Important Elements Of International Sales Contract And Ways To Avoid Problems

Four elements of an enforceable contract

The relationship between a company and its associates must be bounded with four significant elements that makes a contract enforceable. These elements act as the pillars of the contract that bounds the company with its associates such as suppliers into a professional bond (Macaulay, 2018). The first element of an enforceable contract is the offer that the company makes to its supplier. In this scenario, the company makes an offer to its supplier with all the details mentioned. This is even regarded as the first stage of creating an enforceable contract along with the offer comes the agreement r acceptance of the offer that both the parties have to accept with their consent. The second element of an enforceable contract is that each party must readily agree to create a legal relationship with all the legal terms mentioned in details  (Hughes, Champion & Murdoch, (2015). This helps the contract give a legal aspect and put a check on the contract with legal regulations. The third element of an enforceable contract is that each party must have the capacity to enter into a legal agreement. Any party fails to do so the contract cannot be termed as enforceable. In this scenario, both the company and the associated supplier must have the legal capacity to get into the contract. Lastly, one of the significant element of the contract is that the purpose of the contract must be legal in terms and should not include or engage into an illegal act that would endanger both the company and the supplier (Mattson & Schneider, 2014).

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Since in this scenario the agreement is based on, international sales that means both the parties belong to two different countries the contract must agree on certain terms and conditions. Some important elements that must be included in the agreement are – Product is one of the key elements that must be mentioned with precise detail in the agreement of the contract (Jacobi & Weiss, 2013). In this scenario, the product is the container of merchandise that the company intends to buy from its supplier. Therefore, in the agreement a detailed mention of those merchandises must be included mandatorily. Secondly, the quantity of the delivered products must be specified in the agreement. The quantity of the delivered product should be mentioned in the draft of the contract (Schepker et al., 2014). However, if the party fails to provide the exact quantity in the draft, a range of the quantity must be included instead. Thirdly, the time and place of the products that should be delivered must also be included in the agreement. This will create a specific deadline for the supplier within which the products must be delivered to the company. Lastly, the price must also be considered in the agreement, as it is one of the significant part of the contract. However, the factors on which the price is set must be specified in the agreement with precise details beforehand. These factors may be terms of payment and so on. These are some other elements as well that must be considered in the agreement such as government requirements, ownership transfer and so on.

Important elements to be included in an international sales contract

For the purpose of avoiding problems in the business deals, certain trouble spots must be considered beforehand. These trouble spots could arise unexpectedly and could hamper the business deal for both the parties (Abdul Rahman et al., 2014). Hence, to avoid these certain aspects must be considered to avoid problems. It is significant to consider the timeliness of the products that are supposed to be delivered to the company. Another significant spot that must be considered in order to avoid any trouble is the proper packaging of the products. There might be some defects in the packaging of the products that could hamper or damage the products. This could create problem between the supplier and the company. Another trouble spot that must be considered beforehand are the implied warranties that come attached with the containers carrying the good or in this case the merchandise (Schmidt-Kessel & Silkens, 2015). Some items may be perishable and thus it is essential to deliver the products that are within the warranty. It is even essential to consider the invoice slip that is attached with the containers. This might minimise some legal issues during the period of transportation of goods. One of the key problem areas that is essential to be considered is the payment between the supplier and the company. Any delay or issue regarding the payment might discard the deal between the two parties. Therefore, it is extremely essential to specify the mode of payment and other payment related terms that must be included in the draft of the contract.

It is significant to mention the terms on which the container shipment must be made. Therefore the key terms that must be considered in a contract for the shipment of container are – Container tariff is one the significant terms that must be mentioned in the contract. Another term that must be included in the contract is warranty of the merchants who are transporting the products to the appropriate buyer. Another term that is essential to consider within the contract is compensation and liability provision that is imposed on the supplier. If the supplier damages or delay the products that are to be delivered intentionally or purposely the supplier is liable for the damage of the products or the loss that the company would suffer due to the delay. A compensation price is provisioned to be paid to the company by the supplier who fails to deliver products purposely. This includes the damage of the products as well; the supplier would pay a compensation price if the products delivered suffer any kind of damage during the transportation of the shipment. The terms must also include the merchants responsibility that comes within the clauses mentioned in the contract. The merchants’ responsibility must be performed without any failed action as the terms clearly specify the enumerated responsibility entitled to the merchants who are supposed to deliver the items to the appropriate company within the set deadline.

