- •Content module 1. Theoretical aspects of international contract activity
- •1.1. International commercial deal and its steps
- •1.2. Contract and international contract
- •1.3. The basic principles of international contract
- •1.1. The international commercial operation and its stages
- •1.2. Contract and international contract
- •1.3. The basic principles of international contract (Vienna Convention)
- •Theme 2. Classifying international contracts
- •2.1. Multicriteria classifying
- •2.2. Classifying on the contract’s subject
- •2.1. Multicriteria classifying
- •2.2. Classifying on the contract’s subject
- •Theme 3. Structure and contents of international contract
- •3.2. The main Contract’s conditions a) Terms of Payment
- •A c.I.F. Price includes apart from the value of the goods the sums paid for insurance and freight (and all other transportation expenses up to the place of destination).
- •C) Force Majeure Circumstances
- •3.3. Form and content of the contract
- •Theme 4. International commercial terms (incoterms) in international contracts
- •4.1. The Incoterms families (e, f, c, d)
- •4.2. The Incoterms categories (the Incoterms of sale at departure; the Incoterms of sale at destination; the daf Incoterms)
- •4.1. The Incoterms families (e, f, c, d)
- •Incoterms 2000 families
- •4.2. The Incoterms categories (the Incoterms of sale at departure; the Incoterms of sale at destination; the daf Incoterms)
- •Content module 2. Algorythm of concluding and execution of international contracts theme 5. Concluding of international contract
- •5.1. The fist stage: Negotiation
- •5.2. Commercial offer
- •6.1. Formation of the sales contract
- •6.2. Required documents when executing a contract: collecting and filling up
- •6.1. Formation of the sales contract
- •6.2. Required documents when executing a contract: collecting and filling up
- •Import/Export Documentation
- •Theme 7. Regulation of international commercial disputes
- •7.2. Applicable law
- •7.3. Competent tribunal
- •7.4. International Commercial Arbitration
- •7.5. Execution of legal and arbitral decisions
- •7.6. Choosing a regulation process
- •Literature і. Основна література
- •Іі. Додаткова література
- •Ііі. Нормативні матеріали мон і ДонНует імені Михайла Туган-Барановського
A c.I.F. Price includes apart from the value of the goods the sums paid for insurance and freight (and all other transportation expenses up to the place of destination).
A f.o.b. price includes only the value of the goods, transportation and other expenses until the goods are on board vessel.
So, the f.o.b. price is lower than the c.i.f. one.
On FOB and CIF terms the Sellers bear the risk of accidental loss of or damage to the goods until the goods pass the ship’s rail.
C) Force Majeure Circumstances
Force Majeure Circumstances must be included in the contract to avoid difficulties and disputes in the future. The following clauses should be included in the contract of sale: Clause 1 “Manufacturing difficulties such as shortage of raw materials, electric power, labour shall not release the Sellers from responsibility for non-delivery or for delay in delivery of the goods under this contract”. Clause 2: “If the above circumstances last over 6 months, each party shall have the right to cancel the contract”. Clause 2 is usually applied to machinery and equipment. The limit 3 months may sometimes be applied to commodities, various raw materials and the like. Clause 3 “Should the delay in delivery exceed 2 months, the Buyers shall have the right to cancel the contract or its part”.
d) Claims and Arbitration
It may happen in business that certain terms and conditions of the contract are infringed by the Sellers or by the Buyers and then the dissatisfied party makes a claim on the other party. The Buyers most frequently make claims because of late delivery, delivery of wrong or damaged goods, or goods of inferior quality etc. The Sellers in their turn can make a claim when the Buyers fail to open a L/C in time or place a vessel under loading, unreasonable amounts claimed from them by the Buyers etc.
The parties do their best to settle their differences and claims amicably, but if they fail to agree, in accordance with the corresponding clause of the contract, the claim is submitted for arbitration. The Arbitration Court of the country in question at it Chamber of Commerce and Industry is a standing arbitration tribunal which settles disputes resulting from contractual and other civil-law relations in the course of foreign trade and other international economic and scientific technological contracts.
