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INCOTERMS 
& 
CONTRACTS FOR THE INTERNATIONAL 
SALE OF GOODS 
Lecturer: Dinh Khuong Duy 
Faculty of Economics and Internat...
CHAPTER 2 MATERIALS 
 Textbook (Vietnamese and English); 
 Incoterms 2010 (ICC); 
 UN Convention on Contracts for the 
...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
1. Concept 
1.1. Contracts for purchase and sale of goods 
1.1...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
1.1.2. Contracts for purchase and sale of goods 
Commercial La...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
Þ Contracts for purchase and sale of goods: 
Contracts for pur...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
1.2. Contracts for the international sale of goods 
Contracts ...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
(a) where the contract involves the sale of goods which are 
a...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
1.2.1.2. United Nation Convention on Contracts for the 
Intern...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
1.2.2. Vietnam Law 
1.2.2.1. Temporary Regulation on concludin...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
1.2.2.2. Commercial Law 1997 
Contracts for purchase and sale ...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
1.2.2.3. Commercial Law 2005 
Chapter II, Article 27.1.: 
Inte...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
- The movement of goods across national and/or 
customs border...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
Contracts for the international sale of goods 
is the agreemen...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2. Formation of the contract 
2.1. Offer 
2.1.1. Concept 
Art....
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.1.1. Concept 
Note: 
- Vietnam’s Law: No concept of “offer” ...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.1.2. Effect of an offer 
Art. 15, CISG: 
(1) An offer become...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.1.3. Withdraw and revoke an offer 
CISG, Article 15.2: 
An o...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
CISG, Article 16.2: 
However, an offer cannot be revoked: 
(a)...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.2. Acceptance 
Acceptance is a statement indicating the offe...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.2.1. Forms of acceptance 
- Acceptance can be made in writin...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
+ Reservation of material terms of the offer will 
constitute ...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
September 29, 2014 Dinh Khuong Duy 22 
Note: 
Counter-offer is...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.2.3. Effect of an acceptance 
CISG, Article 18.2: 
- An acce...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
- If the offeree indicate assent by performing an act, 
such a...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.2.4. Withdraw an acceptance 
CISG, Article 23: 
An acceptanc...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
2.3. Confirmation 
- After negotiating transaction terms and c...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
3. Features of contracts for the international 
sale of goods ...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
- Subjects: places of business in territories of 
different St...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
4. Legal validity of contracts for the international 
sale of ...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
+ Vietnamese Law: 
• Commercial Law 1997: 6 compulsory article...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
5. Content of Contracts for the international 
sale of goods: ...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
4.2. Terms and conditions 
4.2.1. Core terms and conditions: 
...
OVERVIEW ON CONTRACTS FOR 
THE INTERNATIONAL SALE OF GOODS 
6. Notes on drafting contracts 
- Content: detailed, consisten...
INTERNATIONAL COMMERCIAL TERMS 
1. Overview on International Commercial Terms 
1.1. Concept 
Incoterms are rules for inter...
INTERNATIONAL COMMERCIAL TERMS 
1.3. Content of Incoterms rules 
Seller’s obligations Buyer’s obligations 
A1: General obl...
INTERNATIONAL COMMERCIAL TERMS 
1.4. Notes on using Incoterms 
- Applied in purchase and sale of tangible goods; 
- Non-co...
INTERNATIONAL COMMERCIAL TERMS 
- Incoterms rules do not deal with: 
+ Transfer of property rights in the goods; 
+ Relief...
INTERNATIONAL COMMERCIAL TERMS 
2. Incoterms 2000 and Incoterms 2010 
2.1. Incoterms 2000 
- Number of terms: 13 
- Classi...
INTERNATIONAL COMMERCIAL TERMS 
GROUP TERM COMPLETE NAME 
GROUP E EXW Ex Works 
DEPARTURE 
GROUP F FCA Free Carrier 
MAIN ...
INTERNATIONAL COMMERCIAL TERMS 
INCREASED OBLIGATIONS OF THE SELLER 
E F C D 
DECREASED OBLIGATIONS OF THE BUYER 
Septembe...
INTERNATIONAL COMMERCIAL TERMS 
2.2. Incoterms ® 2010 
- Entered into force since Jan 1st, 2011 
- Number of rules: 11 
- ...
INTERNATIONAL COMMERCIAL TERMS 
 Changes in Incoterms ® 2010: 
- Rules for domestic and international trade terms; 
- “Sh...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 43
INTERNATIONAL COMMERCIAL TERMS 
3. Incoterms ® 2010 rules 
3.1. EXW – Ex Works 
EXW + “named place of delivery” + Incoterm...
INTERNATIONAL COMMERCIAL TERMS 
 Seller’s obligations: 
- Provide goods and commercial invoice in conformity 
with the co...
INTERNATIONAL COMMERCIAL TERMS 
 Note: 
- Applied for all modes of transport; 
- Appropriate for domestic transactions; 
...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 47
INTERNATIONAL COMMERCIAL TERMS 
3.2. FCA – Free Carrier 
FCA + “named place of delivery” + Incoterms 2010 
E.g.: FCA Noiba...
INTERNATIONAL COMMERCIAL TERMS 
 Seller’s obligations: 
- Clear the goods for export (where applicable) and 
assumes any ...
INTERNATIONAL COMMERCIAL TERMS 
 Buyer’s obligations: 
- Clear the goods for import (where applicable); 
- Contract at hi...
INTERNATIONAL COMMERCIAL TERMS 
 Note: 
- Used irrespective of mode of transport; 
- Especially suitable for container tr...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 52
INTERNATIONAL COMMERCIAL TERMS 
3.3. FAS – Free Alongside Ship 
FAS + “named port of delivery” + Incoterms 2010 
E.g.: FAS...
INTERNATIONAL COMMERCIAL TERMS 
 Seller’s obligations: 
- Carry out all customs formalities necessary for the export 
of ...
INTERNATIONAL COMMERCIAL TERMS 
 Buyer’s obligations: 
- Contract for carriage of the goods from the named 
port of shipm...
INTERNATIONAL COMMERCIAL TERMS 
 Note: 
- Sea and inland waterway transport; 
- FAS seller may charter a vessel; 
- Three...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 57
INTERNATIONAL COMMERCIAL TERMS 
3.4. FOB – Free On Board 
FOB + “named port of delivery” + Incoterms 2010 
E.g.: FOB Haiph...
INTERNATIONAL COMMERCIAL TERMS 
 Difference between FOB and FAS: 
- Delivery point; 
- Allocation of cost and risks relat...
INTERNATIONAL COMMERCIAL TERMS 
 “Ship’s rail” is removed from FOB, Incoterms 2010: 
- For centuries considered as an ima...
INTERNATIONAL COMMERCIAL TERMS 
 Note: 
- Diversity of FOB terms; 
- Three important times of delivery notice; 
- Usage o...
INTERNATIONAL COMMERCIAL TERMS 
 FOB 2000 vs. FOB 2010: 
- Ship’s rail is replaced by “on board” 
- Charter a vessel at t...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 63
INTERNATIONAL COMMERCIAL TERMS 
3.5. CPT (Carriage paid to…) 
- CPT + “named place of destination” + ICT 2010; 
E.g.: CPT ...
INTERNATIONAL COMMERCIAL TERMS 
 Seller’s obligations: 
- Clear the goods for export; 
- Contract for carriage of the goo...
INTERNATIONAL COMMERCIAL TERMS 
 Buyer’s obligations: 
- Take delivery, bear all risks of loss of or damage to 
the goods...
INTERNATIONAL COMMERCIAL TERMS 
 Note: 
- All modes of transport; 
- Single delivery notice; 
- Costs arising before and ...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 68
INTERNATIONAL COMMERCIAL TERMS 
3.6. CIP (Carriage and Insurance paid to…) 
- CIP + “named place of destination” + ICT 201...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 70
INTERNATIONAL COMMERCIAL TERMS 
3.7. CFR (Cost and Freight) 
- CFR + “named port of destination” + ICT 2010; 
E.g.: CFR Da...
INTERNATIONAL COMMERCIAL TERMS 
 Note: 
- Unloading port custom; 
- Single delivery notice; 
- Cost arising before and af...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 73
INTERNATIONAL COMMERCIAL TERMS 
3.8. CIF (Cost, Insurance and Freight) 
- CIF + “named port of destination” + ICT 2010; 
E...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 75
INTERNATIONAL COMMERCIAL TERMS 
 Contract for carriage: 
- Made on usual terms; 
- Usual route; 
- Customary manner; 
- V...
INTERNATIONAL COMMERCIAL TERMS 
 Contract for insurance: 
- Minimum cover as provided by the Institute Cargo 
Clauses (Cl...
INTERNATIONAL COMMERCIAL TERMS 
3.9. DAT (Delivered At Terminal) 
- DAT + “named terminal at port/place of destination” 
+...
