CHAPTER 1: NEGOTIATING DELIVERY

1. What are 5 steps in negotiating delivery?

 Timing: date of delivery, delay and results of delay.
 Location: place of delivery and alternatives.
 Transport: modes of transport to be used.
 Risk, title and insurance: transfer of risk, transfer of ownership and
insurance.
 Terms of trade: Incoterms to be used.
2. When might delivery take place?
It ups to delivery terms.
• The date of dispatch from the factory.
• The date of loading onto ship.
• The date when the goods should arrive in (place).
3. What might be the place of delivery?
Place of delivery is the point at which the exporter passes responsibility for
the goods to the Buyer. Delivery can take place at a number of places
between manufacturer’s factory and the Buyer’s warehouse.
• When the goods are handed over to the carrier.
• When the goods are shipped on board in the exporter’s country.
• When the goods are off-loaded in the buyer’s country.
• When the goods arrive at the buyer’s warehouse.
4. Why is location important?
It is important to the exporter because the date of payment, transfer of risk
and ownership depend on the place of delivery.
5. Why is transportation important?
Because we have to find the appropriate cost and type of transport, have to
think of freight, try to minimize the freight and try to find the best mode of
transport.
6. What are modes of transportation?
 Sea transport.
 Air transport.
 Inland transport (by road, by rail, by barge, by mail, or by mixture).
7. Where is the risk often passed from the exporter to the importer?
Risks are transfer from the exporter to the importer at the point of delivery.
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8. Where does transfer of ownership take place?
Transfer of ownership take place at any point between the signature of the
contract and the final payment for the goods.
9. How many kinds of delay in delivery?
There are 2 kinds of delay in delivery: Excusable delay and Non-excusable
delay.
10. What is excused delay?
Excused delay is in the grace period and due to force majeure.
11. What events does delivery date trigger?
The delivery date triggers many contract events:
 Exporter fulfills duties under the contract.
 Payment may become due.
 Risk of and title to the goods pass to the buyer.
12. How to fix delivery date?
 To use a straightforward calendar date.
 The certain date after the date of coming into force of the contract.
13. When does the contract come into force?
After all the preconditions have been met.
14. When is a contract binding?
After the signature date (date of execution).
15. When is a contract binding and effective?
After the date of coming into force (effective date).
16. In what kind of contract is a cut-off date set?
A cut-off date is set in fixed-price contracts because if the contract does not
come into force for quite a long time, the price will be unrealistic.
17. How does the date of coming into affect the delivery date?
The delivery date is normally fixed for a certain number of days after the
date of coming into force.
18. What is the grace period?
It is from the delivery date to the beginning of penalty period.
19. What is the grace period used for?
It is used to facilitate early delivery.
20. What can parties do if the force majeure events continue too long?

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If the force majeure events continue too long, both parties have the right to
terminate the Contract.
21. What are the 3 outcomes of FM?
 Resumption of delivery.
 Termination of contract (if the force majeure events continue too long).
 Unclear and dangerous situation.
22. What are the two remedies given to the Buyer for any unexcused
delay?
 The court may order the exporter to fulfill his obligations, this means
issuing a decree of specific performance requiring the exporter to make
delivery as agreed.
 The court may require the exporter to pay the buyer compensatory
damages – a sum of money that will fully and adequately compensate the
buyer for any measurable loss.
23. Which law prefers to award damages?
Common law countries.
24. Which law enforces performance?
Civil law countries.
25. What questions do the courts ask in setting a figure for
compensatory damages for late delivery?
 Did the loss provably follow from the breach?
 Was the loss reasonably close to the breach in the chain of events?
 Was the loss “mitigated” – in other words, did the buyer take reasonable
steps to keep the loss as small as possible?
26. What are liquidated damages?
They are a fair figure, a lump sum to be paid per day (week or month) of late
delivery. The compensation fixed in advance is called liquidated damages.
27. What are penalties?
They are damages to be paid to compensate one party for a loss.
28. Explain the differences between liquidated damages and penalties?
 Liquidated damages:
• Motive: To compensate the buyer fairly for any delay in delivery.
• Enforceable everywhere but subject to increase or decrease in some legal
systems.
 Penalties:
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• Motive: To terrorize the exporter into punctual delivery.
• Not enforceable in English law or other common law systems.
29. What is quasi-indemnity?
 Motive: To relieve the exporter of liability for delay in delivery.
 Enforceable everywhere but open to challenge as ‘unconscionable’.
30. What notation must a Marine Bill of Lading bear?
The Marine Bill of Lading to be acceptable as a shipping document under a
letter of credit must bear the notation that the goods have been shipped on
board a named vessel.
31. How can a marine bill of lading be made into a negotiable
document?
Typing he word ‘Order’ in the Consignee box. The shipper must endorse the
bill (sign it on the back).
32. What are clean shipping documents?
There are no notes/free of notes about defects, the goods are in perfect
condition.
33. What aspects of the goods does the carrier (the transportation
company) inspect?
The carrier does not inspect the goods themselves, but their packaging and
general appearance.
34. What defects does the carrier note on the face of the bill of lading or
other shipping documents?
If anything is wrong, the carrier notes the deficiency on the face of the bill
of lading or other shipping documents.
35. Which player (exporter or buyer) is responsible for arranging
insurance cover?
In deciding who should insure, there are 2 schools of thought.
 The first sees the point of delivery as decisive: up to delivery the exporter
insures, after delivery the buyer insures.
 The second approach lies behind C-terms (CIF, CIP): it is often easier for
the exporter to arrange insurance.
36. Name types of insurance policy?
There are 7 types of insurance policy:
 Tailor-made policy, Floating policy and Open cover.
 Valued policy and Unvalued policy.
 Time policy and Voyage policy.
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37. What does a Marine Insurance policy cover?
A marine insurance policy has three variant clauses: Cargo Clause A, B and
C.
 Clause A covers anything not excluded.
 Clauses B and C exclude anything not expressly covered.
38. What are 3 variables taken into account when setting up the 13
terms?
 Where along the transportation route delivery takes place.
 What means of transportation is used.
 What costs the exporter might pay after the point of delivery.
39. Identify 4 categories in which the 13 terms are grouped?
 The E-term deals with deliveries at the exporter’s factory.
 The F-terms all concern delivery within the exporter’s country.
 The C-terms involve delivery in the exporter’s country, with extra cost for
the exporter after delivery.
 The D-terms take care of delivery outside the exporter’s country.
40. What are main functions of ocean BL?
 A contract for delivery of the goods.
 A document of title to the goods.
 A receipt for the goods.
41. What are requirement of BL when payment is made by LC?
42. Which notes by carrier make the B/L “unclear”. Some examples of
those notes
- Contents leaking
- Packaging solided by contents
- Packaging broken/ holed/ torn/ damaged.
- Packaging contaminated.
- Goods damaged/scratched
- Goods chaled/ torn/deformed.
- Packaging badly dented
- Packaging damaged- contents exposed
- Insufficient packaging
( Not all notes are consideved to be “claused”. Examples:

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 Second- hand/ reconditioned packaging materials used, unprotected,
unboxed, packaging repaired/ mended/ cooperated.
42. Which risks are generally excluded from Cargo Clause A?
1/willful misconduct of the insured
2/ ordinary leakage; loss of weight; normal wear and tear
3/ poor packaging
4/ inherent vice in the goods
5/ delay
6/ insolvency of carrier
7/ use of nuclear weapon
8/ war risk
9/ strike risk
43. Compare Insured Value and Insured Amount?
Insured value is the maximum amount that an insurance policy can
cover. Sometimes the insured value is so big that premium is
unaffordable for the insured. So the insured may ask the underwriter
to insure part of the value, i.e: Insured amount
44. Name THREE new features of Incoterms 2010?
1/ 11 terms instead of 13 terms
2/ 2 groups instead of 4 groups
3/ on board instead of ship's rail
4/ used for both domestic and international trade
5/ officially recognize e-commerce.

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 CHAPTER 2: NEGOTIATING PRICE AND PAYMENT
1. In negotiating price and payment, what should the price the exporter
quotes relate to?
The complete set of contract terms: size of order, terms of delivery, terms of
payment, warranty provisions and so on.
2. How can the exporter avoid the “price trap” occurred in many
negotiations when the buyer demands concessions about delivery time,
method of payment, etc?
As items in the contract are negotiated, the exporter should assess the
influence of each factor on price, and adjust the price accordingly.
Sometimes the exporter improves his terms without adjusting the price, but
only in order to create goodwill for future deals, to ensure that the exporter
gets the order, or for some other business reason.
3. What are the 5 steps in negotiating payment?
 Mode of payment: How will payment be made?
 Timing: What is the date of payment?
 Place of payment: Where must the money be before payment is considered
complete?
 Delay: What delay in payment is excusable?
 Results of delay: What are the results of non-excusable delay in payment?
4. Why payment in international trade tightly controlled?
Because in international business, trust is rare, court is far away and
unpredictable.
5. What are the common methods of payment in international trade?
There are 4 common methods of payment in international trade:
 Payment on open account with no security.
 Payment on open account secured by export credit insurance.
 Payment on open account secured by a payment guarantee
 Payment by letter of credit.
6. What is payment by open account? What are the risks for the
exporter if he accepts payment by open account?
Open account means the exporter ships the goods to the buyer and just waits
till a forced date as agreed in their contract for payment from the the buyer.
Normally, the exporter only accepts open account method of payment if he
has known the buyer quite well and they have established a long-term and
trustworthy business relationship.
7. What are methods of payment in small purchases?
 Cash on delivery.
 Cash against invoice.
 Cash with order.
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8. What are payment insurances?
 Bank guarantee.
 Export credit insurance.
9. Who can offer bank guarantee?
A bank.
10. Who can offer export credit insurance?
An insurance company.
11. What are the two main elements in payment?
 Time.
 Structure.
12. What does the exporter have to suffer from late payment?
Bank interest.
13. What is an incentive for early payment?
Offer a discount.
14. How to fix payment date?
To use a calendar date or interval times.
15. What points at which money is deemed to be paid does the Buyer
prefer?
 When the buyer instructs the bank to pay.
 When the buyer pays the money into his bank.
16. What points at which money is deemed to be paid does the Seller
prefer?
 When the buyer’s bank transfers funds.
 When funds reach the seller’s bank account.
17. When delay in payment is excused?
 Delay happens in the grace period.
 Delay is caused by force majeure events.
18. What payment does the importer have to pay the exporter in case of
late payment?
Compensation for losses due to late payment.
19. What may reduce risk for exporters?
Exporter may reduce risk by spreading risk with the third party.
20. In order to take out non- payment risk insurance, what does the
exporter have to do?
Contact an insurance company and explain the details of the business,
applies for a quotation from the insurance.
21. What can we imply when the insurance company refuses to offer an
insurance quotation?
 The insurance company knows the buyer’s uncreditworthiness.
 The business is risky.
22. What does the insurance premium depend on?
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 The type of the goods.
 The creditworthiness of the buyer.
 The stability of the buyer’s country and so on.
23. What is the guarantee triangle?
That is the relationship of the principal, guarantor and beneficiary in terms
of guarantee. The principal (the buyer) makes a promise to pay the contract
price to the beneficiary (the seller). Then the principal ask the guarantor (the
bank) to issue a guarantee. In case the principal fails to pay, the guarantor
will pays money to the beneficiary.
24. What is Export credit insurance?
It is a guarantee of payment for the exporter from a third party, an insurance
company, which issues an export credit insurance policy covering the risk
of non-payment. The exporter has to pay the costs for that guarantee. The
insurance company will pay the exporter in case the buyer fails to do so.
25. What is a bank guarantee?
It is a guarantee of payment for the expoerter from a third party, a bank. The
bank may issue a bank guarantee assuring in case the bank will pay for the
exporter in case the buyer fails to do so. The buyer has to pay the costs of
that guarantee.
26. Distinguish Export credit insurance and Bank Guarantee?
 Both of them are guarantee of payment from a third party, providing the
exporter with some level of security in terms of payment.
 For export credit insurance, the exporter has to pay for that guarantee
while it is the buyer who pays for a bank guarantee. The third party
offering export credit insurance is the insurance company while the bank
offers a bank guarantee.
27. What are some limitations of Export Credit Insurance?
 There is always a long wait between the time when the buyer fails to pay
and the time when the insuarance company compensates the exporter, says
six months typically.
 When compensates is paid, it is unlikely to cover 100% of the original
invoice price.
So with export credit insurance, the export is covered against the worst.
28. What are some common guarantees in business? Explain each of
them briefly.
 For the risk of non-payment: Payment guarantee.
A payment guarantee makes sure that the exporter will receive payment. It
commits the bank to pay if the buyer defaults. The payment guarantee is
usually for 100% of the contract price.
 For the risk of revocation: Tender guarantee.

