International Contracts

Content:

1. Introduction to international Contracts
2. The Vienna Convention
3. Usual clauses of an international contract
4. Arbitration
5. Examples of contracts

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Learning Unit Summary

A contract is a single document, in which the rights and obligations of the exporter and the importer are stipulated. International trade practice shows that the majority of transactions are carried out without signing a contract. However, it is strongly recommended to establish an international contract of sale for international transactions.

One can avoid doubts and misunderstandings concerning what has been agreed during the negotiation of terms if they are set down in writing. In certain cases a verbal agreement is legally binding, for example, when an exporter makes a sale at an international fair.

Most international trade transactions do not use a formal contract in practice. However, clauses in the commercial invoice and the incorporation of an appropriate Incoterms in the export price as well as national legislation will nevertheless imply certain obligations on the parties. In any case, we recommend using a formal contract. A standard model contract for international sales has been drafted by the International Chamber of Commerce.

The Vienna Convention on Contracts for the International Sales of Goods regulates the formation of international contracts of sales. The Convention was signed in Austria on 11 April 1980. It has been adopted by over 40 countries, the majority of which are developed. The layout of a contract is left entirely up to companies, it can also be accepted in a verbal form; although there are countries signatories to the Vienna Convention who do not accept verbal agreements and only recognize a written form of a contract. For a contract to be considered accepted the consignee's consent must be obtained. Silence cannot be interpreted as consent. The delivery of the goods must be performed according to what has been stipulated in the contract of sale and the goods must be of the agreed quality, quantity and type. The goods must be inspected as soon as possible and, if the goods are non-compliant, it must be communicated to the exporter within a reasonable period of time.

CLAUSES. An international contract is drafted based on the following:
- Regulations and practice of international trade (for example, Incoterms).
- Arbitration in international trade (for example, possible dispute resolution).

Here are the usual clauses of an international contract, however one should call upon the services of a legal advisor in order to produce a well-prepared contract.
· Preamble
· Definitions
· Duties and Obligations
· Communication and Documentation
· Prices
· Terms of payment
· Penalties
· Force Majeure
· Official Authorizations and Permits
· Dispute Resolution
· Language
· Other Conditions

Arbitration it is a method of dispute resolution relating to international contracts of sale. A well-prepared clause on arbitration provides a basis to duly conduct arbitration in case of litigation.