Introduction to International Sales and Services Contracts and Incoterms.

1. International Sales
and Services Contracts
International Sales and Services Contracts
http://www.lawandselfregulation.com

2. International Contracts’
Structure and Clauses
Contracts’ Structure and Clauses

3. International Business Contracts’ Structure (example)
• Heading (type of agreement e.g. contract for the sale of goods )
• Parties (This agreement is made between A and B (“Parties” )
• Whereas (background parties, rationale, willingness, type of obligations)
• Now therefore , the parties hereto agree as follows (details, clauses)
• Miscellaneous: e.g. :
• Governing law (choice of law, and exclusion, clause)
• Disputes: amicable settlement, if not , competent court or arbitration
• In Witness Whereof, the Parties have duly executed this Agreement in
twofold. By (name (authorised) representative and job title, place and
date, signature.
International Dimensions

4. Examples International Business Contracts’ Clauses (See 8.5.2)
• Exemption (exclude liability)
• Indemnity (other holds you ‘harmless’ )
• Warranty (what is guaranteed)
• Time-is-of-the- essence (date not met = breach)
• No-waiver (what I do now, or do not do, has no meaning for the future)
• Reservation of ownership (conditional to payment)
• Act of God (force majeure) and liquidated damages (to be paid if…. )
• Penalty (interest on late payment)
• Attorney fees (loser pays all costs winner)
• Entire Agreement (in writing covers everything)
• Change of Control (termination opportunity in case of a take over)
• Incoterm (ICC trade terms for risks and costs)
• Anti-corruption. (ICC options and CSR, see appendix Chapter 9)
• Exhibits, or Appendices for details
Clauses to define and shift risks

5. IPL/PIL/Conflicts of Law

6. Fundamentals IPL
• Parties in different jurisdictions: legal relationship is international
• Contracting parties in different jurisdictions: international contract
• International private legal relationships: international private law
(IPL) to resolve disputes, answer specific legal questions.
• IPL (civil law) = conflicts of law (common law)
• IPL = national law + regulations + conventions
• Party autonomy is a fundamental concept for IPL
• NL IPL = Book 10 DCC

7. Fundamentals Contracts
• Sales of goods contracts: define the terms of agreements aimed at
transferring ownership of things against money.
• Services contracts (of instruction): define the terms for the
performance of services against payment.

8. Fundamentals International Trade Risks
International Business & Legal Risks
International Business Risks
• Currency exchange risk (transaction, translation exposure)
• Country Risk (political, economic)
• Credit Risk (payment)
International Legal Risks
• General (compliance with foreign legal sytem)
• Specific Contracts-related (formation, contents, breach etc.)
• Legal System’s Risks
• Specific IPL-related

9. Fundamentals System’s Risks
Foreign Legal Systems’ Risks:
• Judicial Independence (rule of law)
• Efficiency (costs, time)
• Effectiveness (quality courts, decisions enforceable)
• Info Sources: Doing Business(Contract Enforcement), WJP, WGI, IPRI

10. IPL and Contracting Risks
IPL-regulated risks in international contracting:
• Applicable law?
• Competent court?
• Foreign Recognition court rulings/arbitral awards?
• Foreign Enforcement court rulings/arbitral awards?

11. EU & International IPL Regulation
Main IPL-tools to manage specific risks:
• Convention International Sale of Goods
CISG
• Applicable law
EU Rome 1 Regulation
• Jurisdiction/ Competent court
EEX Regulation (Brussels 1bis per 10-01-2015)
• Foreign Recognition/Enforcement court rulings
EEX Regulation
• Foreign Recognition/ Enforcement arbitral awards
New York Convention 1958
• Private regulation: ICC’s Incoterms (2010)

