Professional Documents
Culture Documents
K43B – A6
INQUIRY OR
REQUEST FOR TENDER
NO
Original Is there a
Offer Dies YES COUTEROFFER?
NO
Is there an
OFFER DIES NO ACCEPTANCE
?
CONTRACT YES
* Whereas Recital clause:
Entire Agreement:
This contract comstitutes the entire agreement and understanding between the parties. There
are no agreements, understandings, conditions, reservations or representations, oral or written,
that are not embodied in this contract or that have not been superseded by this contract.
The entire agreement clause means that all documents that predate the contract
become invalid when the contract is signed.
Whereas recital clause is the background to the contract that are often needed by a
court to interpret the contract - is provided in the form of a whereas recital.
It often contains the background information likes:
Background of collaboration
Expertises of the Parties
Previous agreements
Reference to a patent
Mutual interest
Goals of the parties
Economic support available
WHEREAS the Supplier has wide experience in the supply of electronic products for use in
tropical conditions;
WHEREAS both parties are intererted in introducing this new technology into the East
Asian region.
The parties here by agreed ......
d/.
+ The aims of the “Definition" clause:
Definition clause is the best way of clarifying what exactly the two sides have agreed.
It aims to:
- Make the parties have sound understanding of terms which are discussed during negotiation.
- Avoid the disputes and misunderstanding.
+ The purpose of the “Entire Agreement" clause:
The entire agreement clause means that all documents that predate the contract become
invalid when the contract is signed.
Its purpose is clarity. Both sides know where they stand whatever law applies to the contract.
+ The specimen clause of "Entire Agreement and Contract Documents" in common sale and
purchase contract:
All contract documents and clauses of this contract shall be read, if possible, so as to be
consistent. In the event of conflict, the order of precedence for the provision and documents
which constitute this agreement as follows:
- Specifications
- The Buyer's Special Condition of Purchase.
- Statement of work
...
-
II. Termination:
1. Definition: Termination occurs when either party ends a contract other than for a breach.
Any parts of a contract that already have been completed will be left alone, but obligations for
the future, not yet performed, will cease.
2. Types of terminations:
a. Termination for convenience
- Some contracts allow either party to terminate for any reason (or for no reason), under
certain conditions or facts. Terms of the contract govern such terminations and usually specify
that if either party suffers any hardship because of actions of the other, they will be reimbursed
with a satisfactory, documented adjustment. If the amount of the compensation cannot be
determined by mutual agreement, it may be necessary to submit to the courts for a final decision.
- An example of a termination for the convenience of the state is found in a phrase usually
inserted into contracts extending over more than one biennium period; "the state may terminate
the contract without penalty if subsequent legislatures (or the funding agency) fail to appropriate
the funds necessary to carry on the contract."
b. Termination by mutual consent
- Termination is not necessarily a cause for legal action. There may be a mutual agreement for
termination with a satisfactory adjustment worked out between contracting parties.
- Change orders which are common purchasing practice technically constitute a termination
of a part of, or the whole original contract, and a substitution of a new contractual agreement.
These generally are accepted by the buyers and sellers as a natural condition of doing business,
and carry no implication of a breach of faith or contract.
III. Rescission:
Definition: Rescission is an equitable remedy that wipes out the existing contract and restores
the parties to their situation prior to entering into the contract. In general terms, rescission refers
to the cancellation of a contract. If money has been paid by one party to another, that money is
returned as part of the rescission process.
Rescission can occur as a result of innocent or fraudulent representation, mutual mistake, and
lack of legal capacity, an impossibility to perform a contract not contemplated by the parties, or
duress and undue influence. For example, assume you agreed to sell and the buyer agreed to buy
two acres of land that you thought you owned. Later, it turns out that you did not have title to the
property. Rescission would be the proper remedy.
V. Frustration:
Frustration of a contract occurs only where after the conclusion of the contract a
fundamentally different situation has unexpectedly emerged. The emergence of some new set of
circumstances may make the performance of the contract more difficult, onerous or costly than
was envisaged by the parties when entering into the contract, for example, a sudden, even
abnormal, rise or fall in prices or the failure of a particular source of supply requiring the seller
to obtain supplies from another more expensive source. However, these events will not normally
operate to frustrate a contract.
