74595602 Terms of Contract

8/12/2019 74595602 Terms of Contract

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Chapter 1: Negotiating Delivery

1. The five steps in Negotiating Delivery.

To deal with problems arising if there is a delay or if delivery is not as planned the Buy

and the Seller should negotiate delivery systematically. That means making sure aforeseeable problems are discussed and approaches to solving such problems are agreed.overview of the five negotiating steps is suggested to simplify discussion of the ideas andavoid problems: Timing, Location, Transport, isk Title and !nsurance, Terms of Trade.

2. Timing: When must Delivery take place ?

" #ood negotiators should mention a delivery date in negotiating the timing of an e$port dand then other issues relating to coming into force, delay and compensation for delay. %emight be classified into two categories, e$cusable and non"e$cusable. &$cusable oinvolves a 'grace period( and is mostly sub)ect to a force ma)eure provision. Any lossesthe buyer caused by non"e$cusable delay must be compensated. The amount of compensatis usually set in advance and called 'li*uidated damages(

" +se a straightforward calendar date to name the delivery date: -th September / /, fore$ample. The parties often plan for the contract to come into e$istence in two steps: tsignature date and the date of coming into force. The date of coming into force is not usuaa calendar date, but the date on which the last precondition is met. 0ommon preconditioare:

1 eceipt of import and2 or e$port approval

1 eceipt of foreign e$change approval from a central bank

1 !ssuance of a letter of credit or bank guarantee.

1 3aking of a down"payment by the buyer

1 !ssuance of an insurance policy

1 !ssuance of a certificate of origin

1 %elivery by the buyer of plans, drawings or other documentation.

" 4egotiators may agree on a cut"off date: if the contract has not come into

force within a certain time, then it becomes null and void.

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0oming !nto 5orce

This agreement shall come into force after e$ecution by both parties on the date of the lastnecessary approval by the competent authorities in the country of the Seller and the Buyer.

!f the contract has not come into force within ninety days of e$ecution, it shall become null anvoid.

6i7u kho8n hi9u l c

Th;a thu c? hi9u l c sau khi @ c th c hi9n bCi c8 hai bDn v=o ng=y phD duy9t cEn cuGi cHng cIa cJ *uan c? thKm *uy7n t i n Mc ng Ni bOn v= ng Ni mua. 4Fu h p @Png khQng c? hi9u l c trong vRng ch n m Ji ng=y k tU ng=y th c hi9n, n? s> trC nDvQ hi9u.

" The delivery date is normally fi$ed for a certain number of days after the contract has comeinto force.

The date of delivery shall be twenty"eight days after the date of coming to force of the contrac

4g=y giao h=ng s> l= V ng=y sau ng=y h p @Png c? hi9u l c

" Time is of the essence of the contract. !f the time is not kept, the buyer has the right to returnthe goods and refuse payment.

Time is and shall be of the essence of the contract

ThNi gian l= v= s> l= vWn @7 cGt lXi cIa h p @Png.

" &$cused %elay and #race Yeriod:

5or each week of late delivery the Seller shall pay the Buyer /. Z of the contract price.

6Gi vMi m[i tuEn giao h=ng ch ph8i tr8 ng Ni mua /. Z tr] giO h p @Png

A grace period is the time e$ceeding the deadline for an obligation during which a late penaltythat would have been imposed is waived.

!f delivery is not effected within one month of the agreed delivery date, then the Seller shall p

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0ontract.

4Fu m t trong hai bDn b] ng n c8n hay ch ngay l


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giO h p @Png trDn m[i tuEn tr_ ho^n, l=m thi9t h i thanh kho8n, m t kho8n ti7n t Jng @ Jngm t nqa m t phEn tr m giO @ c giao cIa h=ng h?a b] ch @ c th c hi9n theo giO 0!5 %urban

%elivery of the #oods shall be made `!ncoterm . The schedule date of %elivery shall be `date delivery . isk and title to the #oods shall pass from the Seller to the Buyer on %elivery.

The place of %elivery under this 0ontract is `port of shipment

#iao h=ng @ c th c hi9n `!ncoterm . 4g=y giao h=ng theo l]ch tr_nh s> l= `ng=y giao h=ng . Iro v= *uy7n sC h u cOc h=ng h?a @ c chuy n tU ng Ni bOn @Fnng Ni mua khi giao h=ng.

6]a @i m giao h=ng theo p @Png n=y @ c `c8ng giao h=ng

!f the vessel named by the Buyer fails to arrive on or before the agreed delivery date, then seller may at his discretion deliver the #oods to a bonded warehouse in the port of 3ombasand shall be deemed to have fulfilled his delivery obligations under this 0ontract.

4Fu t=u @ c ch @]nh bCi ng Ni mua khQng @Fn v=o ho c tr Mc ng=y giao h=ng @ c th;a tth_ bDn bOn theo s suy $jt cIa m_nh c? th giao h=ng h=ng h?a @Fn kho ngo i *uan t i c3ombasa, v= @ c coi l= @^ ho=n th=nh ngh a v giao h=ng cIa m_nh theo h p @Png. n=y

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4. Transport.