The parties appoint their arbitrators from among the List of Arbitrators. The List consists of more than 40 experts possessing adequate special knowledge in settling disputes. If the two arbitrators can not come to an agreement, they appoint an umpire. The awards of the Arbitration Court are final and binding upon both parties and without appeal. As a rule the indication about the proper law of the contract applied is given in details. For instance, “The Contract shall be governed by English Law” or “The Swedish Civil and Commercial Law shall be applied to this contract”.
Arbitration expenses are usually borne by the loser unless otherwise agreed upon.
3.3. Form and content of the contract
The offer made by the seller and followed by the client's acceptance gives rise to the international sales contract. It is preferable that this agreement is written to be precise and complete, to avoid disputes and arrange a medium of truth.
The use of drawing up a contract is not always recognised by exporters. It is true that the formalisation of the agreement is a source of slowness, supplementary costs and can be useless. When the contract is simple and carried out by loyal parties and in good faith. Yet writing offers the following advantages:
each party knows that which it can require of the other and the reciprocal laws and obligations. The elaboration of a contract therefore takes on a particular importance, as without a formalised agreement, the parties are poorly legally protected,
experience proves that the simple fact of taking a paper and pencil obliges the writer to state his thoughts precisely. Risks and difficulties are better estimated,
a well drafted contract often enables difficulties which can occur during the course of being carried out to be settled amicably. Furthermore contentious solutions are avoided.
For small and medium sized companies in view of the cost and "heaviness" which leads to the drafting of an international contract, it will often be reserved for relatively complicated commercial operations.
Table 3.1
The contract clauses - The main contractual arrangements
Designation of contractors |
Designation of contract signatories (checks on their positions and power). Names of actual people, corporate name of the companies, location of the parties, names of representatives delegated to sign. |
Object of the contract |
Definition of the contract's objective (goods or services) and the nature of the item sold: consumer goods, capital goods, foodstuffs, ... Description of commercial characteristics and/or techniques. Definition of the quality by referring to a sample, standards, a catalogue,... Definition of the quantity in number, weight, capacity,... |
Price and method of payment |
Determination of the price in national currency or in another currency (consider the risk of exchange). The price is accompanied by the incoterm which determines the distribution of transport costs, customs duty, insurance and the moment of ownership transfer. The price of the goods will be detailed. The seller will think about anticipating a method of regulation which assures him maximum security. In the case of documentary credit, the seller will notify the request to open it. |
Methods of transport |
Determination of the form of transport in coherence with the nature of the goods, the destination and security. According to the incoterm, the respective obligations of the contracting parties will be exact. |
Terms of delivery |
Determination of the date, the place of loading and delivery. Defining these time limits according to when the contract comes into force. Respecting this deadline is one of the major obligations for the seller. It is necessary to anticipate and impose lateness penalties in advance.
|
Language |
Determination of the contract's language. This needs to be controlled by the two parties. Also, be aware of the problems a translation can cause.
|
Coming into effect |
Coming into effect generally occurs on the date of the contract's signing, subject to certain prerequisites such as:
|
Safeguard (or hardship) clauses |
This clause enables the terms of agreement to be re-negotiated in the case of an important event altering the balance of the contract (useful in contracts where the carrying out is prolonged, supply contracts). |
Exemption clauses |
They allow the contractors to free themselves of their responsibility in the case of non or partial carrying out of the contract: exemption in the case of absolute necessity (attention as the interpretation of this notion varies from state to state). The case of absolute necessity can be contractually defined (example: strikes, interruption of raw material supplies, embargoes and other political events). |
Penal clauses |
This clause anticipates compensation in the case of non execution of contractual obligations (example: failing to conform, late delivery or payment,...). |
Termination clauses |
Possibility to terminate the contract if there is a certified failure of execution. |
Obligations of seller |
|
Obligations of purchaser |
|
Transfer of ownership |
It is possible to separate the moment of risk transfer to that of ownership transfer by the ownership reservation clause. It is notably the case for the ownership reservation clause which postpones the transfer until the full payment of the price. |
Contract law and settling disputes |
The parties can determine the law which governs their contract as well as the competent tribunal. If these clauses are omitted, the judge will research and determine the applicable law and the competent tribunal by virtue of the rules of international law. |
Compromise clause |
This clause appears when parties decide to resort to international Commercial arbitration. |