A.

Domestic Law
 Conflict of laws on contract forms
- It is the case where laws of different countries comprise different rules on the
form of the sales contracts.
 Conflict of laws on the content of contracts
- It is the case where the laws of different countries comprise different rules on
the various and complex issues, such as the rights and obligations of parties,
principal contract terms, or the application of remedies in the case of breach of
contract.
 Domestic law becomes applicable law for an international sales contract when:
1. It is agreed in the contract at the time the contract is concluded.
2. It is agreed by the parties after the contract is made. For many reasons, the
parties fail to choose applicable law and they may agree afterward or at the time
the dispute occurs.
3. It is referred by the applicable international treaty.

B. International Treaties
Treaties
 Are legally binding written agreements between two or more nations.

International treaty

 Is a written agreement which is concluded or accessed by the state or by the

government with one or more other nations, international organizations or other
subjects of the international law, regardless of the names which can be agreement,
convention, protocol, memorandum of understanding or others.
2 Types
1. Treaties to Unify the Substantive Rules
- Occurs when countries agree to create the substantive rules, in order to govern
international sales of goods transactions.
2. Treaties to Unify the Rules of Conflict
- For example, if a certain dispute over an international business contract is
brought to the national court of the state A with A’s rule of conflict, the law
applicable to the contract may be different from the law that national court of
the state B might choose according to B’s rules of conflict. It will cause
difficulties for parties in predicting the applicable law, since their disputes may be
resolved in many different national courts. This is a great obstacle in applying
the rules of conflict to resolving disputes over international sales of goods.
- Therefore, nowadays, countries tend to negotiate and adopt international
treaties to unify the rules of conflict.

C. International Mercantile Customs and Usages

- Are important source of law governing sales contracts.
 - Include International Commercial Terms (INCOTERMS) codified and issued by
International Chamber of Commerce (ICC) in 1936 (and amended in 1953, 1968,
1976, 1980, 1990, 2000, and 2010; and Uniform Custom and Practice for
Documentary Credits (UCP).
- Usually govern specific issues such as the transfer of risk from the seller to the
buyer, the obligation of each party related to the transport and insurance of
goods, etc.

D. Other legal Sources

 Model Contracts
 General Principles of Contract Law

Model Contracts

- Professional associations of many sectors have developed Model Contracts, such

as the Model Contract on the sale of grains (GAFTA Contracts), the sale of oil
(FOSFA Contracts), and the sale of coffee, cocoa or cotton.
- The Model Contracts would be applied as the source of law for an international
sales contract in the case where parties refer to the Model Contracts or one or
several clauses of the Model Contracts

General Principles of Contract Law

- They have been usually principles extracted from international business practices
recognized and applied by traders in their international contracts transactions,
and have considered popular.
- They have included the principles of free contract, cooperation, good faith and
precaution.
- Most of these principles have also inserted uniformly into national laws.
- Nowadays, the application of the general principles of law becomes an increasing
trend in international business, because these principles exist independently of
the national legal systems, thus may more easily gain the acceptance of parties
to a contract.
- Being created in the practices of international business, these principles contain
norms relevant to the practices of international business, which are always
changing.
- This trend may be seen in the fact these principles have been codified and issued
as Principles, such as the Principles of International Commercial Contracts
(PICC), compiled by the International Institute for Unification of Private Law
(UNIDROIT); or the Principles of European Contract Law (PECL), drafted and
issued by the Commission on European Contract Law (Lando Commission).
 - Regarding their legal effect, the Principles are for reference only and have no
legal binding force over parties or contracts. In other words, these Principles do
not be automatically or mandatorily applied. They may apply only in the case
where they have been chosen by the parties involved. These Principles have the
same legal effect as international mercantile customs and usages.