INTERNATIONAL COMMERCIAL TERMS 
 Seller’s obligations: 
- Clear the goods for export; 
- Contract for the carriage of goo...
INTERNATIONAL COMMERCIAL TERMS 
 Buyer’s obligations: 
- Clear the goods for import. What if the buyer fails 
to perform ...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 81
INTERNATIONAL COMMERCIAL TERMS 
3.10. DAP (Delivered At Place) 
- DAP + “named place of destination” + Incoterms 2010; 
E....
INTERNATIONAL COMMERCIAL TERMS 
 DAT vs. DAP: 
- Place of delivery; 
- Unloading obligation; 
- DAP suitable for on-carri...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 84
INTERNATIONAL COMMERCIAL TERMS 
3.11. DDP (Delivered Duty Paid) 
- DDP + “named place of destination” + ICT 2010; 
E.g.: D...
INTERNATIONAL COMMERCIAL TERMS 
 Note: 
- Buyer’s minimum obligations; 
- DDP not recommended if the seller cannot obtain...
INTERNATIONAL COMMERCIAL TERMS 
September 29, 2014 Dinh Khuong Duy 87
INTERNATIONAL COMMERCIAL TERMS 
 Select the appropriate Incoterms rules: 
- Mode of transport; 
- Place of delivery; 
- A...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
1. Name of goods 
- One of the most important terms in a contract...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
b. Name of goods + place of origin 
c. Name of goods + manufactur...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
2. Quality 
- One of the most important terms; 
- Clearly define ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
e. As per technical documents 
f. As per specifications of goods ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
2.2. Content of a quality article 
- Define quality of goods (use...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
E.g.: Quality of Vietnam export rice 
- Broken: 35% max; 
- Moist...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
3. Quantity/Volume 
3.1. Measurement Unit 
- Countable: 
+ Single...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
3.2. Methods to denote quantity 
- Precise stipulation 
- Flexibl...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
3.3. Methods to determine quantity 
3.3.1. Gross weight 
Gross we...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
3.3.3. Theoretical weight 
M (mass) = D (density) x V (volume) 
3...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
3.4. Content of a quantity article: 
- Specify content: precise/f...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
E.g.: Quantity of Vietnam export coffee: 
- 5000 MT +/- 5% at the...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
4. Tare (Packaging) 
4.1. Basis for term of tare 
- Type of goods...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
4.3. Methods to determine tare’s weight 
- Actual tare 
- Average...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
4.5. Methods to denote tare quality 
- Unspecific stipulation: Pa...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
E.g.: Term of tare for export corn: 
Þ The Seller is obliged to p...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
5. Delivery 
5.1. Time of delivery 
- Specific time of delivery: ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
5.2. Place of delivery 
- Basis to determine place of delivery: 
...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
5.3. Notice of delivery 
- Number, time and content of notice; 
-...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
E.g.: Delivery as per FOB, Incoterms 2010 
- Time of delivery: No...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
6. Price 
6.1. Price currency 
- Parties’ agreement: Export/Impor...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
6.2. Methods to define price 
- Fixed price: Price shall not be r...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
E.g.: The basic price of this Contract is set at USD 
5000 per it...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
P1 = P0 (f + m x M1/M0 + w x W1/W0) 
P0, P1 : Basic and reviewed ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
6.3. Content of a fixed price article 
- Price currency 
- Unit p...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
E.g.: Vietnam export rice price 
- Price currency: USD 
- Unit pr...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
7. Payment 
7.1. Payment currency 
- Payment currency is price cu...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
7.3. Methods of payment 
7.3.1. Telegraphic transfer 
PAYING BANK...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
7.3.2. Collection 
- A payment method in which the exporter shall...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
CLEAN COLLECTION PROCEDURE 
REMITTING 
BANK 
(6) 
(2) (7) (4) 
SE...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
(1): Seller delivers goods and documents to Buyer; 
(2);(3): Sell...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
DOCUMENTARY COLLECTION PROCEDURE 
REMITTING 
BANK 
(6) 
(2) (7) (...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
(1): Seller delivers goods to Buyer; 
(2);(3): Seller handles doc...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
7.3.3. Letter of Credit 
- This is a payment method in which, und...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
LETTER OF CREDIT PROCEDURE 
(4) 
ADVISING BANK ISSUING BANK 
(5) ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
(1): Buyer’s applies to open L/C; 
(2): Sellers delivers goods to...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
7.4. Content of a payment by L/C article 
- Type of L/C 
- Benefi...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
E.g.: L/C payment article 
Payment shall be made in USD by irrevo...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
• At sight draft drawn on the issuing bank 
• Full set (3/3) of o...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
8. Warranty 
8.1. Concept 
An assurance by the seller that attest...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
8.3. Warranty period 
- Dependent on character of product and par...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
8.4. Parties’ rights and obligations 
- Seller: 
+ Repair the pro...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
9. Claim 
Claim is a request in which one party asks the other 
p...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
9.2. Claim period 
- Character of goods; 
- Type of claim 
- Rela...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
9.4. Parties’ rights and obligations 
- Claim party: 
+ Preserve ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
10. Exemption (Force Majeure) 
- This clause essentially frees bo...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
10.2. Rights and obligations of parties under force 
majeure situ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
10.3. Stipulation of an exemption clause 
- Define and set criter...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
Sample 1: 
Neither party shall be liable for any delay or failure...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
Sample 2: 
Neither party shall be held liable for any delay or fa...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
11. Arbitration 
- Arbitration is a legal technique for the resol...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
11.2. Advantages of dispute settlement by arbitration 
- With hig...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
11.2. Advantages of dispute settlement by arbitration 
- With hig...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
11.3. Arbitration procedure 
- Self-conciliation; 
- Arbitration ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
11.2. Advantages of dispute settlement by arbitration 
- VIAC: Al...
 Any dispute, controversy or claim not amicably settled through 
procedures set forth above shall be settled by SIAC acco...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
12. Governing law 
- A governing law or choice of law clause spec...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
13. Penalty 
- Penalty clause is a term of contract that seek to ...
DRAFTING CONTRACTS FOR THE 
INTERNATIONAL SALE OF GOODS 
14. Other terms and conditions 
- Terms of transportation; 
- Ter...
THE END 
THANK YOU 
& 
GOOD LUCK! 
September 29, 2014 Dinh Khuong Duy 148
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Chapter 2 and 3 contracts and incoterms

  1. 1. INCOTERMS & CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS Lecturer: Dinh Khuong Duy Faculty of Economics and International Business khuongduy@ftu.edu.vn September 29, 2014 Dinh Khuong Duy 1
  2. 2. CHAPTER 2 MATERIALS  Textbook (Vietnamese and English);  Incoterms 2010 (ICC);  UN Convention on Contracts for the International Sale of Goods;  UNIDROIT Principles of International Commercial Contracts;  Civil Code (2005);  Commercial Law (2005);  Sample Contracts; September 29, 2014 Dinh Khuong Duy 2
  3. 3. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1. Concept 1.1. Contracts for purchase and sale of goods 1.1.1. Contracts for purchase and sale of property Civil Code 2005, Article 428: A contract for purchase and sale of property is an agreement between the parties whereby the seller has the obligation to hand over the property to the purchaser and receive payment, while the purchaser has the obligation to accept the property and make payment to the seller. September 29, 2014 Dinh Khuong Duy 3
  4. 4. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1.1.2. Contracts for purchase and sale of goods Commercial Law 2005, Article 3: 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 the seller, receive the goods and the ownership thereof as agreed. Þ Goods include:  All types of movables, including those to be formed in the future;  Things attached to land. September 29, 2014 Dinh Khuong Duy 4
