Magazine article International Trade Forum

Primer for Exporters: International Sales Contracts. (Exporting Better)

Magazine article International Trade Forum

Primer for Exporters: International Sales Contracts. (Exporting Better)

Article excerpt

Any firm developing its business in the international arena faces challenges, not least of which is the contract itself. It would be easy to refer the contractual issues to a specialist lawyer, but this may not be realistic for many firms. Two ready-to-use model international sales contracts are now available from ICC and IC.

Until quite recently, international sales were hardly "international" at all in legal terms: the party with the greater bargaining power, often the buyer, would generally impose its standard terms and its own national law. If the parties came from different legal cultures -- for example, from civil law and common law countries -- then understanding and negotiating contract terms were even more difficult. These factors did nothing to foster trust, and therefore hindered international trade development.

Fair terms

In recent decades, however, much has been done to "level the playing field". This sporting metaphor is not entirely out of place, as it captures the effect of instruments that help contracting parties to obtain balanced and easily comprehensible contract terms.

The key initiative was the 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG). The convention has been adopted by more than 50 countries (most of them in the North). For countries that have not yet adopted the convention, parties wishing to conduct international trade can still base their contract on the principles in the convention.

The CISG proposes a broadly worded standard set of rights and obligations for both buyer and seller, including the options open to them if there is a problem with the contract.

Since 1994, the CISG has been accompanied by the UNIDROIT Principles of International Contracts. This wide-ranging set of principles seeks to cover a much broader range of contracts than just sales. As with the CISG, it provides valuable assistance to a party trying to find internationally accepted wording for any given contract term.

Indeed, the CISG and UNIDROIT are increasingly seen as tools that can be turned to at the negotiation stage when trying to counter oppressive terms proposed by the other side. Both texts can be found on the Juris International web site:

These instruments also help to harmonize international trade terms by reducing to a minimum the role to be played by a national system of law. In other words, if the parties use the CISG or UNIDROIT Principles as the basis for their contract terms, then relatively little remains under the authority of national "governing law".

It would be wrong, however, to conclude that one can do away with "governing law". There are always matters that are a question of public policy at law cannot be varied by the parties--thus, for example, the scope of a provision regulating the "liquidated" (i.e. fixed) damages payable in the event of delayed performance is not entirely at the discretion of the parties. There are also key questions that neither CISG nor UNIDROIT address--transfer of title in the goods sold, for example.

Nevertheless, these instruments provide a very useful guide to firms when drafting an international sales contract. …

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