CHAPTER XXX SALES CONTRACTS

1. CHAPTER XXX SALES CONTRACTS • Contractual Terms • Claim Settlement Methods

2. SALES CONTRACT • No international law of contract between a seller in one country and a buyer in another country. • The terms and conditions agreed by the two parties are usually stipulated in the purchase order provided to the exporter by the importer. • If a letter of credit is used, only important requirements can be stated in it and those requirement must be accepted by both exporter and importer prior to opening a letter of credit

3. SALES CONTRACT • Purchase order and a letter of credit are frequently used in lieu of the sales contract as a means to specify the transaction terms to be abided by both exporter and importer. • A sales contract is used more often for large transactions or complicated transactions which require detailed, numerous terms and conditions unable to be included in the purchase order or a letter of credit.

4. Contractual Terms • Depend on the complexity of the transaction and needs of both buyer and seller. • Definition of goods for export: An international transaction by description of the goods, not by product sample. • Terms of Trade: Price at a certain location such as an FOB price at the port of exportation or a CFR or CIF price at the port of importation per Incoterms 2010

5. Contractual Terms • Terms of Payment: Payment means to be used: • Payment on open account • Payment in advance • Documentary collection: • D/P (Documents against Payment) • D/A (Documents against Acceptance) • Irrevocable documentary credit (Letter of Credit • Shipment date: The latest shipment date acceptable by both parties • Warranty: The terms of warranty as to how long the warranty will be effective and what it covers such as labor and material or material only.

6. Contractual Terms • Enforcement Clause: • Jurisdictional Clause. What country’s or state's law to have jurisdictions over the contract. • Highly recommended to use the law of the seller’s country under the United Nations Convention on Contracts for the International Sale of Goods (CISG). Also called Vienna Convention of 1980 • Method of a dispute settlement: The method to settle future disputes • Termination of contract: The contract termination clause such as the end of a certain period or failures of obligations by either party

7. Claim Settlement Methods • The most commonly used four methods • Negotiation: Both parties attempt to reach agreement or settlement of disputes through a give-and- take in informal discussion. No third party is involved in negotiation • Mediation: A neutral 3rd party assists the negotiations, but does not render a binding decision. A disinterested third party act as a go-between.

8. Claim Settlement Methods • Arbitration: A neutral 3rd party renders his independent decision after hearing pleas from both parties. • Binding arbitration: The arbitrator's decision is a binding decision and no litigation is granted. • Non-binding arbitration: Nonbinding decision which can be appealed to regular court system.

9. Claim Settlement Methods • The arbitration clause must be included in the sales contract. It should state that • The parties agree to arbitrate in case a dispute cannot be resolved through negotiation or mediation • they agree to abide by the awards resulting from the arbitration( a binding arbitration) • which rules of arbitration will be applied. • The most often used arbitration rules for international disputes: • International Chamber of Commerce (ICC) • American Arbitration Association (AAA)

10. Claim Settlement Methods • Litigation: • An accusing party (a plaintiff) files a law suit against an accused party( a defendant) with a judicial court of a country. • The court system renders a judgment or decision based on relevant law and the facts. • The litigation is most expensive and time-consuming method of dispute settlement. In many cases, it takes several years to get a court date in the United States. • Best way is to resolve disputes via other than litigation due to bad publicity