CHAPTER I.

NEGOTIATING DELIVERY

 Five (5) steps in negotiating delivery

1. Timing Date of delivery, delay and results of delay

2. Location Place of delivery and alternatives
3. Transport Mode of transport to be used
4. Risk, title and insurance Transfer of risk, ownership and insurance
5. Term of trade Incoterm to be used

 Where must delivery take place?

 The date of dispatch from the factory

 The date of loading onto a ship

 The date when the goods should arrive in destination

 What events does delivery date trigger?

 The exporter fulfills his primary duties under the contract

 Payment normally becomes due

 Risk, and often title, pass to the buyer

 Delay – as well as any compensation to be paid by the exporter – is reckoned

from the planned date of delivery

 How to name the date?

 The simplest way: to use a straightforward calendar date (not common)

 The common way: plan for the contract to come into existence in 2 steps: 1 is
on signature (the signature date), 2 is when the preconditions for the sale have
been meet (the date of coming into force)

 When does the contract come into force?

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 It is not usually a calendar date, but the date on which the last precondition is met, and
common preconditions are:

 Receipt of import/export approval

 Receipt of foreign trade approval from a center bank

 Issuance of a L/C or bank guarantee

 Making of a down-payment by the buyer

 Issuance of a certificate of origin

 Issuance of an insurance policy

 Delivery by the buyer of plans, drawings or other documentation

 When is the contract binding?

 Between the signature date and the cut-off date

 If the contract has not come into force by this date => no contract

 When is the contract binding and effective?

 After the date of coming into force

 In what kind of contract is a cut-off date?

 Common in Fixed-price contracts: a long delay can make the price unrealistic

 Cut-off date is the date that after that day, if the contract does not come into
force, it becomes null and void

 How does the date of coming into force affect the delivery date?

 The delivery date is normally fixed for a certain number of days after the
contract has come into force

 What is the grace period? What is it used for?

 Grace period is extra time allowed for meeting with requirement, satisfaction of
an obligation, or implementation of an agreement.

 Grace period is used for encouraging the seller to make early delivery.

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 What is force majeure? What can parties do if the Force majeure events continue
too long?

 Force majeure is unavoidable circumstances, such as: acts of god, floods, fires,
epidemics, strikes, war, governmental regulations…

 If the Force majeure event continues for too long, both parties should have the
right to terminate the contract.

 What are 3 outcomes of Force majeure?

 Delivery resumes without penalty for the seller

 Buyer notices exporter that the contract is terminated

 Unclear and dangerous situation

 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 (sắc lệnh yêu cầu thi hành nghĩa vụ hợp đồng)
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.

 Which law prefers to award damages? To enforces performance?

 Common-law (Thông luật) countries (England, US, most of the British

Commonwealth and ex-Commonwealth) prefer to award damages

 Civil-law (Dân luật) countries usually enforce performance

 What questions do the court ask in setting a figure for compensatory damages for
late delivery?

 Did the loss provably follow the breach?

 Was the loss reasonably close to the breach in the chain of events?

 Was the loss “mitigated”? – Did the buyer take reasonable steps to keep the
loss as small as possible?

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 What are liquidated damages? Penalties? Quasi-indemnity? Explain the differences
between them?

 Liquidated damages: A fair figure, a lump sum to be paid per day (week or
month) of late delivery

 Penalties: the amount of money that the seller pay to the buyer

 Quasi-indemnity: the amount of compensation fixed by the exporter to relieve

his responsibility for late delivery

Liquidated damages Penalties Quasi-indemnity

To compensate the buyer To terrorize the exporter To relieve the exporter’s
fairly for any delay in into punctual delivery liability for delay in
delivery delivery
Enforceable everywhere Not enforceable in Enforceable everywhere
but subject to increase or English law or other but open to challenge as
decrease in some legal common law systems unconscionable
systems

 What might be the place of delivery?

 The seller’s plants or factory

 Port of loading

 Port of unloading

 The buyer’s warehouse

 Why is location important?

 The place of delivery is doubt important to the seller because the date of
payment normally depends on the place and time of delivery

 At the place of delivery, risk and title to the goods often pass

 2 aspects of transportation?

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  Physical safety of the goods which means appropriate packaging and correct
marking

 Correct documentation

 What are modes of transportation?

