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03/07/2023

FOREIGN
TRADE
OPERATIONS

PHAN VŨ NGỌC LAN – MDE


International Business Administration Department
lanpvn@huflit.edu.vn

INTERNATIONAL
SALES
CONTRACT

CHAPTER 3
PART 1

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IN THIS CHAPTER
1. Concept of International sales contract

2. Requisites to the effect of an international sales


contract

3. Main contents of an international sales


contract

4. Major terms and conditions in international


sales contracts

5. Execution of International sales contracts

1. CONCEPT OF INTERNATIONAL SALES


CONTRACT
1.1. Definitions
1.2. Features

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WHAT IS A CONTRACT?

whenever we buy
goods and/or
services, we enter into
a contractual
relationship

we all enter literally


hundreds of thousands
of contracts over our
lives, many of which
are verbal

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SUBJECT MATTER
WHAT IS SOLD/PURCHASED

Subject
matter

Seller Buyer

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RIGHTS & OBLIGATIONS


Right = legal claim to have or get something
Ex. Every child has the right to play

Obligation = duty = something which you must


do because you have promised
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Ex. Every child has the obligation to study
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TRANSFER OF TITLE

Transfer of title
Seller Buyer

title (c) = the legal right to own something


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GOODS (PL)
THINGS THAT ARE PRODUCED TO BE SOLD

goods

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PURCHASE AND SALE


OF GOODS
Purchase and sale of goods mean commercial activities
whereby the seller is obliged to deliver goods, transfer
ownership of goods to the purchaser and receive
payment; the purchaser is obliged to pay to the seller
and receive goods and the ownership thereof as
agreed.
(Article 3.8)

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What is a contract? What is sale of goods?


“An agreement between
two or more parties over “A sale can be
a subject matter (what is defined as the
sold/purchased) in transfer of title in
which they are to have
rights and undertake a good from the
obligations to the other seller to the
party.” (Ward D., buyer.”
2011)

title (c) = the legal right to own something


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1.1. DEFINITIONS OF INTERNATIONAL SALES


CONTRACT
Seller’s place of business

Buyer’s place of business

different nations

place of business: the country where the business is conducted (Article 10,
CISG)
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1.1. DEFINITIONS OF INTERNATIONAL SALES


CONTRACT
United Nation
Convention on Contracts
for the International Sale
A contract for sale of goods is
considered as “international”
of Goods (CISG 1980)
when the parties concluding
– Article 1, Chapter 1, the agreement have their
Part I. “place of business” in
different nations.
This Convention applies
to contracts for sale of (the Vienna Convention
goods between parties 1980/CISG 1980)
whose places of business
are in different States.
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1.1. DEFINITIONS OF INTERNATIONAL


SALES CONTRACT
Vietnamese Commercial Code 2005 does not give out the definition
of International Sales Contract, but just define International
purchase and sale of goods.
International purchase and sale of goods shall be conducted
in form of export, import, temporary import for re-export, temporary
export for re-import and transfer through border-gates.
(Article 27.1)

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1.1. DEFINITIONS OF INTERNATIONAL


SALES CONTRACT
An agreement
between parties from different countries, whereby:
a party (exporter) is obliged to make delivery and
transfer ownership of a certain asset (goods)
to another party (importer) who is obliged to
receive the goods and make payment.

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1.2. FEATURES OF INTERNATIONAL SALES


CONTRACTS
General features of a common sales contract
Specific features of an international sales contract

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1.2.1 GENERAL FEATURES

Subject (the parties to the contract)


Content
Legal aspect

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1.2.1 GENERAL FEATURES

Subject:
Buyer and Seller, who can be physical person, legal
person and the Government.

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1.2.1 GENERAL FEATURES

Content:
Showing rights and responsibilities of parties concerning
title transfer and how the seller gets paid and buyer
gets delivery of the goods.

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1.2.1 GENERAL FEATURES


Legal aspect: (international) sales contract is bilateral,
“exchanging”, “promising”, freedom of contract, binding
character of contract
-Bilateral: available with at least 2 parties fulfilling at least 2
obligations
-“Exchanging”: each party benefits from a right, and has to
fulfill an obligation in return.
-“Promising”: Rights and Obligations would be effective after
the contract has been signed.

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1.2.2. SPECIFIC FEATURES

Subject (the parties to contract)


Object (subject matter)
Payment currency
Sources of governing law
Organizations for dispute settlement/resolution

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1.2.2. SPECIFIC FEATURES

Subject (the parties to contract):


-Concept 1: Parties with different nationalities
-Concept 2: Parties whose headquarters located in
territories of different nations or exclusive customs areas
Concept 2 is more appropriate and preferable.