4. SETTLEMENT OF DISPUTES
Ways of settlement of disputes parties often incorporate in to their contract are: negotiation,
conciliation (mediation), arbitration and litigation.
• CONCILIATION:
A conciliator assists each of the parties to independently develop a list of all of their
objectives (the outcomes which they desire to obtain from the conciliation). The conciliator then
has each of the parties separately prioritize their own list from most to least important. Thus the
conciliator can quickly build a string of concessions and help the parties create an atmosphere of
trust which the conciliator can continue to develop.
Conciliation differs from arbitration in that the conciliation process, in and of itself, has no
legal standing, and the conciliator usually has no authority to seek evidence or call witnesses,
usually writes no decision, and makes no award. If the conciliator is successful in negotiating an
understanding between the parties, said understanding is almost always committed to writing
(usually with the assistance of legal counsel) and signed by the parties, at which time it becomes
a legally binding contract and falls under contract law.
• ARBITRATION:
Arbitration is similar to a legal proceeding, whereby both sides make an argument of their
"case" and then the arbitrator decides the outcome both parties should follow (non-binding
arbitration) or must follow (binding arbitration).
Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the
parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral
tribunal"), by whose decision they agree to be bound. Arbitration is a form of binding dispute
resolution, equivalent to litigation in the courts, and entirely distinct from the various forms of
non-binding dispute resolution, such as negotiation, conciliation, or non-binding determinations
by experts.
• LITIGATION:
+ Arbitration:
The arbitration is regarded as speedier, more informal and cheaper than conventional judicial
procedure and provides a forum more convenient to the parties who can choose the time and
place for conducting arbitration and the procedure. Further, where the dispute concerns a
technical matter, the parties can select an arbitrator who possesses appropriate special
qualifications or skills in the trade".
However, it must be said that the result of any arbitration depends upon the personality of the
arbitrator. In some legal systems, arbitral awards have fewer enforcement remedies than
judgments.
To summarize, properly conducted arbitrations give acceptable results with speed and
thoroughness at relatively lesser costs. As there is no right of appeal in Courts, the decision
gains finality saving further time and costs.
+ Conciliation:
- Advantages: the parties control the resolution of their dispute–not a hearing officer/court
(and thereby ownerships in it); it presents an opportunity for a "win-win" result and to maintain a
cooperative partnership relationship; all negotiable issues can be discussed not just "legal"
matters; its confidential; and, it avoids a complaint which may be costly in terms of both money
and relationship. In short, the advantages of conciliation are time and expense-saving,
confidentiality, flexibility.
- Some of the disadvantages are: There is not guarantee of an end to the dispute (although a
process might be identified which would lead to a resolution); there is no way to force the other
party to conciliate; time and money may be lost if the effort of conciliation is unsuccessful.
Advantages Disadvantages
Signature date (Date of Execution): Signature date is the date when two parties agree to
do business with each other and are legally bound in a contract by their signature.
Date of coming into force (Effective Date): The date of coming into force is the date when
the preconditions for the sale have been met.
Cut-off date: Cut-off date is the date when the contract becomes null and void, if the con
tract has not come into force within a certain time.
Liquidated Penalties
Damages
To compensate the To terrorize the exporter into punctual delivery
Motive buyer fairly for any
delay in delivery
Everywhere but Not enforceable in English law or other common law
subject to increase or systems
Enforceabili decrease in some legal
ty systems
If the Seller fails to supply any of the Goods within the time period specified in the
contract, the Buyer shall notify the Seller that a breach of contract has occurred and shall deduct
from the Contract Price per week of delay, as liquidated damages, a sum equivalent to one half
percent of the delivered price of the delayed Goods until actual delivery up to a maximum
deduction of 10% of the delivered price of the delayed Goods.
6. INCOTERMS: The natures of E, F group
E group: Departure
- The seller’s obligation is at its minimum
- The goods available at the seller’s own premises
The buyer is responsible for export formalities (not mentioned)
F group: Main carriage unpaid
- The goods are delivered to a carrier named by the buyer
- The buyer must pay the main carriage
- The named place is domestic to the seller
- The seller is responsible for export formalities
Notice: FCA
8. TRANSPORTATION DOCUMENTS
Types of Transport documents
• Marine Bill of Lading (B/L)
• Seaway Bill
• Airway Bill
• Rail Consignment Note
• Road Consignment Note
• Combined Transport Bill of Lading
What makes a Bill of Lading different from other transport documents?
