Drafting the International Contract for Sale of Goods

22/4/2015 DraftingtheInternationalContractforSaleofGoods

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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



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



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



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.



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



[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



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



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.



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,



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



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



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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Drafting the International Contract for Sale of Goods

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Drafting the International Contract for Sale of Goods