Trouble spots to watch out for in business deals

An enforceable contract includes all the four elements that are mentioned in the above discussion however, there might be occurrence of certain defects that can make the contract unviable. The breach of contract by any of the associated parties can make the contract unviable. Both the parties in any cost must follow the terms and conditions that are mentioned in the contract. If any of the mentioned terms and conditions are not fulfilled then the contract is termed to unviable. The breach of the contract might include violations from any of the associated party such as delay in payments or failure to deliver the said products on the set deadline. The defects could even include the associated parties’ incompetence towards the agreed contract (Hariga et al., 2013). There might be a situation when the supplier fails to deliver quality products to the company and this might be related with the specific performance issue. Therefore, it is extremely essential to consider the contract carefully before signing. The defect may also arise if any of the party engages into illegal action that might hamper the reputation of the opponent party. In such scenario, the contract may become unviable, as it is one of the key elements of en enforceable contract that all the parties must have a legal relationship. It is extremely essential to provide an evidence towards the breach of the above-mentioned violations then only the contract could be termed as unviable. The terms and conditions are the essential part of the contract. If any breach occurs regarding the terms and conditions then the contract would be termed as null.

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The inclusion of contracts is extremely important when it comes to establishing an international business deal. If any of the parties involved breaches the terms and conditions mentioned in the contract then the defendant party could involve the litigation procedure where they can enforce a lawsuit on the accused party (Hampton, 2014). In order to win the lawsuit the defendant have to provide correct and relevant evidences that would ensure the defendant to win the case. In such scenario the accused party has to compensate and provide the defendant with the compensation amount. Apart from the litigation procedure the associated parties could settle their dispute with the help of alternative dispute resolution which includes a number of procedure with the help of which the parties involved in the contract could settle their differences. Arbitration is one such process where the parties could choose their tribunals on their own. This procedure is a much simplified procedure than litigation where the scope of choosing a judge is not applicable. Now these, procedures could give an outcome that would result a party that is default in nature. In such scenario, the court of law penalises the defaulting party.

References:

Abdul-Rahman, A., Latif, R. A., Muda, R., & Abdullah, M. A. (2014). Failure and potential of profit-loss sharing contracts: A perspective of New Institutional, Economic (NIE) Theory. Pacific-Basin Finance Journal, 28, 136-151.

Hampton, J. (2017). Contract and consent. A companion to contemporary political philosophy, 478-492.

Hariga, M., Gumus, M., Daghfous, A., & Goyal, S. K. (2013). A vendor managed inventory model under contractual storage agreement. Computers & Operations Research, 40(8), 2138-2144.

Hughes, W., Champion, R., & Murdoch, J. (2015). Construction contracts: law and management. Routledge.

Jacobi, O., & Weiss, A. (2013). The effect of time on default remedies for breach of contract. International Review of Law and Economics, 35, 13-25.

Macaulay, S. (2018). Non-contractual relations in business: A preliminary study. In The Law and Society Canon (pp. 155-167). Routledge.

Mattson, I. A., & Schneider, L. J. (2014). License and Contract Management: Implementing a Useable System for Your Law Library. AALL Spectrum, 19, 17.

Salant, Y., & Siegel, R. (2018). Contracts with framing. American Economic Journal: Microeconomics, 10(3), 315-46.

Schepker, D. J., Oh, W. Y., Martynov, A., & Poppo, L. (2014). The many futures of contracts: Moving beyond structure and safeguarding to coordination and adaptation. Journal of Management, 40(1), 193-225.

Schmidt-Kessel, M., & Silkens, E. (2015). Breach of Contract. In European Perspectives on the Common European Sales Law (pp. 111-135). Springer, Cham.