INCOTERMS

- Sales contracts involving transportation customarily contain abbreviated terms

describing the time and place where the buyer is to take delivery, the place of
payment, the price, the time when the risk of loss shifts from the seller to the
buyer, and the costs of freight and insurance. These terms are widely used in
international business and each has a different meaning, depending on the
governing law.
- The most widely used commercial terms are those published by the ICC known
as INCOTERMS.
- Their use in international sales is encouraged by trade councils, courts and
international lawyers.
- First published in 1936, the current version is INCOTERMS 2010.
- INCOTERMS 2010 eliminated four terms (DAF, DES, DEQ, and DDU) and added
two (DAP- Delivered at Place and DAT- Delivered at Terminal)
- INCOTERMS 2010 are classified into four groups, according to the parties’
obligations:
 ‘E’ Group
 ‘F” Group
 ‘C’ Group
 ‘D’ Group

E Group

- Requires the buyer to take delivery of goods at the buyer’s premises.

- EXW- Ex Works

F Group

- Requires the seller to deliver goods to a carrier

- FCA-Free Carrier; FAS- Free Alongside Ship; FOB- Free on Board

C Group

- Requires the seller to arrange and pay for carriage, but the seller does not
assume the risk for loss or damage once the goods are delivered to the carrier.
- CFR- Cost and Freight; CIF- Cost, Insurance and Freight; CPT- Carriage Paid to;
CIP- Carriage and Insurance Paid to
 D Group
- Requires the seller to bear all costs and risks of bringing the goods to the buyer’s
country
- DAT – Delivered at Terminal; DEP- Delivered at Place; DDP- Delivered Duty Paid

- Certain INCOTERMS apply only to particular forms of transport. FAS, FOB, CFR, CIF apply
only to sea and inland waterway transport. The other terms, EXW, FCA, CPT, CIP, DAT,
DAP, and DDP apply to any form of transport.

Formation of International Sales Contract

1. Offer
- Is a definite expression of the offeror’s will (intention to be bound), addressed to
one or more specific persons. A proposal that is not addressed to one or more
identified persons would be considered as an offer only if it this is clearly
indicated by the person making the offer.

2. Acceptance
- By accepting, the offeree indicates his assent to the offer. As soon as an
indication of assent reaches the offferor, the acceptance becomes effective and a
contract is formed. Actions of the acceptor, such as the dispatch of goods or
payment of the price, may indicate an implied acceptance. This may be when the
offer expressly allows for this possibility, when the implied acceptance by parties
has become customary or when it is in conformity with commercial usages. The
contract then becomes effective at the moment of the implied acceptance.
- On the other hand, silence or inactivity in itself does not amount to acceptance.
An acceptance normally has no effect if it does not reach the offeror within a
reasonable time or a fixed time. The acceptance may be withdrawn if the
withdrawal reaches the offeror at the same time as or before the acceptance
would have effect.
- If an acceptance is late, the offeror may accept it, but must notify the offeree of
this as soon as possible. Conversely, if an acceptance is late (typically for
problems of delivery, postal strike, etc.), but would have been timely under
normal circumstances, the offeror must immediately inform the offeree, if he/she
does not accept the acceptance as timely.

Main Obligations of the seller and the buyer

A. Obligations of the Seller

 1. The seller must deliver goods that conform and are free of third party rights.
 Delivery
- is the physical hand-over of goods to the buyer
- If nothing has been negotiated about the place of delivery, the seller
must in principle make goods available at the place of where he has
the place of business at the time of concluding the contract.
- The seller shall deliver on the date agreed in the contract or implied
by the contract. If nothing is fixed for the delivery date, then the
principle of reasonableness applies.
- The delivered goods must be conformable. The Conformity of the
goods means that the goods must be of the quality, quantity and
description required by the contract and are packaged in a manner
required by the contract or as a sale by sample.
- The seller must deliver the goods free from any right or claim of a
third party, unless the buyer agreed to take the goods subject to that
right or claim.
2. The seller must hand over any documents relating to the delivered goods.

B. Obligations of the buyer

1. The buyer must take delivery of the goods.
- Taking deliver is indelibly linked to the passing of the risk. The buyer
must do all that can reasonably be expected of him/her in order to
make delivery possible. Thus, he must, of necessary, inform the seller
of the exact place of delivery.
2. The buyer must pay for the goods
- Payment is the buyer’s main obligation.
- The obligation to pay covers four elements:
a. Determination of the price
b. place of payment
c. moment of payment
d. Method of payment
- These elements are usually agreed in the contract.
- However, the contract may remain obscure in respect of some of
these elements.