International Sales Contract: Guidelines for Sellers, Buyers and Lawyers

Disputes regarding international Sales Contracts are rising despite efforts from International Commercial Organizations, Governments, and Lawyers etc.

In my experience, many of such disputes could be avoided, or loss of the non-breaching parties could be minimized, if such Sales Contract contained some basic clauses.

In this Article, I will briefly describe some of the most important elements a contract should incorporate for safeguarding the rights and interest of the party concerned in case of any future dispute. Here are few things you should include in your contract:

 Governing Law

Parties should mutually decide as to which law is to govern the Sales Contract, and a clause reflecting parties' mutual decision should be incorporated in the Contract. This is very important because rights and remedies of the parties under all laws are not the same. If the law is not chosen beforehand, it may raise problem in case of future disputes.

Where this has not been specified, private international law rules will be used to determine the proper law of the agreement regardless of whether they are favorable or not to a party or the parties.

 Risk

 No doubt, an international Sales of goods will involve some sorts of carriage of goods. They are mostly either by sea or air. In all cases, there is a chance that there will be a loss of goods or damage while being transported. Who will take the risk during transit? It's an important question to decide.

Currency

Due to of exchange rates, a good deal for a party may become the worst deal, and vice versa. Such fluctuations often affect of a transaction. Thus, an International Sales Contract should always specify the currency.

 Breach and Remedies

 Issues such as specific time frames for completion of transaction, payment & rejection, right to reject/replace defective goods and rights to demand specific performance or replacement of goods must be carefully considered. Remedies available for non-breaching parties should be included in the Sales contract.

Standard Terms

You have probably heard a lot the terms such CIF, CFR, FOB, FCA etc. They are called “INCOTERMS”. INCOTERMS assist international negotiations by providing a neutral agreement base from which parties can operate. The parties may help to prevent disputes from occurring by use of such standard terms. These terms can be employed for defining the obligations of the parties.

Limitation Clauses

In order to define liability of the parties under a Sales Contract, terms are often inserted that exclude or limit the liability of the parties in certain situations.

Dispute Resolution

This is the main concern of this Article. How the parties will resolve a dispute in connection with the transactions under a Sales contract has to be determined by the parties taking into account the circumstances.

Whether the parties will go for Court proceedings, or for Arbitration is to be clearly stipulated in the Sales Contract. Parties should also fix the Venue of such Arbitration/adjudication.

Considering the facts and circumstances of transaction, many other clauses may be required to be incorporated. A good lawyer with experience in the field will ensure that all terms and conditions are clearly written in the Sales Contract.