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This type of guarantee is used in case that the exporter who bids on a contract
to supply goods or materials to a government department or agency is
withdrawn. A normal figure for tender guarantee is usually from 1.5% to 5%
of the contract price.
 For the risk of non-performance: Performance guarantee.
Performance guarantee makes sure that if the exporter works badly or not at
all, the guarantor will pay, within stated limits, the costs of the exporter’s
failure to perform. A figure for performance guarantee is from 5% to 10%
of the contract price.
 For the risk of losing prepayment: Prepayment guarantee.
This guarantee promises the buyer that the bank will return advance
payments if the exporter fails to deliver. The guarantee is often for 100% of
the prepayment.
29. In terms of guarantee, what does it mean by “without demur or
objection”?
It means “on first demand”. Whenever the beneficiary demands payment
under the guarantee, the bank will pay.
30. What is a Conditional Guarantee?
It is a guarantee from a bank but with serious, objective conditions that must
be met before payment by the bank is possible.
31. What is a Letter of Credit? Why it is also called Documentary Credits?
A letter of credit is a binding agreement by a bank to pay a certain sum of
money when the exporter presents the necessary documents to the bank. In
a letter of credit transaction, documents are exchanged for money, so they
are formally also called Documentary Credits.
32. What kind of method of payment makes late payment impossible?
The confirmed, irrevocable, at-sight L/C.
33. What are steps in issuing an L/C?
There are 4 steps in issuing an L/C:
 The exporter and the buyer sign a contract.
 The buyer asks a local bank to open a letter of credit.
 The issuing bank asks a bank in the exporter’s country to advise the
exporter that the letter of credit has been opened.
 The advising bank advises the exporter that the letter of credit has been
opened.
34. What are the steps in presenting a Letter of Credit?
There are 6 steps in presenting a Letter of Credit:
 The seller ships the goods.
 The seller gets shipping documents.
 The exporter presents the shipping documents to the advising bank.

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 The advising bank checks the documents and (if appropriate) pays the
exporter.
 The advising bank notifies the issuing bank that the credit has been
presented and forwards the shipping documents.
 The issuing bank transfers necessary funds to the advising bank.
35. Explain the two principles that make letters of credit safe for both
exporter and buyer: Autonomy and Strict compliance.
 Autonomy means that the L/C is a contract in its own right, entirely
separate from the contract for the safe of goods.
 Strict compliance means that the exporter must present to the bank
shipping documents that comply in all respects with the terms of the
credit. Small deviations will result in refusal by the bank to pay.
36. What are the most common problems with L/C that cause
discrepancies?
 Documents required by the credit are missing.
 Documents required to be signed are not signed.
 The credit amount is exceeded.
 The credit has expired.
 Documents are not presented within the required time.
 Shipment was short.
 Shipment was late.
37. What are the 3 ways the exporter can proceed once the bank has
indicated discrepancies?
 Provide the missing paperwork or correct errors.
 Ask the buyer to instruct the bank to change the terms of the letter of
credit, i.e., to issue an amendment.
 Ask the bank to process the letter of credit with the discrepancies but to
pay only when (and if) the issuing bank permits payment.
38. Distinguish Irrevocable and Revocable Letter of Credit.
 A revocable L/C is the L/C that can be cancelled at any time by the buyer
or by the issuing bank.
 An Irrevocable L/C is the L/C that can only be cancelled with the written
consent of the exporter.
39. Distinguish the Confirmed and Unconfirmed L/C.
 The Unconfirmed L/C is less secure than the Confirmed one. Normally,
the exporter has got certain security for the non-payment risk when using
the L/C as a method of payment in their sales of goods to the buyer. The
issuing bank will have to pay the exporter for the goods in case the buyer
fails to do so.

