Basics of Contracts Select a category and click "Go" Specific Contract Provisions Explained GO Specific Contract Provisions Explained Select a provision and click "Go" Contract Date GO Contract Date Provision This Agreement is made on [date]. Comment: The date when the contract is signed is usually also the date when it becomes effective unless the contract provides otherwise. This date is particularly important if payment or delivery times will be fixed in reference to it. For example, a contract may provide for "shipment within 30 days after the contract date." When dealing internationally, you should remember that the conventional format for dates differs from country to country. In some, the day is stated before the month; in others, the month is given before the day. To avoid confusion, it is highly recommended that you spell out the month when dating your contract. Identification of Parties Provision This Agreement is made between [full name of party A] of [address of party A], a/an [description and nationality of party A] ("Seller"), and [full name of party B] of [address of party B], a/an [description and nationality of party B] ("Buyer"). Comment: The agreement is binding on the parties who sign it, and these parties should be identified in this clause. To ensure that there is no misunderstanding, the full name of each party to the contract should be given. If a party is an entity, the type of entity (partnership, corporation, limited liability company, nonprofit corporation, and so forth) should be disclosed here. Any question as to whether the entity or the person representing the entity has authority to make the contract should be resolved before the contract is executed. The common practice is to include the address of each party in this provision, although sometimes the addresses are included at the end of the agreement with the signatures of the parties. The address given should be the business address for the party. If a party has more than one business address, the address given should be for the registered office or the principle place of business. Unless otherwise specified in the contract, this address is where the party will receive the goods, the payment for the goods, and any notices related to the transaction. In international contracts, the description of each party includes the party's nationality. Examples of descriptions: "a SociŽtŽ Anonyme organized and existing under the laws of
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BasicsofContractsSelectacategoryandclick"Go"
SpecificContractProvisionsExplained GO
SpecificContractProvisionsExplainedSelectaprovisionandclick"Go"
ContractDate GO
ContractDate
Provision
ThisAgreementismadeon[date].
Comment:Thedatewhenthecontractissignedisusuallyalsothedatewhenitbecomeseffectiveunlessthecontractprovidesotherwise.Thisdateisparticularlyimportantifpaymentordeliverytimeswillbefixedinreferencetoit.Forexample,acontractmayprovidefor"shipmentwithin30daysafterthecontractdate."
Whendealinginternationally,youshouldrememberthattheconventionalformatfordatesdiffersfromcountrytocountry.Insome,thedayisstatedbeforethemonthinothers,themonthisgivenbeforetheday.Toavoidconfusion,itishighlyrecommendedthatyouspelloutthemonthwhendatingyourcontract.
IdentificationofParties
Provision
ThisAgreementismadebetween[fullnameofpartyA]of[addressofpartyA],a/an[descriptionandnationalityofpartyA]("Seller"),and[fullnameofpartyB]of[addressofpartyB],a/an[descriptionandnationalityofpartyB]("Buyer").
Comment:Theagreementisbindingonthepartieswhosignit,andthesepartiesshouldbeidentifiedinthisclause.Toensurethatthereisnomisunderstanding,thefullnameofeachpartytothecontractshouldbegiven.Ifapartyisanentity,thetypeofentity(partnership,corporation,limitedliabilitycompany,nonprofitcorporation,andsoforth)shouldbedisclosedhere.Anyquestionastowhethertheentityorthepersonrepresentingtheentityhasauthoritytomakethecontractshouldberesolvedbeforethecontractisexecuted.
Thecommonpracticeistoincludetheaddressofeachpartyinthisprovision,althoughsometimestheaddressesareincludedattheendoftheagreementwiththesignaturesoftheparties.Theaddressgivenshouldbethebusinessaddressfortheparty.Ifapartyhasmorethanonebusinessaddress,theaddressgivenshouldbefortheregisteredofficeortheprincipleplaceofbusiness.Unlessotherwisespecifiedinthecontract,thisaddressiswherethepartywillreceivethegoods,thepaymentforthegoods,andanynoticesrelatedtothetransaction.
Ininternationalcontracts,thedescriptionofeachpartyincludestheparty'snationality.Examplesofdescriptions:"aSocitAnonymeorganizedandexistingunderthelawsof
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France"or"apartnershiporganizedandexistingunderthelawsoftheStateofCaliforniaintheUnitedStatesofAmerica"or"anindividualwhoisacitizenofSingapore."
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GoodsDescription,Quantity,andPrice
Provision
SaleandPurchaseofGoods.TheSelleragreestoselltotheBuyer,andtheBuyeragreestopurchasefromtheSeller,goods(the"Goods")thatare[specifyeitherasdescribedintheattachedExhibitA,whichisincorporatedintothisAgreementorofthefollowingtypeforthepriceandquantitystated:ModelNumber:Description:Quantity:Price:Item:TotalPrice:
Comment:Theprovisionforgoodscontainstwotermsthatareessentialtoallcontracts,whetherinternationalordomestic:adescriptionofthegoodsandtheprice.Forthecontracttobeenforceable,thepartiesmustusuallyagreetobothoftheseterms.Althoughafewjurisdictionswillallowthesetermstobeimpliedincommercialtransactions,thegeneralruleisthatthesetermscannotbeimplied.
