn vị tính số lượng tập hợp: tá, gross, set
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Đơn vị tính
37
 Ví dụ

Hợp đồng mua bán 120MT bông, độ ẩm quy định trong hợp
đồng là 10%. Khi nhận hàng 120MT; độ ẩm 15%, vậy người
mua thanh toán cho bao nhiêu MT hàng?

GTM = 120 x (110 : 115) = 114.78 MT

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Art 4. PRICE

 Đồng tiền tính giá

 Xác định mức giá

 Phương pháp quy định giá

 Giảm giá

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 Đồng tiền tính giá

 Nước xuất khẩu

 Nước nhập khẩu

 Nước thứ ba

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 Xác định mức giá

 Đơn giá

 Tổng giá

 Điều kiện cơ sở giao hàng tương ứng

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PRICE
Unit price: USD 120/ MT CIF Cat Lai
port, HCMC, Vietnam, Incoterms 2010
Total amount:
amount USD 18,000
Say: United State Dollars eighteen
thousand only

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 Giảm giá

- Nguyên nhân: do mua số lượng lớn, thời vụ,

hoàn lại hàng trước đó đã mua
- Cách tính toán:
 Single discount
 Double discount
 Progressive discount
 Discount by give award

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Art 5. Packing & Marking
PACKING
 The method of provide packing
 Packaging price
 Quality packaging requirements

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PACKING
The method of provide packing

•The seller provides packing

•The buyer provides packing

Packaging price
•Is calculated as the price of another goods
•Is included in the price of goods
•Buyer pays packaging in particular 49
PACKING

Quality packaging requirements

General requirements

Detailed requirements

- Vật liệu làm bao bì

- Hình thức của bao bì

- Kích thước của bao bì

- Số lớp, cách thức cấu tạo

- Đai nẹp bao bì

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PACKING
50 kgs net in new white double
polypropylene woven bag with good
quality. Export standard method of
packing is applied. Tare weight of
empty bag is about 240 grams each.
2% of total bag as empty bags to be
supplies free of charge
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 Art 6. SHIPMENT/DELIVERY

 Delivery time:

 Port of shipment (Port of Loading): name of exporter’s port

 Port of destination: name of importer’s port

 Partial shipment: Allow/Not Allow

 Transshipment: Allow/Not Allow

 Delivery Notifications:

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 Delivery Notifications

Delivery notifications regulate how

many time for delivery notifications and
the content of notifications
Before delivery
After delivery

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 Other Regulations

•Partial shipment, total shipment

•Transhipment

•Stale document
•Third party document

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Art 7. PAYMENT

 Currency of payment

 Time of payment

 Methods of payment

 Payment documents

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 Currency of Payment

Currency of Export country

Currency of Import country
Currency of the third country

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 Time of Payment

 Payment before shipping

 Payment after shipping
 Prompt payment

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68
 Payment Documents

 Hối phiếu (Bill of Exchange)

 Hoá đơn thương mại (Commercial Invoice)
 Vận đơn đường biển (Bill of Lading)
 Chứng thư bảo hiểm (Insurance Policy/Insurance Certificate)
 Giấy chứng nhận chất lượng (Certificate of quality)
 Giấy chứng nhận số lượng, trọng lượng
 Phiếu đóng gói hàng hoá (Packing List)

 ...
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 Art 9. WARRANTY

Warranty: Seller 's deadline to ensure the

quality of goods, is considered as the deadline
for buyers to detect the goods’ defects

 Time of warranty
 Warranty’s content
 The rights and obligations of related parties

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 Time of warranty
 Warranty’s period
 When is the start day of warranty?
 When is the last day of warranty?

Warranty’s Content
 Warranty coverage
 Seller’s Responsibilities
 The cases that seller does not warrant

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Example

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82
Example
Example
 Force majeure
Force majeure cases shall be understood the
occurrence of situations to be considered as force
majeure in ICC publication No 421.
The force majeure cases shall be informed to the
other party by the concerned party by phone within 7
days and confirmed by writing within 10 days from the
date of such a phone call together with certification of
force majeure issued by the Chamber of Commerce
located in the region of the case. After this deadline,
claims for force majeure shall not be taken into
account.
In the event of force majeure, the concerned
party shall bear no responsibility of any penalty arising
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from delay of delivery.

Example
Art 13. CLAIM

Time of claim
Claim documents
How to deal with complaints 92
 Claim:
In case upon taking the delivery, the Goods are not in
strict conformity with conditions stipulated in the contract
in terms of quality, quantity and packing, the Buyer shall
submit his claim together with sufficient evidence of copy
of the contract, Survey Report, Certificate of Quality,
Certificate of Quantity, Packing List with certification of
the authorized inspection company agreed by the two
parties within 30 days upon the ship’s arrival
Upon receiving the claim, the Seller shall in a timely
maner solve it and reply in writing within 30 days, after
such receipt. Incase of the Seller’s fault, the Seller shall
deliver the replacements not later than 30 days after the
official conclusion.
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Art 14. ĐIỀU KHOẢN TRỌNG TÀI
(ARBITRATION)

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Example
 Arbitration

In the even of any disputes and differences in

opinion arising during implementation of this
contract between the parties which can not be
settled amicably, such dispute shall be settled by
the Vietnam International Arbitration Center (VIAC),
at the Chamber of Commerce and Industry of
Vietnam. Arbitration fees shall be borned by losing
party.

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 Art 15. Other terms and conditions:
Any amendments or modifications to the contract
shall be made by fax or in writing with the
confirmation of the two parties
The contract is made in English in 4 equal
copies, 2 copies for each party
The contract comes into force upon the date of
signature and shall be valid until 10th April, 2005

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