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 With the Confirmed L/C, there is a promise from another bank, the
confirming bank, usually the advising bank too, to pay for the goods, if
the buyer fails to do so. It’s a kind of double guarantee for the exporter so
he knows for sure that he will get money as long as he submits a set of
documents, strictly complying with the terms and conditions stated in the
L/C.
40. What is the term “Settlement by Sight Payment”?
 The Seller presents the documents to the Paying bank.
 The Paying bank immediately pays the Seller.
41. What is the term “Settlement by Deferred Payment”?
 The Seller presents the documents to the Paying bank.
 The Paying bank agrees to pay the Seller the face value of the credit when
it matures.
42. What is the term: “Settlement by Acceptance”?
 The Seller presents to the Accepting bank the documents and bill of
Exchange (time draft) drawn usually on the Buyer.
 The Accepting bank agrees to pay the bill when it matures.
43. What is the term: “Settlement by Negotiation”?
The Seller presents to the Negotiating bank the documents and a Bill of
Exchange drawn usually on the buyer.
The Negotiating bank negotiates the bill (i.e., pays it at a discount).
44. What are the associated documents with the L/C?
 Commercial invoice.
 Transport document.
 The insurance document.
 Other documents such as: certificate of origin, certificate of analysis,
packing list, weight list, phytosanitary certificate, etc.
45. If a Letter of Credit requires “a full set of original air waybills” to be
submitted, what will be the problem for the exporter?
Normally, an air waybill is issued in 03 originals and 09 copies. If a L/C
requires “a full set of original air waybills”, this is obviously a mistake or an
incorrect requirement. Only the second original goes to the buyer or
consignee. The exporter cannot submit that full set and may be refused by
the issuing bank when asking for payment as the bank must insist on strict
compliance.
46. What are steps in negotiating the terms of a Letter of Credit?
 Agreement: The exporter and the buyer discuss and list all required
documentation.
 Incorporation: The list is incorporated into the contract.

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 Specification: The buyer applies for the letter of credit specifying the
agreed documentation.
 Verification: The exporter checks the credit to see that required
documentation is as agreed.
 Compliance: The exporter rigorously checks documentations and submits
it to the bank.
47. What are different segments in a Letter of Credit?
There are 21 segments in a Letter of Credit:
 Applicant.
 Issuing bank.
 Application date.
 Date and place of expiry of the Credit.
 Benificiary.
 Method of issue.
 Transfer of the credit.
 Confirmation.
 Amount.
 Partial shipment.
 Transshipment.
 Availability.
 Insurance covered by the buyer.
 Transport information.
 Description of the Goods.
 Incoterms.
 Documents.
 Presentation period.
 Additional Instructions.
 Authorization to Debit.
 Signature.
48. About the expiry date of a Letter of Credit, why does buyer wants
an early date while exporter wants a later date?
 The buyer will want an early date to save bank charges.
 The exporter will want enough time after delivery to present the
documents and to correct any discrepancies that might be discovered by
the bank.
49. Distinguish Partial shipments and Shipment in installments.
 Shipment in installments means that an agreed schedule has been set up,
for example, three equal shipments in March, August and October 2012.
 A Partial Shipment is simply an incomplete shipment with some part of
the goods to follow later.
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50. Name types of L/C you know?
 At-sight L/C.
 Advised L/C.
 Back-to-back L/C.
 Confirmed L/C.
 Deferred Payment L/C.
 Irrevocable L/C.
 Red Clause L/C.
 Revocable L/C.
 Revolving L/C.
 Stand-by L/C.
 Transferable L/C.
 Traveler’s L/C.
 Unconfirmed L/C
CHAPTER 2:
51. What are the factors affecting the price?
- Oder size
- Specification
- Packaging
- Incoterms
- Terms of payment
- Date of delivery
- Warranty period
As items in the contract are negotiated, the Exporter should assess
the influence of each foctor on price and adjust the price
accordingly.
52. Which method of payment is most favoured by the buyer?
Why?
Open account. Because the buyer doesn’t have to pay immediately
after receiving the goods.
53. Which method of payment is most favoured by the seller?
Why?
Advance payment. Because it is safe and the Seller can receive money
before delivering the goods to the Buyer.
*Cash in advance/ Prepayments
- Exporter can avoid credit risk
- Wire transfer and credit cards are the mosth commonly used cash-
in- advance option available to exporters.
- Requiring payment in advance is the least attractive option for the
Buyer.

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 - Exporter risk losing customer to competitors.
54. What does the insurance premium depend on?
Exporter insurance premium
- Insurance fee: the exporter has to pay insurance premium.
- Vary according to:
+ Tupe of goods exporter
+ Credit worthiness of the Importer
+ Political stability of the Importer’s country
+ Normally between 0,5% and 1% of the invoice price
- Pros and Cons ( advantages and disadvabtages)
Pros Cons
-Reduce the risk of non- -A long wait/ 6 months is
payment by foreign buyer typical
-Offer open account terms -Unlikely to cover 100% of the
safety in the gobal market. original invoice price
-Importer engages in “bad
faith”…

55. What is Export Credit Insurance?

- Offered by insurance companies or governmental export credit
agencies.
- Protects the exporters from the risk of non-payment, including.
+ Commercial risk
+Political risk
56. What is a Payment Guarantee?
The buyer -> the Bank -> guarantee the payment obligation
57. How does Export Credit Insurance work? What are its
disadvantages?
Explain situation
Send quetation
Exporte accept Insurance company Evaluate credit
rating Importer
Compensation (credit risk happens)

58. Compare payment guarantee and advanced payment

guarantee.
Payment guarantee Pre-payment guarantee
-Risk - Exporter’s losing - Importer’s losing paymet
involved payment amoumt
- Principal - Importer - Exporter
- Beneficiary - Exporter - Importer
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 - Guarantee - Importer’s Bank - Exporter’s Bank