" 4egotiators should mention the type of packaging and the shipping marks in the 0ontract.

#oods are to be packed in new, strong, wooden cases suitable for long"distance ocean transpo

and are to be well protected against dampness, shock, rust or rough handling. The Seller shall liable for any damage to or loss of the #oods attributable to improper or defective packaging.

=ng h?a s> @ c @?ng g?i trong thHng g[ ch c v= mMi th ch h p cho v


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delivery in the e$porter(s country, with e$tra costs for e$porter after delivery. %"terms tacare of delivery outside the e$porter(s country.

The e*uipment listed in Anne$ shall be delivered 5 B `Beira `!ncoterms /

0Oc thiFt b] li9t kD trong Yh l c @ c giao theo @i7u ki9n 5 B `Beira `!ncoterms /

5or the e*uipment listed in Anne$ the price is for delivery free on board carrying vessdesignated by the Buyer at the port of Beira including the cost of packing, as well as e$penincurred before loading the e*uipment on board the carrying vessel.

6Gi vMi cOc thiFt b] @ c li9t kD trong Yh l c giO l= giO giao h=ng mi\n ph trDn boong t=theo ch @]nh cIa ng Ni mua t i c8ng Beira bao gPm chi ph @?ng g?i, c ng nh cOc chi ph psinh tr Mc khi t8i cOc trang thiFt b] lDn boong t=u chC.

The contract should always specify that terms such as 5 B, 0!5 and so on are !ncotermunder the rules set out in !ncoterms /. The contract should regulate what happens i!ncoterms / and the terms of the contract conflict. 4ormally, the contract prevails.!ncoterms apply only to international trade, for trade within a country, !ncoterms are nappropriate.

!ncoterms / as used in this contract means the publication !ncoterms /, being theinternational rules for the interpretation of their terms published by the !nternational 0hamber

0ommerce. hen a term from '!ncoterms /( is used in this 0ontract, the rules and definitionsapplicable to that term in !ncoterms / shall be deemed to have been incorporated in the0ontract e$cept insofar as they may conflict with any other provision of the 0ontract, in whicase the 0ontract provisions shall prevail.

!ncoterms / nh @ c sq d ng trong h p @Png n=y l= Wn b8n !ncoterms n m /, l= cOc *uyt c *uGc tF cho vi9c di\n gi8i cOc @i7u kho8n cIa ch ng do YhRng Th Jng m i *uGc tF $ b8n. xhi m t @i7u kho8n tU !ncoterms / @ c sq d ng trong p @Png n=y, cOc *uy t c v=@]nh ngh a Op d ng cho thu @ c coi l= @^ @ c kFt h p troh p @Png ngo i trU tr Nng h p ch ng c? th $ung @ t vMi bWt k @i7u kho8n khOc cIa p @P

trong tr Nng h p @? *uy @]nh cIa h p @Png s> @ c Op d ng.

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0 AYT& : 4 T!AT!4# Y !0& A4% YA 3&4T

1. EXPORT PRICING STRATEGIES T & Y BL&3

ow can the e$porter avoid the price trap occured in many negotiations when the buyedemands concessions about delivery time, method of payment,etc

T & Y !40!YL&The e$porter should guarantee that the contract price reflects any change in a set assumptions about delivery, payment and warranty terms.

!4 3 & %&YTAny terms of a contract relate to each other. Therefore, as items in the contract anegotiated, the e$porter should assess the influence of each factor on price, and ad)ust price accordingly. 5or e$ample, a longer warranty period creates higher costs, it should reflected in the contract price. !n fact, the most common term negotiated with the two sideon price.

Scenario: erbena &lectric hopes to e$port its best"selling product, small domestic elecfans, from erbena to &sperana. oyalstone, the manager of erbena &lectric, bediscussions with the purchasing manager of &sperana &lectrical !mporting, Alice Sm 4egotiations begins. oyalstone offers a unit price of based on some main followingassumptions:

" The sie of the order is /// items." %elivery is 5 B." The warranty period on the fans is three months from the date of delivery.

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$rder %i&e: /// units is one container load, the unit price will increase on a smaller order.An order of /// fans, for e$ample, would cost - each not .

"ncoterm: the cost of insurance and freight between Yort erbena and &sperana 0ity is -

on an order of /// items.

Warranty Period : oyalstone knows that a three"month warranty on an 5 B delivery produces very few claims for defects. !f Smart asks for a si$"month warranty, it will addcents per fan to oyalstone(s costs.

This e$ample shows that the negotiating decisions bear directly on the price of the produ

And a good manager knows that almost every decision made during a negotiation incluen price.

. T!E "I#E STPES IN NEGOTIATING PA$%ENT!n negotiating payment, the e$porter should follow these five steps:

Step 1: Mode of Payment

This determines how payment will be made. There are four common mode of payment:

payment on open account with no security: this type is seriously risky to the e$porter payment on open account secured by e$port credit insurance: the e$porter pays money

an insurance company to buy an e$port credit insurance payment on open account secured by a paymenr guarantee: the buyer pays money to

bank to receive a bank guarantee.

payment by letter of credit.: the buyer must position the money with a bank in the couof the e$porter and the e$porter can collect that money when the goods are delivered.