Ifadescriptionofthegoodsismissingorisnotspecific,enforcementofthecontractmaybeimpossiblebecausethegoodscannotbeidentified.Aclauseisconsideredsufficientlyspecificifitissoclearthatbothpartiesfullyunderstandthespecificationsandhavenodiscretionininterpretingthem.Thegoodsmaybedescribedbymodelnumbers,showninplansordrawings,ordefinedbyotherspecifications.Formultiplegoods,youshouldprovideadetailedlistattachedasanexhibittotheagreement.
Ifthepartiesfailtoagreetoapriceortoameansfordeterminingtheprice,thecourtsareunlikelytoenforcethecontract.Youmayindicateatotalpriceforallgoodsorapriceperunitorothermeasure,suchasperpoundorton,andtheextendedprice.Evenifthequantityofthegoodsisnotfixedatthetimethecontractismade,ameansofdeterminingthepricemustneverthelessbestated(refertoChapter8:DraftingPreciseContractProvisions).Inaninternationalcontract,itiswisetostatethepriceusinganabbreviationofthecurrencyinwhichpaymentistobemade,suchasHK$(HongKongdollars)orUS$(UnitedStatesdollars),toavoidanymisunderstandings.
Thequantityofgoodsisimportant.Ifthecontractcoversgoodsofmorethanonetype,thequantityofeachtypeshouldbegiven.Youmayspecifyanumberofunitsoranyothermeasureofquantity.Ifthegoodsaremeasuredbyweight,becertaintospecifynetweight,dryweight,ordrainedweight.
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PaymentTerms
Provision
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TermsofPayment.TheBuyerwillpaythepurchaseprice[specifye.g.,onorbefore(date)ornotlaterthan(number)daysbeforetheDeliveryDate].ThepaymentmustberemittedtotheSellerat[theaddressstatedaboveorspecifyotheraddress].Thepaymentmustbemadein[currency]bymeansof[instrumentoftransfer].
Comment:Inaonetimetransaction,thesellerwilltypicallyseekthemostsecureformofpaymentbeforecommittingtoshipment,whileabuyerwillwantthegoodsclearedthroughcustomsanddeliveredinsatisfactoryconditionbeforeremittingpayment.Thepartieswillneedtonegotiateacompromisebetweenthesetwopositions,andeachshouldinsistoncertainprotectiveclausestoalleviatesomeoftherisk(refertoChapter8:DraftingPreciseContractProvisions).
Ininternationalcontracts,youshouldalwaysspecifytheacceptablecurrencyandtheinstrumentofpayment.Thecurrencyselectedshouldbestrongandstabletoallowsomeprotectionagainstfluctuatingexchangerates,andthemeansofpaymentshouldbesecure.Forexample,thepaymentmaybemadebydeliveryofadocumentaryletterofcreditordocumentsagainstpayment,byadvancepaymentincashorwiretransfer,orbyalineofcreditforaspecifiednumberofdays.
CostsandCharges
Provision
CostsandCharges.Thebuyerisresponsibleforthefollowingcostsandchargesincurredinthesaleandtransportofthegoods:[list].Thesellerisresponsibleforthefollowingcostsandchargesincurredinthesaleandtransportofthegoods:[list].
Comment:Youshouldspecifywhichpartyistopayanyadditionalcostsandchargesrelatedtothesale.Evenifyouuseatradeterminyourcontracttoindicateoneparty'sresponsibilityforthepaymentofcostsandcharges,youshouldelaborateontheobligationsofbothparties.Theitemstobeconsideredincludeimport,export,andothercustomsandshippingfees,advaloremandothertaxes,andexpensesforobtainingrequisitelicenses.
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PackagingandArrangements
Provision
PackagingArrangements.TheSellerhasdiscretioninpackagingthegoods,providedthatthepackagingmustwithstandtransportation,preventdamagetothegoodsduringtransport,andcomplywiththefollowingrequirements:[specify,e.g.,productwarningandoriginmarkinglawsoftheBuyer'scountry,assetforthinExhibitAannexedtothisAgreement].TheSellerwillendeavortocompleteallpackagingwithintimefortheDeliveryDate.Ifthereisanydelay,theSellerwillimmediatelynotifytheBuyerofthedelay,theexpectedtimeforcompletion,andthereasonforthedelay.TheBuyerwillthenhavetheoptiontorenegotiatewiththeSellerforanewDeliveryDate,whichthepartieswillconfirminwritingasamodificationtothisAgreement,ortonotifytheSellerthattheAgreementisterminated.
Comment:Ataminimum,thisprovisionshouldrequirethesellertopackagethegoodsinsuchawayastowithstandtransportation.Ifspecialpackagingrequirementsarenecessary,you
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shouldspecifythemalso.Specialpackagingmayberequiredtomeetbothlegalrequirementsandmarketexpectationsinthebuyer'scountry.Thus,productsmaybesubjecttoimportation,transportation,health,agricultural,environmental,navigation,construction,andconsumerlawsandregulations.Compliancemayinvolvegettingalicenseorpermit,arrangingforinspections,usingproperpackagingandlabeling,providingproofofinsurance,andpresentingproperentrydocumentsforcustomsclearance.
Thepartiesmaydecidethatthebuyerwillberesponsibleforconformingthepackagingforsaleinthebuyer'scountry.Inthiscase,thesellershouldinsistonprotectiveprovisionsforintellectualpropertyandthirdpartyliability(refertoChapter8:DraftingPreciseContractProvisions).
