MANDATORY CLAUSES IN INTERNATIONAL SALE OF GOODS
Question: I am CEO of a company with 100% capital in Vietnam and I want to get into a sale contract with a company in Hungary, so which terms do I have to focus in my contract?
Answer: DTD and Associates are very pleasure to answer your question as mentioned above:
1. Legal basis and references.
- United Nations Convention on Contracts for International Sale of goods 1980 ( CISG )
- UNIDROIT Principles of International Commercial Contract ( PICC )
- International Trade Center - Model contract for small firms.
- INCOTERMS 2010 ( International commercial terms ).
2. Detailed consultations.
In terms of International sale of goods, the application of law or fundamental terms in the contract can be freely negotiated. As long as those negotiations are not against the law of the states in which parties sign the contract and where the legal entities of the parties are located . Furthermore, you can also take the “ Principles of International Commercial Contract” into account in order to draft these following terms:
2.1. Goods.
Here are the terms about the object of contract, thus these are the most fundamental terms
- Name of goods: name of goods relies on the representation of the contract between parties but usually you should address both the ordinary name and scientific name of the goods so as to avoid misrepresentation or to avoid the situation that the goods is called differently in various places which could result in the false of goods when delivery.
- Quantity of goods: The quantity of goods can be calculated based on packages or the total amount of goods or be calculated by various methods to specify the exact quantity.
- Weight: The weight of goods must be addressed as clearly as what specific unit it is weighed and the total weight of goods.
- Quality: This is a very fundamental part in the “ Goods” section because if the quality is addressed clearly so that the parties could avoid dispute afterward. The regulation on quality can follow a model standard or description or sample,…
Note: “When and where the goods should be examined and checked and who will be held liable for doing that” should be concerned as a clauses in a contract.
2.2. Price.
- Rules on the currency of the price: this one can be agreed by the parties.
- Rules on the determination of price:
+ Immediately specified: Price can be specified at the moment that the contract is signed.
+ Specified afterward : Price can be specified while performing the contract.
+ Reconsidered price: Price that can be considered again if there is specified fluctuation at the delivery time.
+ Moving price is the price that can be considered based on the first price related to manufacturing price in the contract performing period.
2.3. Payment.
- Payment can be performed through Letter of Credit, cash, check or other method.
- Payment duration: The duration can be before or after the delivery of goods or even during the delivery, parties should include the exact time of payment with “day”, “month” and “year” term.
2.4. Delivery.
In this term, parties can use INCOTERMS 2010 and choose one suitable trade term which can be the base for determining shipping and receiving principle thoroughly. INCOTERMS 2010 also indicates clearly the information as follows:
- Delivery method:
- Place of delivery: ( E.g: Cai Rong Port, Quang Ninh ).
- Obligation of the buyer and seller in goods – related activities such as: cost division and risks,…
2.5. Dispute resolution procedure.
- Parties can include the dispute resolution procedure which the case will be heard in a particular state court or international arbitrator.
2.6. Applicable law and guiding principles.
- Parties can include international legal documents such as CISG 1980 or model contract PICC.
- Parties can agree on the use of the law of Vietnam or Singapore.
2.7. Avoidance of contract.
- Strict compliance with the obligation which has not been performed is of the essence under this contract.
- The non-performance substantially deprives the aggrieved party of what it was reasonably entitled to expect under this contract.
Note: In order to indicate right and obligation of both parties precisely, both parties can include extra terms as follows:
- Restitution term such as Punitive Damages will be applied whenever a party fails to perform its basic contract obligation.
- Force Majeure – excuse for non-performance, this term is provided in Article 79 CISG.
All of the consultation above is about fundamental clauses that parties should consider carefully before drafting an international commercial contract, during the operation if you have any difficulty or if you want to have your contract reviewed please contact us immediately, it’s our pleasure to help!
