Commercial Documentation in English. Учебное пособие

UNIT 5. Business Documents. Part 2

–твердоепредложение, твердаяоферта;

–зауказаннуюценувуказанныйпериодвремени,

–отозвать, отменитьпредложение;

–уважающийсебяпродавец,

–взаимныеобязательства,

–нарушениеконтракта,

–потерпевшаясторона,

–предъявлятьисковозмещенииущерба,

–аннулировать(контракт),

–судебноепредписание(запрет),

–специфическоеисполнение,

–невыполнениеобязательства.

4.Translate the sentences into English using words from

the text:

1.Контракт – это соглашение между двумя или несколь- кими сторонами, накладывающее на них взаимные обязатель- ства.

2.Ряд пунктов обязательны в каждом контракте – юри- дическое наименование сторон, предмет контракта, качество, цена, условия платежа и доставки.

3.Качество оборудования должно соответствовать техни- ческой спецификации контракта.

4.Цена остается неизменной в течение времени исполне- ния контракта.

5.В случае нарушения контакта потерпевшая сторона мо- жетобратитьсявсудзавозмещениемпричиненногоущерба.

6.Специфическоеисполнениеконтракта– этоправоодной стороны в контракте заставить другую сторону исполнить усло- вияконтрактавсоответствиисоговореннымиранееусловиями.

5. Choose Russian equivalents to the following English expressions:

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Commercial Documentation in English

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UNIT 6.

Terms of Payment

1. Read and translate the text:

Payment in foreign trade made in cash

Payment in foreign trade may be made in cash and on credit. There are different methods of cash payment:

1.Payment by cheque is not practicable as a cheque is payable in the country of origin. That’s why cheques are mostly used for payment in home trade.

2.Payment by telegraphic or telex transfers (TT) or post (mail) remittance which is made from the Buyers’ bank account to the Sellers’ in accordance with the Buyers’ letter of instruction. The debtor can buy a telegraphic transfer (or cable transfer) from the bank, paying the equivalent amount at the current rate plus the cost of the telegram to be sent by the bank. The bank will then send their correspondent in the creditor’s town a telegram in a secret code instructing the correspondent to pay the creditor or to his order the amount of the debt. Actually the method of cash payment may sometimes take several months, which is naturally very disadvantageous to the Sellers. The transfer is carried out at current rates of exchange.

3.Direct interbanking system is an interbank payment system whereby funds are collected via a pre–authorised debit on the current account of the debtor. The service is particularly useful where there are regular payments due to the commercial payments or services (e.g. insurance premiums, leasing installments, utilities etc). The procedure which is completely electronic, enables the creditor, via the bank to collect at agreed times, funds due, by means of debit being passed to the debtor’s account at a bank

4.Payment by Letter of Credit (or just by credit) – L/C. The Letter of Credit is the most effective means of ensuring payment.

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Commercial Documentation in English

It is a useful way for companies to trade with each other until they build up a relationship of mutual trust. Letters of Credit are not cheap to raise and the customer may be reluctant to incur the additional expenditure without some form of ‘compensation’ because your foreign competitors may be offering payment arrangements which are less costly to raise but, above all involve them in fewer administrative chores. In simple terms it involves the customer instructing their bank to pay you after a certain period of time provided all documents are presented to his bank precisely in accordance with all conditions laid down in the Letter of Credit. This substitutes bank risk for buyer risk from the exporter’s point of view. The exporter must however present documents, which comply fully with the terms and conditions of the credit.

The following types of letters of credit are usually used: irrevocable, confirmed and revolving.

An irrevocable L/C is one which can neither be modified nor cancelled without the consent of the party in whose favour it has been opened.

A confirmed L/C is an irrevocable L/C, payment under which is guaranteed by a first class bank in case the opener of the L/C (i.e. the Buyers) or the bank effecting payment defaults, or is unable to make payment.

A revolving L/C is one under which its value is constantly made up to a given limit after payment for each shipment, which saves the charges on multiple letters of credit.

The Letter of Credit is the most frequently used method of cash payment because it is advantageous and secure both to the Exporter and to the Importer though it is more expensive than payment by transfer. It overcomes the gap between delivery and payment and gives protection to the Sellers by making the money available for them on the fulfilment of the transaction and to the Buyers because they know that payment will only be made against shipping documents giving them the title for the goods. This method of payment is often used in dealings with developing countries.

4. Payment for collection does not give any advantages to the Exporter because it does not give any guarantee that he will receive payment in time or at all. That’s why the Exporter usually requires that the Importer presents a guarantee of a first class bank that payment

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UNIT 6. Terms of Payment

will be effected in due time. Also, there is a long period of time between the delivery of the goods and actual payment. But it is advantageous to the Importer because there is no need to withdraw from circulation big sums of money before actually receiving the goods.

Payment for collection against documents (with subsequent acceptance or very often telegraphic collection with subsequent acceptance) is mostly used in trade with East European countries. The costs involved in effecting payment for collection are twice or three times lower than those by letter of credit.

Payments on credit bases

Most modern business is done on a credit basis which may be:

1. Payment by drafts (by Bills of Exchange – B/E) – the Exporter credits the Importer which is advantageous to the latter.

A draft (a bill of exchange) is an order in writing from a Creditor to a Debtor to pay on demand or on a named date a certain sum of money to a company named on the Bill, or to their order. It is drawn by the Sellers on the Buyers and is sent through a bank to the Buyers for acceptance (i.e. for acknowledging the debt). The draft becomes legally binding when signed and dated by the Buyers on its face (front) and is to be met when due, i.e. 30, 60 or 90 days after presentation. The draft may be negotiable, i.e. it may be used by the Sellers to pay their own debts, but in this case the Sellers are to endorse it by signing it on its back, then they can pass it on to the new holders.