 Overseas transport: Air transport & Sea transport

 Inland transport: by road/rail/barge/mail/mixture

 3 packaging problems:

 Packaging of dangerous goods is subject to special regulations in all countries

 Some national laws require fumigation of all containers entering the country

 Agriculture-based, developed economies tend to place severe restrictions on

packaging materials. Hay, straw and rice husk are often forbidden, wooden
packaging must often be fumigated.

 Shipping documents: Bill of lading (most important)

 A marine bill of lading: must indicate that the goods have been loaded on board
on a name vessel. A marine BL can be made into a negotiable document by
typing the word “order”

 An air waybill

 A rail consignment note

 A road consignment note

 A combined transport bill of lading

 Clean shipping documents? What aspects of the goods does the carrier inspect?

 Clean shipping documents are the documents which are free of note or have
notes but they are not affected to the quality of the goods, and can be
acceptable in their line of business

 The carrier inspects not only the goods themselves, but also their packaging
and general appearance. Common notes include:

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  Contents leaking

 Packaging soiled by contents

 Packaging broken/holed/torn/damaged/contaminated

 Goods damage/scratched

 Goods chafed/torn/deformed

 ….

Some notes are not considered to be “claused”: second-hand packaging

materials used/ packaging repaired/ unprotected/ unboxed/…

 Bill of Lading acts as:

 Evidence of contract of carriage

 Receipt of goods

 Document of title to the goods

 2 risks in the sale of goods:

 Risk of the goods injuring a third party

 Risk of loss or damage (more significant)

 Which party should arrange insurance cover?

There are 2 schools of thought

 Point of delivery is decisive: up to the delivery, the export insures; after that.
The buyer insures

 Exporter should insure: Because they have standing arrangement with an

insurance company and they can declare the details of their products

 Certificate of insurance?

 Each individual shipment is covered by it, not a full insurance policy (a full policy
can be issued if the buyer wants it).

 Certificate of insurance is also called “Letter of insurance”

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  Has no legal force except as evidence in a law suit against the exporter

 States in outline the cover offered

 Gives the details of the individual shipment

 Types of Insurance policy

 Based on the description of insured ship, goods or insured subject matter

o Floating policy (HĐ bảo hiểm bao): set up for a particular time and
automatically expires unless renewed

o Open policy (HĐ BH mở) (preferred): does not expire; more

fundamental: it is not an insurance policy, and less formal, less time-
consuming but extremely reliable

o Both cover on all shipments over time period

 Based on the value of the insured subject matter

o Valued policy (HĐ BH định giá) (preferred): the value is stated

o Unvalued policy (HĐ BH không định giá): the value is not stated, and
can be naturally established; after the loss, the exporter must prove his
figures

 Based on time period

o Voyage policy (HĐ BH chuyến)

o Time policy (HĐ BH thời hạn)

 Tailor-made policy: a single policy for a single shipment (other above are not)

 Cargo clause A, B or C

 By International chamber of commerce, as a means of insurance for cargo in

transit

 Cargo clause A: the widest insurance coverage, the insured pays the highest
premium for total coverage

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  Cargo clause B: a more restrictive coverage, the insured pays a moderate
premium because only the more valuable items or partial cargo coverage

 Cargo clause C: the most restrictive coverage, the insured pays the lowest
premium

 3 variables taken into account when setting up 13 terms:

 Where along transportation route delivery takes place

 What means of transportation is used

 What costs the exporter may pay after the point of delivery

 4 categories of Incoterms:

 E-term: deals with deliveries at the exporter’s factory

 F-terms: all concern delivery within the exporter’s country

 C-terms: involve delivery in the exporter’s country, with extra costs for the
exporter after delivery

 D-terms: deliveries outside the exporter’s country

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CHAPTER II. NEGOTIATING PRICE & PAYMENT

 What should be the price exporter quotes relate to?

 Exporter should quote a price that relates to the complete set of contract terms:
size of order, terms of delivery, warranty provisions and so on

 5 steps in negotiating payment

1. Mode of payment : how will payment be made?

2. Timing : what is the date of payment?
3. Place of payment : where must the money be before the
payment is considered completed
4. Delay : what delay in payment is excusable?
5. Results of delay : what are the results of non-excusable delay
in payment?

 Mode of payment definition?

 The way that a buyer chooses to compensate the seller of the goods or services
that is also acceptable to the seller

 Typical payment methods include: cash in advance, collection, documentary

credit and open account (left-to-right more secure for the importer)

 Why payment in international trade tightly controlled?