TransportationandDeliveryofGoods
Provision
DeliveryandTransportofGoods.TheGoodswillbedelivered[tradeterm,e.g.,F.O.B.][place]onorbefore[date]("DeliveryDate").TheSellerwilldelivertheGoodsinasingleshipment.ThemodeoftransporttothepointofdeliveryisattheSeller'sdiscretion.TheSellerwillmakeeveryefforttocommencetransportoftheGoodssothattheywillarrivebytheDeliveryDate.Ifthereisanydelay,theSellerwillimmediatelynotifytheBuyerofthedelay,theexpectedtimefordelivery,andthereasonforthedelay.TheBuyerwillthenhavetheoptiontorenegotiatewiththeSellerforanewDeliveryDate,whichthepartieswillconfirminwritingasamodificationtothisAgreement,ortonotifytheSellerthattheAgreementisterminated.
Comment:ContractsforthesaleofgoodsmostcommonlyuseinternationaltradetermsusuallyIncotermsasdefinedbytheInternationalChamberofCommerceinParistoassignresponsibilityfortherisksandcostsoftransport.Althoughinternationaltradetermshavebeenstandardized,inpracticetheirmeaningscanvary.Precisedefinitionsofthesetermsareimportanttoyourcontractbecausethesetermscandeterminesuchitemsaswhichpartyisresponsibleforinsuringthegoodsatanyonetime,thetimeatwhichtitletothegoodswilltransferfromsellertobuyer,andthepartyresponsibleforpayingcertaintransportationcosts.
IfyoudonotuseanIncoterm,thedeliveryandtransportprovisionmaysimplystatethenameofthecarrierwhowillhandlethefreightshipment,designatethepointatwhichandthedateonwhichthegoodswillbedeliveredtothebuyer,andidentifythepartywhowillpayfortransportationfrompointAtopointB.Ifmorethantwoorthreecarriersareinvolvedoryourgoodsrequirespecialtreatment,youwillhavetoaddextradetailstothisprovision.
Itisoftenwisetonameapreferredcarrierfortransportingthegoods.Youshoulddesignateaparticularcarrierif,forexample,acarrieroffersyouspecialpricingorisbetterablethanotherstotransporttheproduct.Ifthecarrierisdesignated,however,youmaybelockedintousingthatcarrierunderunfavorableterms.Therefore,thechoiceofcarriershouldremainflexible,evenifapreferenceisstated.Anotheralternativeistodescribeatypeofcarrier,particularlyifspecialhandlingofthegoodsisrequired.Thetransportclauseshouldalsospecifyanyparticularrequirementsforstorageofthegoodsbeforeorduringshipment,suchassecurityarrangements,specialclimatedemands,andweatherprotectionneeds.
Thepartiesmayincludenoticeprovisions,particularlyifgoodsarenotreadyforimmediatetransfer.Thus,asellermayberequiredtonotifythebuyerwhenthegoodswillbereadyfordeliveryorpickup,particularlyifthegoodsareperishableorfluctuateinvalue.Ifyourtransactionistimesensitive,youcouldevenprovideforseveralnotices,whichwillallowyoutotrackthegoodsandtotakestepstominimizecostsanddamagesifdeliveryisdelayed.
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Insurance
Provision
Insurance.The[Buyer/Seller]willobtainandpay,onitsownaccount,forallinsuranceontheGoodswhileintransit,providedthattheinsuranceobtainedwillincludefortheprotectionofthe[Seller/Buyer]coverageforthefollowing:[specify].Evidenceofthisinsurance,intheformofacopyofthepolicyorotherstatementprovidedbytheinsurer,willbeprovidedtothe[Seller/Buyer]beforetheGoodsareshipped.EachpartyisresponsibleforobtainingonitsownaccountanyotherinsurancecoveragefortheGoodsthathe/shemaydesire.
Comment:Youshouldspecifytheinsurancerequired,thebeneficiaryofthepolicy,thepartywhowillobtaintheinsuranceandwhowillpayforit,andthedatebywhichitmustbeobtained.Youshouldalsoagreeonwhichdocumentswillbeconsideredsatisfactoryevidenceofinsurance.
TitletoGoods
Provision
TitletoGoods.TitletotheGoodswillpasstotheBuyeratthetimetheGoodsaredeliveredto[place],providedtheBuyerhastransmittedpaymenttotheSellerbythattime.
Comment:Thisisacriticalprovisionbecause,ifthegoodsarelostduringtransit,thepartywithtitlegenerallybearstherisk.Thegeneralruleisthattitletransfersatthepointwhenthesellerdeliversthegoodstothebuyer.Thus,ifthebuyerpicksupthegoodsattheseller'splaceofbusinessandcarriesthemoff,titlehastransferredandthebuyerbearstheriskoflossordamageduringtransport.Ifthesellershipsthegoods,titlemaytransferatanypointduringthetransit,evenrightuptothebuyer'sdoor,dependingontheagreementoftheparties.Eachpartyshouldbecertaintoinsurethegoodsfortheentiretimethatthepartyholdstitletothegoodsorbewillingtotaketheriskoflossordamage.