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1.2.2. SPECIFIC FEATURES

Object (subject matter of contract): Commodities


moving across the nations’ borders.
Commodities moving inside a country?

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1.2.2. SPECIFIC FEATURES


Payment currency: Foreign currency to at least 1 party

$
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1.2.2. SPECIFIC FEATURES


Sources of governing law
-International Trade Treaties
-National Laws
-International Trade Practices/Trade usages
-Other sources (Unidroit Principles, Model contracts &
clauses)

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GOVENRING LAW

Examples:
General Agreement on Tariffs and Trade (GATT) (1947 - 1994)
General Agreement on Trade in Services (GATS) (1/1995)
Agreement between the United States of America and the Socialist
Republic of Vietnam on Trade Relations (BTA) (2000)

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GOVERNING LAW

Examples:
CISG – Convention on Contract for International Sale of
Goods, United Nations. (1980)
ULIS – Convention relating to a Uniform Law on the
International Sale of Goods (The Hague, July 1, 1964)
The Hague Rules of 1924 – The International Convention for
Reunification of Certain Rules Relating to Bill of Lading.
(Brussels, 25/8/1924).

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CISG – CONVENTION ON CONTRACT


FOR INTERNATIONAL SALE OF
GOODS
Another name: Vienna Convention of 1980 (United Nations)
As of 30 May 2023, 95 countries have adopted the
convention.
Consists of 101 articles, 4 parts with 5 chapters
Part 1: Sphere of application and general provisions
Part 2: Formation of the Contract
Part 3: Sale of Goods
Part 4: Final Provisions

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CISG – CONVENTION ON CONTRACT


FOR INTERNATIONAL SALE OF
GOODS

Applies to Contracts for International Sale of Goods.


When to apply?
-When the relevant States are the Contracting States
-When the rules of private international law refer to the
law of a Contracting States

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MAP OF CISG COUNTRIES IN


2023

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VIETNAM AND CISG


Does Vietnam join CISG?
 18/12/2015, Vietnam becomes 84th member of CISG
1/1/2017, CISG enters into force in Vietnam

Can Vietnamese exporters apply CISG into their contract


legal regulation?
--> Yes

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GOVERNING LAW
Common Law (Anglo-American law)
Civil Law (Romano-Germanic law)
Islamic Law
Indian Law
Chinese Law
African Law
Socialist Law

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1.2.2. SPECIFIC FEATURES

Organizations for dispute settlement/resolution


-Court
-Arbitrator

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EXAMPLE OF APPLICABLE LAW


Article 12: Dispute settlement and applicable law
12.1 Law used for the preparation, conclusion, interpretation
and dispute settlement of this agreement is the law of the
Vietnam.
12.2 The two parties shall be responsible for fully implementing
the contents of this Agreement. If there is any dispute caused
by this Agreement or relating to this Agreement, the two parties
will negotiate and settle amicably within 30 days. If two parties
can not settle through negotiation the matter will be brought to
the Singapore International Arbitration Centre (SIAC), which will
conduct the arbitration in accordance with current and effective
regulations of SIAC; the outcome of arbitration is the final
result, binding both parties.

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TYPES OF INTERNATIONAL SALES CONTRACTS


Based on contract form
• By conduct (implied contract)
• Orally (express contract)
• In writing (express contract)

Based on contract time

• Short-term/Isolated contract
• Long-term/Ongoing contract

Based on types of sale

• Export contract
• Import contract
• Temporary import for re-export
• Temporary export for re-import
• Transfer
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IN THIS CHAPTER
1. Concept of International sales contract
2. Requisites to the effect of an international sales contract
3. Main contents of contracts
4. Major terms and conditions in international sales contracts
5. Execution of International sales contracts

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2. REQUISITES TO THE EFFECT OF AN


INTERNATIONAL SALES CONTRACT
2.1. Principles (True agreement)
2.2. Legal status of subjects (contracting parties)
2.3. Legal object (Subject matter)
2.4. Legal content & essential terms
2.5. Valid form
2.6. Legal formation
2.7 Intention to be legally bound

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GROUNDS FOR AVOIDANCE OF THE CONTRACT:


IF ABSENCE OF ONE OF THE FOLLOWING CONDITIONS:

2.1. Principles
(True agreement)

2.7 Intention to 2.2. Legal status


be legally of subjects
bound (contracting
parties)