 Because trade within a country is based on a mixture of trust and the close
proximity of courts of law; however, in international trade, trust is rare and courts
are far away and unpredictable.

 Common methods of payment in international trade?

 Cash-in-advance

 Open account

 Documentary collections

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  Documentary credits

 Bank payment obligations

 Methods of payment in small purchase?

 Cash in delivery

 Cast against invoice – typical open account transaction: receive an invoice and
have a certain time to pay it

 Cash with order – the seller ask for 100% prepayment as security

 Payment by an open account? The risks for exporter if he accepts it?

 An open account transaction is a sale where the goods are shipped and
delivered before payment is due

 The exporters are seriously at risk. If anything goes wrong – if the check is not
honored by the bank, or if the buyer files for bankruptcy or simply disappears,
the exporter is in a poor position to claim payment

 What does the exporter suffer from late payment? And what is an incentive for early
payment?

 The exporter must borrow money, perhaps on a high rate of interest, until he is
paid

 To speed up payment, most exporters offer a discount for early payment

 How to fix payment date?

 Parties must negotiate a chain of date if delivery involves partial shipments,

periodic shipments, or spare parts supply contract

 These are either calendar dates (19th October), or interval times (within 30 days
of the date of invoice)

 Point at which money is deemed to be paid? Why it is important?

 When the buyer instructs the bank to pay (buyer prefers most)

 When the buyer pays the money into his bank

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  When the buyer’s bank transfers fund

 When funds reach the seller’s bank account (seller prefers most)

 Because late payment is subject to payment of interests and the cost of any
delay along the payment route properly belongs to the buyer

 When delay in payment is excused?

 Delay in payment might be excused during a grace period, though it’s unusual

 Most commonly, the force majeure event excuses delay, but in fact, it seldom
makes sense in the context of contract

 What payment does the importer have to pay the exporter in case of late payment?

 It is generally agreed that the exporter has the right to be compensated for
losses due to late payment. What happened in practice depends on the
payment agreement negotiated by the parties

 Typically, the buyer has to pay an interest on the amount unpaid during the
period of delay. The interest payable is simply added to the outstanding sum

 What could reduce risk for exporters?

 A classic strategy is to spread it by means of a third party

 2 forms of a third-party security:

o Export credit insurance: allows the exporter to recover the major part of
the contract price if the buyer fails on due date

o Bank guarantee: the bank will pay for the contract price if the buyer fails
to do so

 The insurance company refuses to offer an insurance quotation means:

 The insurer has used its network to run some checks on the buyer and found
the buyer un-creditworthy - a sign to the exporter that the business is risky

 It might also mean that the insurer has check on the exporter and found some
problems: a criminal record, or a history of unpaid insurance premiums

 What does the insurance premium depend on?

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  The type of goods exported

 The creditworthiness of the buyer

 The political stability of the buyer’s country, …

 What is the guarantee triangle?

 Limitations of Export Credit Insurance?

 A long wait between the time when the buyer fails to pay and the time when
insurance company compensates the exporter

 When compensation is paid, it is unlikely to cover 100% of the original invoice

price

 Some common guarantees in business?

 Non-payment – Payment guarantee: it simply commits the bank to pay if the

buyer defaults, 100% of the contract price

 Revocation – Tender guarantee: it is used for a procurement contract,

especially at government level. It protects a company against the risk of a
project falling behind because a tender is withdrawn; 1,5-5% of the price

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  Non-performance – Performance Guarantee: if the exporter works badly or not
at all, then the guarantor will pay, within stated limits, the costs of your failure
to perform; 5-10% of the price

 Losing prepayment – Prepayment guarantee: it promises the buyer that the

bank will return advance payments if the exporter fails to deliver; 100%
prepayment

 “without demur or objection” meaning?

 = “on first demand”

 The moment that the beneficiary demands payment under the guarantee, the
bank will pay. Naturally, the bank will withdraw immediately the money it has
paid from the account of the principal

 Bank guarantee?

 2 types: demand guarantee & conditional guarantee

 Conditional guarantee contains serious, objective conditions that must be met

before payment by the bank is possible

 Demand guarantee: no serious, objective conditions the beneficiary must meet

before claiming payment of the guarantee

 Export credit insurance & Bank guarantee

Export credit insurance Bank guarantee

Purpose Cover risk of non-payment
Depends on types of goods, creditworthiness of buyer and political
Fee policy
Normally 0.5 – 1%
Fee paid by Exporter Importer
Insurance companies of
Third-party
governmental export credit Commercial banks
involved
agencies
Coverage Not 100% Normally 100%

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 Long wait for compensations Demand guarantee: abuse and
Limitations Not 100% contract price court arise Conditional
“Bad faith” from buyer guarantee harsh conditions

 What is a letter of credit?