  5. 5. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS Þ Contracts for purchase and sale of goods: Contracts for purchase and sale of goods is an agreement between the parties, according to which the seller has the obligation to deliver goods, transfer the ownership of the goods to the buyer and receive payment, the buyer has the obligation to arrange payment, receive the goods and the ownership thereof. Note: Commercial Law 2005 does not provide any concept for contracts for either domestic or international purchase and sale of goods. September 29, 2014 Dinh Khuong Duy 5
  6. 6. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1.2. Contracts for the international sale of goods Contracts for the international sale of goods = Contracts for purchase & sale of goods + international elements. 1.2.1. International Law 1.2.1.1. Convention relating to a Uniform Law on the International Sale of Goods (Hague Convention 1964) Article 1, Chapter I, Annex (Uniform Law on the International Sale of Goods): The present Law shall apply to contracts of sale of goods entered into by parties whose places of business are in the territories of different States, in each of the following cases: September 29, 2014 Dinh Khuong Duy 6
  7. 7. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (a) where the contract involves the sale of goods which are at the time of the conclusion of the contract in the course of carriage or will be carried from the territory of one State to the territory of another; (b) where the acts constituting the offer and the acceptance have been effected in the territories of different States; (c) where delivery of the goods is to be made in the territory of a State other than that within whose territory the acts constituting the offer and the acceptance are effected. Þ The application of the present Law shall not depend on the nationality of the parties. September 29, 2014 Dinh Khuong Duy 7
  8. 8. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1.2.1.2. United Nation Convention on Contracts for the International Sales of Goods (CISG 1980) CISG, Article 1, Chapter I, Part I : This Convention applies to contracts of sale of goods between parties whose places of business are in different States; Neither the nationality of the parties nor the civil or commercial character of the parties or of the contract is to be taken into consideration in determining the application of this Convention. Þ CISG does not define exactly the concept of contracts for the international sale of goods. September 29, 2014 Dinh Khuong Duy 8
  9. 9. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1.2.2. Vietnam Law 1.2.2.1. Temporary Regulation on concluding foreign trade contracts (Regulation 4794/TN-XNK, issued by the Ministry of Trade on 31/7/1991) - Foreign trade contracts are those with international elements; - International elements: Traders are of different nationalities; Goods are transported across borders; Payment currency is foreign to at least one party. Þ Nationality is one of the most important elements. September 29, 2014 Dinh Khuong Duy 9
  10. 10. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1.2.2.2. Commercial Law 1997 Contracts for purchase and sale of goods with foreign traders are contracts entered into between a Vietnamese trader and a foreign trader Þ What is the crucial element? Þ A contract entered into between a Chinese trader and a Vietnamese one, both based in Vietnam? Þ A contract entered between two Vietnamese traders based in different countries? September 29, 2014 Dinh Khuong Duy 10
  11. 11. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1.2.2.3. Commercial Law 2005 Chapter II, Article 27.1.: 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. Þ Legal definitions of forms of international sale of goods: Article 28-30, Commercial Law 2005; Þ Commercial Law 2005 and nationality? September 29, 2014 Dinh Khuong Duy 11
  12. 12. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS - The movement of goods across national and/or customs borders. - Contracts without the movement of goods across national and/or customs borders will not be considered “contracts for the international sale of goods”; - Commercial Law 2005 may not govern all cases. Traders may refer to Civil Code 2005 (civil relations involving foreign elements) or other Laws; Þ Real estate sold to foreigners? Þ What is on-spot import/export? Þ Your opinion on the listing of forms of international purchase and sale of goods? September 29, 2014 Dinh Khuong Duy 12
  13. 13. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS Contracts for the international sale of goods is the agreement between parties whose places of business are in different countries or separate customs areas, according to which the Seller (the Exporter) is obliged to deliver goods, and transfer the ownership thereof to the Buyer (the Importer); the Buyer is obliged to receive of the goods and the ownership thereof, and arrange payment. September 29, 2014 Dinh Khuong Duy 13
  14. 14. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2. Formation of the contract 2.1. Offer 2.1.1. Concept Art. 14, CISG: (1) A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. 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. (2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal. September 29, 2014 Dinh Khuong Duy 14
  15. 15. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.1.1. Concept Note: - Vietnam’s Law: No concept of “offer” Art. 390, Civil Code 2005: A proposal for concluding a contract itself is binding the offeror - Order? - Free offer vs. firm offer: + Not legal terms either in CISG or Vietnam Civil Code + Offer in CISG: similar to “firm offer” + Invitation to make offer in CISG: similar to “free offer” => Example of “invitation to make offer”/“free offer”? September 29, 2014 Dinh Khuong Duy 15
  16. 16. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.1.2. Effect of an offer Art. 15, CISG: (1) An offer becomes effective when it reaches the offeree. (2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. September 29, 2014 Dinh Khuong Duy 16 E.g.: An offer sent from VN on Jan 1st and reached Japan on Jan 2nd; the offeree dispatched a rejection letter on Jan 5th and it reached Vietnam on Jan 6th.
  17. 17. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.1.3. Withdraw and revoke an offer CISG, Article 15.2: An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. CISG, Article 16.1: Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance Þ All offers can be withdrawn but they can only be revoked under certain conditions. September 29, 2014 Dinh Khuong Duy 17
  18. 18. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS CISG, Article 16.2: However, an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer. 2.1.4. Termination of an offer Art. 17, CISG: An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror. September 29, 2014 Dinh Khuong Duy 18
  19. 19. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.2. Acceptance Acceptance is a statement indicating the offeree’s agreement to the content of the offer and his intention to conclude a contract; Vietnam Civil Code, Article 396: The acceptance of an offer to enter into a contract is the offeree’s reply to the offeror on the acceptance of the whole content of the offer. CISG, Article 18.1: A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. September 29, 2014 Dinh Khuong Duy 19
  20. 20. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.2.1. Forms of acceptance - Acceptance can be made in writing, orally or by specific acts; - Silence and inactivity does not in itself amount to acceptance (CISG, Article 18.1); 2.2.2. Types of acceptance - Unconditional acceptance; - Acceptance with reservation; Þ Vietnam’s law: full (unconditional) acceptance September 29, 2014 Dinh Khuong Duy 20
  21. 21. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS + Reservation of material terms of the offer will constitute a counter-offer; + Reservation of non-material terms of the offer will constitute an acceptance unless without delay the offeror rejects such discrepancies. CISG, Article 19.3: 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. September 29, 2014 Dinh Khuong Duy 21
  22. 22. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS September 29, 2014 Dinh Khuong Duy 22 Note: Counter-offer is the bargaining transaction terms and conditions. Counter-offer terminates the original offer and constitutes a new one; Vietnam Civil Code, Article 395: When the offeree accepts to enter into a contract but states the conditions therefor or modifies the offer, he/she/it shall be considered to make a new offer. Þ The offeree made a counter-offer and then changed his mind, accepted the offer? Þ Vietnam Civil Code and CISG?
  23. 23. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.2.3. Effect of an acceptance CISG, Article 18.2: - An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror […]within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. - An oral offer must be accepted immediately unless the circumstances indicate otherwise. September 29, 2014 Dinh Khuong Duy 23
  24. 24. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS - If the offeree indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph; - A late acceptance is nevertheless effective if the offeror without delay orally informs the offeree or dispatches a notice to that effect. (CISG, Art. 21) - A contract is concluded when an acceptance of an offer becomes effective. (CISG, Art. 23) September 29, 2014 Dinh Khuong Duy 24
  25. 25. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.2.4. Withdraw an acceptance CISG, Article 23: An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective. September 29, 2014 Dinh Khuong Duy 25 Note: Any indication of intention “reaches” the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence.
