International Sale Contract

Assoc.Prof. Dr. BUI THANH TRANG

 Key pionts

•  Main articles in international sale contract

•  Mistakes/errors in International sale contract

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WHAT IS INTERNATIONAL SALE CONTRACT?

§  International sale contract (ISC) means an

agreement that regulates the rights and obligations
of parties with regard to the sale and purchase of
the products

§  An export contract is an agreement between a

seller and an overseas customer for the
performance, financing, and other aspects of an
export transaction. It also includes supply contracts
for the manufacture of a product within a given
period. 3
 CONTRACTING PARTY

•  Parties: two or more than and at

different countries
•  SELLER and BUYER
Ø Seller: provide the goods, transfer
documents of title to the goods, and
collect money.
Ø Buyer: make payment and receive goods.

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 STRUCTURE OF INTERNATIONAL
SALE CONTRACT

n  Phase 1: contracting parties

–  Name of contract
–  Contract number
–  Date and place contract signed
–  Contracting parties
–  Terminology (if necessary)

n  Phase 2: the main articles of the contract

n  Phase 3: signature of contracting parties

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 INTERNATIONAL SALE CONTRACT

Date:……..
Party A:
Address:
Tel Fax
Represented by
Hereinafter called as the Seller
Part B:
Address:
Tel Fax
Represented by
Hereinafter called as the Buyer

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Two parties have agreed to sign the contract with the following
terms and conditions.
Art1. COMMODITY PRODUCTS
Art2. QUALITY
Art 3. QUANTITY
Art 4. PACKING & MARKS
Art 5. PRICE
Art 6. DELIVERY
Art 7. PAYMENT
Art 8. INSPECTION check the qual and quan of the goods

Art 9. INSURANCE CIF VÀ CIP

Art 10. CLAIM KHIẾU NẠI

Art 11. PENALTY

Art 12. ARBITRATION
Art 13. FORCE MAJEURE
Art 14. OTHERS

FOR THE SELLER FOR THE BUYER

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 Article 1: COMMODITY
•  The goods should be SIMPLE AND EXACTLY
described
•  Name of goods should be written :
- technical and commercial name
- name of manufacturer
- origin country, and so on
•  In simple case, the goods are lists in the body of the
contract
•  In complex case, descriptions are usually included as
an appendix

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 Example
Article 1:COMMODITY

Wrong Right
Coffee Vietnam Robusta Coffee
Groundnut Vietnamese Groundnut Kernels
Rice Long Grain White Rice 5% broken

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 Article 2: QUALITY

The goods shall correspond to the specifications and

quality agreed by two parties
Methods to describe the quality of goods:
1.  By samples
•  Seller sends the samples to the buyer.
•  Buyer sends the samples to the seller.
2. By standard
•  Name of authorized agencies issuing standard of
products
•  Issuing date

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 Article 2: QUALITY

Methods to describe the quality of goods:

3. Bydescribing in details
4. By Trade-mark
5. By technical documents: catalogue, manufacturing
drawings

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 Example
ARTICLE 2: Quality

Long Grain White Rice 5% broken

Broken : Max 5.0 %
Moisture : Max 14.0 %
Damaged Kernels: Max 0.75 %
Yellow Kernels : Max 0.5 %
Foreign matter : Max 0.1 %
Rice to be free from live insects after fumigation on
board the vessel, fit for direct human consumption in
country of origin

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 Example
Article 2: Quality

ü  According to the sample agreed by both parties

(Sample No 2345)

ü All goods must comply with export standard of

manufacturer and 100% brand new made in Japan
as catalogue attached.

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 Article 3: QUANTITY
1. Units used for identifying quantity of goods
n  Units of weight
01 Ton ( Metric Ton-MT) = 1,000 kg
01 Pound (Lb) = 0.454 kg

n  Units of length

01 yard = 0.914 m
01 Mile = 1,609 km

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15
 Article 3: QUANTITY

2. The methods of identifying quantity

n  To identify exactly quantity of goods

Ex: Motorcycle: 10,000 units

n  To identify approximately quantity of goods

Ex: Rice: 10,000 MT more or less 5% at the
Buyer’s option

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 Article 3: QUANTITY

3. Types of weight

n Gross weight: the full weight of products and

packages ( including goods and tare weight)

n Net weight: weight of goods itself

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Article 4: PACKAGING & MARKING

To specify the” required packaging” such as:

–  Packaging materials
–  Packaging sizes and shapes (case, bales,
drums, roll, bags)
–  Package insides
–  Volume and weight of package to save
transportation costs

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 Example
ARTICLE 4: PACKAGING & MARKING

All goods to be packed in export standard packing appropriated for

transport, loading, unloading and transshipment, in wooden drum.
Guaranteeing the specifications and supporting the collision during
the carriage until they discharge in good safety in Ho Chi Minh port.
All drums to be marked:
NM 34578
POSMASCO I
NICHIMEN
MADE IN JAPAN

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 Article 5: PRICE
Currency of price:
The currency to be used in hard currency (as
US dollar) to avoid the currency exchange
risks

Methods of identifying price

1. Fixed price:
2. Deferred price
3. Revisable price
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 Article 5: PRICE

1.  Fixed price:

The price to be stipulated at the time of
signing and not changed in implementing
contract
2. Deferred price
The price to be stipulated at the time of
implementing contract, for example: 01 week
before shipment time or the time of shipment

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 Article 5: PRICE
3. Revisable price
The price to be quoted at the time of signing and
revised at the time of implementing contract when
having price fluctuation.

