international contract for sale of goods (pdf)
TRANSCRIPT
INTERNATIONAL CONTRACTS FOR
THE SALE OF GOODS
Nguyen Xuan Dao, MIB (Curtin University of Technology, Australia)
Banking University HCMC, Vietnam
Three elements to an international sale
of goods:
(a) A sale
A contract for the sale of goods is distinct from an exchange or
barter (of goods for goods). In other words, a sale of goods
requires an exchange of goods for money, not for money’s
worth. The seller’s consideration is a transfer of title to certain
goods to the buyer, and the buyer’s consideration is the payment
of the purchase price.
Three elements to an international sale
of goods: (cont.)
(b) Of goods
The Vienna Sales Convention provides a list of the types of
property and contracts that are beyond the scope of the
application of this treaty.
It is generally understood that goods bear the following
characteristics:
• “Goods” are items of personal (moveable)
property, as distinct from real property (comprising
land, buildings, and things attached to land).
• “Goods” are tangible property (something you can
see and touch), as opposed to intangible property
(such as, for example, shares or copyright).
(b) Of goods (cont.)
It is also necessary to distinguish a contract for the sale of goods from a contract for the provision of labour, skills and materials.
For example, a contract for the purchase and installation of a stove is likely to be considered a sale of goods, because the main purpose of that contract is to transfer title in the stove from the seller to the buyer, and the provision of services is merely incidental. By way of contrast, an agreement to have a portrait painted is a contract for the provision of services, as the artist’s skills and time are essential in the performance of the contract, with the transfer of materials being secondary.
Three elements to an international sale
of goods: (cont.)
(c) With an international aspect
Frequently a sale of goods will be at an international level because the
seller and the buyer are domiciled in different nations.
However, other arrangements, including the application of a foreign law, or
a foreign origin or destination of the goods will also provide an
international aspect.
Three elements to an international sale
of goods: (cont.)
The law that affects a contract for the international sale of goods has three
sources:
(i) International treaties
(ii) Custom
(iii) Domestic law
The Sources of Law
International Treaties
• In 1980 the United Nations Convention on Contracts for
the International Sale of Goods (The Vienna Sales
Convention) was formed. By the end of 2006, there were
69 member nations and it is therefore the most important
treaty relating to international sales of goods.
• An international convention has relevance for a particular
international contract for the sale of goods only if the
nations in which the parties to the contract are domiciled
are members of the convention or, alternatively, the
convention is applicable because of the operation of the
conflict of laws rules.
Custom
• Prior to the time when international treaties and
conventions were established, custom, which had been
commonly accepted by those involved in international
transactions, formed the basis for these transactions.
• Indeed, the terms of most international treaties and
conventions that exist today are codifications of the
customs that had earlier been developed. Many of these
customs have also formed the basis of commercial rules
formulated by the International Chamber of Commerce,
for example, “Incoterms”.
Incoterms• The International Chamber of Commerce (ICC) has
compiled a list of commercial terms that are commonly used in international trade and it has provided an interpretation for these terms. This list is known as "Incoterms" (for International Commercial Terms), which was first published in 1936. The interpretation provided by the ICC is not binding upon the parties to an international contract for the sale of goods, but may be, and often is, incorporated into the contract.
• The current version of the Incoterms is called "Incoterms2000" [1]. It contains thirteen terms that set out the obligations and responsibilities of seller and buyer that flow from the use of each of those terms. When a term is incorporated into a contract, the interpretation and the obligations that are defined as flowing from its use are also incorporated into the contract.
[1] http://www.iccwbo.org/index-incoterms.asp
Incoterms (cont.)
• Each Incoterm sets out the ten major obligations of both the seller and the buyer.
• These include matters such as:
– Time and place of delivery
– The passing of risk from the seller to the buyer
– Responsibility to make, and pay for, a contract of insurance
– Responsibility to make, and pay for, a contract of carriage
– Responsibility for the cost of import or export approval, etc.
• There are four broad categories of Incoterms These categories exist to distinguish the nature and extent of the seller’s (or buyer’s) obligations, and the point in time at which risk in the goods passes from the seller to the buyer.
• (i) E-terms:
There is only one term in this category, called “Ex Works”. This term requires the buyer or his agent to take delivery of the goods at the seller’s place of manufacture or storage, after the seller has given adequate notice of delivery to the buyer. Risk in the goods passes when the goods are placed at the buyer’s disposal, at the seller’s premises. It is therefore the most onerous term for the buyer.
Incoterms (cont.)
• (ii) F-terms:
There are three F-terms: “Free Carrier”, “Free Alongside Ship” and “Free on Board”. Under this group, the seller is not required to make a contract of carriage, or insure the goods. However, the seller must deliver the goods to a carrier and place named by the buyer, and the risk passes at the time the goods are delivered to that carrier.
Incoterms (cont.)
• (iii) C-terms:
This category consists of four terms, called “Cost and
Freight”, “Cost, Insurance and Freight”, ”Carriage paid to”
and “Carriage and Insurance paid to”. All C-terms require
the seller to make a contract of carriage, and some terms
also make the seller responsible to arrange a contract of
cargo insurance. Depending on the particular term used,
passing of risk occurs when the goods are passed over
the ship’s rail, or when the goods have been delivered to
the carrier.
Incoterms (cont.)