Step 2: Timing 10


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This step determines the date of payment. The importer often wants to delay the time of paym but the e$porter suffers from delay because late payment is sub)ect to payment of interestmosts sellers offer discount for early payment. This helps the buyer save on the invoce price the seller *ickly collect his money.

The date of payment may be regulated date or a chain of dates. !t is also calendar datesinterval times.

Step 3: Place of payment

This step determines where the money must be before payment is to be completed

Step 4: Delay - what delay in payment is excusa le!

%elay in payment may be e$cused during a grace period `not common or a force ma)eure ev`more common . But most e$porters do not want to e$cuse these delays and any payment maafter the agreed date of payment is in delay.

Step ": #esults of delay

hen delay in payment happens the e$porter is usually compensated for losses due to lat payment. The e$porter may ask for a payment guarantee which makes sure payment be madetime.

The best solution to get risk of delay is to create a payment article in the sale contract whmakes late payment is impossible.

0u trong sOch " trang 0u d]ch

Yayment shall be deemed to have beenmade only when the contract sum is paidinto the Seller(s bank account and is at the

i9c thanh toOn @ c cho l= @^ ho=n th=nhch khi sG ti7n h p @Png @^ @ c chuy n@Fn t=i kho8n ngn h=ng cIa ng Ni BOn v=

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Seller(s full disposal. do ng Ni BOn to=n *uy7n @]nh @o t

0u trong sOch "trang V/ 0u d]ch

!f payment of any sum payable is delayed,

the Buyer shall be entitled to receiveinterest on the amount unpaid during the period of delay. The interest shall be at anannual rate three percentage points abovethe discount rate of the central bank in theSeller(country.

Thanh toOn ch @ c t nh caohJn Z so vMi l^i suWt chiFt khWu do 4gnh=ng Trung Jng n Mc ng Ni bOn *uy @]nh

&. T!IRD'PART$ SEC(RIT$ "OR PA$%ENT!n the international trade, the e$porter may face a lot of risks and one of the significant ois non"payment. There are two main way that the e$porter can use to reduce this risk. ne e$port credit insurance and the other is bank guarantee.

E)port cre*it in+,rance&$port credit insurance allows e$porter to recover the ma)or part of the contract price if buyer fails to pay after si$ months. To buy such insurance, the e$porter must e$plain tdetail of the busineess to an insurance company and receive a *uotation. !f the insurer refuto pay, its may mean that there are some problems in the e$porter or importer. The e$porhas to pay e$port insurance premiums which depends on many factors, such as: the typegoods e$ported, the creditworthiness of the buyer, the political stability of the importcountry.

Although this way is attractive, it has some limitations: the e$porter has to wait for a lotime to be compensated and the compensation is unlikely to cover //Z of the invoce price.

Pay-ent g,arantee!n this method, the buyer may ask for a bank guarantee which means that the bank will pthe contract price if the buyer fails to do so.

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#uarantees are comonly used in four business situations, as the following:

isk ': Non(payment )*Payment guarantee

A payment guarantee makes sure that the e$porter will receive payment. !t commits the bawhich issuses the payment guarantee to pay if the buyer defaults. The payment guaranteeussually for //Z of the contract price.

isk +: evocation )* Tender guarantee

This type of guarantee is used in case that the e$porter who bids on a contract to suppgoods or materials to a goverment department or agency is withdrawn. A normal figure tender guarantee is usuallly between .-Z to -Z of the contract price

isk ,: Non(performance)*Performance guarantee

Yerformance guarantee makes sure that if the e$porter works badly or not at all, the guaranwill pay, within stated limits, the costs of the e$porter(s failure to perform. A figure f performance guarantee is between -Z to /Z of the contract price.

isk 4: -osing Prepayment)*Prepayment guarantee

This guarantee promises the buyer that the bank will return advance payments if the e$pofails to deliver. The guarantee is often for //Z of the prepayment.

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. T!E /ETTER O" CREDITLetters of credit are issued in many forms for many purposes. Some letters of credit offirst class security for the e$porters, some are little better than a personal check

The most ideal type of letter of credit from the e$porter(s point of view is irrevocabcomfirmed, at sight letter of credit.

The +niform 0ustoms and Yractice for %ocumentary 0redits `+0Y by the !nternation0hamber of 0ommerce is the most universal set of practices rulling over payment by letter credit. Besides, parties to a contract can also use the rules of the +nited States.

/etter o0 cre*it: The Gro,n* R,le+

Documents a$e exchanged fo$ money%

5irstly, the letter of credit is issued by an issuing bank at the re*uest of the buyer. Thissuing bank, then, istructs the advising bank to advise the e$porter that the letter credit has been opened. 4ormally, the issuing bank is in the buyer(s country and thadvising bank is in the country of the e$porter.

4e$t, the e$porter ships the goods, passes them to the carrier and receives shippindocuments from the carrier.

Then, presents these documents to the bank as evidence that the goods have beeshipped. The bank checks the correctness of the documents and sets the payme procedure in motion.

