4 international contracts

8/10/2019 4 International Contracts

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International Contracts


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Lex Mercatoria

International Sales Contracts

Agency vs. DistributorshipDistribution Contracts

Termination

ArbitrationMediation


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Contract of sale between exporter and importer

Contract of insurance between the exporter or theimporter and the insurance company

Contract of carriage between the importer and theshipping line

The contract between an exporter and itsagents/distributors

The contract of payment arrangement with

exporter/importer and its banks.

PotentialContracts


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Criteria:

The economic criteria

Judicial criteria

Is the contract international?


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Lex Mercatoria

Lex Mercator ia is the sum total of all the international

agreements, international conventions, and other international

trade customs that complement the domestic laws of any givencountry, and to which all international trade transactions are

subject.

It is difficult to comprehensively grasp Lex Mercatoriabecause itcan include agreements from many different areas, such as the

United Nations, World Trade Organization, multinational

conventions, free trade agreements, and any number of bi-lateral

agreements.


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CISG and UCC

The United Nations Convention on Contracts for the International Sale

of Goods (CISG) was adopted in 1980 as a way to oversee international

contracts.

The CISG allows parties from different countries to enter into contractswith reasonable assurance that the provisions of the contract will be

enforced.

More than 60 countries have ratified this agreement. Trade between

these countries represents 80 percent of all word trade.

The United States has only partially adopted the CISG.

India and UK have not ratified the conventions of CISG as of

now.


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The Uniform Commercial Code (UCC) is the commercial law of the

United States. This is the law that is typically used to form contracts in

domestic transactions.

While the United States has not adopted the entire CISG, many

American traders elect to follow it anyway, allowing it to apply to their

contract.

The CISG is used for international transactions and varies from

the UCC is some significant ways.

CISG and UCC


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CISG vs. UCC

CISG

UCC

A positive response asking for

change is considered a rejection.

A contract is not been accepted until

both parties agree to all terms.

Offer is open until a certain date and

cannot be withdrawn until said date.

The buyer is allowed to unilaterally

apply a price reduction to the amountagreed upon in the contract for

nonconforming or damaged goods.

Contract need not be in written form

as long as there is an evidence that it

was the intent of both parties

A positive response asking for

change is considered an

acceptance.

Offer can be withdrawn at any

time.

The buyer cannot change the

terms of the contract unless theseller performs a fundamental

breach.


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Contract Formation

Counteroffer

Offer

Acceptance

Rejection

Initial step in

the formation of

the contract

when one party

contacts

another.

If the second

party accepts

the terms of the

offer, the

contract is

formed.

An intermediary

step. If the

second party

does not accept

the terms of the

original offer.

If the second

party reject the

first offer, they

may make a

counter offer

with new terms.


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Agency vs. Distributorship

The contract between an exporter and its representatives abroad is

called a distribution contract. It is a contract between the exporter

and an agent or a distributor.

There is no uniform international agreement mandating how

these relationships should work. However the parties often agree

to abide by the model contracts of the International Chamber of

Commerce.


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Contract Law vs. Labor Law

An important point to note when entering into a contact with a foreign

distributor or agent is whether this relationship will be considered a

contract between equalsor a contract between unequal partners

by the courts of the country in which the agent or distributor is

located.

In the first case, the contract will fall under contract law. Under the

second, it will fall under labor law.

The way this relationship is viewed could have a significant

impact on the way a court will resolve a dispute.


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Home Government Restrictions

Some governments take special efforts to ensure agents or distributors

working in their countries are protected from deals that are not fair or

equitable, and generally place all distribution contracts under labor law.

Some countries may require the agent or distributor be a national of

the home country and/or register with the government.

Some countries also do not allow distributor or agents at all.


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ContractLanguage

Good FaithForce

Majeure

Scope ofAppointment

Territory CorporateAccounts

Term ofAppointment

Choice LawChoice ofForm orVenue

ArbitrationClause

MediationClause

Profitabilityor

Commission

Contract Elements


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The contract is signed by parties who have different languages.

This clause specifies the official language of the contract. If a copy

of the contract exists in the other language, it is a translation.

A contract is entered into under good faith, and assumes that

neither of the parties has an ulterior motive. This clause states that

neither party will attempt to distort the terms of the agreement.

A French expression meaning roughly overwhelming power.

This is a clause in a contract releasing all parties from

responsibility due to events outside of their control.

Force majeure

Good faith

Contract language

Contract Elements


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This clause defines the functions that the representative will

perform; it is the clause that spells out whether it will be an agency

or a distributorship agreement.

This clause defines the geographical limits within which the agent

or distributor is authorized to sell. It can be a country or a group of

countries.

This clause specifies which customers will remain corporate clients,

customers to which agents or distributors are not allowed to sell.

Corporate accounts

Territory

Scope of appointment

Contract Elements


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This clause defines the period for which representative will be

appointed. This must be a specific time period and is generally

renewable, as long as the agent or distributor performs adequately.

This clause specifies which countrys laws will be used in the case

of a dispute between the exporter and the agent or distributor.

This clause specifies the location of the court that will be used to

render a judgment in the case of a dispute. It is generally in the

country whose laws are specified in the Choice of Law clause.

Choice of forum or venue

Choice of law

Term of appointment

Contract Elements


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This clause identified the process of arbitration. Arbitrators are

empowered by the parties involved in a contract dispute to reach a

decision on the facts of a dispute. Their decisions are binding.

This clause identifies the process by which the parties to a contract

can attempt to settle a dispute, generally involving a third

independent party who can suggest a compromise solution.

This clause spells out the amount of commission that the agent will

earn or, alternatively, the price at which the distributor is expected to

sell the product, or the margin that it is expected to add to its costs.

Profitability or commission

Mediation

Arbitration

Contract Elements


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Facilities and activitiesA clause that spells out what specific

facilities an agent or a distributor will maintain, and what specific

activities each (exporter and agent or distributor) will engage in.

Competing linesThis clause outlines which competing products

the agent or the distributor is allowed to represent.

Trademarks, patents, and copyrightsIn the event that the agent

or distributor create intellectual property, this clause determines the

ownership of that intellectual property.

ConfidentialityA clause that binds all parties to promise not to

reveal what is learned during the business relationship.

Ownership of the customers listThis clause outlines who owns

the customers list, which is considered an asset.

Miscellaneous other clauses

Contract Elements


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Termination for just cause is triggered when either of the parties

is not honoring the terms of the contract. It is generally quite

easy to end a contract this way.

A contract is terminated for convenience when it is for any

reason otherthan just cause. It can be initiated by any of the

parties (but it is normally the exporter). This is typically a painfulway to end a contract, as the opposite party feels slighted.

Termination

Just cause

Convenience


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A form of dispute resolution in which a panel of arbitrators is

asked to reach a legally-binding decision.

Perceived as fair, even-handed and independent.

Quicker and more efficient than litigation through the courts.

More creative Arbitrators can find solutions to the dispute that a

court would not be allowed to use.

Very effectiveArbitrators are professionals who know the industry

and are able to quickly understand a situation.

Not open to the public, like most court proceedings.

Typically much cheaper than litigation through the courts.

Arbitration


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The process by which a mediator will attempt to find a middle

ground between the parties who are having a dispute.

Less formal that court proceedings or arbitration.

Outcomes are non-binding, unlike court decisions or arbitration

outcomes.

More practical for smaller disputes or when parties are interested in

keeping a business relationship.

Works well for disputes that have arisen from misunderstandings.

Mediation

4 international contracts

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