International sale of goods: the importance of a well-drafted contract in export and import transactions
International sale of goods as the legal foundation of cross-border transactions
An international sale of goods forms the fundamental legal basis on which export and import transactions can be carried out with legal certainty. This type of contract is the legal instrument that enables the parties to anticipate the risks and contingencies inherent in any cross-border transaction.
In our professional practice as solicitors, we frequently encounter businesses that rely on verbal agreements for the success of their commercial transactions. This approach is particularly risky in the international context, where different legal systems, business practices, languages, cultures and commercial customs converge. In such circumstances, it is essential to execute a written international sale of goods contract that provides appropriate legal safeguards and is capable of preventing and resolving the issues that may arise during the conclusion and/or performance of the transaction.
Essential elements of an international sale of goods contract
An international sale of goods contract should clearly define matters such as the obligations of the seller and the buyer, the place and time of delivery, the method and date of payment, the allocation of risk, the quantity and quality of the goods, the applicable law and dispute resolution forum, as well as the consequences or contractual penalties arising from a breach of contract.
The preliminary stage: offer, acceptance and the pro forma invoice
Although the principles of freedom of form and freedom of contract apply to international sale of goods contracts, international commercial transactions generally begin with a preliminary stage consisting of an offer capable of being accepted or amended by means of a counter-offer.
This stage is usually reflected in a pro forma invoice, whose essential elements are:
- The parties (the importer and the exporter)
- The subject matter (the quantity and quality of the goods)
- The price.
The letter of intent
This preliminary stage may also be formalised by means of a letter of intent, whereby an individual or a legal entity expresses to another party its intention to enter into a contract and to be bound by its terms.
Obligations of the seller and the buyer
As regards the parties’ obligations, the seller is under a fundamental obligation to deliver the goods. However, the questions of where, when and how delivery is to take place are sufficiently extensive and complex to warrant separate discussion in future articles on this blog.
The buyer, for its part, has a number of rights and obligations, the principal one being the obligation to pay the purchase price. The available methods of payment, together with the place, manner and timing of payment and the legal consequences of non-payment, will likewise be examined in subsequent publications.
The importance of a clear contract in international trade
Given the complexity of international trade and the diversity of legal systems, commercial environments, economic circumstances and business practices involved, drafting a clear, comprehensive and concise contract that accurately reflects the parties’ intentions is the most effective way of ensuring that an international sale of goods transaction is completed successfully and with legal certainty.
Need legal advice? Visit our practice area relating to international sale of goods:
