BUSINESS CONTRACT TRANSLATION QUESTIONS – CHAPTER 3-textbook –

(HỒNG LINH)

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 program to ensure that customers get what they pay for/to ensure customer satisfaction.

2. Why may conflicts arise in negotiating specifications?

Because it s a difficult process. The manufacturer often tempted to be over-optimistic and to agree
to impossible specifications, which is very 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 void
costs.

4. Which kind of goods needs pre- delivery inspection? Give example.

All kinds of goods need pre-delivery inspection, especially sophisticated items or 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?

It reveals discrepancies in weight, size and description.

7. What is the real inspection for goods?

That is inspection by the buyer, or “open package inspection”.

8. What counts as a patent defect? Give examples.

Defects that are apparent, e.g, wrong items, broken or missing parts, scratches, etc.

9. What counts as a latent defect? Give examples.

Defects that only come to light after buyer’s acceptance, or hidden defects, e.g, structural
weaknesses, failure to operate at high or low temp, high fuel consumption.

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 10.What are Implied Warranties?
Assumptions that buyers can make about goods, even if the exporter gives no express warranty

11.What are 3 types of Implied Warranties? Give examples

- Implied warranty of conformity with contract
- Implied warranty of merchantable quality: An implied warranty of merchantability is an
unwritten and unspoken guarantee to the buyer that goods purchased conform to ordinary
standards of care and that they are of the same average grade, quality, and value as
similar goods sold under similar circumstances. In other words, merchantable goods are
goods fit for the ordinary purposes for which they are to be used.

(The Uniform Commercial Code (UCC), adopted by most states, provides that courts may imply
a Warranty of merchantability when (1) the seller is the merchant of such goods, and (2) the buyer
uses the goods for the ordinary purposes for which such goods are sold (§ 2-314).)
- Implied warranty of fitness for intended purposes: merely requires that the seller possess
knowledge and expertise on which the buyer may rely.
(Before a court will imply a warranty of fitness, three requirements must be met: (1) the
seller must have reason to know of the buyer's particular purpose for the goods; (2) the seller
must have reason to know of the buyer's reliance on the seller's skill and knowledge in
furnishing the appropriate goods; and (3) the buyer must, in fact, rely on the seller's skill and
knowledge.
Students give their own examples.

12.What is a Product Warranty?

A promise by the exporter to cure defects in his product. There are two parties: the buyer and the
seller

13.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.

14.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
1. Content: Contract to perform the promise or discharge the liability
2. Parties: Tripartite
3. Essence: promise about somebody else performance.
4. Purposes:
+ to obtain loan
+ credit purchase/ sales
+ for good conduct or honesty of person
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Warranty
1. Content: State of the subject of contract
2. Parties: Bilateral
3. Essence: commitment of Seller to make good defects or product or services in a fixed period
4. Purposes
+ to enhance their value
+ show of quality
+ assurance of product performance

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

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 three years.

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

Defective workmanship,
defective materials,
defective design
Students give their own examples.

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

Fair Wear and Tear – the result of normal use.
Misuse – seriously incorrect handling by the buyer
Faults not present on delivery
Students give their own examples.

18.What are the four timing problems in Defect Liability Period?

- The starting point of the period
- The time allowed to the buyer to notify the exporter of a defect (notification period)
- The time the exporter has to correct the defect (rectification period)
- The period during which the buyer can begin a legal action (legal action period)

19.What are the 5 options for curing defects?

Repair
Allow the Buyer to repair at the exporter’s cost
Replace
Reduce the price
Return the goods and refund the price

20.Which corrective method is least favourable for the seller? Why?

Returning the goods and refunding the price seems to be the least favourable for the exporter
because this can be considered a cancellation of the contract. Often defective goods are not worth
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the cost of return shipment to the exporter’s country. That means the deal is a total loss for the
exporter.