 It 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 situation, documents are exchanged for money – that is why
letters of credit are formally called Documentary credit

 What kind of method makes late payment is impossible?

 The confirmed, irrevocable, at-sight letter of credit

 Steps in issuing an L/C

 Exporter & buyer sign a contract

 The buyer asks a local bank to open a L/C

 The issuing bank asks a bank in the exporter’s country to advise the exporter
that the L/C has been opened

 The advising bank advises the exporter that the L/C has been opened

 Steps in presenting a L/C

 Seller ships the goods & gets shipping documents

 Seller presents the shipping documents to the advising bank

 The advising bank checks the documents and pays the exporter if appreciate

 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

 Autonomy & Strict compliance – 2 principles of L/C

 Autonomy

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 o L/C is an agreement by a bank to pay money against document

o It is a separate agreement from the sales contract and is unrelated to it

o The bank is obligated to pay whatever disputes between 2 parties

 Strict compliance

o Bank will only pay if the shipping documents are exactly in line with the
buyer’s instruction

 When the bank refuses to pay under L/C?

 Provide the missing paperwork or contract errors

 Ask the buyer to instruct the bank to change the terms of the L/C (issue an
amendment)

 Ask the bank to process the L/C with the discrepancies but to pay only when
the issuing bank permits payment

 What can be done by the exporter when the L/C is nearly its expiry date?

 Must contact the buyer and ask to instruct the issuing bank to extend the date
of credit

 Extra bank costs are at the exporter’s expense

 Revocable and Irrevocable L/C

 Revocable L/C can be amended, cancelled by the issuing bank of the buyer
without prior notice to the beneficiary

 Irrevocable L/C cannot be amended or cancelled without agreement of all

parties

 Confirmed and Unconfirmed L/C

 The seller will usually want a bank in their country to check that the L/C is valid.
The seller may require the L/C to be confirmed by the bank that checks it. By
confirming the L/C, the second bank agrees to guarantee payment even if the
issuing bank fails to make it

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  Unconfirmed L/C: the advising bank forwards the unconfirmed L/C directly to
the exporter without adding its own undertaking to make payment or accept
responsibility for payment at a future date, but confirming authenticity.

 Settlement by Sight payment

 The exporter presents the necessary documents to the paying bank (confirming
bank)

 The bank checks the documents, and if they are in order, the bank pays the full
face value of the letter of credit

 Settlement by Deferred payment

 The exporter presents the necessary documents to the paying bank

 The paying bank agrees to pay the seller the face value of the credit when it
matures (often a number of days after delivery)

 If the seller needs money immediately, he can exchange the L/C for cash (at a
discount) with any agreeable bank

 Settlement by Acceptance

 The seller presents to the accepting bank the documents and a bill of exchange
drawn usually on the buyer

 The accepting bank agrees to pay the bill when it matures

 If the seller needs money immediately, he can exchange the L/C for cash (at a
discount) with any agreeable bank

 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

 Associated documentary with the L/C

 Commercial invoice

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  Transport document

 Insurance document

 Other documents: certificate of origin, certificate of analysis, packing list, weight

list…

 Steps in negotiating the terms of a L/C

 Agreement: both parties discuss and list all required documentation

 Incorporation: the list is incorporated into the contract

 Specification: the buyer applies for the L/C specifying the agreed
documentation

 Verification: the exporter checks the credit to see that required documentation
is as agreed

 Compliance: the exporter rigorously checks documentation and submits it to

the bank

 Segments in a L/C

 Applicant  Confirmation

 Issuing bank  Amount

 Application date  Partial shipment

 Date and Place of expiry  Transshipment

 Beneficiary  Availability

 Method of issue  Insurance covered by the

buyer
 Transfer of the credit
 Transport information

 Partial shipments & Shipment in installments

 Shipment in installment means that an agreed schedule has been set up

 Partial shipment is simply an incomplete shipment with some part of the goods
to follow later

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CHAPTER III. NEGOTIATING INSPECTION AND DEFECTS
LIABILITY

 Why do companies have quality assurance programs?