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Import/ExportDocumentation
Provision
Import/ExportDocumentation.TheSellerwillberesponsibleforobtaining,completing,andpresentingto[country]customsallexportdocumentationandfeesrequiredforclearance,includingthefollowing:[list].TheBuyerwillberesponsibleforobtaining,completing,andpresentingto[country]customsallimportdocumentationandfeesrequiredforclearance,includingthefollowing:[list].TheBuyermustnotifytheSellerthatallimportrequirementshavebeenmet.TheSellerisnotrequiredtoshiptheGoodsuntiltheBuyerfurnishestheSellerwithproofthattheimportrequirementsandfeeshavebeenorwillbetimelymet.IfshipmentisdelayedbecausetheBuyerfailstofurnishsuchprooftimely,theSellerwillnotbedeemedtohavebreachedthecontract.
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Comment:Shipmentofthegoods,andeventhecontractitself,maybemadecontingentonaparty'shavingobtainedorarrangedinadvancetheproperlicenses,inspectioncertificates,andotherauthorizations.Alwaysmakecompleteimportandexportdocumentationthatis,documentationthatissatisfactoryforcustomsclearanceandentryarequirementofyourcontractforthepurchaseofproductsorcommodities.
Aswritten,thisprovisionisintendedtosplittheresponsibilityforcustomsclearancebetweenthepartiesinaccordancewiththerequirementsmostfamiliartoeachthesellerfortheexportingcountry,thebuyerfortheimportingcountry.Theclausemaybeamendedtoprovidethatonepartywillmakeallarrangementsforcustomsclearance.
Invoices
Provision
Invoices.TheSellerwillissueprovisionalinvoicesandfinalinvoicesfortheshipmentoftheGoods.TheinvoicesmustspecificallydescribetheGoods,thequantityoftheGoods,andthepriceoftheGoods.
Comment:Ininternationaltransactions,invoicesservetoconfirmtheshipment,notifythebuyerofshipment,andfurnishdocumentaryevidenceforcustomsclearance.Thecontractshouldalsorequirethattheinvoicebeincompliancewithanyspecificrequirementsimposedbythelawsorregulationsofthebuyer'sorseller'scountry,anditiswisetoappendthoserequirementstothecontracttofacilitatecompliance.
ReExportationProhibition
Provision
ReExportation.TheBuyercovenantsthattheGoodswillbeshippedtoanddeliveredin[country]andthattheBuyerwillnotshipordelivertheGoodstoanyothercountry,norwilltheBuyerreexporttheGoodsafterdeliveryin[country].
Comment:Thisclauseisespeciallyimportantifthegoodsmightbesubjecttoimportorexportrestrictions,includingtradeembargoes,inanyparticularcountry.Underthelawsofsomecountries,suchastheUnitedStates,asaletoabuyerwhointurnshipsthegoodstoanothercountrywhereasalefromthefirstexportingcountrywouldotherwisehavebeenprohibitedmaysubjectthefirstsellertocriminalpenaltiesinthatseller'sowncountry.Penaltiesmaybeimposedifthesellerkneworshouldhavereasonablyknownofthesubsequentexportandsale.Thus,ifthesellerhasanysuspicionthatthebuyermaybedeliveringorreexportingthegoodstoaprohibitedcountry,thesellershouldavoidthetransactionentirely.Thisclausemaybeamendedtoallowreexporttooneormoredesignatedcountriestowhichreexportsarepermissible.
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InspectionRights
Provision
Inspections.TheBuyerisentitledtoinspect,ortohaveitsagentinspect,theGoodsatthe
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[Seller'splaceofbusinessorpointofshipping].TheSellerwillpayreturnfreightchargesandwillreplaceGoodsthattheBuyeroritsagentrejectswithGoodsthatmeetthedescriptionandspecificationssetforthinthisAgreement.OncompletionoftheinspectionandacceptanceoftheGoods,theBuyeroritsagentwillexecuteacertificateofinspectionandacceptance.TheinspectionandexecutionofthecertificatewillbeattheBuyer'scost.TheBuyer'sfailuretoinspecttheGoodswillconstituteawaiveroftherightofinspection,andtheBuyerwillbedeemedtohaveacceptedtheGoodsasdelivered.
Comment:Thebuyershouldinsistonarightofinspectionofthegoodsbeforetakingdeliverytodeterminewhetherthegoodsmeetthecontractspecifications.Thisclauseshouldspecifywhowilldotheinspectionthebuyer,anagent,aneutralthirdparty,oralicensedinspectorwheretheinspectionwilloccur(forexample,attheseller'splant,thebuyer'swarehouse,orareceivingdock)andwhentheinspectionwilloccur.
Warranties
Provision
ExpressandImpliedWarranties.TheSellerexpresslywarrantsthattheGoodsarefreefromalldefectsofmaterial,workmanship,orinstallation.Within[number]daysafterdelivery,theSellerwillreplacefreeofallcharges,includingthecostoftransportation,anypartoftheGoodsfounddefective.EXCEPTASEXPRESSLYSTATEDINTHISAGREEMENT,THESELLERDOESNOTWARRANTTHEGOODSINANYMANNERATALL.IMPLIEDWARRANTIESOFFITNESSFORAPARTICULARPURPOSEOROFMERCHANTABILITYAREDISCLAIMED.THEGOODSARESOLD"ASIS"ANDTHEBUYERUNDERSTANDSANDAGREESTHATNORELIANCEHASBEENPLACEDONTHESELLER'SSKILLANDJUDGMENTTOSELECTORFURNISHGOODSFORANYPARTICULARPURPOSE.