59. When does "discrepancy" occur in payment? What are the

possible outcomes of discrepant documents?
Discrepant of occurs when documents presented under an L/C do
not conform with L/C requirement or do not conform with one
another
Outcome
- Issuing bank refuses to pay
- Beneficiary contacts applicant to amend LC
- Beneficiary alters documents to comply with LC requirement
60. Distinguish Irrevocable and Revocable Letter of Credit.
- A revocable L/C is the L/C that can be cancelled at any time by the
buyer or by the issuing bank.
- An Irrevocable L/C is the L/C that can only be cancelled with the
written consent of the exporter.
61. some situations where the exporter demands a higher price?
earlier delivery date, longer warranty period, smaller order, stricter
packaging rules, advance payment, more sophisticated specifications

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 CHAPTER 3: NEGOTIATION INSPECTION AND DEFECTS
LIABILITY
1. Why do companies have quality assurance programs?
Because no manufacturer can produce perfect products all the time.
Moreover, quality is a key issue and customer satisfaction is essential to
successful business. So companies have quality assurance programs to
ensure that customers get what they pay for/ to ensure customer satisfaction.
2. Why may conflicts arise in negotiating specifications?
Because it is a difficult process. The manufacturer is often tented to be over-
optimistic and to agree to impossible specifications, which is risky in
business. Conflicts can arise even within the exporter’s own team: the
marketing manager is eager to sell brilliant products, but the production
department knows that it cannot make them.
3. What is the benefit of a well-designed set of specifications?
It protects both the buyer and the seller: the buyer is protected against
inferior products as it can reject any products that fail to meet specification;
the seller can protect its reputation and avoid costs.
4. Which kind of goods needs pre-delivery inspection? Give example.
All kinds of goods need pre-delivery inspection, especially sophisticated
items and capital equipment.
5. What are the functions of independent inspection?
It reports on the weight, size and most importantly, the value of the goods.
It prevents exporter and importer agreeing an unrealistically low invoice
price in order to avoid customs duties in the buyer’s country. Such inspection
also prevents shipment of patently defective goods.
6. What does customs inspection reveal?
Customs inspection reveals discrepancies in weight, size and description.
7. What is the real inspection for goods?
That is the inspection by the buyer, or “open package inspection”.
8. Name quality checks on goods exported for resale?
 Inspection by Buyer during manufacture.
 Inspection by Buyer or Buyer’s agent before delivery.
 Inspection by Inspection service (e.g: SGS).
 Inspection by Carrier on dispatch.
 Open package Inspection on arrival at destination.
 Seller’s liability for defects after sale.
9. How long is the defects liability period?
The defects liability period is negotiable, this is likely to be several months
from the date of delivery or the date of arrival.
10. What are 5 steps in negotiating the Defects Liability Period?

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 Inspection: When are the goods inspected? And when can the buyer to
reject them?
 Terms: Warranty or guarantee?
 Definition: What is, and what is not, a defect?
 Timing: How long is the defects liability period? When does it begin?
What about other timings?
 Corrective action: What must the seller do to cure defects?
11. What counts as a patent defect? Give examples
Defects that are apparent, e.g., wrong items, broken or missing parts,
scratches, etc.
12. What counts as a latent defect? Give examples.
Defects that only come to light after buyer’s acceptance, or hidden defects,
e.g., structural weaknesss, failure to operate at high or low temp, high fuel
consumption.
13. What are Implied Warranties?
Assumptions that buyers can make about goods, even if the exporter gives
no express warranty.
14. What are 3 types of Implied Warranties? Give examples
 Implied warranty of conformity with contract: In principle, the Buyer can
reject the goods if they do not conform with the Contract.
 Implied warranty of merchantable quality: The Buyer can reject the goods
that are not of merchantable quality.
 Implied warranty of fitness for intended purpose: If the Exporter knew the
intented purpose, and if the Buyer relied on the Exporter’s judgment, the
Buyer can reject the goods that are not suitable for their intented purposes.
15. What is a Product Warranty?
A promise by the exporter to cure defects in his products. There are two
parties: the buyer and the seller.
16. What is a Product Guarantee?
A promise of the guarantor to pay the beneficiary, made out at the request
of the principal. There are three parties: guarantor, principal and beneficiary.
17. What are the similarities and differences between a guarantee and a
warranty?
 Similarities: Both are promise about performance, payment is only made
when there is non-performance of products or of parties involved.
 Differences:
Guarantee Warranty
Contract to perform the State of the subject of contract.
Content promise or discharge the
liability.

18
 Tripatite (guarantor,
Parties
principal and beneficiary).
Promise about somebody
Essence else’s performance.
 To obtain loan.
 Credit purchases/sales.
Purposes
 For good conduct or
honesty of person.
Bilateral (the seller and the
buyer).
Commitment of Seller to make
good defects of product or
services in a fixed period.
 To enhance their value.
 Show of quality.
 Assurance of product
performance.

