Examples terms of delivery clauses
I. Delivery of equipment shall be made C.I.F ....port, when shipped by Soviet ships; and F.O.B. Black Sea Ports when shipped by Customer's vessels.
The date of the Bill of Lading for the last consignment of the equipment shall be considered the date of completion of the supplies.
The equipment to be delivered under this Contract shall be considered as delivered by the Supplier and accepted by the Customer:
In respect of quality — in accordance with the Manufacturer's certificate of quality or test — reports of the Manufacturing plant; In respect of quantity — in accordance with the number of packages and the weight as shown in the Bill of Lading.
The Supplier shall inform by cable the Customer not later than three days after the vessel's departure from suppliers' port about the ship's sailing date, the vessel's name, the weight of the equipment shipped, the number of the Bill of Lading and the number of the Contract.
Types of payment
Payment of goods supplied in the local trade is a rather simple matter. It is made either in advance or within a sensibly short period after delivery. If a buyer fails to pay, there comes legal action after which payment can be enforced.
The matter is different in foreign trade because a great deal of time is spent on correspondence, dispatch and delivery. It is here that banks play a fundamental part. Their services have to be paid for, but are not expensive and always necessary — the bank comes into each transaction at this or that stage.
Payments in foreign trade are usually made by:
1. banker's transfer;
2. bill of exchange;
3. letter of credit.
As well as in the local trade, payment may be made a) in advance; b) on open account.
Payments in advance are used 1) when a buyer is in urgent need; 2) when a buyer is unknown to a seller; 3) in the case of a single isolated transaction. The method of payment in these cases will probably be by banker's draft or banker's transfer.
Open account terms are granted by a seller to a buyer of unquestionable reputation in whom he has complete confidence, e.g. regular customers, agents or distributors. In these cases payment is made quarterly by bill of exchange or banker's transfer.
The banker's transfer is a mere transference of money from the bank account of a buyer in his own country to the bank account of the seller in the seller's country. It is only necessary for the customer to send a letter of instruction to his bank — or use a special form. The transfer is executed at current rates of exchange and subject to any exchange control regulations of the countries concerned.
The bill of exchange (B/E) is a written order from a creditor to a debtor to pay on demand or at a specified date a stated sum of money to a person named on the bill, or to his order. The bill is drawn by the creditor on the debtor, and is sent to the debtor or his agent to pay or accept (to acknowledge the debt). The debtor accepts it through signing his name on the front of the bill, together with the date. The bill becomes now legally binding, and the acceptor must meet it at or before the due date. Failure to meet the bill on the due date will result in total discredit for the creditor, and legal action can follow. An unpaid bill is called "dishonoured", and the creditor can protest it, which gives him the right to prosecute the debtor.
The letter of credit (L/C) is the most generally used method of payment in the export trade. It starts with the buyer who instructs his bank to issue the L/C for the amount of the purchase and in favour of the seller. The buyer's bank sends this instruction, a special printed form containing full details of the transaction, to its agent (a bank cooperating with it) in the seller's country. On receiving the instruction, the agent bank informs the seller about the credit. The seller can now carry out the buyer's order, knowing that when he has done so, the money will be paid at once by the agent bank. The buyer is equally secure, because the agent bank will pay on his behalf only if the conditions of the transaction are completely executed by the seller.
A L/C may be paid to the seller not immediately upon execution of the order. If there is an agreement between the seller and the buyer the agent bank can accept a bill of exchange drawn by the seller on the agent bank. The buyer gets credit and the action is absolutely safe for the seller, who can discount the bill for ready cash if he needs it.