The revisable price should be based on:

•  What kind of reference documents- Reference
prices?
•  How difference between market price and contracting
price should be revised?
BT là gì: Build – Transfer) có nghĩa là Xây dựng – Chuyển giao: không hoàn lại
BOT: build-operation-transfer: trạm thu phí
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 Article 5: PRICE

ü  TERMS OF SALE

•  The term of sale must be stipulated to prevent the
misunderstandings of responsibilities between the
buyer and the seller
•  Terms of sale is provided in INCOTERMS 2010 or
2000.

ü  UNIT PRICE & TOTAL AMOUNT

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 Example
Article 5: Price

§  Unit price: USD 345/UNIT CIF Tokyo port,

INCOTERMS 2010
§  Total amount in number:
§  Total amount in letter:
----------------------------------------------------------------------------------
Unit price: USD 500/MT FOB Saigon port
INCOTERMS 2010
Total amount:

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 Article 6: DELIVERY

6.1 Term of delivery

6.2 Time of delivery
6.3 Place of delivery
6.4 Notice of delivery
6.5 Others

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 Article 6: DELIVERY

6.1 Term of delivery

Example:
•  Applicable International Chamber of
Commerce (hereinafter: ICC) Incoterms
2010. Delivery of goods will be made FOB.
•  Applicable International Chamber of
Commerce (hereinafter: ICC) Incoterms
2010. Delivery of goods will be made CIF.

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 Article 6: DELIVERY

6.2 Time of delivery

Should be stipulated:
•  Fixed date: such as 20 Sep, 2021 chọn cái này => dễ gặp penalty
•  Period time: seller choose this
ü Time of delivery: not later than December 30, 2021.
ü Time of delivery: from 01/8/2018 to 30/9/2021.

•  General expressions as to Dates for shipment should not be used

ü  Subject to shipping space available
ü  Subject to the opening of L/C
ü  or the words “prompt”, immediately”, “as soon as possible”

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 Article 6: DELIVERY

6.3 Place of delivery

According to the terms of sale -INCOTERMS

•  Port of shipment ; Port of loading

•  Port of destination; Port of discharge
•  Port of transshipment
•  Place of receipt/departure
•  Place of destination

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 Article 6: DELIVERY

6.4 Notice of delivery

ü Who has responsibilities of notification: Seller or Buyer
ü The contents of notice: Notices should be made
before and after shipment of goods, such as:
The vessel name, mode of transport, Loading port,
port of destination,
ü Required delivery time,
ETD: Estimated Time of Departure,
ETA: Estimated Time of Arrival,

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 Article 6: DELIVERY

6.5 Others
•  Partial shipment: allowed or not allowed
•  Total shipment
•  Transshipment allowed or prohibited

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 Example
Article 6: Delivery
•  Delivery of goods will be made FOB.
•  Time of delivery: not later than August 30, 2021.
•  Place of delivery: Port of Loading: Saigon.
•  Port of discharge: Osaka.
•  Partial shipment: not allowed. giao hàng từng phần
•  Transshipment is not allowed trung chuyển

•  Notice of shipment: thông báo

–  Pre- advice of shipment: The Buyer will advise the Seller the
tên tàu
name of vessel not later than three (03) days before shipping
date by fax.
–  Final advice of shipment: within 24 hours after shipment the
Seller shall advice by cable/telex : Contract No, quantity, gross
weight, net weight, measurement, number of packages, invoice
value, name of carrying vessel, Bill of Lading number.
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 Article 7: PAYMENT

7.1 Currency of payment

7.2 Methods of payment
7.3 Time of payment

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 Article 7: PAYMENT

7.1 Currency of payment

ü  Payment is usually made in either the buyer’s or
seller’s currency, or in a mutually agreed on
currency that is foreign to both parties

ü  If currency of payment is not same currency of

quotation, the currency of quotation is converted into
the currency of payment.

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 Article 7: PAYMENT

7.2 Methods of payment

•  Depending on the agreement between
the buyer and the seller, payment
methods often used: T / T, D / A, D / P,
CAD, L / C.
•  It should study carefully the risks when
using the payment method.

