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FINANCE MARKETING UNIVERSITY

COMMERCE DEPARTMENT
INTERNATIONAL TRADE
Nghiemmarket.blogspot
(AVTMQT 3-4)
Chapter 1: Exporting and the Management of Risk.
Chapter 2: Negotiating Delivery
Chapter 3: Negotiating Price & Payment
Translate Import & Export Contracts
Listening: Business English CD 8
(AVTMQT 5-6)
1.
Negotiating Inspection & Defects liability.
2.
Legal framework
3.
Export Contract
Business English CD 9
EXPORTING AND THE EXPORT CONTRACT
Dr. Dr. James R. Pinnells
Compiled by Mr. Nguyen Thanh Nghiem
(For Internal Use Only)
September 2011
Syllabus
CD 8, 9
-Lessons:
1. Exporting Management of Risk
2. Negotiating Delivery
3. Negotiating Price & Payment

4. Negotiating Inspection & Defect Liability


5. Legal Framework
6. The Export Contract
.

TABLE OF CONTENTS
4.
Exporting and the Management of Risk
5.
Negotiating Delivery
6.
Negotiating Price & payment
7.
Negotiating Inspection & Defects liability.
8.
Legal framework
9.
Export Contract
THIS PART IS USED FOR CD 8
8.1 ORIENTATION TO A NEW JOB
8.1.1 COMPREHENSION QUESTIONS
1) What does Anthony have to do if he wants some coffee?
a. He has to pay 50 cents for each cup.
b. He has to help himself to it in the kitchen.
c. He has to ask Kara to make some coffee for him.
2) If you run out of pencils and paper at work, where can you get more?
a. from the kitchen
b. from the CEOs office.
c. from the storeroom.
3) When Ellen says, We have flex-time here, what does it mean?
a. Workers are not all on the same schedule.
b. There are no clocks at this company.
c. There is time for exercise at the office every day.
4) Using Tiffany as an example, what should you when introduced to a new co-worker?
a. Extend your hand for a handshake.
b. Ask the new employee to make some coffee.
c. Smile and look at your feet.

5) Does Anthony speak a second language?


a. Yes, he speaks French very well.
b. Yes, he speaks a little French.
c. No, he only speaks English.
6) Where is Karas cubicle?
a. Its to the left of the entrance door.
b. Her cubicle is on the shelf in the storeroom.
c. Its free.
7) If something is difficult for you at work, which phrase could you use to express this?
a. Its quiet down here.
b. Im having trouble.
c. Things are certainly flexible here.
8) What is Anthony having trouble with today?
a. Hes having trouble remembering peoples names.
b. He doesnt remember how to speak French.
c. Anthonys having trouble dealing with international accounts.
9) Suppose your boss wants you to visit Mr. Harmon in advance of the design meeting. What do you
need to do?
a. Call Mr. Harmon and invite him to talk with you during the design meeting.
b. Go to the design meeting so you can tell Mr. Harmon about it when you visit him.
c. Meet with Mr. Harmon first, before attending the design meeting.
10) Where is Anthonys workspace going to be at AdRad?
a. Anthony will share Tiffanys cube until his is ready.
b. His cubicle is the first one on the left as you come in.
c. Hell be working in Ellens office for a couple of weeks.
-Perk: Use of a company car is a common perk.
Free coffee is just one of the small perks of working here.
This job has a lot of great perks, including a lot of free travel and membership at a nearby gym.
-Storeroom: Did you look in the storeroom?
I stocked the shelves in the storeroom just yesterday.
Almost everything you need is already on your desk, but the extra supplies are stored in the
storeroom.
-What I need: What I need is a cup of strong coffee.
Im making a list of what I need for my trip to Venezuela.
As soon as I find what I need, Ill get to work.
-Cubicle: Stop by my cubicle later, and we can talk about that.
The worst thing about cubicles is that they have no windows.
I dont have an office of my own, but I have a comfortable little cubicle all to myself.
-As you come in: As you come in, youll see the secretarys desk just inside the door.
Please stop and sign the registry as you come in.
Our office is on the right as you come into the building, its on the left, of course.
Have trouble
I always have trouble finding my way around downtown.
No, we didnt have trouble finding your place- you gave us excellent directions.
Shes having a lot of trouble with her computer today. Shes lost several files already.
Keep names straight
Do you think you can keep all the names straight.
Karas very good at keeping names straight.
When I saw Ted, I called him Tim. I just cant seem to keep these names straight.
Share
Im going to find a roommate to share expenses, that way, I can get a better apartment.
Miles dreamed that he had to share a cubicle with Rick.
Theres only one piece of cake left. Get two forks, and well share it.

