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CHAPTER XXX CHAPTER XXX SALES CONTRACTSSALES CONTRACTS

Contractual Terms Contractual Terms Claim Settlement MethodsClaim Settlement Methods

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SALES CONTRACTSALES 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

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SALES CONTRACTSALES 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.

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Contractual TermsContractual Terms

Depend on the complexity of the transaction and needs of both buyer and seller.

1) Definition of goods for export: An international transaction by description of the goods, not by product sample.

2) 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

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Contractual TermsContractual Terms3) Terms of Payment: Payment means to be used:

• Payment in advance• Payment on open account• Documentary collection:

• D/P (Documents against Payment)• D/A (Documents against Acceptance)

• Irrevocable documentary credit (Letter of Credit)

4) Shipment date: The latest shipment date acceptable by both parties

5) 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.

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Contractual TermsContractual Terms

6) 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

7) Method of a dispute settlement: The method to settle future disputes

8) Termination of contract: The contract termination clause such as the end of a certain period or failures of obligations by either party

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Claim Settlement MethodsClaim Settlement Methods The most commonly used four methods 1) 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

2) Mediation: A neutral 3rd party assists the negotiations, but does not render a binding decision. A disinterested third party act as a go-between.

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Claim Settlement MethodsClaim Settlement Methods

3) 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.

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Claim Settlement MethodsClaim 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)

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Claim Settlement MethodsClaim Settlement Methods4) 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