Comment:Thesellermayagreetoofferextendedorlimitedwarranties,ornowarrantiesatall,astofitnessorqualityofthegoods.Theexacttermsofthewarrantiesshouldbegiveninthecontract.Insomecountries,thelawwillimplywarrantiesunlessthesellerexpresslydisclaimsthem.ImpliedwarrantiesalsoariseundertheUNConventiononInternationalSaleofGoods.Becauseofenforcementdifficulties,itmaybewisetohavebothpartiesinitialthewarrantiesparagraph.
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Indemnity
Provision
IndemnificationofBuyer.ProvidedtheBuyerhasnotalteredtheGoodsorthepackagingoftheGoodsinanymannerbeforesale,theSellerwilldefendanysuitfordamagesbroughtagainsttheBuyerbasedonadefectinthematerials,design,ormanufacturingoftheGoodsoronpatentortrademarkinfringementinconnectionwiththesaleoruseoftheGoods.IfanactionisbroughtagainsttheBuyer,itwillpromptlynotifytheSeller.TheSellerwillindemnifytheBuyeragainstanyliability,damage,orexpensesincurredinconnectionwithanysuchsuitandwillpayanyjudgmententeredagainsttheBuyerinsuchsuit.
Comment:Anindemnificationclauseisoptional.Ininternationalcontracts,thesellerwill
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sometimesagreetoholdthebuyerharmlessfromdamagesthatarisefromspecificcauses,suchasadesignflawormanufacturingdefect,inordertoencouragethebuyertodebuttheseller'sproductsinanewmarket.Ifanindemnityisgiven,thesellershouldalwaysinsistthatthereisnochangeinthegoods,packaging,labeling,ormarkingsbeforethesaleanyalterationbythebuyershouldcanceltheindemnity,unlessthealterationwasapprovedbytheseller.
IntellectualandIndustrialPropertyRights
Provision
IntellectualPropertyProtection.TheBuyerunderstandsthattheSellerownstheexclusiverightsinthedesigns,patents,trademarks,tradenames,andcompanynames(the"IntellectualProperty")usedinconnectionwiththeSeller'sGoods.TheBuyerisgivennorightsinanyoftheSeller'sIntellectualProperty.TheBuyerwillnotusetheSeller'sIntellectualPropertyasifitweretheBuyer'sownproperty,norwilltheBuyerregistertheSeller'sIntellectualPropertyinanycountryasifitweretheBuyer'sown.TheBuyeracknowledgesthatitsunauthorizeduseorregistrationoftheSeller'sIntellectualProperty,orofanyintellectualpropertythatisconfusinglyordeceptivelysimilartotheSeller'sIntellectualProperty,willbedeemedaninfringementoftheSeller'sexclusiverights.
Comment:Theinfringementofrightsinintellectualproperty,trademarks,servicemarks,tradenames,patents,designs,andsimilarrights,shouldbepreventedifatallpossiblefromtheoutsetoftherelationshipbetweentheparties.Alltoooften,acompanywillmakeasmallsaletoaforeignbuyer,whoneverplacesanotherorder.Then,fiveortenyearslater,thecompanydecidestoexpandintothatsameforeignmarketonlytofindthatitcannotregisteritsintellectualpropertytherebecausetheforeignbuyerhasacquiredregistrationofthesameornearlyidenticaltrademarks,tradenames,orpatents.Ifthecompanytriestosellinthatcountry,itwillbechargedwithinfringement.Itsonlyremedyistobuyouttheinfringerorexpendsubstantialtimeandcostsinfightingtheinfringementthroughthecourts.Thevalueofintellectualpropertyrightsshouldnotbeunderestimatedevenforaonetimesaleandtheyshouldbeprotected.Thelegalremediesavailableagainstinfringersareofteninadequaterelativetotheharmcaused,andthereforealiquidateddamagesclauseisrecommended.
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TimelyPerformance
Provision
Time.Thepartiesagreethat[specify,e.g.,timeisoftheessenceortimelyperformanceofthisAgreementisimportant,providedthatifapartyfailstoperformontime,thepartieswillstrivetorenegotiatetheterms].
Comment:IntheUnitedStates,thepartiestoacontractoftenstipulatethattimelyperformanceisessential.Theinclusionofthisclauseallowsapartytoclaimbreachsimplybecausetheotherpartyfailstoperformwithinthetimeprescribedinthecontract.Inothercountries,aclauseofthistypeisconsideredlessimportantbecausecontractingpartiesoftenwaiveorrenegotiateterms,ratherthansuefordamagesonbreachofthecontract.Anoptionalprovisionisincludedhereincaseyouprefertoamendthisclausetomorecloselyreflecttheinternationalpractice.
ConditionsPrecedent
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Provision
ConditionsPrecident.ThisAgreementissubjectto[specify,e.g.,theissuanceofanimportlicensetotheBuyerbytheappropriateagencyof(country)governmentandtheissuanceofanexportlicensetotheSellerbytheappropriateagencyof(country)government].