A Bill of Lading can be negotiable or non-negotiable.
- “To order of…” means negotiable
- “To order” (To order of Shipper): must be endorsed by shipper
Functions of a clean Bill of Lading
- The proof of carriage contract
- The goods in good condition
- The legal title to the goods
- A compulsory document for receipt of payment in Documentary Credit
Bad comments or not?
Unclean Clean
9. PAYMENT
Methods of international payment:
- Commonly used methods of int’l payment
- Remittance
- Open account
- Letter of Guarantee
- Counter-trade
- Collection
- Documentary credit
Telegraphic transfer remittance
Open account
- Close relationship
- The Seller sells the goods on credit (finances the Buyer)
Cash in advance
- The Buyer finances the Seller
- The Seller is in a strong position
Counter trade
- A close relationship
- Commonly used in transactions between two governments
Collection
Clean Collection
Documentary collection
- L/C is a document issued by a bank stating its commitment to pay the Seller / Exporter a stated
amount of money on behalf of the Buyer. In other way, L/C is a written undertaking on the part
of the import bank (the issuing bank) to accept or make payments, on instructions from the
importer (the applicant), to the exporter (the beneficiary) within a prescribed period and against
the surrender of documents under the L/C.
- L/C is a conditional payment commitment of the issuing bank. The issuing bank undertakes the
first obligation of payment and is liable to pay so long as the presented document is in
accordance with the conditions and requirements stipulated in the L/C.
- It is formally called documentary letter of credit because the banks handle transaction deal in
documents as apposed to the goods.
- L/C is opened based on the sales contract, while independent of it at the same time. What it
deals with are documents and has nothing to do with the actual goods.
(4)
Buyer
Seller
- Quantity and content of the presented documents are under required as the stated in L/C.
- There is conflict between the presented documents.
- The documents are under required of UCP-DC.
-The date of presentation documents and shipment is late with the stated in the L/C.
-The documents: commercial invoice and bill of lading are not set up exactly.
The Seller shall be liable for the defects which come to light during a period of three months
from the date of delivery of the goods. After the end of this period, the Buyer shall have no right
to raise claims of any kind against the seller for any defect in any goods of the Seller’s supply
Notification of defect
When we state that the buyer has to notify us when arising the damages. Commonly, the buyer
must notify the damages to the seller in a specific period after he check the consignment at the
port of discharge.
Notification of Defects
If within twenty – one days of receipt of any consignment from the seller, the Buyer does not
notify the Seller that the consignment is defective and submit samples as evidence of defect,
then the consignment shall be deemed to comply in all respects with the specifications and the
Buyer shall forego all right to reject the consignment.
Total liability
Total liability
The Seller’s total liability for all claims for damage made against him by the buyer under this
contract or otherwise shall not exceed 10% of the contract price.
Delivery
Define what counts as delay and what does not. Like total liability, we should set a ceiling figure,
commonly maximum is 10% of contract price.
We should define the excusable delay, especially force majeure. Force majeure is an effective
tool to protect the interest of the seller. The delay which belongs to the force majeure clause was
not the responsibility of the seller.
*****
1. The ceiling
Ceiling figure is the largest money that the exporter has to pay when he is late in delivery, or
in curing the defects or whatever.
For each week of delay, the Seller shall pay 1% of the contract price up to a
maximum of 10% of the contract price.
The ceiling figure may be a fixed percentage of the contract price or a cash ceiling
2. The roadblocks
The most familiar roadblocks in the export contract are set up to cover force majeure and
exporter’s liability for large damage incurred by the Buyer.
The risks of an export contract are from: - nature of products
- transportation
- market situation
- the economic or political situation
3. Iron curtain
This will restrict the effect of unknown provisions of an unknown legal system.
When the duties of the exporter involve unexpected cost or the right of the Buyer
against the exporter, the “Iron curtain” can clarify the situation and protect the seller.
Comprehensiveness
The rights and duties provided for this Contract are the only rights and the
duties existing between the parties, and all further rights and duties, be they
expressly contract or otherwise, are hereby expressly excluded.