Two p$inciples that ma&e a lette$ of c$edit wate$tight:

Principle ': utonomy

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The letter of credit is an agreement by a bank to pay money against documents !t is a separagreement from the sale contract and is unconnected with it. This means the bank is obliged pay whatever the disputes between the buyer and the e$porter are.

Princile +: %trict compliance

The bank will pay only if the shipping documents are e$actly in line with the buyerinstructions. !n case of discrepancies in one or some aspects of the documents presented, bank will refuse to pay.

!n this situation, to proceed payment, the e$porter can:

- Yrovide missing payper or correct errors.- Ask the buyer to instruct the bank to change the terms of the letter of credit.- Ask the bank to process the letter of credit with the discrepancies but to pay only when and

the issuing bank permits payment.!f the letter of credit is near its e$piry date and there may be no time for the e$porter to provthe missing pieces, he `or the advising bank must contact the buyer asking the buyer to instrthe issuing bank to e$tend the date of credit.

'The expo$te$ should p$o(ide sc$upulous ca$e in p$o(iding the documentation called fo$ y

the lette$ of c$edit%

Yage V: The Buyer, on receipt of the0onfirmation of rder from the Seller, shallat least / days prior to the date of deliveryopen a confirmed, irrevocable letter of credit.

This credit shall be sub)ect to +niform0ustoms and Yractice for %ocumentary0redits, evision, !00 Yublication 4o-//. /Z of the credit shall be availableagainst the Seller(s draft accompanied byinvoice the remaining V/Z shall be available

4g Ni mua, khi nh


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against the Seller(s draft accompanied by theshipping documents.

ng Ni bOn $uWt tr_nh hGi phiFu v= cOc ch ngtU v


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confirm the credit by an issuing bank. By adding its confirmation to an L20, it has an absolobligation to pay the e$porter according to the terms of credit. The payment are made withrecourse, which means that if the issuing bank finds a problem with the documents and refusesend funds to cover the payment, the confirming bank has no way of recovering the money it paid to the e$porter. !t is different from an advising bank which always makes payment wrecourse if it agrees to pay the value of the credit over the counter. This helps the advising bget its money back from the e$porter if the problems occur.

Sometimes, problems can arise when very small banks or banks in countries with severe forecurrency shortages try to instruct a bank in e$porter(s country to confirm a letter of credit. Tissuing banks may delay in sending funds to cover the payment.

The sign of a confirmed letter of credit is usually the cross in the confirmation bo$.

The At'+ight /etter o0 Cre*it an* the Alternative+

%ettlement /y sight Payment

+nder this method of payment, if the documents the e$porter presents are in order, the payi bank immediately pays the full face value of the letter of credit.

%ettlement /y Deferred Payment

!n settlement by deferred payment, the letter of credit is not payable until a number of days adelivery. The seller presents the documents to the paying bank, and the paying bank agrees pay the seller the face value of the credit when it matures. !f the e$porter needs ready moneycan e$change the letter of credit for cash `at a discount with any agreeable bank.

%ettlement /y cceptance

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The seller presents to the accepting bank the documents and a bill of e$change `time draft drausually on the buyer, and the bank will accept the bill of e$change and agree to pay it at full fvalue when falls due. This is obviously a danger for the seller.

A bill of e$change that is accepted can be sold at a discount to an agreeable bank if the seneeds money immediately.

%ettlement /y Negotiation

4egotiation means the selling of a financial instrument to a bank for `usually less than its favalue. !n this method of settlement, the seller presents to the negotiating bank the documents

a bill of e$change drawn usually on the buyer, and the negotiating bank negotiates the bill.

The /etter o0 Cre*it an* it+ A++ociate* Doc,-entation

!. The letter of credit contains a list of the documents which must be presented and is also the basis for bank checking that the documents are in perfect order and correct or not.

!!. Associated %ocumentation

. 0ommercial invoice must be made out to the applicant for the L20 about the descriptionand the amount of the goods, and specific demands.

. Transport documentation is the document issued by the carrier to the e$porter, andincludes five types: sea transport, air transport, rail transport, road transport andcombined transport. The type re*uired is stated in the L20.

Special p$o lems $elated to t$anspo$t document .

There are some problems arising in specific circumstances when transport document is used afollows:

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Negotiating the Ter-+ o0 a /etter o0 Cre*it

" greement: the e$porter and the buyer discuss and list all re*uired documentation. The two parties may have to talk to their 0hambers of 0ommerce, to their bank or to the carrier toestablish the complete list.

" "ncorporation: the list is incorporated into the contract.

"%pecification: the buyer applies for the letter of credit specifying the agreed documentation.!00 form can be used to apply for a letter of credit. The e$porter and the buyer can complete thapplication form during their negotiations and append a copy of the form to their contract, the

passsing it to the bank. This is to make sure that the credit once issued should be e$actly asagreed by the parties with no nasty surprise for the e$porter.

"1erification: the e$porters checks the credit as soon as he receives the advice of the L20 beingopened to make sure it complies with the agreement negotiated with the buyer. !mmediatediscussion with the advising2confirming bank is essential since amendments are always timeconsuming, which can lead to the delay in payment.