Comment:Youshouldspecifyanyeventsthatmustoccurbeforeapartyisobligatedtoperformthecontract.Forexample,youmayagreethatthesellerhasnodutytoshipgoodsuntilthebuyerforwardsdocumentsthatsecurethepaymentforthegoods.Anotherconditionprecedentmightbereceiptofadvancepayment.Ifthecontractiscontingentontheoccurrenceofcertainconditions,itisbesttorepeatallofthecontingenciesforterminationtoensurethatyourintentisclear.Ingeneral,conditionsthatcouldresultinterminationarenotconsidereddesirableandthereforearestrictlyconstruedbythecourtsinmostjurisdictions.
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Cancellation
Provision
RighttoCancel.TheBuyerhasarighttocancelthisAgreementiftheSellerfails[specify,e.g.,toshipalloranyoftheGoodsontime].TheSellerhasarighttocancelthisAgreementiftheBuyerfails[specify,e.g.,tomakeanypaymentrequiredbythisAgreementwithin(number)daysofitsduedate].Ifeitherpartynotifiestheotherpartythatitwillnot,orisunableto,performthisAgreement,thepartyreceivingnoticeisentitledtocanceltheAgreement.Tomakethecancellationeffective,thepartyseekingtocancelmustgivenoticetotheotherpartythattheAgreementisdeemedcanceled.Thedateofthecancellationwillbethedateonwhichthepartyreceivesthenoticeofnonperformance.
Comment:Ifeitherpartyhasarighttocancelthecontract,thegroundsforexercisingthatrightshouldbespecified,andthereshouldbearequirementfornoticeofcancellation.Theprovisionofarighttocancelfurnishesapartywitharemedythatcanbeutilizedwithouthavingtoseeksatisfactionthroughlegalproceedings.
ForceMajeure
Provision
ForceMajeure.ThisAgreementwillbedeemedcanceled,andneitherpartywillhaveanyliabilitytotheotherforlossesresultingfromnonperformance,ifdeliveryispreventedbycausesbeyondthecontroloftheSeller.Suchcausesinclude,butarenotlimitedto,actsofnature,labordisputes,failureofessentialmeansoftransportation,orchangesinpolicywithrespecttoexportsorimportsbythe[country]governmentorthe[country]government.
Comment:Acommonclauseinallcontracts,theforcemajeureclausemerelyexpresseswhatisnodoubttheintentoftheparties:ifperformanceispreventedbyanaturaldisasterorothercatastrophiceventbeyondthecontroloftheparties,theagreementiscanceled.
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LiquidatedDamages
Provision
LiquidatedDamages.EachpartyunderstandsthatabreachofthisAgreementwillcausethenonbreachingpartydamagesthatwillbedifficulttocalculateintermsofsales,markets,andgoodwilllost.ItisagreedthatthepartieshaveconsideredwhatwouldbeareasonableestimateofthedamageseachwouldsufferiftheotherweretobreachthisAgreement.IftheSellercannotdelivertheGoodsforanyreasonotherthanbyfaultoftheBuyer,theSellerwillpaytotheBuyerasliquidateddamagesthesumof[currencyandamount].IftheBuyerfailstofurnishshippinginstructions,wrongfullyrefusestoaccepttheGoods,orfailstopaytheamountdueontime,theBuyerwillpaytotheSellerasliquidateddamagesthesumof[currencyandamount].IftheBuyerinfringestheSeller'sIntellectualProperty,theBuyerwillpaytotheSellerasliquidateddamagesthesumof[currencyandamount]foreachdayofcontinueduse.Paymentofliquidateddamageswillnot,inanyway,affecttheSeller'srightstoenjointheBuyer'scontinueduseoftheSeller'sIntellectualProperty.
Comment:Thepartiesmayprovideforaspecificamountofdamagespayableonbreachoftheagreement,andthatprovisionwillusuallybeenforceableaslongasitisareasonableestimateofthedamages.Theestimatemustbereasonableinrelationtotheanticipatedoractualharmcausedbythebreach.Ingeneral,proofofdamagesmustalsobedifficultorimpracticable,ordamagesmustbeaninadequateremedybecausetheharmwillcontinuetooccurunlessitisenjoined.
Arbitration
Provision
Arbitration.Exceptwhenliquidateddamagesapply,ifadisputearisesbetweenthepartiestothisAgreementwithregardtoanyoftheprovisionsortheperformanceofanytermsandconditionsofthisAgreement,thedisputewillbesettledby[binding/nonbinding]arbitrationtobeconductedinaccordancewiththe[nameofarbitrationrules]in[location].
Comment:Youmightprovideforarbitrationasanalternativetolitigationforresolvingcontractdisputes.Arbitrationislessformalprocedurallythanacourttrialbutstillallowsthepartiestopresenttheirclaimsbeforeaneutralpersonorpanelforanobjectivedecision.Thisremedyisincreasinginpopularityincommercialdisputes,largelybecauseitislessadversarial,lesscostly,andfasterthanlitigation.However,becertainthatyouseriouslyintendtosettledisputesinthisway.Ifyouagreetoarbitratebutlaterfilesuit,thecourtislikelytoupholdthearbitrationclauseandforceyoutosettleyourdisputeasyouagreedunderthecontract.
