What is an Export Contract?
A contract is a transaction that is formed by
the mutual declaration of will of one or more persons or organizations and aims
to produce legal results. Unless otherwise stated in the law, the validity of a
contract is not dependent on the form condition, but at least the basic points
must be agreed. This is especially true in the context of
an export contract, where
specific terms must be clearly defined to avoid potential disputes.
According to the Contracts for the International Sale of Goods (CISG),
to which 94 states are parties as of April 2021, the main issues expected to be
agreed upon in import export agreements are as follows:
·
Quality and quantity of
goods
·
Price
·
Payment term and method
·
Delivery date, place, and
type
·
Obligations of the
parties
·
Additions or terms for
disputes
In summary, an export contract meaning encompasses all the agreed terms
between the buyer and the seller for the international sale of goods. These
agreements ensure that both parties are clear about their rights and
responsibilities.
Validity Rules of Contracts
For contracts to be valid, certain conditions
must be met. These conditions are generally as follows:
1. No violation of capacity
For contracts to be valid, the parties must have
the capacity to enter into the contract. The ability of the person making the
declaration of will to have the power to distinguish is the basic condition of
the legal action capacity. Otherwise, the contracts are absolutely void. When preparing an import export contract sample,
ensuring the capacity of both parties is critical.
2. Compliance with law, morality, personal rights
and public order
Contracts must comply not only with the Law of
Obligations, but also with all the imperative rules of law, morality, personal
rights, and public order. This is an essential element of any export
agreement template to
maintain its legal validity.
3. Realizability of the subject of the contract
In order for the contracts to be valid, the
subject of the contract must not be physically or legally impossible. This principle should be carefully observed when drafting an export
agreement format to
ensure all obligations can be fulfilled.
4. Mutual Agreement
In order for the contracts to be valid, the
parties must be in agreement and the declarations of intent must be given
properly. This is one of the core export
agreement terms and conditions for ensuring clarity and mutual
consent.
5. The price is specified
Trading contracts without unit price and total
amount are not valid. Clearly stating these details is a
fundamental part of an export agreement
template to avoid
disputes.
United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention, CISG)
On 11 April 1980, the UN Conference on Contracts
for the International Sale of Goods convened in Vienna, the headquarters of the
United Nations Commission on International Trade Law (UNCITRAL), and Contracts
for the International Sale of Goods (CISG) was adopted.
The basis in CISG is the freedom of will of the
parties and the enforceability of the contract. In the provisions of the CISG,
it has been decided that, within the scope of the applicability of the
agreement, the contracts for the sale of goods between the parties whose
workplaces are in different contracting states are subject to CISG, unless
otherwise agreed, and that the CISG can be applied to the sales contracts
between the parties that are not from the contracting states.
According to CISG, which makes international
sales law uniform and contributes to the removal of legal obstacles in
international trade, the rights and obligations of the parties are subject to
the Convention unless otherwise agreed.
The content of the Convention is as follows:
·
Sphere of Application and General Provisions
·
Formation of the Contract
·
Sale of Goods
§ General Provisions
§ Obligations of the Seller
1. Delivery of the Goods and Handing Over of Documents
2. Conformity of the Goods and Third-Party Claims
3. Remedies for Breach of Contract by the Seller
§ Obligations of the Buyer
§ Payment of the Price
2. Taking delivery
3. Remedies for Breach of Contract by the Buyer
§ Passing of Risk
§ Provisions Common to the Obligations of the Seller and
of the Buyer
1. Anticipatory Breach and Instalment Contracts
2. Damages
3. Interest
4. Exemptions
5. Effects of Avoidance
6. Preservation of the Goods
· Final Provisions
Key Export Agreement Elements and Considerations
Although it varies according to the subject of the contract to be made
between the parties (purchase and sale contract, service contract, construction
contract, etc.), the contents of commercial contracts in general are as
follows:
1. Contract
Title: The contract must have a title that will express the subject of
the contract.
2. Parties: The
commercial titles, addresses and contact information of the parties should be
stated in full in the contracts. In international commercial contracts, the
nationalities of the parties should also be written.
3. Subject
of the Contract: If the contract is a purchase and sale contract, the
details of the goods must be clearly stated. Details can be specified in this
article of the contract, as well as documents such as technical reports or
drawings can be attached to the contract. It is important that the documents
annexed to the contract are clearly written in the relevant article and that
they are an integral part of the contract. For
an export contract example,
specifying detailed product descriptions is critical.