Workspace
My workspace is usually pretty messy.
Its a small workspace, but you should find everything you need here.
His workspace used to be a small cube, but now he has a big office with a wooden desk.
In
Is the doctor in?
Mr. Burns is out right now, but Ill let you know when he gets in.
I guess nobodys in yet. The office is completely empty.
Straggling
When the game ended in defeat, the fans went straggling home.
On Monday mornings, the workers come straggling in to the office.
Stop straggling, boys! Stay together and move a little faster!
Flex-time
Im looking for a job with flex-time opportunities.
Do you have flex-time here?
She needs a job with flex-time because her children often need her at home.
In advance
She didnt schedule an appointment in advance, so she couldnt see the dentist.
Youll need to cancel your reservation 24 hours in advance in order to get a refund.
If you had explained the problem in advance, then I would have been prepared to solve it.
Flexible
Oh, come on! Be flexible!
You can come anytime. Were flexible.
Shes not flexible enough for this job. Things are always changing here, and she hates change.
Fluency
She has total fluency not only in Spanish, but also in Portuguese and Italian.
His fluency in Japanese often surprises our clients.
Susan studied German for years, but never achieved fluency until she went to live in Germany.
Useful
This knowledge will be very useful to our company.
Does anybody have any useful ideas?
Yor umbrella is beautiful, but it cant be very useful here in the desert.
International
Will the job involve international travel?
The International Food Court at the mall has ethnic food from many different countries.
Our international accounts are much more profitable
ELLEN
The kitchen is down there. Youll find coffee there and a refrigerator, if you
want to bring your lunch.
ANTHONY Do you have to pay for the coffee?
ELLEN
No, it's free, but you might have to make it yourself sometimes.
ANTHONY That's OK. It's a nice perk.
ELLEN
Yes, it is. And down past the kitchen is the storeroom. If you need supplies
like pads or pens, you can get them from here. 2
ANTHONY What if I cant find what I need?
ELLEN
You can ask Kara. She knows where everything is.
ANTHONY Have I met her?
ELLEN
She's the woman who sits in the first cubicle on the left as you come in.
ANTHONY Oh, yes. Im having trouble keeping all the names straight.
ELLEN
And this is where you'll be working. You'll be sharing a workspace with
Tiffany McGuire until we can get you one of your own.