12. Legal Risks & Management

13. United Nations Convention on Contracts for the
International Sale of Goods (Vienna, 1980) (CISG)
SIGNATORIES

14. United Nations Convention on Contracts for the
International Sale of Goods (Vienna, 1980) (CISG)
Key- facts CISG
Application:
• Only applies to international b-t-b sale of goods (movables) contracts (not services)
• Applicable when both parties in a contracting state, (or parties’ choice) or
• As a result of referral to it by IPL rules (For EU see Rome 1)
• What is not regulated in CISG is subject to a national legal system (the ‘back-up’ system)
• Application can be excluded (art. 6 e.g. in standard conditions) for choice of law clause
Regulates:
• Formation (verbal offer + acceptance, signatories may require in writing )
• Seller’s obligations : delivery in conformity with contract, documents, transfer ownership
• Buyer’s obligations : payment price and taking delivery
• Non-performance remedies: performance, damages, avoid
• Avoidance requires fundamental breach (more than just breach)
Not regulated:
• Validity contract
• Effect contract on ownership [applicable legal system to be used]
• Transportation

15. United Nations Convention on Contracts for the
International Sale of Goods (Vienna, 1980) (CISG)

16. Applicable Law: Sale of Goods
Sale of Goods
Contract?
Yes
Both Parties in
CISG Country?
Yes CISG excluded? No CISG applies
No
Both Parties
in EU
Yes
Choice + CISG
excluded
Yes
Chosen national
law applies
No
Law Country
Seller
CISG Country Yes
No
National Law
Country Seller
Topics
not in CISG

17. Applicable Law: Services Contracts

18. Applicable Law: Services Contracts
Services Contract Parties in EU Choice of Law Yes Choice applies
Law habitual
residence provider
Yes
No
Choice of Law
Court/Arbitrators
will accept or not
No
Yes
No
Court/Arbitrators
will decide
[Trade in Services Agreement ]

19. Contractual
Dispute
Parties in EU Consumer
Yes
ConsumerCompany
Sue in own
country or
defendant’s
Sue in
consumer’s
country
No Choice
Chosen Court
Competent
Yes
Sales Contract Yes
Country
defendant or
place (to be)
delivered
Services
Contract
Yes
Country
defendant or
place (to be)
performed
No
Other
Contract
Yes See Sections
2, 3, 5, 6
Contracts :Competent Court/Jurisdiction in EU

20. Recognition and Enforcement

21. Recognition and Enforcement

22. IPL based Management Opportunities
• Make national law, or third country’s e.g. English law or law of NY, applicable.
• Consider to agree on explicitly excluding CISG
• When seller/provider in EU: risk of lack of choice of law is limited
• Use Incoterms correctly and aligned to other clauses such as LC-payment
• Include amicable solution and block court’s competence by arbitration
• Arbitral awards ‘globally’ recognized and enforceable.
• EU: recognition and direct enforcement of EU court’s rulings
• Business outside EU, consider arbitration clause
• See Chapter’s examples of miscellaneous clauses

23. Example form the General Conditions of Sale - Merck -Germany
1. Where the purchaser is an entrepreneur or a legal person under public law or a separate fund under
public law, the exclusive court for all disputes resulting directly or indirectly from the contract is that of
the registered office of Merck (Darmstadt).
All obligations under the contract are deemed to be performed at the registered office of Merck.
The place of performance for all claims resulting from the contract concluded between the purchaser
and Merck is the registered office of Merck’s headquarters in Darmstadt.
3. In any case, in particular also in international deliveries, German law (BGB) shall apply.
The law of the United Nations Convention on Contracts for the International Sale of Goods (CISG) of
11.04.1980 applies secondarily for foreign transactions.
The above rules take precedence over the rules according to the CISG.

30. In carrier
At disposal carriers

33. Overviews: Costs, Risk Transfer, Documents

38. INCOTERMS MANAGEMENT DIMENSIONS
• Containers : use FCA or CIP; not FOB or CIF
• Ownership transfer: in contract or by applicable law
• Align term to documents of payment conditions (L/C)
• Assess (in/direct) effects on pricing
• Transporters’ liability usually limited, extra insurance
• Consider service element for value and competing

40. Sources of Model
Contracts