"0ompliance: the e$porter rigorously checks documentation and submits it to the bank.emember that timely payment depends on the compliance by the e$porter with the terms ofcredit.

Doc,-entary Cre*it Application "or-

Segment 1 : Applicant: full name, address, account number with issuing bank of the buyer.

Segment 2 : !ssuing bank: name `can be left blank

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Segment 3 : Application date: the date on which the application form is submitted to the ban`can be left blank

Segment 4 : %ate and place of e$piry:

1 The last date for presentation of documents to the bank

1 The place of e$piry: often at the counter of the confirming bank

Segment " : Beneficiary: full name, address `the e$porter in most cases

Segment ) : 3ethod of issue:

1!ssue by mail: slower

1!ssue by teletransmission `normally tele$

1 !ssue by mail and brief advice by teletransmission.

Segment * : Transfer of the 0redit

" !n case the e$porter wants to hide the actual supplier.

" !n principle, a L20 is not transferable unless it is permitted.

Segment + : 0onfirmation: &$porters prefer confirmation.

Segment , : Amount

1the amount of the credit is e$pressed both in figures and in words.

1The currency of the credit: using the !S currency code. &g: +S%, %&3, #BY

1 About, Appro$imately: the actual payment can be 12" /Z the stated amount.

13i$ed payment: must state what percentage of the invoice price is covered by the credit.

Segment 1 : Pa$tial Shipment

!n principle, partial shipments are allowed unless the not allowed bo$ is crossed.

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%istinguish carefully between partial shipments and shipment in installments.

Segment 11: T$ansshipment

Transshipment means moving the goods from one conveyance to another. 4ormalltransshipment is allowed e$cept for goods travel by sea under a sea waybill or marine B2Lsome other special reasons for prohibition.

Segment 12: .(aila ility

0redit available with this is sometimes followed by the name of the advising bank chos by the e$porter or left blank, and the issuing bank is free to decide a bank will act for it in e$porter(s country

The various types of payment are by sight payment, by acceptance,etc.

Segment 13: /nsu$ance co(e$ed y the 0uye$

The bo$ is normally checked when the delivery term is 5 B, 05 .

Segment 14: T$anspo$t /nfo$mation

Shipment from2precise places 3 ha/ors! airports

To 2precise places 3 ha/ors! airports

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4 Pre'*elivery In+pection

3any importers re*uire inspection of their goods in the manufacture(s factory befordelivery. ith sophisticated items or capital e*uipment, the buyer may also want to inspect th

goods at pre"agreed times during manufacture.

Some countries, !ndonesia for e$ample, re*uire that all imported goods are inspected an inspections service immediately before shipment. This inspection prevents e$porter and buagreeing an unrealistically low invoice price in order to avoid customs duties in the buyecountry. This also prevents shipments of patently defective goods.

The ne$t step, assuming 5 B delivery, is e$amination of the goods by the carrier. Thecarrier does not unpack the goods or check their *uality, although leaks and obvious damage well as incorrect shipping marks, defective packaging or discrepancies in weight and sie noted on the shipping documents.

4 In+pection an* Acceptance

The principle is clear" the buyer has the right to inspect the goods when they arrive andre)ect them if they are incorrect. At this point,exact specification is of g$eat (alue to expo$te$ ifthe goods confo$m to specifications the uye$ is o ligated to accept them%

4 De0ect+ /ia ility Perio*

nce the goods are accepted by the buyers as apparently correct, they must )ump to thfinal hurdle the defect liability period. The manufacturer accepts liability for defects the coto light after acceptance: if anything is wrong with any item, they will repair or replace it. Sdefects are calledlatent defects %

The defects liability period is negotiable, this is likely to be several months from the date

of delivery or the date of arrival.

Yrotection against dishonest claims or e$cessive demands should be written into tcontract.

To sum up, in negotiating the terms of the contract, we can look at the process in steps.

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Step . !nspection : hen are the goods inspected And when can the buyer to re)ectthem

Step . Terms : arranty or guarantee

Step . %efinitions : hat is, and what is not, a defect

Step . Timing : ow long is the defects liability period hen does it begin hat aboutother timings

Step -. 0orrective action : hat must the seller do to cure defects

. INSPECTION5 ACCEPTANCE AND RE6ECTION

n a contract, both the parties, the buyer and the e$porter run risks. bviously, the gooddelivered are not always perfect. Thus, the buyer stands the risk of receiving inferior gowhen inspecting the goods on arrival. The e$porter may have a disaster when the buy

decides to cancel the contract if the deviation amounts to a fundamental breach of contract. Tdefects liability provision gives double protection. This warranty protects the buyer froreceiving inferior goods and the e$porter from losing the contract right away. %elivery can

re)ected from two kinds of defects: the patent one ` which can be found when being inspectthe latent one `which only comes to light during usage .