ANTHONY That's fine. It's quiet down here. Isnt anybody in yet?
ELLEN
Oh, they'll come straggling in.
ANTHONY So everyone isn't required to work the same hours?
ELLEN
Oh, no, we have flex-time here. So everyone puts in at least 40 hours, but
when they do is pretty much up to them.
ANTHONY How does that work for meetings?
ELLEN
We try to schedule them well enough in advance so that everyone can plan
to be there.
ANTHONY Things are certainly more flexible here than at my last job.
ELLEN That was in France?
ANTHONY Yes, it was.
ELLEN
Your fluency in French will be very useful when dealing with some of
our international accounts.
TIFFANY
Good morning, Ellen. Hello.
ELLEN
Tiffany, this is Anthony Brown, our new writer. Today's his first day.
TIFFANY
Nice to meet you, Anthony. Welcome.
ANTHONY Thank you. It's nice to meet you, too.
ELLEN
Tiffany just started working here a few months ago, so she'll be a good one to
ask for help.
TIFFANY
Sure. I know what it's like to be new and not know anyone or where things are.
ANTHONY Thank you. I'm sure I'll have lots of questions.
ELLEN
Well, I've got to get Anthony over to see Mr. Scott in Human Resources so we can
take care of his paperwork.
ANTHONY Nice to meet you. Tiffany.
TIFFANY See you later, Anthony.
8.1.1 COMPREHENSION QUESTIONS
1) What does Anthony have to do if he wants some coffee?
a. He has to pay 50 cents for each cup.
b. He has to help himself to it in the kitchen.
c. He has to ask Kara to make some coffee for him.
2) If you run out of pencils and paper at work, where can you get more?
a. from the kitchen
b. from the CEOs office.
c. from the storeroom.
3) When Ellen says, We have flex-time here, what does it mean?
a. Workers are not all on the same schedule.
b. There are no clocks at this company.
c. There is time for exercise at the office every day.
4) Using Tiffany as an example, what should you do when introduced to a new co-worker?
a. Extend your hand for a handshake.
b. Ask the new employee to make some coffee.
c. Smile and look at your feet.
5) Does Anthony speak a second language?
a. Yes, he speaks French very well.
b. Yes, he speaks a little French.
c. No, he only speaks English.
6) Where is Karas cubicle?
a. Its to the left of the entrance door.
b. Her cubicle is on the shelf in the storeroom.
c. Its free.
7) If something is difficult for you at work, which phrase could you use to express this?
a. Its quiet down here.
b. Im having trouble.
c. Things are certainly flexible here.
8) What is Anthony having trouble with today?
a. Hes having trouble remembering peoples names.
b. He doesnt remember how to speak French.

c. Anthonys having trouble dealing with international accounts.


9) Suppose your boss wants you to visit Mr. Harmon in advance of the design meeting. What do you
need to do?
a. Call Mr. Harmon and invite him to talk with you during the design meeting.
b. Go to the design meeting so you can tell Mr. Harmon about it when you visit him.
c. Meet with Mr. Harmon first, before attending the design meeting.
10) Where is Anthonys workspace going to be at AdRad?
a. Anthony will share Tiffanys cube until his is ready.
b. His cubicle is the first one on the left as you come in.
c. Hell be working in Ellens office for a couple of weeks.
8.2 LISTEN TO DIRECTORS
8.3 TEAMWORK
Excuse me. Tiffany, could I bother you for a second?
Yes?
I'm supposed to review the documents on the Toulouse Travel account, but I cant access the
folder.
Just click on the new accounts icon.
Thanks, Tiffany. Sorry to interrupt you.
No problem.

Hey, Anthony, do you have a minute to talk about this new project?
Sure. You're Rick, right?
Righto, pal. Now, I've got an idea for this project that I think will really blow them away.
Would you guys mind discussing this somewhere else? I've got a deadline.
Sorry, Tiff.
Why don't I meet you in your office? Ill be there in five minutes.
Perfect. I'll see you there.
Look, Anthony, I'm sorry to blow up like that.
Don't worry about it. It's understandable.
It's just that I have a lot of work to do, and having to share the workspace and the computer makes
it harder.
Is there anything I can do to make it easier?
You could pick stuff up when you're done with it.
I guess I have been bad about leaving papers all over the desk.
It isn't that you've been bad. It's just that with two of us in this small space, we have to think about
the other person all the time.
Ill get these out of your way now.
This must be even harder for you, being new and all.
Well, it isn't ideal, that's for sure. But I suppose it'll make me appreciate it more when I have my
own space.
That's for sure.
Id better go see what Rick wants. See you later.
TIFFANY Bye.
1) Who interrupts Tiffany while she's working?
a. Anthony interrupts her.
b. Rick interrupts Tiffany by asking her a question. c. Ellen does.
2) In this scene, how does Tiffany feel about being interrupted while she's working?
a. She feels that Anthony and Rick need her help, and she's going to help them right away.
b. She's annoyed.
c. She's happy to have someone to talk to.
3) Anthony says that he's supposed to review some documents. What does he mean?
a. He's volunteering to review the documents.
b. It's part of his job to review the
documents.
c. He doesn't want to review the documents.
4) What problem does Tiffany help Anthony with?
a. Tiffany shows him how to review documents.
b. She tells him where to find highlighters and floppies.
c. She helps Anthony locate folder in his computer.

