Special Considerations in International Sales Agreements

Special Considerations in International Sales Agreements

International sales contracts constitute a specialist area of law that raise unique considerations when compared with domestic counterparts. Commercial law, responding to the requirements of the international trading community as a whole, has adapted in order to meet the special needs and problems posed by such international contracts. International sales are generally governed by common law, legislation, a number of international conventions, rules, terms and customs. In this article I will highlight some of the particular problems that an international sales agreement can raise.

Governing Law

One of the most interesting aspects of an international sale is the determination of the governing law. The proper law of the contract or the proper forum for dispute resolution, for instance, can be matters that raise considerable problem if not addressed and agreed at the pre contract negotiation stage.

A good international contract lawyer will ensure that the choice of law is made clear in the written agreement governing the relationship by expressly stating the relevant choice of law. Where this has not been specified, private international law rules will be used to determine the proper law of the agreement.

Risk

One inherent feature of an international sale is that it will most often involve transit by sea or air. The period of transit can often be substantial and this means a heightened risk in relation to loss of or damage to the goods being transported. The risk in the goods during this time must be determined. Furthermore separate contracts will need to be entered into for carriage of goods and for insurance of those goods.

Currency

A further complication inherent in the international sale concerns currency. Fluctuations will affect the desirability of a transaction and may mean that what was initially a good deal can swiftly become unprofitable as exchange rates vary.

Political Impact

Political instability in a country may have a very serious impact on an international sales agreement, as may changes in government policies regarding import and export, taxes and duties.

 

Breach and Defective Performance

Specific time frames for rejection, right to replace defective goods and rights to demand specific performance or replacement of goods must be carefully considered. An international element to the sale will often magnify the impact of such events because of the potential pressures of a lengthy transit time.

Standard Terms

A number of standard terms have been developed in order to address some of the key issues highlighted by international sales and standard terms. INCOTERMS for instance assist international negotiations by providing a neutral agreement base from which parties can operate. The parties may help to prevent disputes from occurring by use of such standard terms.

International sales agreements will amplify problems that may similarly occur on a domestic level. They will also introduce some more unique issues. International commercial law has developed to provide traders with a number of useful tools such as standard terms and international payment mechanisms, which may be employed to avoid confusion and (ultimately) future dispute.

Michael Chambers & Co. LLC team of international commercial contract lawyers and will assist those undertaking transactions with an international element to enter into appropriate agreements reflecting the unique nature of an international transaction and can advise on how to minimise risk throughout the contract period. If you wish to speak to one of our lawyers, then please contact us.