Anarbitrationclauseshouldspecifywhetherarbitrationisbindingornonbindingonthepartiesthecountrywherearbitrationwillbeconductedtheprocedureforenforcementofanawardtherulesgoverningthearbitration,suchastheU.N.CommissiononInternationalTradeLawModelRulestheinstitutethatwilladministerthearbitration,suchastheInternationalChamberofCommerce(Paris)thelawthatwillgovernproceduralissuesorthemeritsofthedisputeanylimitationsontheselectionofarbitrators(forexample,anationalofadisputingpartymaybeexcludedfrombeinganarbitrator)thequalificationsorexpertiseofthearbitratorsthelanguageinwhichthearbitrationwillbeconductedandtheavailabilityoftranslationsandtranslatorsifneeded.
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Arbitrationisnotusedinallcountries.Forexample,disputesinMexicoarerarelysettledbyarbitration,andthroughoutAsia,arbitrationisfrownedonnearlyasmuchaslitigationincourt.Moreover,somecountriesdonotrecognizearbitrationawardsfromotherjurisdictions.Youshouldconsultanattorneyfamiliarwiththelawofthecountryofyoursupplierbeforeassumingthatyouwillbeabletoarbitratepotentialcontractdisputes.
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GoverningLawandChoiceofForum
Provision
ForumandGoverningLaw.Thepartiesunderstandandagreethatthelawsof[location]willbeappliedtointerpretthisAgreement.ThisAgreement[is/isnot]tobeinterpretedbyapplicationoftheUnitedNationsConventiononInternationalSaleofGoods.Anyactionfiledtoresolveadisputebetweenthepartiesmustbebroughtin[location].
Comment:Choosethelawofaspecificjurisdictiontocontrolanyinterpretationofthecontractterms.Thelawthatyouchoosewillusuallyaffectwhereyoucansueorenforceajudgmentandwhatlaws,rules,andprocedureswillbeapplied.Ifyoufilesuitinyourowncountry,wheredomesticcounselandcommerciallawsarefamiliartoyou,yourexperiencewillbedifferentthanifyoulitigateinaforeigncountry,whereyouwillbesubjecttounfamiliarlaws,rules,andproceduresandwillhavetorelyonforeigncounsel.Youshouldalsoidentifytheplacewhereadisputemaybesettledforexample,thecountryoforiginofthegoods,thecountryofdestination,orathirdcountrythatisconvenienttobothparties.
AmendmentstoContract
Provision
ModificationsandWaivers.AllmodificationsofthisAgreementmustbeinwritingandsignedbythepartiesortheirauthorizedagents.IfapartywaivesanyofitsrightsunderthisAgreementtomakeaclaimforbreach,thatwaiverwillhavenoeffectwithregardtotheparty'srighttoenforcetheAgreementastoanysubsequentbreach.
Comment:Requirethepartiestomakeallchangestothecontractinadvanceandinasignedwrittenmodification.Thisprovisioniscommontoallcontracts.Itisawiseprotectionagainstoralalterationsand,ifthereisanoralorwrittenwaiverofaright,againsttheexpectationthatotherrightsarealsowaived.Youshouldinsistonthisclauseincontractswithforeigntraderstoavoidmisunderstandingsthatcanarisefromoralmodificationswhenit'syourwordagainstthatoftheothertrader.
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InurementandAssignment
Provision
InurementandAssignment.ThisAgreementbinds,andinurestothebenefitof,theparties,
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theirsuccessors,andassignees,subjecttothelimitationsofanyassignment.NeitherpartymayassigntherightsordelegatetheperformanceofitsdutiesunderthisAgreementwithoutthepriorwrittenconsentoftheotherparty.
Comment:Inaonetimesale,itisunlikelythatapartywillhavetimetoassignthecontracttoanotherperson.Nevertheless,thepotentialexists,andwhendealingoverseasinacountrywheretheeconomyorthegovernmentisunstable,anassignmentclausecanbecomesignificant.
Severability
Provision
SeverabilityandProvisions.IfanyprovisionofthisAgreementisheldinvalidorunenforceableforanyreason,thatprovisionisfullyseparable,andwillbedeemedseparatedfrom,therestofthisAgreement.TheremainingprovisionswillbevalidandenforceableasiftheinvalidorunenforceableprovisionwerenotpartofthisAgreement.
Comment:Youshouldincludethisstandardprovisionthatindividualclausescanberemovedfromthecontractwithoutaffectingthevalidityofthecontractasawhole.Thisclauseisimportantbecauseitprovidesthat,ifoneclauseisdeclaredinvalidandunenforceableforanyreason,therestofthecontractremainsinforce.
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Integration
Provision
EntireAgreement.ThisAgreementistheentireunderstandingbetweentheparties.TheSellerisnotboundbyanystatements,representations,promises,orinducements,regardlessofwhethermadebytheSeller,anagent,oremployee,unlessitissetforthinthisAgreement.TheBuyerspecificallyagreesthatnoreliancehasbeenplacedonanyrepresentationsotherthantheprovisionscontainedinthisAgreement.
Comment:Contractnegotiationsmaylastforsometimeandthroughseveralmeetings.Inoverseascontracts,tradersoftenmeetinvarioussettingsfrombusinesstosocialtofermenttheirrelationshipbeforecementingit.Thisclausethenbecomesparticularlysignificantinemphasizingtothepartiesthatthewrittenwordsconstitutetheirentirefinalagreement,regardlessofwhatrepresentationsweremadeduringthenegotiations.