  26. 26. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.3. Confirmation - After negotiating transaction terms and conditions, the seller/buyer should write down a confirmation note and send to each other; Þ Sale confirmation/Purchase confirmation. - Two ways of making confirmation: + Confirmation is made into 2 copies; one party signs, keeps one and sends to the other; + Confirmation is made into 1 copy with 2 signatures; Þ Without a confirmation, is there a contract? September 29, 2014 Dinh Khuong Duy 26
  27. 27. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 3. Features of contracts for the international sale of goods 3.1. General features: - Principles: freedom and voluntariness (Art. 389 Civil Code 2005); - Subjects: traders; - Content: rights and obligations; - Bilateral, consensual contracts, with consideration. 3.2. Particular features: September 29, 2014 Dinh Khuong Duy 27
  28. 28. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS - Subjects: places of business in territories of different States/separate customs areas; - Objectives: move across State/customs border; - Payment: foreign currency to at least 1 Party; - Various sources of governing law: + National law + International will + Commercial practice + Legal precedent September 29, 2014 Dinh Khuong Duy 28
  29. 29. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 4. Legal validity of contracts for the international sale of goods - Subjects: legal; - Objects: legal; - Form: legal + CISG: no need to be in writing (Art. 11, Art. 12); + Vietnam Law: in writing or equal forms; - Content: Legal (includes legally compulsory articles): Dependent on sources of law: September 29, 2014 Dinh Khuong Duy 29
  30. 30. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS + Vietnamese Law: • Commercial Law 1997: 6 compulsory articles; • Civil Code 2005: 8 commonly used articles; • Commercial Law 2005: no requirement; + International Law: • CISG, Article 14: 3 articles; • CISG, Article 19: 6 articles; • English Law: commodity, quality, price; • French Law: commodity, price. September 29, 2014 Dinh Khuong Duy 30
  31. 31. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 5. Content of Contracts for the international sale of goods: 5.1. Preamble: - Contract date and number; - Date and place of signing contract; - Parties’ information; - Legal basis of the contract (if necessary); - Definition of terms (if necessary). September 29, 2014 Dinh Khuong Duy 31
  32. 32. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 4.2. Terms and conditions 4.2.1. Core terms and conditions: - Object-related terms; - Finance-related terms; - Transport-related terms; - Legal-related terms; 4.2.2. Additional terms and conditions: - Confidential information; maintenance; warranty… - Validity of contract; number of copies; languages… September 29, 2014 Dinh Khuong Duy 32
  33. 33. OVERVIEW ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 6. Notes on drafting contracts - Content: detailed, consistent; - Word choice: clear, precise; - Language: official, popular Þ Seller and buyer are free to choose language; Þ VN customs regulations: Vietnamese or English; or certified translation from other languages; Þ Copies of different languages? September 29, 2014 Dinh Khuong Duy 33
  34. 34. INTERNATIONAL COMMERCIAL TERMS 1. Overview on International Commercial Terms 1.1. Concept Incoterms are rules for interpretation of trade terms which clarify the distribution of functions, costs and risks relating to the transfer of goods from the seller to the buyer. 1.2. Evolution of Incoterms rules 1936, 1953, 1967, 1976, 1980, 1990, 2000, 2010 Þ To reflect trade practice more precisely September 29, 2014 Dinh Khuong Duy 34
  35. 35. INTERNATIONAL COMMERCIAL TERMS 1.3. Content of Incoterms rules Seller’s obligations Buyer’s obligations A1: General obligations B1: General obligations B2: Formalities B2: Formalities A3: Carriage & insurance B3: Carriage & insurance A4: Delivery B4: Taking delivery …………………………… …………………………… A10: Assistance B10: Assistance September 29, 2014 Dinh Khuong Duy 35
  36. 36. INTERNATIONAL COMMERCIAL TERMS 1.4. Notes on using Incoterms - Applied in purchase and sale of tangible goods; - Non-compulsory trade practice; - Need to be referred to in sale contracts; - Revision (year of publication) must be stated; - Selection of appropriate terms dependent upon certain circumstances; - Modification of terms is not encouraged; September 29, 2014 Dinh Khuong Duy 36
  37. 37. INTERNATIONAL COMMERCIAL TERMS - Incoterms rules do not deal with: + Transfer of property rights in the goods; + Relief from obligations and exemption from liability in case of unexpected events; + Consequences if various breaches of contracts; - Transport terms (FI, FO, FIO, FIOST,…) should not be incorporated; Þ Incoterms rules only interpret of terms of delivery, not other terms of the sales contract. September 29, 2014 Dinh Khuong Duy 37
  38. 38. INTERNATIONAL COMMERCIAL TERMS 2. Incoterms 2000 and Incoterms 2010 2.1. Incoterms 2000 - Number of terms: 13 - Classification based on first letters of terms: + Group E: 1 + Group F: 3 + Group C: 4 + Group D: 5 - Classification based on modes of transport: + Maritime transport: FAS, FOB, CFR, CIF, DES, DEQ; + Any mode or modes of transport: EXW, FCA, CPT, CIP, DAF, DDU, DDP. September 29, 2014 Dinh Khuong Duy 38
  39. 39. INTERNATIONAL COMMERCIAL TERMS GROUP TERM COMPLETE NAME GROUP E EXW Ex Works DEPARTURE GROUP F FCA Free Carrier MAIN CARRIAGE FAS Free Alongside Ship UNPAID FOB Free on Board GROUP C CFR Cost and Freight MAIN CARRIAGE CIF Cost, Insurance and Freight PAID CPT Carriage paid to… CIP Carriage and Insurance paid to… GROUP D DAF Delivered at frontier ARRIVAL DES Delivered ex ship DEQ Delivered ex Quay DDU Delivered Duty unpaid DDP Delivered Duty paid September 29, 2014 Dinh Khuong Duy 39
  40. 40. INTERNATIONAL COMMERCIAL TERMS INCREASED OBLIGATIONS OF THE SELLER E F C D DECREASED OBLIGATIONS OF THE BUYER September 29, 2014 Dinh Khuong Duy 40
  41. 41. INTERNATIONAL COMMERCIAL TERMS 2.2. Incoterms ® 2010 - Entered into force since Jan 1st, 2011 - Number of rules: 11 - Classification based on modes of transport + Any mode or modes of transport: EXW, FCA, CPT, CIP, DAT, DAP, DDP; + Maritime transport: FAS, FOB, CFR, CIF. Þ Rules for maritime transport are placed behind? September 29, 2014 Dinh Khuong Duy 41
  42. 42. INTERNATIONAL COMMERCIAL TERMS  Changes in Incoterms ® 2010: - Rules for domestic and international trade terms; - “Ship’s rail” replaced by “on board”; - Number of rules, new rules and classification; - Security-related obligations; - String sales - Contract of carriage in FOB, FAS - Transport documents in CIP, CPT - EDI September 29, 2014 Dinh Khuong Duy 42
  43. 43. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 43
  44. 44. INTERNATIONAL COMMERCIAL TERMS 3. Incoterms ® 2010 rules 3.1. EXW – Ex Works EXW + “named place of delivery” + Incoterms 2010 E.g.: EXW 10, Downing Street, London, United Kingdom, Incoterms 2010 - The seller fulfils his obligation by placing the goods unloaded at the disposal of the buyer at the seller’s premises or another named place. - Seller’s minimum obligations. September 29, 2014 Dinh Khuong Duy 44
  45. 45. INTERNATIONAL COMMERCIAL TERMS  Seller’s obligations: - Provide goods and commercial invoice in conformity with the contract of sale; - Free from loading, carriage and insurance, customs formalities;  Buyer’s obligations: - Take delivery since the goods are placed at his disposal at the seller’s premises; - Carry out necessary import & export formalities (where applicable). September 29, 2014 Dinh Khuong Duy 45
  46. 46. INTERNATIONAL COMMERCIAL TERMS  Note: - Applied for all modes of transport; - Appropriate for domestic transactions; - Buyer should use EXW rule if: + He is able to perform export customs formalities; + He has representatives in the seller’s country; - The seller is often not considered exporter; - Premature transfer of risk; - Seller and buyer are free from carriage obligation. September 29, 2014 Dinh Khuong Duy 46
  47. 47. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 47
  48. 48. INTERNATIONAL COMMERCIAL TERMS 3.2. FCA – Free Carrier FCA + “named place of delivery” + Incoterms 2010 E.g.: FCA Noibai Airport, Vietnam, Incoterms 2010 - The seller fulfils his obligations by delivering the goods to the carrier or another person nominated by the buyer at the seller promises or another named place; - Who is the carrier? What if the seller nominates more than one carrier? - When delivery is considered to be completed? September 29, 2014 Dinh Khuong Duy 48
  49. 49. INTERNATIONAL COMMERCIAL TERMS  Seller’s obligations: - Clear the goods for export (where applicable) and assumes any risk or expense involved; - Deliver the goods to the carrier/another person nominated by the buyer; - Provides the buyer with usual proof of delivery; - No obligation to the buyer to make a contract of carriage/insurance; - Contract for carriage at buyer’s risk and expense? September 29, 2014 Dinh Khuong Duy 49
  50. 50. INTERNATIONAL COMMERCIAL TERMS  Buyer’s obligations: - Clear the goods for import (where applicable); - Contract at his own expense for the carriage of goods from the named place of delivery; - Notify the seller of the carrier/selected time/mode of transport/point of taking delivery; - Bear all risks of loss of or damage to the goods from the time of delivery; Þ The buyer fail to perform his obligations in B7? September 29, 2014 Dinh Khuong Duy 50
  51. 51. INTERNATIONAL COMMERCIAL TERMS  Note: - Used irrespective of mode of transport; - Especially suitable for container transport; - FCA should be used instead of FAS or FOB if the seller does not intend to deliver the goods alongside the ship or on board; - Usual proof of delivery; - Deliver to the first carrier; - Premature transfer of risk; September 29, 2014 Dinh Khuong Duy 51
  52. 52. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 52