 To ensure that customers get what they pay for. No manufacturer produces
perfect products every time, and quality is a key to get customer satisfaction.
When customer is in another country, distance makes communication,
transport, inspection, payment expensive and time-consuming.

 What conflicts may arise in negotiating specifications?

 It is the conflict arising in the exporter’s own team: the marketing manager is
eager to sell brilliant products, but the production department knows that it
cannot make them

 What is the benefit of a well-designed set of specifications?

 It offers vital protection to both side. The buyer can reject any item that fails to
meet specification. The seller can be protected too: When all the goods meet
specifications, the buyer cannot find any excuse for rejection or for exaggerated
defects liability claims.

 What kinds of goods needs pre-delivery inspection? Give example

 Sophisticated items or capital equipment

 Ex:

 What are the functions of independent inspection?

 Prevent exporter and buyer agreeing an unrealistically low invoice price to avoid
custom duties in the buyer’s country

 Prevent shipment of patently defective goods

 What does customs inspection reveal?

 Discrepancies in weight, size and description

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 What is the real inspection for goods?

 It is called “open package inspection” – the buyer’s inspection. The buyer has the
right to inspect the goods when they arrive and to reject them if they are incorrect

 Name quality checks on goods exported for resale?

 Inspection by buyer during manufacture

 Inspection by buyer or buyer’s agent before delivery

 Inspection by carrier on dispatch

 Open package inspection on arrival at destination

 Seller’s liability for defects after sale

 How long is the defects liability period?

 It depends on negotiation between both parties

 What are 5 steps in negotiating the Defects Liability Period?

 1, inspection: When are the goods inspected? When can the buyer to reject them?

 2, terms: warranty or guarantee?

 3, definition: What is and what is not a defect?

 4, timing: How long is the defects liability period? When does it start? What about
other timing?

 5, corrective action: What must the seller do to cure defects?

 What counts as a patent defect? Give examples

 Defects in material and/or workmanship that may cause failure or malfunction of

an item, and is discoverable upon its inspection

 Ex: wrong items, broken or missing parts, scratches…

 What counts as a latent defect? Give examples.

 Defects that only come to light after buyer’s acceptance, or hidden defects

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  Ex: structural weakness, failure to operate at high/low temperature, high fuel
consumption….

 What are Implied Warranties?

 Warranty claims buyer can make even if exporter doesn’t express it in the contract

 What are 3 types of Implied Warranties? Give examples

 Implied warranty of conformity with contract (Bảo hành mặc thị về sự phù hợp với
HĐ)

 Implied warranty of merchantable quality (Bảo hành mặc thị về phẩm chất thương
mại)

 Implied warranty of fitness for intended purpose (Bảo hành mặc thị về phù hợp với
mục đích sử dụng)

 What is a Product Warranty?

 A commitment by the exporter to cure defects in his products or services in a fixed

period

 What is a Product Guarantee?

 A promise of the guarantor about somebody else’s performance

 What are the similarities and differences between a guarantee and a warranty?

 Similarity: They are all promises about performance

 Differences:

Guarantee Warranty
Content Contract to perform the State of the subject of contract
promise/discharge the liability
Parties 3 (guarantor, principal, beneficiary) 2 (seller and buyer)
Essence Promise about somebody else’s Commitment of seller to cure defects
performance of products/services in a fixed period
Purposes  To obtain loan  To enhance their value
 Credit purchases/sales  Show of quality
 Good conduct  Assurance of product

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

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  Defective workmanship - Ex: a radio lacks the wires connecting the loudspeaker to
the amplifier

 Defective materials - Ex: tractor wheels that should be galvanized are simply
painted with anti-rust paint

 Defective design – Ex: a crane on an oilrig vibrates dangerously in high wind

 What are the common exclusions of defects? Give example.

 Fair wear and tear – Ex: the plastic handle on an electric drill is scratched after 6
months use

 Misuse – Ex: the use of acetone to clean plastic components

 What is the Defect Liability Period?

 It is a period agreed by parties to specify the liability with the defects of the goods

 What are the four timing decisions in Defect Liability Period?

 The defect liability period

 The notification period

 The rectification period

 The legal action period

 What is “Eternal warranty”? How to avoid problems of an Eternal warranty?

 It is an endlessly renewed liability for defects

 Seller should reject the clause altogether; if rejection is impossible, he can – and
should – break the chain warranty with a cut-off clause

 What are the 5 options for curing defects?