2.6. Legal 2.3. Legal


formation object (Subject
matter)

2.4. Legal
2.5. Valid form content &
essential terms

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2.1. PRINCIPLES (TRUE AGREEMENT)


Vietnam law: freedom of contract & voluntariness
(willingness)

Unidroit Principles 2016 requires that for a contract to


be valid, there must be an absence of the following:

• Mistake
• Threat/Duress
• Fraud
• Gross disparity
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2.1. PRINCIPLES (TRUE AGREEMENT)


One of the requisites for a valid transaction: The subjects enter
into civil transactions totally voluntarily;
(Article 117, Vietnam Civil Code 2015);
1. Parties have the rights of freedom to reach agreements not in
contravention of the provisions of law, fine traditions and customs
and social ethics in order to establish their rights and obligations in
commercial activities. The State respects and protects such rights.
2. In commercial activities, the parties shall act on their own free
will, and neither party is allowed to impose its own will on, to force,
intimidate or obstruct the other party.
(Article 11, Section 2, Vietnam Commercial Law, Chapter I,
2005).

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2.1. PRINCIPLES (TRUE AGREEMENT)


Article 117. Conditions for effective civil
transactions
1. A civil transaction shall be effective when it
satisfies all of the following conditions:
a) Participants in the transaction have legal
personality and/or legal capacity in conformity with
such transaction;
b) Participants in the transaction act entirely
voluntarily;
c) The purpose and contents of the transaction are not
contrary to the law and/or social ethics.
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2.2. LEGAL STATUS OF SUBJECTS


(CONTRACTING PARTIES)
Based on Vietnam Civil Code 2015, each party
must have legal capacity (natural person) or
legal personality (juridical person) to enter into
legally binding contracts.

Making a contract without legal capacity or


legal personality means that it cannot be
enforced against the counter party.

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LEGAL CAPACITY

when one party does not


have the ability to enter
into a legal contract. i.e.
is not of legal age, is
insane or is a convict

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2.2. LEGAL STATUS OF SUBJECTS (CONTRACTING


PARTIES)
Subject (contracting party) – who signs the contract –
Trader
Under Vietnamese legislation, an international sales
contract is a lawful agreement when the parties have
legal capacity, act capacity and authority to sign the
contract.
Foreign party is the trader whose legal status is
identified in accordance with his country's laws.
Vietnamese party is the trader allowed to perform
commerce – related activities directly with foreigners.

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2.2. LEGAL STATUS OF SUBJECTS


(CONTRACTING PARTIES)
Vietnamese traders without foreign investment are allowed to
import and export the goods irrespective of their registered
occupations and sectors.
Foreign - invested traders and branches of foreign companies
in Vietnam are permitted to import and export in compliance
with other relevant regulations and international treaties to
which Vietnam is a contracting party.
- For conditional imported and exported goods businesses must
earn permits.

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2.3. LEGAL OBJECT (SUBJECT MATTER)


The object (subject matter) of the contract is the items which can
be imported and exported in compliance with current
regulations.

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2.3. LEGAL OBJECT (SUBJECT MATTER)


The subject matter must be
legal.
Article 117.1.c of Vietnam
Civil Code requires
that “the purpose and
contents of the
transaction are not
contrary to the law
and/or social ethics.”
Ex. the import of weapons is
prohibited under
Vietnam law.

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2.3. LEGAL OBJECT (SUBJECT MATTER)

Based on the Decree 69/2018/NĐ-CP (replacing


Decree No. 187/2013/NĐ-CP), imported &
exported goods are classified into 3 groups:

• Goods banned/prohibited from export and import


• Goods imported and exported under conditions, for
which businesses must get permits from the Ministry
of Industry and Trade or competent relevant
Ministries
• Goods freely imported and exported

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2.3. LEGAL OBJECT (SUBJECT MATTER)

Firecracker Used consumption Used consumption


products products

Medicine not yet African elephant Weapons


having visa ivory
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2.4. LEGAL CONTENT & ESSENTIAL TERMS

The content For a contract to


(rights and be valid, the
obligations) of parties must also
the contract is agree on the
not contrary to essential terms
the laws. of the contract.