  53. 53. INTERNATIONAL COMMERCIAL TERMS 3.3. FAS – Free Alongside Ship FAS + “named port of delivery” + Incoterms 2010 E.g.: FAS Haiphong Port, Vietnam, Incoterms 2010 - The seller fulfils his obligations by placing the goods alongside the ship nominated by the buyer at the named port of shipment or by procuring the goods so delivered. - Who has to contract for carriage? - How to place the goods alongside ship? September 29, 2014 Dinh Khuong Duy 53
  54. 54. INTERNATIONAL COMMERCIAL TERMS  Seller’s obligations: - Carry out all customs formalities necessary for the export of the goods (where applicable); - Deliver the goods by: + Placing them alongside the named vessel in the port of shipment either on the quay or in lighters; + Procuring them delivered alongside ship by the 1st seller; - Provides the buyer with usual proof of delivery; - Carriage and insurance: no obligation; - Contract for carriage at the buyer’s risk and expense? September 29, 2014 Dinh Khuong Duy 54
  55. 55. INTERNATIONAL COMMERCIAL TERMS  Buyer’s obligations: - Contract for carriage of the goods from the named port of shipment at his own expense; - Take delivery and bear all risks from the time of delivery; - Give the seller sufficient notice of vessel name, loading point and delivery time (if necessary); - Carry out import formalities (where applicable); Þ If the buyer fails to fulfill his obligations in B7? September 29, 2014 Dinh Khuong Duy 55
  56. 56. INTERNATIONAL COMMERCIAL TERMS  Note: - Sea and inland waterway transport; - FAS seller may charter a vessel; - Three important shipment notices; - Distribution of lighterage cost; - Not suitable for containerized goods (should use FCA instead of FAS); - Usual proof of delivery; - Premature transfer of risk; September 29, 2014 Dinh Khuong Duy 56
  57. 57. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 57
  58. 58. INTERNATIONAL COMMERCIAL TERMS 3.4. FOB – Free On Board FOB + “named port of delivery” + Incoterms 2010 E.g.: FOB Haiphong Port, Vietnam, Incoterms 2010 - The seller delivers the goods by placing the goods on board the vessel nominated by the buyer at the named port of shipment or procured the goods already so delivered; - Obligations of the seller and the buyer are similar to those in FAS; - FOB Incoterms 2000 vs. Incoterms 2010? September 29, 2014 Dinh Khuong Duy 58
  59. 59. INTERNATIONAL COMMERCIAL TERMS  Difference between FOB and FAS: - Delivery point; - Allocation of cost and risks related to delivery: + Risks of loading: Seller; + Costs of loading: liner charter/voyage charter; custom of the loading port; - Proof of delivery: received for shipment/on board; - Popularity of FOB. September 29, 2014 Dinh Khuong Duy 59
  60. 60. INTERNATIONAL COMMERCIAL TERMS  “Ship’s rail” is removed from FOB, Incoterms 2010: - For centuries considered as an imaginary border between the seller and the buyer ; - Impracticable division of parties’ functions, costs and risks while the goods are swinging across ship’s rail; - Development of transport infrastructure; - Compatibility with proof of delivery; - Requirements of a more clearly defined FOB price. Þ Replaced by “on board” to reflect trade practice. September 29, 2014 Dinh Khuong Duy 60
  61. 61. INTERNATIONAL COMMERCIAL TERMS  Note: - Diversity of FOB terms; - Three important times of delivery notice; - Usage of transport terms: FI, FO, FIO…; - Parties’ extension of liabilities by adding “FOB stowed”, “FOB trimmed”…; - Custom of loading port; - Proof of delivery; - Not suitable for containerized goods (FOB => FCA); - Premature transfer of risks. September 29, 2014 Dinh Khuong Duy 61
  62. 62. INTERNATIONAL COMMERCIAL TERMS  FOB 2000 vs. FOB 2010: - Ship’s rail is replaced by “on board” - Charter a vessel at the buyer’s risk and expense;  FCA should be used instead of FAS and FOB when goods are not carried by sea: - FCA is designed for all modes of transport; - Seller delivers the goods earlier, at lower risks & costs; - Seller may receive payment earlier; - Avoid bank’s rejection of delivery documents. September 29, 2014 Dinh Khuong Duy 62
  63. 63. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 63
  64. 64. INTERNATIONAL COMMERCIAL TERMS 3.5. CPT (Carriage paid to…) - CPT + “named place of destination” + ICT 2010; E.g.: CPT Noibai Airport, Vietnam, Incoterms 2010; - The seller fulfils his obligations by delivering the goods to the carrier or another person nominated by the seller at a place agreed between the parties; - Noibai Airport is the point of delivery? - Who is responsible for carriage of goods? - Two critical points? September 29, 2014 Dinh Khuong Duy 64
  65. 65. INTERNATIONAL COMMERCIAL TERMS  Seller’s obligations: - Clear the goods for export; - Contract for carriage of the goods from the agreed point of delivery; - Pay the freight and unloading charges at the place of destination for the seller’ account under the carriage contract; - Provide the buyer with usual transport documents; - Deliver the goods the carrier nominated by the seller and notice the buyer of such delivery. September 29, 2014 Dinh Khuong Duy 65
  66. 66. INTERNATIONAL COMMERCIAL TERMS  Buyer’s obligations: - Take delivery, bear all risks of loss of or damage to the goods from the time they have been delivered; - Notice the seller of time of dispatching/place of destination and bear all arising costs and risks if fail to perform B7; - Pay all additional charges relating to the goods in transit or unloading costs, unless such costs are for the seller’s account under contract of carriage; - Clear the goods for import; September 29, 2014 Dinh Khuong Duy 66
  67. 67. INTERNATIONAL COMMERCIAL TERMS  Note: - All modes of transport; - Single delivery notice; - Costs arising before and after point of delivery; - If the two parties do not intend to deliver the goods on board, CPT should be used instead of CFR; - The buyer should contract for insurance; - Contract for carriage and transport documents; - Premature transfer of risks. September 29, 2014 Dinh Khuong Duy 67
  68. 68. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 68
  69. 69. INTERNATIONAL COMMERCIAL TERMS 3.6. CIP (Carriage and Insurance paid to…) - CIP + “named place of destination” + ICT 2010; E.g.: CIP Chua Ve CFS, Haiphong port, Vietnam, Incoterms 2010; - The seller fulfils his obligations by delivering the insured goods to the carrier or another person nominated by the seller at a place agreed between the parties; - Parties’ obligations are similar to those in CPT; - Contract for insurance vs. bear risks? September 29, 2014 Dinh Khuong Duy 69
  70. 70. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 70
  71. 71. INTERNATIONAL COMMERCIAL TERMS 3.7. CFR (Cost and Freight) - CFR + “named port of destination” + ICT 2010; E.g.: CFR Danang Port, Vietnam, Incoterms 2010; - The seller fulfils his obligations by placing the goods on board the vessel nominated by the seller at the agreed port of loading or by procuring the goods already so delivered; - Parties’ main obligations are similar to CPT; - CFR and CPT; - CFR Incoterms 2000 and CFR Incoterms 2010; September 29, 2014 Dinh Khuong Duy 71
  72. 72. INTERNATIONAL COMMERCIAL TERMS  Note: - Unloading port custom; - Single delivery notice; - Cost arising before and after delivery; - CPT used instead of CFR; - The buyer should contract for insurance; - CNF, C&F, C + F: not recommended; - Premature transfer of risks; - Ocean Bill of lading. September 29, 2014 Dinh Khuong Duy 72
  73. 73. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 73
  74. 74. INTERNATIONAL COMMERCIAL TERMS 3.8. CIF (Cost, Insurance and Freight) - CIF + “named port of destination” + ICT 2010; E.g.: CIF Haiphong port, Vietnam, Incoterms 2010; - The seller fulfils his obligations by placing the insured goods on board the vessel nominated by the seller at the agreed port of loading or by procuring the goods already so delivered; - Parties’ main obligations are similar to those in CIP; - CIF vs. CFR; CIF vs. CIP; - CIF Incoterms 2000 vs. CIF Incoterms 2010; - Contract for insurance vs. bear risks? September 29, 2014 Dinh Khuong Duy 74
  75. 75. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 75
  76. 76. INTERNATIONAL COMMERCIAL TERMS  Contract for carriage: - Made on usual terms; - Usual route; - Customary manner; - Vessel of type normally used for the transport of the type of goods sold.  Transport documents: - Dated within the period agreed for shipment; - Enable the to claim the goods from the carrier; - Enable the buyer to sell the goods in transit. September 29, 2014 Dinh Khuong Duy 76
  77. 77. INTERNATIONAL COMMERCIAL TERMS  Contract for insurance: - Minimum cover as provided by the Institute Cargo Clauses (Clause C); - Insurance company of good repute; - Insurance value: 110% CIP or CIF; - Insurance cover the goods from the point of delivery to at least the named place/port of destination; - Provide the buyer with negotiable insurance policy or other evidence; - Additional insurance at buyer’s request, risk, and expense. September 29, 2014 Dinh Khuong Duy 77
  78. 78. INTERNATIONAL COMMERCIAL TERMS 3.9. DAT (Delivered At Terminal) - DAT + “named terminal at port/place of destination” + Incoterms 2010; E.g.: DAT Chua Ve CFS, Haiphong Port, Vietnam, Incoterms 2010; - The seller fulfils his obligations by placing the goods unloaded from the arriving means of transport at the disposal of the buyer at a named terminal at the named port/place of destination; - What is a “terminal”? September 29, 2014 Dinh Khuong Duy 78
  79. 79. INTERNATIONAL COMMERCIAL TERMS  Seller’s obligations: - Clear the goods for export; - Contract for the carriage of goods to the named terminal at place/port of destination; - Unload the goods from arriving means of transport; - Notice the buyer to enable the buyer to take necessary measures to take delivery of goods; - Provide the buyer with documents enabling the buyer to take delivery of goods. Þ Contract for insurance? September 29, 2014 Dinh Khuong Duy 79
  80. 80. INTERNATIONAL COMMERCIAL TERMS  Buyer’s obligations: - Clear the goods for import. What if the buyer fails to perform customs clearance? - Take delivery, bear all risks of loss of or damage to the goods from the point of delivery. What if the goods continue to be transported after the point of delivery? - Notice of time/place of delivery (if entitled). What if the buyer fail to perform his obligations in B7? September 29, 2014 Dinh Khuong Duy 80