 Repair: the seller repairs the defective items

 Allow the buyer to repair at the seller’s cost

 Replace (part or whole item)

 Reduce the price

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  Return the goods and refund the price

 Which corrective method is least favorable for the seller? Why?

 Return the goods and refund the price

 Because that means the deal is a total loss for the exporter

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CHAPTER IV. THE LEGAL FRAMEWORK

 What are the six steps in negotiating the legal framework of the Contract?

 Step 1: The applicable law (choices of law)

 Step 2: Contract or no contract (meetings of minds, capacity, legality,

consideration)

 Step 3: Entire agreement (whereas-recital, contract documents, definitions)

 Step 4: The parties (identity, naming, notices, assignment)

 Step 5: Status of the contract (termination, cancellation, rescission, language)

 Step 6: Settlement of dispute (amicable settlement, arbitration, litigation)

 What are the main differences between Anglo-American Law &Continental Law?

Anglo-American law Continental law

Goal Justice in the individual case Consistency and uniformity of
enforcement
Predictability and Unless matters are carefully Most decisions are predictable
consistency of regulated in contract, the decision with some accuracy. Decisions are
court decision of the judge is not fully predictable generally consistent
and consistent
Length and detail Contracts tend to be long and Contracts can be short and lacking
of contract detailed in details because the law
regulates most problems
International Widely understood and respected Tend to focus on national rather
acceptance than international issues

 Give the main characteristics of Continental Law?

 Consistency and uniformity of enforcement

 Predictable

 Brief

 Nationally accepted

 Give the main characteristics of Anglo-American Law?

23
  Justice in the individual case

 Not fully predictable

 Long and detailed

 Internationally accepted

 What does the applicable law govern?

 Questions concerning the validity, interpretation and performance of the

contract

 What are the principles of an enforceable contract?

 The parties achieve a “meeting of minds referring to mutual agreement

 The parties are capable of entering a contract

 The purpose of a contract is legal

 When does a contract come into existence?

 when two parties achieve a meeting of minds. One party makes an offer and
another party accepts it

 Who are unable to sign contracts?

 People who lack contractual capacity: children, the feeble-minded and drunks

 What does "ultra vires" mean?

 It means “beyond its power”. Under the public law of many countries, a
company only sign a contract that is within its power. A contract that is ultra
vires is unenforceable

 When is the agreement unenforceable?

 When the purpose (or effect) of an agreement is illegal. For examples, an

agreement to murder someone is not enforceable

 Name 2 types of agreements under Anglo-American systems?

 Agreements in which one side has only rights and the other side has only duties

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  Agreements in which both sides have rights and duties

 Which kind of agreement is not a contract?

 Agreements in which one side has only rights and the other side has only duties.
It is not a contract and is not governed by contract law

 What is the Entire Agreement?

 The final written version of the contract that replaces all previous agreement
between the parties

 What is The Whereas Recital? Why is it necessary?

 The whereas recital is the background of the contract. “whereas” means

“because” or “considering that”, so whereas recital is not provision, promise or
condition, it is explanation.

 Because if a dispute arises, the recital allows the court to discover the real
meaning of the contract though an understanding of the expectations of the
parties when they signed it

 What should appear at the head of the contract?

 The full, registered name of the parties

 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

 What is termination? Name the two types of termination?

 Termination occurs when either party pursuant to a power created by

agreement or law puts an end to the contract otherwise than for its breach

 2 kinds of termination:

 Termination for convenience

 Termination for default

 What is Termination for convenience?

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  It 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

 What is Termination for default?

 It occurs when the contract names certain defaults which allow one side
(usually the buyer) to terminate

 What is Cancellation?

 It occurs when either party puts an end to the contract for breach, and the other
side has the right to demand cancellation of the contract

 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 side
simply refuses to proceed

 What is Rescission?

 It is the generally used term when 2 parties agree to end a contract

 What are the ways to solve disputes?

 Conciliation: an amicable settlement

 Arbitration: a panel of arbitrators solves the disputes

 Litigation: settlement by the court

 What are characteristics of litigation?

 Public, expensive, time-consuming and the results are often legalistic rather
than business like

 What are the advantages of using a panel of arbitrators?

 Its tendency to be quicker than litigation

 The foreseeability of the costs

 Decisions are business-oriented

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 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?

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