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2.4. LEGAL CONTENT & ESSENTIAL TERMS


US UCC CISG

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2.4. LEGAL CONTENT & ESSENTIAL TERMS


US Uniform Commercial
CISG
Code
A proposal is sufficiently “If the parties have
definite if it indicates agreed on the quantity,
the goods and expressly the sales agreement is
or implicitly fixes or enforceable even if the
makes provision for parties have not agreed
determining the quantity on price.” (Bade D.,
and the price. 2015)
(Article 14, CISG 1980)

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2.4. LEGAL CONTENT & ESSENTIAL TERMS


The contracting parties have the right to agree on the content
of contract.
A contract may have the following contents:
1. Object of the contract;
2. Quantity and quality;
3. Price and mode of payment;
4. Time limit, place and mode of performing the contract;
5. Rights and obligations of the parties;
6. Liability for breach of contract;
7. Dispute resolution.
(Article 398, Vietnamese Civil Law 2015)

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2.5. LEGAL FORM

Article 27.2 of Article 11 of CISG


Vietnam Commercial
need not be concluded in writing and is not subject to
Law 2005 any form requirements

must be in writing

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2.5. LEGAL FORM

A contract of sale need not be concluded in or


evidenced by writing and is not subject to any
other requirement as to form. It may be proved
by any means, including witnesses.
(Article 11, CISG 1980)
International purchase and sale of goods shall be
conducted on the basis of written contracts or
other forms of equal legal validity.
(Article 27, Vietnamese Commercial Law, 2005)

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IN WRITING

A written sales agreement can be contained:

• In a single document signed by both parties


• In various documents such as quotation,
purchase order, purchase order
acknowledgment, sales confirmation, proforma
invoice

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IMPORTANCE OF WRITTEN CONTRACTS

At the very least you


should have a written
contract whenever
you pay for goods,
especially when you
do not take
possession of them at
the time of payment.

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2.6. LEGAL FORMATION


According to CISG, there must be an offer and acceptance
which match.

offer acceptance contract

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2.6. LEGAL FORMATION

In international custom:
A contract = offer + acceptance of the offer
A contract = order + confirmation of the order

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2.6. LEGAL FORMATION


Offer and acceptance must match each other (i.e. must be the
same)

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2.6. LEGAL FORMATION


According to Article 19.1 of CISG, a reply to an offer contains
modifications is a rejection of the offer and constitutes a
counter-offer.

counter-
offer contract
offer
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2.6. LEGAL FORMATION

However, if the counteroffer does NOT materially alter


the terms of the offer, it constitutes an acceptance unless
objected and notified by the offeror.
Material terms include: price, payment, quantity, and
quality of goods; place and time of delivery; and
liability.

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TERMS (PLURAL N)
the conditions that people offer, or accept when they make an agreement
or a contract

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LEGAL FORMATION - EXAMPLE


A buyer from Australia sends
a purchase order (P/O) for
500 pairs of polished leather
from a manufacturer in
Vietnam at $100 per pair
and three year warranty.
The supplier in Vietnam
accepted the order but
modified the terms: “$120
per pair and two year
warranty.”

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IN THIS CHAPTER
1. Concept of International sales contract
2. Requisites to the effect of an international sales contract
3. Main contents of contracts
4. Major terms and conditions in international sales contracts
5. Execution of International sales contracts

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BECAUSE

Merchants unfamiliar with foreign laws and legal systems

INTERNATIONALBUSINESSTRANSACTIO
N S are complicated by the movement of goods and services
between foreign jurisdictions with different legal systems.

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What Your
Importance Contracts
of Written Know Your Anticipate Should
Contracts Jurisdiction Problems Include

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3. MAIN CONTENTS OF INTERNATIONAL


SALES CONTRACTS
The content of contracts for the international sale of
goods must be legal, which includes legally compulsory
articles and dependent on sources of law.
Vietnamese Law:
-6 compulsory articles (Commercial Law 1997 – Article
50),
-8 commonly used articles (Civil Code 2005 – Article
402),
-no requirement (Commercial Law 2005)

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3. MAIN CONTENTS OF INTERNATIONAL


SALES CONTRACTS
International Law:
-CISG, Article 14 (3 articles);
… A proposal is sufficiently definite if it indicates the goods and
expressly or implicitly fixes or makes provision for determining
the quantity and the price.
-CISG, Article 19 (6 articles)
Additional or different terms relating, among other things, to the
price, payment, quality and quantity of the goods, place and time
of delivery, extent of one party’s liability to the other or the
settlement of disputes are considered to alter the terms of the
offer materially.

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3. MAIN CONTENTS OF INTERNATIONAL


SALES CONTRACTS
Main components
-Preamble / Presentation
-Terms and Conditions
-Closing

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CONTRACT No …
Place, Date …
Between: Name: …
Address: …
Tel: … Fax: … Email: …
Represented by …
Hereinafter called as the SELLER
And: Name: …
Address: …
Tel: … Fax: … Email: …
Represented by …
Hereinafter called as the BUYER
The SELLER has agreed to sell and the BUYER has agreed to buy the commodity under the terms and conditions provided in this
contract as follows:
Art.1: Commodity
Art.2: Quality
Art.3: Quantity
Art.4: Price
Art.5: Shipment
Art.6: Payment
Art.7: Packing and marking
Art.8: Warranty
Art.9: Penalty
Art.10: Insurance
Art.11: Force majeure
Art.12: Claim:
Art.13: Arbitration:
Art.14: Other terms and conditions:
… (Loading terms/loading and discharging rate; Performance Bond, Insurance; Penalty)

For the BUYER For the SELLER

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3.1. PREAMBLE / PRESENTATION

1. Title
2. Contract No.
3. Place and Date of entry
4. Names and addresses of the parties
5. Definitions
6. Background information

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3.1. PREAMBLE / PRESENTATION


1.Type/name of contract
 Export – Import contract
 Sale/Purchase contract
 International sale contract
 …..
2. Contract number
Contract No. 105/2009
Contract No. PETECH/2009-15

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3.1. PREAMBLE / PRESENTATION


3. Time and place
-HCMC, 15th May, 20…
-15th March 20.. in Indonesia
* Purpose:
-Identification of applicable law
-Effectiveness of the contract

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3.1. PREAMBLE / PRESENTATION


3. Time and place:
At the beginning of the contract:
Hochiminh City, 15 May, 20...
The present contract was made and entered into force in
Hochiminh City on 15 May 20... by and between ...
At the end of the contract:
The present contract was made and entered into force in
Hochiminh City on 15 May 20... in quadruplicate of equal force,
two of which are kept by each party.

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3.1. PREAMBLE / PRESENTATION


4.Name and Address of Contract parties
Seller:
ABC Company
110 Lý Chính Thắng, Dist. 3, HCMC
Tel:
Fax:
Email:
Represented by Mr. Nguyen Văn A – Director
Buyer: …..
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3.1. PREAMBLE / PRESENTATION


5. Definitions
-Not compulsory/optional
-Can be a part in Terms and Conditions
Ex: “Foreign Currency” means a currency of a country in which the Plant is to
be installed.
“Plant” means machinery, apparatus, materials and all things to be provided
under the Contract for incorporation in the works.

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3.1. PREAMBLE / PRESENTATION


6. Background information (convention/decree to be based
on, voluntariness of the parties)
- Upon the result of the negotiation on……
- The Buyer agrees to buy and the Seller agrees to sell …
- The two parties agree to enter into this contract under the
following terms and conditions:…

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3.2. TERMS AND CONDITIONS

Core Terms and Conditions


Commodity: name, quantity, quality and packaging
Finance terms: price, payment and payment documents
Delivery terms: time and place of delivery, shipments
to be delivered, transshipment
Legal terms: applicable law, claim, force majeure,
arbitration

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3.2. TERMS AND CONDITIONS

Additional Terms and Conditions


Confidential information;
Maintenance;
Warranty…

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3.3. CLOSING
Number of the contract to be made and retained by each
party
Contract language: if the contract is written in many
languages, it should be expressly stipulated which version shall
prevail in the event of dispute.
Validity of the contract
Regulations with respect to the amendment and addition of
the contract
Authorized signatures of the contracting parties

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Q&A THANK YOU FOR YOUR LISTENING

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References
1. International Trade Centre. Model Contracts For Small Firms: Legal
Guidance For Doing International Business. 2010. p35-p58. Retrieved
from http://www.intracen.org/model-contracts-for-small-firms/
2. United Nations Convention on Contracts for the International Sale of
Goods 1980 (CISG)
3. James R. Pinnells. Exporting and the export contract. Prodec. 1994
4. Belay Seyoum. Export-import theory, practices, and procedures (second
edition). Taylor & Francis, 2009
5. Jim Sherlock & Jonathan Reuvid. The Handbook of International Trade -
A Guide to the Principles and Practice of Export (2nd edition). GMB
Publishing Ltd., 2008
6. Donna L. Bade. Export/import procedures and documentation (fifth
edition). Amacom, 2015
7. GS. TS Đoàn Thị Hồng Vân & ThS. Kim Ngọc Đạt. Quản trị xuất nhập
khẩu, NXB Kinh tế Tp. HCM, 2016

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