4. Rights
and Obligations of the Parties: The rights and obligations of the
parties should be clearly stated in the contract. These
are essential elements of an export contract to ensure clarity.
5. Amount
of Goods, Unit Price and Contract Amount: It is very important to
write the quantity, unit price and contract amount of the goods in purchase and
sale contracts. The use of international measurement units when specifying the
quantity of the goods is important in terms of preventing any disputes that may
arise. While writing the unit price and contract amount, it should be stated in
which country's currency the payment will be made. For the works that are
agreed on a turnkey basis, there is no need to specify the unit price, it is
sufficient to specify the contract amount. This
is a common practice in an export contract format.
6. Payment
Terms: There are many payment types in international trade. The type
of payment to be used must be clearly stated in the contract. The bank to be
worked with and IBAN numbers can be added to the contract.
7. Fees
and Expenditures: It is important to clearly write which party will
bear the fees and expenditures, such as customs fees, document costs and taxes
that may arise due to the contract, in order to avoid any disputes that may
arise.
8. Delivery
Place, Time, and Delivery Method of the Goods: The place and time of
delivery of the goods should be specified in the contract in order to change
the party responsible for costs and risks and to determine the delivery time.
Incoterms prepared by the International Chamber of Commerce (ICC) are widely
used for delivery methods. Incoterms applications are not taken into account
unless expressly stated in the contract. The parties must clearly indicate the
agreed delivery method in the contract. Incoterms are not used in service
contracts. This aspect is often detailed in an export
contract sample.
9. Packaging
Conditions: When it is desired to reach an agreement on the packaging
and labeling conditions of the goods in the purchase and sale contracts, it
must be clearly stated in the contract.
10. Commercial
Documents: Although the documents vary according to the subject of the
contract, which party will provide the necessary documents such as
import-export documents, quality certificate and the time should be specified
in the contract.
11. Insurance: Information
such as the type of insurance that the parties have agreed to have, by which
party it will be paid, and the duration of the insurance policy should be
specified in the contracts.
12. Warranty: If
a warranty is given for the work subject to the contract, information such as
the date, duration, scope of the warranty, and the terms of return of the goods
should be included in the contract.
13. Penalties
for Delays: If there are mutually agreed penalties for delays in
shipment or payments, they should be specified in the contract.
14. Intellectual
and Industrial Property Rights: It is important to specify the
regulations regarding intellectual and industrial property rights in the
contract in accordance with the subject of the contract. Legal regulations
regarding intellectual and industrial rights may vary on a country basis.
15. After-Sales
Services: Details of services such as assembly, training and support
agreed to be provided after the sale, the fees for these services, if any, and
the payment method should be specified in the contracts.
16. Maintenance,
Repair and Spare Parts Supply: The details of time and cost for
maintenance and repair, where and how spare parts can be obtained should be
specified in the contracts.
17. Guarantees: If
there is a guarantee in the agreement, details should be added to the
agreements.
18. Inspection: If
it is agreed that an inspection will be made in the production, shipment or
delivery of the goods subject to the contract, it should be included in the
contract. A reasonable time should be given for this inspection, and it should
be stated by whom and where it will be carried out.
19. Failure
to Fulfill the Conditions of the Contract: The penalty to be incurred
by the parties in case of not fulfilling the conditions agreed by the parties
in the contract should be included in the contract in detail.
20. Resolution
of Disputes and Applicable Law: The contract should clearly state
which method will be used, such as resorting to legal remedies or arbitration,
which is one of the alternative ways, in resolving disputes that may arise in
international commercial contracts. In addition, due to the differences in the
legal regulations of the countries, it is of great importance to decide which
law to use in case of disputes.
21. Unexpected
Circumstances, Force Majeure: Due to the occurrence of circumstances
beyond the control of the parties and unforeseen during the preparation of the
contract, it may be difficult or impossible to fulfill the obligations. For
these cases, the Force Majeure and Hardship
Clauses prepared
by the International Chamber of Commerce (ICC) can be used while preparing the
contracts.
22. Arrangements
and Amendments: Details such as how the amendments and arrangements to
be made in the contract will be valid, how they will be accepted as notified,
and what the changes can be about should be clarified in the contracts.
Otherwise, it can be claimed that verbal changes were made.
23. Term
and Date of Contract
24. Effective
Date of the Agreement
25. Termination
of Contract
26. Language
of Agreement and Number of Copies
27. Signature,
Stamp, Seal
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For detailed
information on the subject of target market selection in export, you can review
the content “Target Market
Selection in Export”.