18. What are the 3 types of defects? Give examples.

 Defective workmanship: a product with defective workmanship is
incorrectly built.
Ex: a radio lacks the wires connecting the loudspeaker to the amplifier,
nuts and bolts are inadequately tightened.
 Defective materials: defective materials are materials or parts of a product
that are inferior or somehow incorrect.
Ex: tractor wheels that should be galvanize are simply painted with anti-
rust paint, a drive belt made or inferior rubber falls to pieces after five
hours use.
 Defective design: defective design means that a product does not meet
specifications.
Ex: a crane on an oil-rig vibrates dangerously in high wind, a voltmeter
that is specified as accurate within 1 millivolt is accurate within only 5
millivolts.
19. What are the common exclusions of defects? Give example.
 Fair wear and tear: the results of normal use.
Ex: the plastic handle on an electric drill is scratched and scuffed after 6
months use.
 Misuse: seriously incorrect handling by the buyer.
Ex: the use of acetone to clean plastic components, failure to check the oil
level in a motor.
20. What is the Defect Liability Period?
The period during which the Exporter is liable for and must make good
defects that are apparent on delivery or that come to light later.
21. What are the four timing decisions in Defect Liability Period?
 The starting point of the period (defect liability period).
 The time allowed to the buyer to nofify the exporter of a defect.
(notification period).
 The time the exporter has to correct the defect (rectification period).

19
  The period during which the buyer can begin a legal action (legal action
period).
22. What is “Eternal warranty”? How to avoid problems of an Eternal
warranty?
Eternal warranty is an endlessly renewed liability for defects. The exporter
cannot break the chain of warranty and is involved in endless responsibility
for the goods. The problems can be avoided with a cut-off clause such as:
the total warranty period shall in no case exceed 3 years.
23. What are the 5 options for curing defects?
 Repair
 Allow the buyer to repair at exporter’s cost
 Replace (part or whole item)
 Reduce the price
 Return the goods and refund the price
24. Which corrective method is least favourable for the seller? Why?
Returning the goods and refunding the price seems to be the least favorable
for the exporter because this can be considered a cancellation of the contract.
Often defective goods are not worth the cost of return shipment to the
exporter’s country. That means the deal is a total loss for the exporter.
25. Software is often delivered with a Disclaimer of Warranty.
Disclaimer of Warranty means the iterms are supplied as they are and
without support of any kind.
26. The software provied under this Agreement is furnished “as is“ and
without support of any kind whatsoever.
The supplies disclaims all warranties with regard to any software licensed to
the purchaser under this Agreement, including all implied warranties of
merchant ability and fitness for a particurlar purpose....
27. What types of information are ussually contained in a Defects
Liability Provison?
- It states the length of the defects liability period and its starting point.
- It regulates the period during which the buyer must notify the seller about
the defects (Notification Period)
- It regulates, the amount of time the exporter has to cure the defects (
Retification Period)
- It seldom regulates the legal action period.

20
 CHAPTER 4: THE LEGAL FRAMEWORK
1. What are the six steps in negotiating the legal framework of the
Contract?
 The applicable law: Choice of law.
 Contract or no contract? : Meeting of minds, capacity, legality,
consideration.
 Entire agreement: Wherears recital, contract documents, definitions.
 The parties: Identity, naming, notices, assignment
 Status of the contract: Termination, cancellation, rescission, language.
 Settlement of disputes: Amicable settlement, arbitration, litigation.
2. What are the main differences between Anglo-American Law &
Continental Law?
 Continental law is fully codified.
 Anglo-American Law relies on cases and precedents.
Continental law Anglo-American Law
- Goal: Consistecy and - Goal: Justice in the individual
uniformity of enforcemen.t case
- Predict ability and consistency - Predict ability and consistency
of court decisions: Most of court decisions: not full
decision are predictable with predictable and decisions are
some accurancy and decisions not consistent.
are generally consistent. - The contract: is long and
- The contract: is short and detailed.
lacking in details. - Widely understood and
- Not internationally accepted. respected.