!+nder most laws, a buyer can make certain assumptions about goods even if the e$por

gives no e$press warranty. These assumptions are legally called implied warranties, which coin three types:

6 /mplied wa$$anty of onfo$mity with ont$act:

3ost laws provide a way to grade non"conformity: while ma)or discrepancies allow th buyer the right to re)ect the goods and cancel the contract, minor discrepancies do not. Tienna Sales 0onvention `Article says:

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7The /uyer may declare the contract advoided 2)canceled if the failure /y the sellerto perform any of his o/ligations under the contract amounts to a fundamental /reach ofcontract.8

5 /mplied wa$$anty of Me$chanta le 6uality:

#oods can well conform with the contract but they can be of serious inferior *ualitwhich make them inappropriate for sale. 3ost laws have a provision on this warranty omerchantability which allows the buyer to reiect goods and cancel the contract

5 /mplied wa$$anty of 7itness fo$ /ntended Pu$pose:

#oods can conform with the contract, be merchantable but useless to the buyer. !n th

case when the e$porter knew the buyer(s intented purpose and the buyer trusted the seller wthe correct goods then the buyer has the legal right to re)ect unusual items.

5 #e8ection: Total o$ Pa$tial:

The buyer can re)ect the consignment wholly or partially. 4ational laws take one of thrchoices. hile &nglish law re*uires re)ection of all contract goods, #erman law and iennSales 0onvention `Article - both allow total and partial re)ection. hen goods are re)ected, the buyer most notify the seller within a reasonable period. Then, on assuming that the re)ectio )ustified, the e$porter has the additional cost to dispose the unwanted goods.

5 The 9xpo$te$ s #ight to cu$e:

%oes the e$porter have the right to cure r it is simply a duty re*uested by the buyerThe ienna Sales 0onvention says the following:

7 the seller may! even after the date for delivery! remedy at his o9n e pense any failureto perform his o/ligations! if he can do so 9ithout unreasona/le delay and 9ithout causing the/uyer unreasona/le inconvenience or uncertainty of reim/ursement /y the seller of e pensesadvanced /y the /uyer.8

!f the seller wants the right to cure, the contract should contain the necessary provision.

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&. 7ARRANT$ AND G(ARANTEE: TER%INO/OG$

re a warranty and a guarantee the same thing hy do some contracts replace a warrantwith a defects liability provision.A

A warranty is a promise you make about your own perfomance. A product 9arranty is a promise by the e$porter to cure defects in his products. There are two parties to a warranty:/uyer and seller . A guarrantee is a promise about somebody else(s performance. !t involves three parti principal! /eneficiary and guarantor . The guarantor makes a promise to one party at the re*uestof another.

!n strict legal usage, a warranty is an absolute undertaking on the part of the warrantand the contract is void unless it is strictly and literally perfomed, while a guarantee is a prom` not imposing any primary liability on the guarantor, but binding him to be answerable fthe failure or default of another .

!nternationally, the distinction between warranty and guarantee is often blurred. 3ancontracts avoid the problem by speaking ofdefects lia/ility rather than warranty this is the rightconcept.

. T!E DE"ECTS /IA2I/IT$ PERIOD: A C!ANCE TO P(T T!INGS RIG!T

he e$porter is liable for defects in his products. hat is a defect And what liability fodefects must the e$porter acceptT

There is one thing that everyone knows: not all products are perfect on delivery. So the warracovers defects that are presentat the moment of delivery. The defects that give rise to the mostserious problems between e$porter and buyer arehidden or latent defects. There are three kindsof defects: workmanship, materials and design.

4 Three type+ o0 De0ect:

A product with defective9orkmanship is incorrectly built. 5aults are often hidden anddo not come to light until the product is used.

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%efectivematerials are materials or parts of a product that are inferior or somehowincorrect. 3any suchhidden defects take time to come to light.

%efectivedesign means that a product does not meet specifications. The design is

defective, again, is not apparent until the product is used.

4 7hat i+ Not a De0ect:

A defects liability provision does not cover: two common e$clusions are fair wear atear and misuse by the buyer. 5air wear and tear is the result of normal use. 3isuse is seriousincorrect handling by the buyer. Sometimes misuse is e$pressly defined in the contract: opena sophisticated machine.

4 "a,lt+ Not Pre+ent on Delivery:

The defects liability period is the period during which the e$porter is liable for anmust make good defects that are apparent on delivery or that come to light later. The buymust prove that the defects was present in the goods at the date of delivery. hen two sidenegotiate contract, both sides must understand thata defect is a fault prova/ly present in the goods on delivery.

4 Speci-en 7arranty Cla,+e+:

A standard provision mentions the three types of defect, it states a date on which th products were free of defects, it e$cludes problems caused by misuse or wear and tear, anestablishes the e$porter(s duty to cure the fault.

Sometimes, the parties decide on a totally different kind of obligation. An interestie$ample is the Disclaimer of Warranty common in software contracts. Such a disclaimer is often printed in capital letters because it is unusual and because it denies the purchaser some of

normal rights.

Any attempt to hide or subordinate such a disclaimer makes it invalid under most lawThe purchaser has given up certain rights: but in e$change for what hat is the )ustification this whole proceeding The answer is: without such a %isclaimer of arranty, the contract priwould be far higher.

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8. TI%ING O" T!E DE"ECTS /IA2I/IT$ PERIOD

he defects liability period presents four separate timing problems. 3any contractregulate only one. hat are the other problems, should the e$porter regulate them, and

if so, how Let(s now look at each timing problem in more detail.