  81. 81. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 81
  82. 82. INTERNATIONAL COMMERCIAL TERMS 3.10. DAP (Delivered At Place) - DAP + “named place of destination” + Incoterms 2010; E.g.: DAP 91 Chua Lang Street, Hanoi, Vietnam, Incoterms 2010; - The seller fulfils his obligations by placing the goods on the arriving means of transport ready for unloading at the disposal of the buyer at the named place of destination; - Parties’ main obligations are similar to DAT; - Place vs. terminal. September 29, 2014 Dinh Khuong Duy 82
  83. 83. INTERNATIONAL COMMERCIAL TERMS  DAT vs. DAP: - Place of delivery; - Unloading obligation; - DAP suitable for on-carriage of goods after a named place of delivery; - DAP suitable for a delivery within the import country’s territory; - DAP: DES, DAF, DDU (Incoterms 2010); - DAT: DEQ (Incoterms 2010); Þ CIP price vs. DAP/DAT price? September 29, 2014 Dinh Khuong Duy 83
  84. 84. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 84
  85. 85. INTERNATIONAL COMMERCIAL TERMS 3.11. DDP (Delivered Duty Paid) - DDP + “named place of destination” + ICT 2010; E.g.: DDP 91 Chua Lang street, Hanoi, Vietnam, Incoterms 2010; - The seller fulfils his obligations by placing the goods cleared for import on the arriving means of transport ready for unloading at the buyer’s disposal at the named place of destination. - Parties’ main obligations are similar to DAP; - Unloading costs and risks? September 29, 2014 Dinh Khuong Duy 85
  86. 86. INTERNATIONAL COMMERCIAL TERMS  Note: - Buyer’s minimum obligations; - DDP not recommended if the seller cannot obtain import clearance ; - Buyer’s responsible for unloading (different from EXW – seller not responsible for loading); - Seller has to pay VAT or other import taxes unless expressly agreed otherwise in the sales contract; - Seller pay the costs of PSI mandated by the authority of the country export/import. - Customs valuation for goods sold under DDP price. September 29, 2014 Dinh Khuong Duy 86
  87. 87. INTERNATIONAL COMMERCIAL TERMS September 29, 2014 Dinh Khuong Duy 87
  88. 88. INTERNATIONAL COMMERCIAL TERMS  Select the appropriate Incoterms rules: - Mode of transport; - Place of delivery; - Allocation of costs and risks; - Competition rate; - Ability to contract for carriage and insurance and perform customs clearance; - Political and social situation; - Import/export country’s regulations. September 29, 2014 Dinh Khuong Duy 88
  89. 89. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 1. Name of goods - One of the most important terms in a contract - Clearly define the goods to be exchanged - Also known as: Commodity / Object of Contract - Methods to draft: a. Name of goods + trade name / scientific name E.g.: . Arabica/Robusta coffee . Pitaya (Hylocereus undatus): red dragon fruit . Pitaya (Hylocereus megalanthus): yellow dragon fruit September 29, 2014 Dinh Khuong Duy 89
  90. 90. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS b. Name of goods + place of origin c. Name of goods + manufacture’s name d. Name of goods + brand name e. Name of goods + major specifications E.g.: 14-inch TV; 29-seat bus f. Name of goods + main use E.g.: Cotton for medical use g. Name of goods + HS code E.g: Automobile air conditioner 8415.20 Þ To specify the goods, a-g are often combined. September 29, 2014 Dinh Khuong Duy 90
  91. 91. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2. Quality - One of the most important terms; - Clearly define main characteristics of the goods; - Require wide knowledge on machandizing 2.1. Methods to denote quality: a. As per sample b. As it is (tale quale) c. As inspected and approved d. As per standard or category September 29, 2014 Dinh Khuong Duy 91
  92. 92. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS e. As per technical documents f. As per specifications of goods g. As per volumetric weight of goods h. As per general customary criteria E.g.: FAQ, GAQ, GMQ i. As per content of essential components j. As per ratio of products form k. As per brand of goods l. As per description of goods September 29, 2014 Dinh Khuong Duy 92
  93. 93. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 2.2. Content of a quality article - Define quality of goods (use one of / a combination of the above methods) - Inspection of quality + Place of inspection: place of manufacture; place of delivery; place of destination; place of use + Inspector: Manufacturer; representatives of parties; intermediary organization + Inspection cost + Certificate of quality: preliminary/final September 29, 2014 Dinh Khuong Duy 93
  94. 94. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS E.g.: Quality of Vietnam export rice - Broken: 35% max; - Moisture: 14,5% max; - Foreign matter: 0,4% max; - Crop: Summer Autumn crop 2011 - Quality of goods is to be determined at the loading port by Vinacontrol Haiphong. Inspection charges shall be borne by the Seller. - C/Q issued by Vinacontrol shall be final and binding both parties. September 29, 2014 Dinh Khuong Duy 94
  95. 95. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 3. Quantity/Volume 3.1. Measurement Unit - Countable: + Single: 100 bales; 200 parcels; 1000 barrels + Collective: 5 dozens of eggs; 7 tens of oranges - Uncountable: + Metric system: mm, cm, dm, m, g, kg, MT + English system: inch, foot, yard, mile, pound, LT, SL Note: 1MT = 1000 kg; 1 LT = 2240 pounds (1016 kg); 1 ST = 2000 pounds (907 kg). September 29, 2014 Dinh Khuong Duy 95
  96. 96. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 3.2. Methods to denote quantity - Precise stipulation - Flexible stipulation E.g.: Fridges: 1000 pieces Rice:1000 MT +/- 5% Þ Tolerance: about ...; approximately…; +/-…%; more or less…%; from…to…MT. + Range of tolerance + Tolerance at seller’s/ buyer’s/ vessel charterer’s option + Tolerance’s price - Exemption rate (franchise): With/without deduction September 29, 2014 Dinh Khuong Duy 96
  97. 97. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 3.3. Methods to determine quantity 3.3.1. Gross weight Gross weight = net weight + tare 3.3.2. Net weight - Net net weight: without any package; - Semi net weight: with direct package; - Gross weight for net: negligible package cost; - Legal net weight: Gross weight – tare determined by Customs officers. September 29, 2014 Dinh Khuong Duy 97
  98. 98. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 3.3.3. Theoretical weight M (mass) = D (density) x V (volume) 3.3.4. Commercial weight 100 + W0 G0 = G1 x 100 + W1 - Goods whose mass is sensitive to moisture change. - G0 : Commercial weight W0: Standard moisture - G1 : Actual weight W1: Actual moisture September 29, 2014 Dinh Khuong Duy 98
  99. 99. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 3.4. Content of a quantity article: - Specify content: precise/flexible (if it is flexible weight, there must be stipulation on tolerance). - Select the method to determine quantity (gross/net/ theoretical/commercial weight) - Inspection of goods: + Place of inspection: shipped weight/landed weight; + Inspector: Parties’ representatives or intermediary; + Inspection cost distribution + Certificate of quantity: preliminary or final September 29, 2014 Dinh Khuong Duy 99
  100. 100. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS E.g.: Quantity of Vietnam export coffee: - 5000 MT +/- 5% at the seller option; - Tolerance’s price is determined at time of delivery; - The mentioned above quantity is understood as gross weight for net; - Quantity is to be determined at the unloading port by Continent Inspection Service Co.; Ltd. - Inspection cost shall be at Buyer’s account. - C/Q issued at the unloading port shall be final and binding both parties. September 29, 2014 Dinh Khuong Duy 100
  101. 101. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 4. Tare (Packaging) 4.1. Basis for term of tare - Type of goods; - Means of transport; - Route of transport; - Legal regulations. 4.2. Provision of tare - Tare provided by the seller without return - Tare provided by the seller with return - Tare provided by the buyer September 29, 2014 Dinh Khuong Duy 101
  102. 102. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 4.3. Methods to determine tare’s weight - Actual tare - Average tare - Customary tare - Estimated tare - Invoiced tare 4.4. Methods to determine tare’s charge - Packing charge included - Separate packing charge to be paid by the buyer - Gross weight for net September 29, 2014 Dinh Khuong Duy 102
  103. 103. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 4.5. Methods to denote tare quality - Unspecific stipulation: Packaging must be suitable for a certain means of transport; + By sea: Durable, endure pressure; + By railway: Durable, suitable size; + By air: Light, fireproof, suitable size. - Specific stipulation: + Material: Polyethylene, cardboard, fiber; + Type: Case, Bale, Drum, Roll, Gunny bag; + Size: 50-kg gunny bag; 50 x 50 x 50 cm drum; + Number of layers… September 29, 2014 Dinh Khuong Duy 103
  104. 104. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS E.g.: Term of tare for export corn: Þ The Seller is obliged to packing corns in 50-kg bags suitable for sea transport with transshipment. Þ Corn to be packed in single jute new bags of 50 kg net each, about 50.3 kg gross each, sewn at mouth with jute twine thread suitable for rough handling and sea transportation. The Seller shall supply 0.2% of new jute bags free of charge out of quantity of bags shipped. Þ In which article of an international sales contract shall packaging charge be often stipulated? September 29, 2014 Dinh Khuong Duy 104
  105. 105. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 5. Delivery 5.1. Time of delivery - Specific time of delivery: + On a specific date: On May 5th, 2012. + No later than/Before a specific date: Before May 5th; + In a specific period of time: Within 2 months since the contract date/ From 1st to 20th of August; - Unspecific time of delivery: + Prompt delivery: Immediate delivery; + Conditional delivery: Subject to the opening of L/C. September 29, 2014 Dinh Khuong Duy 105