Notices
Provision
Notices.TogivenoticepursuanttothisAgreement,apartymustsendwrittennoticetotheotherpartyattheaddressstatedinthisAgreement.Noticeisdeemedtobegivenatthetimeitisreceived.Apartymustnotifytheotherpartyinwritingofanychangeinaddresswithin[number]daysoftheeffectivedateofthechange.
Comment:Althoughnotanessentialterm,thenoticeprovisionisimportanttoclarifythe
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acceptableprocedure.Thistermrequireswrittennotice,andthusanoralnoticemustbeconfirmedinwritingbeforethenoticebecomeseffective.
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AuthoritytoBindPartytoContract
Provision
BindingAuthority.ThepartieswarranttoeachotherthateachhaslegalcapacitytoenterintoandbeboundbythetermsofthisAgreement.
Comment:Thisclauseshouldbeaddedregardlessofwhetherapartyisanindividualoranentitybecauseitgivessomeassurancetoeachpartythatthepersonsigningthecontracthasauthoritytodoso.Ifasignerhadnoauthority,acontractmaysubsequentlybevoidable.Ifthepartyisanindividual,heorshemustbelegallycapableofmakingthecontract(i.e.,ofadultageandmentallyfit).Ifthepartyisanentity,thesignermustbeanauthorizedrepresentative.
Ifperformanceoftheagreementextendsbeyondasingletransaction,theperson'sauthoritytoactfortheforeigncompanyshouldbeestablishedadditionallybyacopyofastatementofcapacitycertifiedbyagovernmentofficialinthatcountry.Iftheforeigncompanyisacorporationorsimilarentity,authoritytoactshouldalsobeestablishedbyacorporateresolutionofthecompany'sgoverningbody,suchasitsboardofdirectors.Theforeigncompanymayrequiresimilarcertifiedproofofauthorityfromyou.Yourcontractshoulddescribedocumentsthatwillbeconsideredsatisfactoryevidenceofauthority.
IndependentCounsel
Provision
IndependentLegalAdvice.Eachpartyacknowledgesthatithasbeenadvisedandhasbeengiventheopportunitytoobtainindependentadviceregardingthelegal,tax,andaccountingissuesandconsequencesofthisAgreement.Thepartiesfurtheracknowledgethattheyhavebeengiventheopportunitytomaketheirownseparatejudgments,andeachisrelyingsolelyonitsownreviewandthatofitsownadvisorsregardingtherights,obligations,liabilities,andconsequencesofthisagreement.
Comment:Internationalagreementsaremadebetweenpartieswhoaresubjecttodifferentlaws,andonepartyisoftenmoresophisticatedinbusinessthantheotherparty.ForpurposesofenforcingthisAgreement,itiswisetoincludethisprovisiontoshowthatthepartiesareactingwithdueregardtotheirrighttoreceiveseparatelegaladviceabouttheirrightsandobligationsundertheagreement.
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LegalCostsandFees
Provision
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CostsandAttorneys'Fees.Costsandattorneys'feesmaybesoughtbytheprevailingpartyinalegalactionif(1)eitherpartytothisAgreementisrequiredtoemploylegalcounsel,toincurotherexpensestoenforceanyobligationoftheotherparty,ortodefendagainstanyclaim,demand,action,orproceedingbecausetheotherpartyfailstoperformanyobligationimposedbythisAgreement(2)alegalactionisfiledbyoragainstapartytothisAgreementand(3)theactionoritssettlementestablishesthedefaultoftheotherparty.Insuchevent,theprevailingpartyisentitledtorecoverfromtheotherpartytheamountofallreasonableattorneys'feesandallotherexpensesincurredintheenforcementordefense.Thesefeesandexpensesarerecoverableregardlessofwhethertheywereincurredpriorto,inpreparationfor,incontemplationof,during,orafterthefilingoftheaction.
Comment:Thelawontherecoverabilityoflegalcostsandattorneys'feesvariesfromcountrytocountry.Insomecountries,theprevailingpartyisentitledtorecoverfromtheotherpartyinmostactions.Inothercountries,recoveryisavailableonlyincertaintypesofactions,suchassuitsbasedonnegligent,wrongful,orfraudulentconduct.Thecourtswillusuallyenforceanexpressagreementfortherecoveryoflegalcostsandfees,evenintheabsenceofalawthatimpliesthisright.
AcceptanceandExecution
Provision
Acceptance.Toacceptthisoffer,theBuyermustsignandreturnitwithoutanymodificationstotheSeller,whomustreceiveitnolaterthan[date].TheSellerisentitledtorevokethisofferatanytimebeforereceiptofacceptance.
Signedthis[date]By:[signatureofofficeroragent]Seller/[titleofseller'srepresentative]forSeller
Acceptedon[date]By:[signatureofofficeroragent]Buyer/[titleofbuyer'srepresentative]forBuyer
Comment:Ifthetermsofanofferspecifythemeansforacceptance,theacceptancemustbeincomplianceornocontractwillarise.Thisprovisionrequiresacceptancewithoutmodification,whichmeansthatanymodificationbythe"accepting"partywillinfactresultinacounteroffer.
Thefullnameofeachpersonwhoissigningthecontractshouldbetypedbelowhisorhersignaturetoavoidanyquestionastowhorepresentedeachpartytothetransaction.Foranypartywhoisnotanindividual,therelationshipofthepartyandthesignershouldbestated.
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