If the exporter wants immediate payment, he can discount the draft in return for a cash advance with a bank for commission, i.e. sell it a bank for face value less interest, and by supplying a document (a letter of hypothecation) giving the bank the legal right to claim the goods if necessary. Besides, he may leave it with a bank as security for a loan. All this makes the Draft a very practical method of payment in foreign trade. To sum up its advantages – it simplifies the financing of export and import foreign trade and cuts down innumerable movements of currency.

There are two main types of drafts:

Sight Drafts, which are payable on presentation (at sight) or on acceptance and

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Commercial Documentation in English

Term Drafts, which are drawn at various periods (terms) and are payable at a future date and not immediately they are accepted. Term drafts may pass through several hands before maturity and require endorsement by the Sellers.

2.Payment in advance – the Importer credits the Exporter, for example, the contract may stipulate a 10 or 15 % advance payment, which is advantageous to the Sellers. This method is used when the Buyers are unknown to the Sellers or in the case of a single isolated transaction or as part of combination of methods in a large–scale (transaction) contract.

3.Payment on an open account. Open account terms are usually granted by the Sellers to the regular Buyers’ or customers in whom the Sellers have complete confidence, but sometimes they are granted when the Sellers want to attract new Buyers then they risk their money for that purpose. Actual payment is made monthly, quarterly or annually as agreed upon. This method is disadvantageous to the Exporter, but may be good to gain new markets.

The two methods of payment (in cash and on credit) are often combined in a contract. Drafts, for example, may be represented under a letter of credit and there may be other, sometimes very complicated combinations of various methods of payment stipulated in a contract.

The currency to be used for payment is a matter for arrangement between the counterparts.

Payment by Cheque

A cheque is a written order to a Bank given and signed by someone who has money deposited there to pay a certain amount mentioned in the cheque to a person named on it. In the place of the cheque system Banks provide an international system of Bank Transfers. The Seller gives TT or mail remittance terms to a Buyer when he is a trusted customer or agent. It involves risk as the Seller ships goods without any assurance of getting payment. A cheque is defined as a bill of exchange drawn on the bank and payable on demand. The holder of the bearer chegue can receive its value in cash from the bank on which it is drawn.

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UNIT 6. Terms of Payment

The following form is a form of a bearer chegue:

№__________

London, 200_ Stamp

Brown’s Bank Limited

Pay to Mr. A. White or bearer the sum of fifty dollars only. USA $ 50

John Smith

An order cheque is also payable direct to the holder, but the latter must endorse it before such a cheque can be cashed at the bank.

In order to safeguard the cheque it is often crossed. The purpose of crossing is to instruct the bank not to pay the amount of the cheque over the counter, but only through another bank

The following form is a form of an order chegue (crossed):

General crossing consists in drawing two parallel lines across the face of the cheque with words “and Company”, “& Co.” or “not negotiable” between them. Two parellel lines without these words also constitute a crossing:

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Commercial Documentation in English

When the name of a bank is written across the face of a cheque either with or without the words “not negotiable”, this addition constitutes a special crossing, the cheque is then crossed specially and to that bank. The name of the bank may be between parallel lines, or it may stand alone without lines. A special crossing directs the bank on which the cheque is drawn to pay the amount of the cheque to payee’s account at the bank indicated in crossing.

Here is an example of a bill of exchange or draft:

Moscow, _________, 2000_

ON ___ PAY AGAINST THIS BILL OF EXCHANGE TO THE ORDER OF

THE ALPHA BANK RUSSIA, MOSCOW, THE SUM OF _________

ONFY FOR VALUE RESEIVED.

To.– Promstrojimport

Foreign bills of exchange are usually drawn in sets of three, and sent abroad by different mails, so that in case the first gets lost by any means, the second or third may be safely delivered.

The following is a specimen of a foreign bill of exchange:

Bill of exchange for $ 5,000

New York, May 3, 200_ Ninety days after sight of this First of Exchange (Second

and Third of the same date and tenor are being unpaid) pay to the order of Messrs. Collecting Bank, Ltd. the sum of five thousand dollars only. Value received and charge to the account of

The American Exporting Corporation (Signature)

Like a cheque, a draft is an order to pay. It is made out by an exporter and presented to the importer. It is also called a bill

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UNIT 6. Terms of Payment

of exchange. A sight draft is a bill, which is paid immediately on presentation. A bill to be paid at a later date is called a term draft. There are 30–day, 60–, 90– and 120 day drafts. A very useful method is to attach the shipping documents (the Bill of Lading, the Insurance Policy and the Invoice) to the Draft and hand them to the Bank for collection. The documents can be handled over to the Buyer either against payment (D.P. – Documents against payment) or against acceptance of the Draft (D.A. – Documents on Acceptance). D.P. refers to sight drafts. D.A. refers against to terms drafts.

A sight draft does not require acceptance. A term draft must be necessarily accepted. The drawee writes “Accepted” across it and signs his name. The draft is then returned to the seller, who can hold it until maturity. This method of payment involves risk to the exporter or his bank as it may happen that a draft is not honoured when it is due.

The shipper has full protection when drafts are presented against L/C. With a letter of credit, at least when it is confirmed and irrevocable, the payment is guaranteed. The bank at the Seller’s end guarantees payment in case the opener of the credit defaults. Besides, the credit cannot be cancelled before the expiry date.

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Commercial Documentation in English

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