3. Give the main characteristics of Continental Law?

 Consistency and uniformity of enforcement.
 Predictable.
 Brief.
 Nationally accepted.
4. Give the main characteristics of Anglo-American Law?
 Justice in the individual case.
 Not fully predictable.
 Long and detailed.
 Internationally accepted.
5. What does the applicable law govern?
Questions concerning the validity, interpretation and performance of the
contract.
6. What are the principles of an enforceable contract?
21
 The parties achive a “meeting of mind” referring to mutual agreement.
 The parties are capable of entering a contract.
 The purpose of a contract is legal.
7. When does a contract come into existence?
A contract comes into existence when one party makes an offer and another
party accepts it.
8. Who are unable to sign contracts?
Those who look contractual capacity; e.g. Children, the feeble-minded and
drunks.
9. What does “ultra vires” mean?
Beyond its powers.
Under the public law (company law) of many countries, a company only
sign a contract that is within its powers.
A contract that is ultra vires is unenforcable.
10. When is the agreement unenforceable?
When the purpose (or effect) of an agreement is illegal.
11. Name 2 types of agreements under Anglo-American systems?
 Agreements in which one side has only rights and the other side has only
duties.
 Agreements in which both sides have rights and duties.
12. Which kind of agreement is not a contract?
Agreements in which one side has only rights and the other side has only
duties.
13. What is the Entire Agreement?
The final written version of the contract that replaces all previous agreement
between the parties.
14. What is The Whereas Recital? Why is it necessary?
The word “whereas” means “because” or “considering that”. Whereas –
clauses are not provisions, promises or conditions – they are explanations.
A typical whereas – recital contains many types of background information.
When the dispute arises, the judge must ask some background questions.
15. What should appear at the head of the contract?
The official/full registered names of the parties.
16. What is discharge by performance?
The contract is discharge by performance when both parties perform their
duties exactly according to the contract and the last duty is fully performed.
17. What is termination? Name the two types of termination?
One side may have the right under the contract to end contract.
There are 2 types of termination:
 Termination for convenience.
 Termination for default.
22
18. What is Termination for convenience?
Termination for convenience occurs when one party (usually the buyer)
simply decides to drop the contract. No reason is required. The buyer must
pay for all work performed or partly performed
19. What is Termination for default?
Termination for default occurs when the contract names certain defaults
which allow one side (usually the buyer) to terminate.
20. What is Cancellation?
Cancellation occurs when one party breaches a contract, the other has the
right to demand cancellation of the contract.
21. What is the difference between termination and cancellation?
 The contract is terminated under a provision of the contract.
 The contract is cancelled when one side has breached and the other simply
refuses to proceed.
22. What is Rescission?
The parties many simply agree to end their contractual relationship.
23. What are the ways to solve disputes?
 Conciliation: an amicable settlement.
 Arbitration: a panel of arbitrators solves the disputes.
 Litigation: settlement by the court.
24. What are characteristics of litigation?
Litigation before the courts is internationally the least attractive.
 It is public.
 It is expensive.
 It is time-consuming.
 The results are often legalistic rather than business like.
25. What are the advantages of using a panel of arbitrators?
 Quick.
 Costs are predictable.
 Decision is business-oriented.
26. What does the arbitration clause specify?
 How many arbitrators sit in the court?
 Where does the court sit?
 What is the language of the court?
 Who pays court costs?
27. What is partial invalidity provision?
- a contract is not enforceable if it has an illegal purpose
- to avoid problems with contracts that might infringe government
regulations, most contracts include a partial invalidity provision
- the invalidity of one part of the contract does not invalidate the rest
23
28. give one example of what is called one-sided agreement (page 164)
- naturally, most export contracts are two-sided: both sides must have
rights and duties
- one-sided agreement can be released from an obligation or an agreement
to modify a contract
FOR EXAMPLE:
1/ a release from an obligation is like this. Seller is entitled to payment on
10th Jan. Late payment is subject to 10% interest. Payment arrives 2 weeks
late but to create goodwill, Seller writes a letter to Buyer saying that Buyer
shall not have to pay such an interest through agreed.
2/ Example about an Agreement to modify a contract is when Seller has
contracted to deliver cables with heat resistant up to 500C. Customer asks
for resistance up to 600C. Seller then agrees in writing to make the change
without increasing price
29. Should the exporter treat the recitals as the chance to promote his
skills and the excellence of his products?
No, the exporter shouldn't. This is a mistake. If the contract gets into
trouble, the buyer will have a "big stick" with which to beat the exporter.
For example: "you told me you were the best" - and I acted on that belief."
If big claims are in the recital in black-and-white, the exporter is trapped.
30. When is a contract discharged by performance?
Both parties perform their duties exactly according to the contract and the
last duty is fully performed
31. what is Impossibility and Frustration?
Impossibility and Frustration occur when a contract is discharged because
it is impossible or totally poinless to continue with it
32. Define four cases when a contract can be dícharged (status of the
contract)
1/ discharge by performance
2/ termination: for convenience and for default
3/ cancellation
4/ rescission
5/ impossibility and frustration

24
CHAPTER 1: NEGOTIATING DELIVERY
1. What are 5 steps in negotiating delivery?
2. When might delivery take place?
3. What might be the place of delivery?
4. Why is location important?
5. Why is transportation important?
6. What are modes of transportation?
7. Where is the risk often passed from the exporter to the importer?
8. Where does transfer of ownership take place?
9. How many kinds of delay in delivery?
10.What is excused delay?
11.What events does delivery date trigger?
12.How to fix delivery date?
13.When does the contract come into force?
14.When is a contract binding?
15.When is a contract binding and effective?
16.In what kind of contract is a cut-off date set?
17.How does the date of coming into affect the delivery date?
18.What is the grace period?
19.What is the grace period used for?
20.What can parties do if the force majeure events continue too long?
21.What are the 3 outcomes of FM?
22.What are the two remedies given to the Buyer for any unexcused delay?
23.Which law prefers to award damages?
24.Which law enforces performance?
25.What questions do the courts ask in setting a figure for compensatory
damages for late delivery?
26.What are liquidated damages?
27.What are penalties?
28.Explain the differences between liquidated damages and penalties?
29.What is quasi-indemnity?
30.What notation must a Marine Bill of Lading bear?
31.How can a marine bill of lading be made into a negotiable document?
32.What are clean shipping documents?
33.What aspects of the goods does the carrier (the transportation company)
inspect?
25
34.What defects does the carrier note on the face of the bill of lading or other
shipping documents?
35.Which player (exporter or buyer) is responsible for arranging insurance
cover?
36.Name types of insurance policy?
37.What does a Marine Insurance policy cover?
38.What are 3 variables taken into account when setting up the 13 terms?
39.Identify 4 categories in which the 13 terms are grouped?
40.What are main functions of ocean BL?
41.What are requirement of BL when payment is made by LC?
42.Which notes by carrier make the B/L “unclear”. Some examples of those
notes
43.Which risks are generally excluded from Cargo Clause A?
44.Compare Insured Value and Insured Amount?
45.Name THREE new features of Incoterms 2010?