5) Rick says that his idea "will blow them away." What does informal expression mean?
a. that nobody will understand his idea
b. that everybody will leave him alone in the
future
c. that people will be very impressed with his idea
6) What is the main topic of conversation between Anthony and Tiffany in this scene?
a. They're discussing a new project.
b. Their conversation is about computers and how difficult they can be to work with.
c. They talk about how hard it is to share a small workspace.
7) Why is Tiffany in a hurry?
a. She has a deadline b. She always goes home at 5:00 o'clock, and it's already 4:50 .
c. She has a lunch appointment and she's running late.
8) When Tiffany says that she is sorry to "blowup like that," how else could she express her feelings?
a. "I'm sorry to hear you had flat tire."
b. I'm sorry to interrupt you.
c. "I'm sorry that I
got angry."
9) Suppose that a co-worker is eating lunch in your cube, and this bothers you. What phrase could
you use to politely ask your co-worker to leave?
a. "Do you think you could crunch those chips a little louder?"
b. "Would you mind eating in the kitchen?'
c. "Are you going to leave mustard stains on my chair again?"
10) Where do Rick and Anthony decide to meet?
a. They're going to meet in the kitchen.
b. Rick has reserved a conference room for their meeting.
c. Anthony's going to go to Rick's office.
11) Why does Rick come to Tiffany's cube, and why does he go away?
a. He comes to the cube to help Anthony with the computer and he leaves when he's done.
b. Tiffany invited Rick to the cube to help her, and he goes out to get coffee.
c. Rick comes to talk to Anthony and he leaves because he's bothering Tiffany.
12) How do Tiffany and Anthony deal with the difficulty of sharing her workspace?
a. They discuss the situation. b. They decide not to talk so they won't bother each other.
c. Tiffany tells Anthony that he can't use her cube anymore.
13) If your colleague says that she has meetings all over town today, what is she telling you?
a. Your colleague will hold several meetings at different times in her office.
b. She has meetings in many different places today.
c. She must attend several meetings downtown today.
14) Which phrase best follows or goes with the expression, "Don't worry"?
a. "You made a huge mistake."
b. "You'll get chewed out for this." c. "It's not a
problem.
15) What does Anthony offer to do to make it easier to share the cube?
a. He offers to do most of his work in the storeroom.
b. He's going to ask Rick to help them discuss the situation.
c. He's going to pick up his papers and other stuff.
8.4 REQUEST CLARIFICATION
ANTHONY & RICK.
Rick, before we talk about the project, can I ask you a question?
Sure thing. I can't guarantee an answer though.
I've met a lot of people in the past couple of days, and most of them are pretty friendly. But I
can't figure Miles out.
Welcome to the club, buddy. Nobody can.
No, I'm serious. He's very cold to me. I must have offended him somehow, but I have no idea how.
Dont worry about it. He's that way with everybody. The only person he ever lightens up with is
Ellen.
So you don't think I did something to annoy him?
Life annoys Miles, Anthony. He's basically a good guy, but he's just too serious and can't stand it
when everybody isn't equally as grim.
Ellen doesn't seem so serious. Why does he lighten up with her and nobody else?
RICK Those two have been friends since the Stone Age. Once you've known Miles for a few
millennia, he'll relax with you, too.