T4 Ti-e0ra-e 1: The De0ect+ /ia ility Perio*The parties first agree the length of the defects liability period. e can note that manylegal systems allow a si$"month period if the two sides agree nothing. The e$porter should knhow many defects liability claims does he generally e$perience within a three"month, a smonthperiod, in order to calculate the cost of e$tending `or reducing the defects liabili period.

aving agreed the length of the defects liability period, the two sides then ask:Whendoes it start? The contract must regulate this problem. !t is generally accepted as fair that th period is e$tended by the down"time.

4 Ti-e0ra-e : The Noti0ication Perio*

!f a defect occurs, the buyer must notify the e$porter. !f both parties act in good faisuch a soft"edged timeframe works well. !f a problem arises, the )udge sets a fair period undue delay, a reasonable time, or forthwith.

4 Ti-e0ra-e &: The Recti0ication Perio*

nce the e$porter has learned of the defect, he must cure it as soon as practicable and his own cost.

4 Ti-e0ra-e : The /egal Action Perio*

!f the e$porter has failed to repair under warranty, the buyer must start a legal actioThis legal action period differs under applicable laws `0ivil law or 0ontinental law . Th period also varies greatly from country to country and from one type of contract and2or dutanother. "n practice! contracts rarely regulate the legal action period! leaving the matter to thapplica/le la9. "f you foresee a pro/lem! take legal advice.

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9. CORRECTI#E ACTION

6 The Pro le-:

Some contracts do not point out corrective action that the e$porter must take, whichdangerous for both e$porter and importer.

6 The Principle:

The e$porter used to correct the defects. !n case the buyer has this right, it must bindicate e$actly in the contract.

6 In -ore *epth:

The defects liability provision allows the e$porter to correct problems without losing tcontract. There are five steps that the manufacturer of goods can normally take to cure defects

5 8 option+ 0or c,ring *e0ect+:

ption : epair.

To the domestic manufacturer, this is the most saving but this is very e$pensive to the$porter because he has to send a mechanic together with many tools and spare parts to buyer(s country.

ption : Allow the Buyer to repair at &$porter(s cost.

The risk that the e$porter may easily encounter can be an e$pensive repair bill or trepair may not properly be carried out which make the e$porter has to fi$ under the warranAlmost every e$porters try to avoid this or allow it only in e$ceptional cases and then only w

the e$porter(s e$press approval.

ption : eplace `Yart or hole !tem

By this way, the e$porter can keep the goodwill of the customer. owever, it is verye$pensive especially, when the customer want to send back the defective item, which leads to

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same problems as option : sets of customs, air mail or air freight. Sometimes, skilledtechnican must be at hand, gqi th @Fn n Mc 4x @ l p @ t thiFt b]. And the e$porter(s e$pensmuch more higher than the local trader.

ption : educe the price.

This is the replacement of option and option . !f the buyer pay by L20, the seller mureduce price directly. !f payment is on open account, and the invoice has not yet been settled, payment due is simply reduced. 3oreover, comple$ item include retainer provision `normal-Z which is kept by the buyer until the end of the defects liability period to negotiate pricreductions.

ption -: eturn the #oods and efund the Yrice.

The e$porter do not want to use this option this is the same as lose the contract. Tvalue of defective goods is not as high as the cost of return shipment to the e$porter(s counThis means the deal is a total loss for the e$porter. So, if the buyer insists on including a retand refund clause in the contract. The e$porter must protect himself by allowing this optonly in e$ceptional cases and with his e$press agreement.

6 7ho choo+e+

3ainly e$porter depends on what kinds of defects that the e$porter must be fle$ible irepairing to save money.

Let us look at a clause that mentions all five options, but still allows the e$porter tnecessary freedom:

Trang 0u gGc 0u d]ch

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!n the event of a defect coming tolight and being notified to the Seller,the Seller shall, without undue dalay,make good the defect at his own riskand cost and at his discretion in oneof the following ways:

a. epair the defective item

b. Allow the Buyer or a third partyappointed by the Buyer to repair thedefective item at the seller(s cost

c. eplace the defective item

d. educe the contract price

e. Allow the Buyer to return thedefective goods and refund all sums paid for the goods.

Trong tr Nng h p sai s?t @ c t_m thWy v=thQng bOo @Fn ng Ni bOn, ng Ni bOn ngayl


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/IST O" TA2/ES AND T!EIR TRANS/ATIONS:

Ta le 1 ;page 11*ch ' trang 11? C=, *@ch

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!nspection before %elivery

The Buyer may, at the Buyer(soption, inspect the #oods prior to

shipment. At least fourteen days beforethe actual delivery date, the Seller shallgive the notice to the Buyer, or to anyagent nominated by the Buyer, that the#oods are available for inspection. TheSeller shall permit access to the #oods for purposes of inspection at a reasonabletime agreed by the parties.

xi m tra tr Mc khi v cho phjph=ng h?a @ c ki m tra v=o thNi @i m h p lm= hai bDn @^ th;a thu


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Ta le 3 ;page 12"


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phEn.