CHAPTER 2: NEGOTIATING PRICE AND PAYMENT

1. In negotiating price and payment, what should the price the exporter quotes
relate to?
2. How can the exporter avoid the “price trap” occurred in many negotiations
when the buyer demands concessions about delivery time, method of
payment, etc?
3. What are the 5 steps in negotiating payment?
4. Why payment in international trade tightly controlled?
5. What are the common methods of payment in international trade?
6. What is payment by open account? What are the risks for the exporter if he
accepts payment by open account?
7. What are methods of payment in small purchases?
8. What are payment insurances?
9. Who can offer bank guarantee?
10. Who can offer export credit insurance?
11. What are the two main elements in payment?
12. What does the exporter have to suffer from late payment?
13. What is an incentive for early payment?
14. How to fix payment date?
15. What points at which money is deemed to be paid does the Buyer prefer?
16. What points at which money is deemed to be paid does the Seller prefer?
26
17. When delay in payment is excused?
18. What payment does the importer have to pay the exporter in case of late
payment?
19. What may reduce risk for exporters?
20. In order to take out non- payment risk insurance, what does the exporter
have to do?
21. What can we imply when the insurance company refuses to offer an
insurance quotation?
22. What does the insurance premium depend on?
23. What is the guarantee triangle?
24. What is Export credit insurance?
25. What is a bank guarantee?
26. Distinguish Export credit insurance and Bank Guarantee?
27. What are some limitations of Export Credit Insurance?
28. What are some common guarantees in business? Explain each of them
briefly.
29. In terms of guarantee, what does it mean by “without demur or objection”?
30. What is a Conditional Guarantee?
31. What is a Letter of Credit? Why it is also called Documentary Credits?
32. What kind of method of payment makes late payment impossible?
33. What are steps in issuing an L/C?
34. What are the steps in presenting a Letter of Credit?
35. Explain the two principles that make letters of credit safe for both exporter
and buyer: Autonomy and Strict compliance.
36. What are the most common problems with L/C that cause discrepancies?
37. What are the 3 ways the exporter can proceed once the bank has indicated
discrepancies?
38. Distinguish Irrevocable and Revocable Letter of Credit.
39. Distinguish the Confirmed and Unconfirmed L/C.
40. What is the term “Settlement by Sight Payment”?
41. What is the term “Settlement by Deferred Payment”?
42. What is the term: “Settlement by Acceptance”?
43. What is the term: “Settlement by Negotiation”?
44. What are the associated documents with the L/C?
45. If a Letter of Credit requires “a full set of original air waybills” to be
submitted, what will be the problem for the exporter?
46. What are steps in negotiating the terms of a Letter of Credit?
27
 47. What are different segments in a Letter of Credit?
48. About the expiry date of a Letter of Credit, why does buyer wants an early
date while exporter wants a later date?
49. Distinguish Partial shipments and Shipment in installments.
50. Name types of L/C you know?
CHAPTER 2:
51. What are the factors affecting the price?
52. Which method of payment is most favoured by the buyer? Why?
53. Which method of payment is most favoured by the seller? Why?
54. What does the insurance premium depend on?
55. What is Export Credit Insurance?
56. What is a Payment Guarantee?
57. How does Export Credit Insurance work? What are its disadvantages?
58. Compare payment guarantee and advanced payment guarantee.
59. When does "discrepancy" occur in payment? What are the possible
outcomes of discrepant documents?
60. Distinguish Irrevocable and Revocable Letter of Credit.
61. Some situations where the exporter demands a higher price?

CHAPTER 3: NEGOTIATION INSPECTION AND DEFECTS

LIABILITY
1. Why do companies have quality assurance programs?
2. Why may conflicts arise in negotiating specifications?
3. What is the benefit of a well-designed set of specifications?
4. Which kind of goods needs pre-delivery inspection? Give example.
5. What are the functions of independent inspection?
6. What does customs inspection reveal?
7. What is the real inspection for goods?
8. Name quality checks on goods exported for resale?
9. How long is the defects liability period?
10. What are 5 steps in negotiating the Defects Liability Period?
11. What counts as a patent defect? Give examples
12. What counts as a latent defect? Give examples.
13. What are Implied Warranties?
14. What are 3 types of Implied Warranties? Give examples
15. What is a Product Warranty?

28
16. What is a Product Guarantee?
17. What are the similarities and differences between a guarantee and a warranty?
18. What are the 3 types of defects? Give examples.
19. What are the common exclusions of defects? Give example.
20. What is the Defect Liability Period?
21. What are the four timing decisions in Defect Liability Period?
22. What is “Eternal warranty”? How to avoid problems of an Eternal warranty?
23. What are the 5 options for curing defects?
24. Which corrective method is least favourable for the seller? Why?
25. Software is often delivered with a Disclaimer of Warranty.
26. The software provied under this Agreement is furnished “as is“ and without
support of any kind whatsoever.
27. What types of information are ussually contained in a Defects Liability
Provison?
CHAPTER 4: THE LEGAL FRAMEWORK
1. What are the six steps in negotiating the legal framework of the Contract?
2. What are the main differences between Anglo-American Law & Continental
Law?
3. Give the main characteristics of Continental Law?
4. Give the main characteristics of Anglo-American Law?
5. What does the applicable law govern?
6. What are the principles of an enforceable contract?
7. When does a contract come into existence?
8. Who are unable to sign contracts?
9. What does “ultra vires” mean?
10. When is the agreement unenforceable?
11. Name 2 types of agreements under Anglo-American systems?
12. Which kind of agreement is not a contract?
13. What is the Entire Agreement?
14. What is The Whereas Recital? Why is it necessary?
15. What should appear at the head of the contract?
16. What is discharge by performance?
17. What is termination? Name the two types of termination?
18. What is Termination for convenience?
19. What is Termination for default?
20. What is Cancellation?

29
21. What is the difference between termination and cancellation?
22. What is Rescission?
23. What are the ways to solve disputes?
24.What are characteristics of litigation?
25.What are the advantages of using a panel of arbitrators?
26.What does the arbitration clause specify?
27.What is partial invalidity provision?
28.Give one example of what is called one-sided agreement (page 164)
29. Should the exporter treat the recitals as the chance to promote his skills and
the excellence of his products?
30.When is a contract discharged by performance?
31.what is Impossibility and Frustration?
32. Define four cases when a contract can be dícharged (status of the contract)

30