• (iv) D-terms:
This category is made up of five terms, which require the
seller to place the goods at the disposal of the buyer at
an agreed port or point of destination, usually in the
buyer’s country. These terms are most onerous for the
seller, who has to pay most costs and also carries the
risks of delivery.
Incoterms (cont.)
• Some Incoterms are only suitable if the goods are to be
carried by sea (for example, “Free alongside ship” or
“Free on board”) while other terms are recommended for
any mode of transport, or any combination of modes of
transport, such as by sea, air and/or land. This will be
discussed in more detail in topic seven.
• Please note that parties may modify Incoterms to suit
their particular needs, but any such modification must be
made in writing.
• The following website provides the complete version of
Incoterms 2000: http://www.iccwbo.org/index-
incoterms.asp
Incoterms
Domestic Law
• The provisions of domestic legislation will govern the
operation of an international contract for the sale of
goods whenever the rules of conflict of laws deems them
relevant, or where the parties to the contract have stated
that they should be relevant.
• For example, the Law of Commerce 2005 in Vietnam.
Part 1
• Contract title
• Contract number
• Contracting time
Part 2
• The seller and the buyer’s business names
• The seller and the buyer’s addresses
• Fax numbers, telephone numbers, email addresses
• Bank accounts
• Presenters of each of parties
• Hereafter called the seller/the buyer
Common structure of international contract for sale of goods in VietnamCommon structure of international Common structure of international contract for sale of goods in Vietnamcontract for sale of goods in Vietnam
Part 3: Terms
• Article 1: Commodity Article 2: Quality
• Article 3: Quantity Article 4: Price
• Article 5: Shipment Article 6: Payment
• Article 7: Packing and marking
• Article 8: Warranty Article 9: Penalty
• Article 10: Insurance
• Article 11: Force Majeuce
• Article 12: Claim Article 13: Arbitration
• Article 14: Other terms and conditions
Part 4
• Additional information
• Signatures of both parties
Article 1: Commodity
• Commercial name/ scientific name: Rice, Robusta coffee
bean
• Origin of goods: Vietnamese rice, Korean ginseng
• Main specifications: 20 ton trucks, 2mm iron sheets
• Time of production: in 2009
• Brand name, producer name: Innova cars, Cannon
camera
• (Tax) code: Water hyacinth Drawer HS code
9403600090
• Combination of some ways:
– Vietnamese white long-grain rice, 10% broken,
Winter-Spring crop in 2009
– Indonesian Urea fertilizer, Nitrogen 40% min
Article 2: Quality
• As sample
• Standards, grades
• Brand name
• As it is
• As the buyer’s inspection and approval
• FAQ (fair average quality) and GMQ (good merchantable
quality)
• Ingredient
• Description of goods
Article 3: Quantity
• Fixed quantity: 1,000 units; 150 Innova cars
• Quantity/weight with tolerance: +/-, more or less,
approximately, from O. to O
– 10,000 MTs more or less 5%
Article 4: Price
• Unit price
• Total amount
• Amount in words
For example,
Article: Price
Unit price: USD 525/MT FOB Saigon port Incoterms
2000
Total amount: USD 525,000
Amount in word/ Say: United State Dollars Five
Hundred and Twenty Thounsand only.
Price:Price:
Unit Price : USD 200/MT FOB Saigon Port, Unit Price : USD 200/MT FOB Saigon Port, IncotermsIncoterms 2000 2000
Total Total amoutamout : 100MT x USD 200/MT = USD 20,000.00: 100MT x USD 200/MT = USD 20,000.00
Say : US Dollars twenty Thousand only.Say : US Dollars twenty Thousand only.
GOODS QUANTITY(MT)
PRICE CIF KOBE PORT USD/MT
AMOUNT(USD)
REMARK
ABC
100200300
180.00250.00300.00
18,000.0050,000.0090,000.00
TOTAL AMOUNT 158,000.00
SAY us dollars one hundred fifty - eight thousand only.
Combination of commodity, quantity and price:Combination of commodity, quantity and price:
Article 5: Shipment
• Time of shipment
• Places of delivery
– Port of loading/ Airport of Departure
– Port of discharge/ Airport of Destination
• Notice of shipment/ Shipment advise
• Shipment instructions
- Time of Shipment: October 2010
- Places of delivery
• + Port of loading: Singapore port
• + Port of destination: Saigon port
- Notice of shipment:
• + First time: the seller shall notify that the goods is available for
delivery in terms of name of goods, quantity/weight,
specifications, packaging, and marking.
• + Second notice: the buyer shall notify information: vessel
name and nationality, flag, tonnage, and ETA.
• + Third notice: the seller shall notify the buyer the following
information: name of goods, quantity, specifications, packaging,
marking, vessel name and nationality, tonnage, B/L number and
date, ETD, and ETA.
- Shipment instruction: Partial shipment and transhipment: not
allowed.
Article: Payment
• Payment mode
• Time of payment
• Payment value(s) over contract value
• Payment documents
• Banking charges
• TTR: bank accounts
• L/C:
– Opening bank, Advising bank
– Time of opening L/C
– Validity of L/C
– Period of presentation
Additional Reading
• The text of the Vienna Sales Convention can be
accessed online:
• www.uncitral.org
• Please read the text of the Convention. This will
assist your understanding. It is not a lengthy
document.