V. uy7n cIa ng Ni bOn @ sqa ch a bWt ckhiFm khuyFt n=o trong vi9c giao h=ng v n l=

@7 gy tranh c^i nFu nh= $uWt khKu muGn*uy7n n=y, h p @Png ph8i cung cWp @i7u khcEn thiFt.

Ta le 4 ;page 12*


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1. 3ost contracts contain anassurance that the e$porter will make goodany defects in his products: the assurance isvariously know as a warranty, a defectsliability provision, or incorrectly~aguarantee.

. The term guarantee, in strictlegal usage, means a promise aboutsomebody else(s perfomance it is ,therefore, not incorrect in the conte$t ofdefects liability.

3. The word guarantee might produce a dangerous result for the e$porterunder certain applicable laws.

4. The term warranty is `correctlyused in many other conte$ts than the product warranty.

-. Yrobably the best term isdefects liability since this is the only termwith an e$clusive and unmistakablemeaning.

. Eu hFt cOc h p @Png c? m t @8m brng ng Ni $uWt khKu s> sqa ch a tGt bWt kkhiFm khuyFt n=o trong cOc s8n phKm cIa m b8o @8m @ c biFt nh l= m t s b8o h=nh, mtrOch nhi9m cung cWp cOc khiFm khuyFt, khQng ho=n to=n ch nh $Oc m t s b8o l^nh.

2. i9c b8o l^nh, trong vi9c Op d ng plu


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Ta le ) ;page 13


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0u trong sOch trang 0u d]ch

%isclaimer of arranty

A. The software provided under this

Agreement is furnished as is and withoutsupport of any kind whatsoever.

B. The supplier disclaims all warrantieswith regard to any software licensed to the purchaser under this agreement, including allimplied warranties of merchantability andfitness for a particular purpose. !n no event

shall the supplierbe liable for any special,indirect or conse*uential damages whatsoeverresulting from loss of use, data or profits,whether in an actionof contract, negligence orother tortious action, arising out of or inconnection with use or performance of anysoftware licensed under this agreement.

C. The Supplier(s prices are based inmaterial part upon this limitation of theSupplier(s liability.

6i7u kho8n tU b;

A. YhEn m7m @ c cung cWp d Mi s @P

n=y cung cWp giGng h9t v= khQng k m theos h[ tr n=o.

B. 4g Ni cung cWp tU b; to=n b nh ng @kh;an vMi s *uan tm @Fn cOc lo i giWy pmua bOn d Mi s @Png , bao gPm to=n b @i7u kho8n cIa kh8 n ng th Jng m i v= phH hvMi nh ng yDu cEu @ c bi9t. xhQng c? vi9

cung cWp c? trOch nhi9m vMi bWt k t n th bi9t hay giOn tiFp n=o khi m= @? l= kFt *vi9c mWt mOt d li9u hay l i nhu


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41

Trang 0u trong sOch 0u d]ch

z

The %efects LiabilityYeriod shall be e$tended by a period e*ual to the periodduring which the #oodscannot be used by reason ofany defect, but not so as to

e$tend the %efects LiabilityYeriod for more than twenty"four months from the date offirst delivery of the #oodsrepaired or replaced under this provision.

ThNi h n trOch nhi9m phOp l v7 sai s?t@ c gia h n thDm m t kho8ng thNi gian bvMi thNi gian m= h=ng h?a khQng th sq d ngnh ng sai s?t @? gy ra, nh ng khQng gia *uO thOng k tU ng=y giao h=ng @Eu tiDsG h=ng h?a @ c sqa ch a hay thay thF th

6i7u kho8n n=y.

Any Supplies furnished by

way of replacement underwarranty shall be sub)ect tothe provisions of this 0lauseto the same e$tent as Suppliesinitially accepted by the0ontractor for a full further period of warranty.

BWt c h=ng h?a n=o @ c cung cWp b

ph Jng th c thay thF trong thNi h n b8o h=nh ph8i tun theo 6i7u kho8n n=y vMi cHngm c @ nh nh ng h=ng h?a m= ng Ni k kFh p @Png @^ chWp thu ph8i tun theo 6i7u kho8n ph8i ch]u m t ThNi h n b8o h=nh @Ey @I n anhiDn, t ng thNi h n b8o h=nh trong bWtr Nng h p n=o c ng khQng @ c v t *uO n m.

4otice of %efects

The Buyer shall notify theSeller of defects withoutundue delay.

ThQng bOo v7 Sai s?t

4g Ni 3ua s> thQng bOo cho 4g Ni BOn nh ng sai s?t m= khQng @ c tr_ ho^n *uO m

3aking #ood of %efects

The Seller shall make

good of the defect or damageas soon as practicable and at

Sqa ch a sai s?t

4g Ni BOn s> sqa ch a sai s?t hay thi9t h

ngay khi c? th th c hi9n @ c v= ph8i t ch]um{i chi ph .


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Ta le , ;page 143


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without undue dalay, repair or replacethe defective item at his own risk andcost.

thF h=ng h?a sai s?t, ch]u m{i rIi ro v= c ph .

Ta le 12 ;page 14)

74595602 Terms of Contract

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