  106. 106. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 5.2. Place of delivery - Basis to determine place of delivery: + International commercial terms + Means of transport; + Intentions of parties in the contract - Content of place of delivery + Place/port of loading + Place/port of discharge - Methods to denote: + Single port/Multiple ports + Specified port(s)/Optional port(s). September 29, 2014 Dinh Khuong Duy 106
  107. 107. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 5.3. Notice of delivery - Number, time and content of notice; - Parties’ liability subject to failure of notice; - Customary: single notice (C, D); triple notices (F); 5.4. Shipment advice - Transshipment (not) allowed; - Partial shipment (not) allowed; - Stale B/L (not) accepted; - Loading/Unloading advice (if necessary). September 29, 2014 Dinh Khuong Duy 107
  108. 108. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS E.g.: Delivery as per FOB, Incoterms 2010 - Time of delivery: No later than June 30th 2012; - Port of delivery: Haiphong, Vietnam - Port of discharge: Main ports in Europe - Seller should without delay inform Buyer by fax when the goods are ready for delivery. Within 48 hours prior to vessel’s arrival, Buyer should inform Seller of details of ship number, ETA and loading conditions. Within 24 hours after the loading of goods on board, Seller should inform Buyer of B/L date and number. - Partial shipment and stale B/L are not accepted. September 29, 2014 Dinh Khuong Duy 108
  109. 109. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 6. Price 6.1. Price currency - Parties’ agreement: Export/Import countries’ currency or a third country’s currency; - Customary: E.g.: USD (Crude oil ); GBP (Metals) - Often determined by the stronger party; - Often of stable value; - May differ from payment currency. September 29, 2014 Dinh Khuong Duy 109
  110. 110. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 6.2. Methods to define price - Fixed price: Price shall not be reconsidered despite unexpected fluctuation; - Future price: The contract does not indicate a certain price but mentions time, method to define it in the future. E.g.: Price shall be determined at the time of delivery by mutual agreement between both parties. - Flexible price: Basic price + method to review basic price in case of unexpected rise/fall. September 29, 2014 Dinh Khuong Duy 110
  111. 111. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS E.g.: The basic price of this Contract is set at USD 5000 per item. However, by the time of delivery, if there is a downward or upward change of more than 10% the above price shall be mutually redefined. If the fluctuation is of less than 10%, the basic price shall still be taken as final. - Sliding price: + Often applied in sales of factories, ships, and other technical products with long manufacture duration; + The formula must be quoted in the sales contract if sliding price method is adopted. September 29, 2014 Dinh Khuong Duy 111
  112. 112. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS P1 = P0 (f + m x M1/M0 + w x W1/W0) P0, P1 : Basic and reviewed total price M0, M1 : Basic and reviewed material cost W0, W1 : Basic and reviewed labor cost f, m, w : Proportion of fixed cost, material, and wage E.g.: Basic price: USD 70000, f = 50%, m = 35%. At the time of reviewing, M and W increase by 10%? September 29, 2014 Dinh Khuong Duy 112
  113. 113. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 6.3. Content of a fixed price article - Price currency - Unit price: Include the Incoterms rule applied and charges (not) included; - Total price: in number and in words; - Discount (if any) 6.4. Discount - Trade discount: consumer/retailer/wholesaler; - Cash discount: early payment; - Quantity discount: (Accumulating) value of contract. September 29, 2014 Dinh Khuong Duy 113
  114. 114. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS E.g.: Vietnam export rice price - Price currency: USD - Unit price: USD 410/MT as per FOB Haiphong Port, SRV, Incoterms 2010, packing charges included. - Loading, unloading costs and any other surcharges arising from the contract, whether at the loading or unloading charges shall be at Buyer’s account. - Total price: Approximately USD 410,000. (In words : About four hundred and ten thousand United States Dollars only). September 29, 2014 Dinh Khuong Duy 114
  115. 115. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 7. Payment 7.1. Payment currency - Payment currency is price currency - Payment currency is not price currency 7.2. Classification - Payment before delivery/ at the same time as delivery / after delivery (or combined); - One-off payment / payment by installments; - Payment made by Telegraphic transfer / Collection / Letter of Credit… (or combined). September 29, 2014 Dinh Khuong Duy 115
  116. 116. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 7.3. Methods of payment 7.3.1. Telegraphic transfer PAYING BANK REMITTING BANK (2) (3) REMITTER (5) BENEFICIARY (4) (1) September 29, 2014 Dinh Khuong Duy 116
  117. 117. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 7.3.2. Collection - A payment method in which the exporter shall handle documents to the buyer's bank and also gives the banks necessary instructions indicating when and on what conditions these documents can be released to the importer. - Classification: + Clean Collection + Documentary Collection: D/P; D/A; D/OT. (Collection document often includes drafts and other commercial documents). September 29, 2014 Dinh Khuong Duy 117
  118. 118. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS CLEAN COLLECTION PROCEDURE REMITTING BANK (6) (2) (7) (4) SELLER COLLECTING BANK BUYER (3) (5) (1) September 29, 2014 Dinh Khuong Duy 118
  119. 119. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (1): Seller delivers goods and documents to Buyer; (2);(3): Seller authorizes banks to collect payment; (4): Collecting bank presents B/E to claim payment from Buyer; (5): Buyer makes payment; (6);(7): Payment transferred to the Seller. Þ What is the similarity and difference between T/T and clean collection? Þ What is seller’s risk when payment is made under clean collection? September 29, 2014 Dinh Khuong Duy 119
  120. 120. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS DOCUMENTARY COLLECTION PROCEDURE REMITTING BANK (6) (2) (7) (5) SELLER COLLECTING BANK BUYER (3) (4) (1) September 29, 2014 Dinh Khuong Duy 120
  121. 121. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (1): Seller delivers goods to Buyer; (2);(3): Seller handles documents to authorize banks to collect payment; (4): Buyer makes payment/accepts to pay; (5): Collecting banks releases documents to Buyer; (6);(7): Payment transferred to the Seller. Þ What is the difference between documentary & clean collection? Þ What is seller’s risk when payment is made under documentary collection? September 29, 2014 Dinh Khuong Duy 121
  122. 122. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 7.3.3. Letter of Credit - This is a payment method in which, under Buyer’s request, Banks shall agree to make payment to the Seller or anyone nominated by the Seller against Seller’s presentation of documents and completion of requirements stipulated in the Letter of Credit. - Classification: + Revocable/Irrevocable + At sight/Deferred payment + Other: Standby, Back to back, Transferable… September 29, 2014 Dinh Khuong Duy 122
  123. 123. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS LETTER OF CREDIT PROCEDURE (4) ADVISING BANK ISSUING BANK (5) (6) (7) BENEFICIARY APPLICANT (1) September 29, 2014 Dinh Khuong Duy 123 (3) (2)
  124. 124. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (1): Buyer’s applies to open L/C; (2): Sellers delivers goods to Buyer; (4): Seller send documents to Issuing Bank through Advising Bank; (5): Issuing Bank makes payment (at sight or deferred); (6): Payment transferred to Seller; (7): Issuing Bank releases documents to Buyer; Þ Why is L/C a secure payment method to sellers? Þ What is the risk that buyers take? September 29, 2014 Dinh Khuong Duy 124
  125. 125. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 7.4. Content of a payment by L/C article - Type of L/C - Beneficiary / Applicant - Payment currency and value of L/C - Issuing bank / Advising bank - Time of opening / Effective Period - Honor by: sight payment, deferred payment, acceptance or negotiation - Set of documents Note: L/C is based on sales Contract but independent of Contract. Banks only deal with documents. September 29, 2014 Dinh Khuong Duy 125
  126. 126. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS E.g.: L/C payment article Payment shall be made in USD by irrevocable L/C for 100% of Commercial Invoice value. The L/C is to be issued by a reputable Korea bank, advised by Vietcombank, indicating the Seller as the beneficiary. The L/C must be opened no later than 20 days after the Contract date and shall not expire until 30 days after the B/L date. The Seller shall be fully paid at sight against the presentation of the following documents: September 29, 2014 Dinh Khuong Duy 126
  127. 127. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS • At sight draft drawn on the issuing bank • Full set (3/3) of original, clean B/L, clearly m marked “On Board”, issued to order of the issuing bank with the Buyer as the Notify Party. • 03 original, signed Commercial Invoices; • 02 original Certificate of Quantity and Quality issued by a reputable inspection company in Vietnam; • 02 original C/O form AK issued by competent authority of Vietnam; • Negotiable insurance certificate for 110% Invoice Value, blank endorsed. September 29, 2014 Dinh Khuong Duy 127
  128. 128. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 8. Warranty 8.1. Concept An assurance by the seller that attests quality or durability of the product in certain period, which is considered as the “warranty period”. 8.2. Area of warranty - Stable performance; - Technical criteria compliance; - Requirements: product’ quality, fuel consumption… Þ Dependent on characters of product. September 29, 2014 Dinh Khuong Duy 128