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 Article 7: PAYMENT

7.3 Time of payment

•  Pre payment: the buyer prepays the seller before
the shipment of goods

•  Sight payment: pay when receiving documents

•  Deferred Payment: the buyer takes delivery of the

shipped goods by accepted the documents and
agreed to pay after period of time such as 30 days,
60 days, 90 days

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 Article 8: DOCUMENTS

–  Commercial Invoice
–  Bill of Lading
–  Certificate of Quantity
–  Certificate of Quality
–  Packing List
–  Insurance Certificate/ Insurance Policy
–  Certificate of Origin

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 Example
Article 7: Payment

Payment by irrevocable L/C at sight for 100% of invoice value, in

favor of the Seller.
Issuing bank: ………
Notifying bank: ……….
The documents must be presented within 20 days after the date of
shipment:
•  Signed commercial invoice 02 copies
•  3/3 clean on board Bill of Lading made out to order of L/C
opening bank marked freight to collect at destination and notify
the Buyer.
•  Detailed packing list 02 copies
•  Certificate of quantity and Quality issued by Manufacturer 02
copies
•  Certificate of Origin issued by VCCI
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 Example
Article 7: Payment

Payment by irrevocable L/C at sight for 100% of invoice value, in

favor of the Seller.
Issuing bank: ………
Notifying bank: ……….
The documents must be presented within 20 days after the date of
shipment:
•  Signed commercial invoice 02 copies
•  3/3 clean on board Bill of Lading made out to order of L/C
opening bank marked freight prepaid and notify the Buyer.
•  Detailed packing list 02 copies
•  Certificate of quantity and Quality issued by Manufacturer 02
copies
•  Certificate of Origin issued by VCCI
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 Article 9: INSPECTION
8.1. Inspection before shipment ( Pre-shipment
Inspection)
ü  Inspection by the Buyer:
Time of inspection: at least …..(reasonable time) days
before actual delivery date
Responsibilities of the Seller: notify the goods are
available for inspection
ü  Inspection by Inspection service: depending on the
decision of buyers and sellers

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 Article 9: INSPECTION
8.2. Inspection of goods at arrival (destination place)

Duty to inspect and notify discrepancies:

•  The Buyer has the duty to inspect the goods for
defects in quantity or quality within a reasonable
time.
•  The Buyer will notify the seller of any discrepancy
within a reasonable time without delay
•  Fail to notify discrepancy within a reasonable time,
goods shall be deemed to have been in conformity
with the contract on arrival.

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 Article 9: INSPECTION
•  Buyer’s rights in the event of discrepancy in quantity:
ü Accept the delivered portion of goods and require
to deliver the remaining portion
ü  Accept the delivered portion of goods and
terminate the remaining portion

•  Buyer’s rights in the event of discrepancy in quality:

the buyer has the right to reject defective goods and
recover his money.

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 Article 10: INSURANCE
•  Insurance to be covered by the seller or the buyer
depending on terms of sale.
•  Conditions of Insurance (1963):
* Institute Cargo Clause - FPA: Free Particular Average
* Institute Cargo Clause –WA: With Particular Average
* Institute Cargo Clause - AR: All Risks

•  Conditions of Insurance (1982):

* Institute Cargo Clause A - ICC(A)
* Institute Cargo Clause B - ICC(B)
* Institute Cargo Clause C – ICC (C)

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 Article 11: CLAIM
Reasons for claim:

•  Discrepancy in quantity (damage/ shortfall) or quality

•  Other issues are not in conformity with contract

Claim period

•  The length and starting date of defects liability.

•  After the end of this period, the seller shall have no liability for
any defect
Required documents for claim: Letter of Claim, Survey Report,
Invoice, Bill of Lading, Certificate of Quantity, Certificate of Quality,
Packing List, Report on Receipt of Cargo, Cargo Outturn Report

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 Article 12: PENALTY

•  LATE DELIVERY: In the event of late delivery for

reasons other than force majeure, the seller shall pay
as penalty
*Stipulating penalty the sum of <FIHURE> percentage of the
value of the undelivered part per day of late delivery up to
maximum of <FIGURE> percentage of the total contract value.

•  LATE PAYMENT: penalty of delay on payment, such

as …% of total unpaid amount

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 Article 13: ARBITRATION

Arbitration article shall be stipulated:

•  Applicable law: The contract, and all questions
relating to its formation, validity, interpretation or
performance shall be governed by the law of
<COUNTRY>
•  Dispute Settlement

•  Place of arbitration

•  Who shall bear arbitration costs

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 Article 14: FORCE MAJEURE
•  Force majeure shall be understood to be
unforeseeable, unavoidable and impossible to
overcome.
•  Listing events are considered force majuere such as
war, riot, insurrections, strikes, lockout, government
regulations, fire, explosion, flood, storm, earthquake,
or other abnormal natural event.
•  Notification of force majuere by parties
•  Solving the force majeure: terminate, or prolong the
validity period of performance

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 Article 15: EFFECTIVE DATE

The contract should be stipulated the

effective date, such as:

–  Example: The contract shall come into force after

signature by both parties.

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 Article 16: TERMINATION

•  Notice of termination shall be in writing and shall take

effect <FIGURE> days from the receipt of such notice
by the party notified

•  In the event of termination, the duties of the parties

shall be as incurred up to the date of termination

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