  129. 129. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 8.3. Warranty period - Dependent on character of product and parties’ relationship; - Period may be defined: + As a duration of time: 6 months, 12 months + According to some operational criteria: 1000 km. - Note: Parties must clearly state the ideas on: + When the period starts? + If product needs repairing, is the period lengthened? September 29, 2014 Dinh Khuong Duy 129
  130. 130. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 8.4. Parties’ rights and obligations - Seller: + Repair the product if flaws are made by seller/manufacturer; + Replace the product or refund payment; - Buyer: + Follow usage instructions; + Keep the product in primitive state; + Notify the seller timely; - Exemption: + The buyer does not follow instructions; + Natural deterioration of certain parts. September 29, 2014 Dinh Khuong Duy 130
  131. 131. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 9. Claim Claim is a request in which one party asks the other party to compensate for the damage caused by his contract violation; 9.1. Objects to be claimed - Seller is often claimed for late delivery, wrong quality or quantity of good; - Buyer is often claimed for late payment, failure to charter ship; - Other: insurer, carrier. September 29, 2014 Dinh Khuong Duy 131
  132. 132. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 9.2. Claim period - Character of goods; - Type of claim - Relationship between parties; - Geographical distance; - Law/custom; 9.3. Claim documents - Letter of claim; - Commercial documents; - Inspection documents. September 29, 2014 Dinh Khuong Duy 132
  133. 133. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 9.4. Parties’ rights and obligations - Claim party: + Preserve the primitive state of goods; + Notify the claimed party; + Collect and dispatch claim documents in due time; + Assist the claimed party in handling claim; - Claimed party: + Review documents and give response in due time; + Assist the claim party in handling claim. September 29, 2014 Dinh Khuong Duy 133
  134. 134. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 10. Exemption (Force Majeure) - This clause essentially frees both parties from liability when facing with an objective event or circumstance beyond the control of the parties, preventing one or both parties from fulfilling their obligations under the sales contract; 10.1. Features of a force majeure situation + Unforeseeable; + Irresistible; + Relevant to contract. September 29, 2014 Dinh Khuong Duy 134
  135. 135. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 10.2. Rights and obligations of parties under force majeure situations - Rights: + Delay the implementation of the contract; + Terminate the contract if the FM situation lasts too long and/or takes too long to overcome - Obligations: + Inform the other party in writing + Confirm the FM situation in due time with evidence certified by local authorities. September 29, 2014 Dinh Khuong Duy 135
  136. 136. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 10.3. Stipulation of an exemption clause - Define and set criteria according to which a situation is considered to be a FM one; - List FM situations, parties’ rights and obligations, and procedure to handle such FM situations; - Refer to ICC Publication No. 421: "The Force Majeure clause of the International Chamber of Commerce (ICC Publication No. 421) is hereby incorporated in this contract“ - Combined stipulation. September 29, 2014 Dinh Khuong Duy 136
  137. 137. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS Sample 1: Neither party shall be liable for any delay or failure to perform its obligations under this Contract or for any damage or loss due to any event or circumstance beyond its reasonable control ("Force Majeure"). The affected party shall within 07 days give notice in writing to the other party specifying the cause and extent of its inability to perform its obligations and the likely duration of such delay or non-performance and shall take all reasonable steps and with due diligence to remedy or abate the Force Majeure. September 29, 2014 Dinh Khuong Duy 137
  138. 138. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS Sample 2: Neither party shall be held liable for any delay or failure to perform its obligations under this Agreement or for any damage or loss due to any event or circumstance beyond its reasonable control including, but without limitation to, any delay, failure, damage or loss due to fire, flood, storm, explosion, any act of God, industrial disturbance, failure of electrical supply or telecommunication network, vandalism, sabotage or civil disturbance. The affected party shall within 05 working days give notice in writing to the other party specifying the cause and extent of its inability to perform its obligations and the estimated duration of such delay or non-performance and shall take all reasonable steps and with due diligence to remedy or abate the Force Majeure. September 29, 2014 Dinh Khuong Duy 138
  139. 139. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 11. Arbitration - Arbitration is a legal technique for the resolution of dispute outside the court, wherein the parties to a dispute refer it to one or more persons (the "arbitrators"), by whose decision (the “award") they agree to be bound. 11.1. Classification of arbitration: - Institutional arbitration; - Ad-hoc arbitration. September 29, 2014 Dinh Khuong Duy 139
  140. 140. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 11.2. Advantages of dispute settlement by arbitration - With highly technical subject matter, experts can be appointed as arbitrators; - Arbitration is often faster than litigation in court; - Arbitration more flexible; - Arbitral proceedings and award are more confidential; - Arbitration awards are easier to enforce in other nations than court judgments (New York Convention); - Arbitral awards are final. September 29, 2014 Dinh Khuong Duy 140
  141. 141. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 11.2. Advantages of dispute settlement by arbitration - With highly technical subject matter, experts can be appointed as arbitrators; - Arbitration is often faster than litigation in court; - Arbitration more flexible; - Arbitral proceedings and award are more confidential; - Arbitration awards are easier to enforce in other nations than court judgments (New York Convention); - Arbitral awards are final. September 29, 2014 Dinh Khuong Duy 141
  142. 142. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 11.3. Arbitration procedure - Self-conciliation; - Arbitration agreement; - Setting arbitration tribunal; - Mediation; - Selection of applicable law; - Presentation of evidences; - Judgment; - Award implementation. September 29, 2014 Dinh Khuong Duy 142
  143. 143. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 11.2. Advantages of dispute settlement by arbitration - VIAC: All disputes arising out of or in relating to this contract shall be finally settled by the Vietnam International Arbitration Centre at the Viet Nam Chamber of Commerce and Industry in accordance with its Arbitration Rules. - UNCITRAL: All disputes controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof shall be settled by arbitration in accordance with the UNCITRAL Rules as at present in force. September 29, 2014 Dinh Khuong Duy 143
  144. 144.  Any dispute, controversy or claim not amicably settled through procedures set forth above shall be settled by SIAC according to its arbitration rules, regulations and procedures. The arbitration will be conducted in English.  Only one arbitrator shall be appointed whose award is considered to be final, binding upon both Parties.  This Contract and the rights and obligations of the parties shall remain in full force and effect pending passing of the award in any arbitration proceeding entered into under this Article.  Each party shall bear its own costs and expenses of the arbitration. However, the prevailing party shall be entitled to recover such cost and expenses, including reasonable legal fees from the other party.  Nothing in this Article will preclude a party’s recourse to a court of competent jurisdiction to (a) enforce the terms of, or an arbitration award under this Article, or (b) seek temporary equitable relief necessary to protect its interests.
  145. 145. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 12. Governing law - A governing law or choice of law clause specifies that the laws of a mutually agreed upon jurisdiction will govern the interpretation of the terms of the contract. - Stipulation: Narrow Clause: This Agreement shall be governed by and construed in accordance with the laws of [….], without regard to its conflict of laws rules. Broad Clause: This Agreement shall be governed by, construed, and enforced in accordance with the laws of [….], without regard to its conflict of laws rules. September 29, 2014 Dinh Khuong Duy 145
  146. 146. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 13. Penalty - Penalty clause is a term of contract that seek to impose upon a party to the contract the obligation to pay a sum of money in the event that the contract is breached; - Parties can agree in advance on the amount of damage that must be paid if either breaches the contract. This can avoid the need to go to court to work out the amount due if a breach occurs. - If the agreed amount represents a genuine estimate of the likely loss, the courts will enforce the clause. The agreed amount must be paid even if the real loss is more or less than that. September 29, 2014 Dinh Khuong Duy 146
  147. 147. DRAFTING CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 14. Other terms and conditions - Terms of transportation; - Terms of insurance; - Terms of validity and termination of contract; - Terms of confidential information; - Terms of copies and languages; - Terms of checking and acceptance; - Terms of maintenance… Þ Number of terms and conditions depends on types of goods and parties’ relationship. Þ Why Commercial Law 2005 omit compulsory terms? September 29, 2014 Dinh Khuong Duy 147
  148. 148. THE END THANK YOU & GOOD LUCK! September 29, 2014 Dinh Khuong Duy 148
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Chapter 2 and 3 contracts and incoterms

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