ANTHONY When I was introduced to him, he seemed polite enough, but when I ran into him in the
lunchroom yesterday he barely said "Hi" to me.
RICK Well, he's got a lot on his mind these days.
ANTHONY What do you mean?
RICK
Off the record, rumor has it that he's looking for another job.
ANTHONY Why in the world would he do that?
RICK
Let's just say there are some people here with whom our Miles can't quite get along.
ANTHONY But everybody here is so friendly. Why can't he talk to them about it?
RICK
Mostly because they won't take it as seriously as he will and then he'll get even madder.
ANTHONY That's hard to believe.
RICK Well, you know us creative types. We're unpredictable.
ANTHONY You mean it's you that Miles cant get along with?
To be fair, it isn't all his fault. We just dont see eye-to-eye on many things.
ANTHONY That's too bad.
RICK
It is too bad. But if we dont get back to work here, we might be the ones looking for jobs.
OK. Now, what was your idea?
Questions
1 Where are Anthony and Rick meeting?
a. in Ellen's office
b. in Ricks cubicle c. in the storeroom
7 If you think someone is being too serious in an informal setting, what can you say?
a. Nobody can.
b. "Lighten up."
c. Sure thing.
7 What does Rick say about Miles's personality?
a. He says that Miles likes to lighten up with most of his co-workers during meetings
b. Rick says that Miles is cold with everybody except Ellen.
c. Rick thinks that Miles is very friendly.
7 Which phrase can you use to ask someone to keep your information secret or confidential?
a. "these days" b. "rumor has it"
c. off the record
7 Why does Rick say, "We just don't see eye to eye"?
a. He's implying that his eyesight is better than Miles's.
b. This is his way of saying that he's much taller than Miles.
c. He means that he and Miles disagree.
1) What does Anthony want to talk about?
A)He wants to talk about the weather.
B)He asks Rick to tell him something about
Ellen.
C)Anthony wants to ask question about Miles.
2) Suppose that you are having trouble understanding your boss's personality. Which phrase would
express this idea?
A) "I just can't figure him out."
B) "I'm serious."
C) "I can't guarantee an answer."
7 Rick says, "Welcome to the club." What does this mean?
He means that Anthony is now a member of a special organization of writers and artists.
Rick is inviting Anthony to play golf with him.
It means that many people have had a similar experience.
7 What is Anthony's opinion of his co-workers?
He says that they all take things too seriously, except for Miles.
He thinks everyone seems cold.
Anthony thinks they are friendly, except for Miles
7Which statement best summarizes this scene?
Rick tries to talk about Miles, but Anthony doesn't want to.
After Rick and Anthony discuss Miles, they decide to get to work.
Anthony and Rick work on project, and then they start talking about Miles.
8.5 OBTAIN HELP Anthony & Tiffany
ANT: Oh, hello Tiffany. Would you mind helping me with something?
Sure. What can I do for you?
Im working on a new slogan for a travel agency, and Im having some problems.

What's the matter?


Well, they want a short, punchy catch phrase.
We all know how easy it is to come up with those.
Yes, well, all I've got is a bunch of silly phrases, none of which hits the mark.
...What have you come up with so far?
Tell us where, we'll get you there" is about the best I've got.
Hmm, I see what you mean. Rhymes are tough. What kind of travel do they specialize in?
Right now all kinds, but they're hoping to lure in more business travelers with this new campaign.
Well, can you work the word "business" into a slogan?
Something like, "It's our business to get you to your business"?
I liked the first one better. What's the name of the agency?
Toulouse Travel. I think it's the person's name or something.
How about, "No time to lose? Call Toulouse"?
They've already rejected that one, about a hundred years ago.
Well, let's work on the, "Take the hassle out of travel" angle.
"Near or far, we'll get you that"?
I was thinking more along the lines of, "Let us do the work while you relax."
Well, as you can see, I'm not coming up with anything.
When I get blocked like that, it helps to wander around and talk to people.
I dont really know anyone well enough to just drop in on them in their cube. I'd feel like Im
disturbing them.
Dont worry. People do it all the time. They'll let you know if they're busy.
Should I ask people for input?
You could, but be careful. If you ask, and then dont use it, they might feel slighted.
Maybe I go find Rick. He's easy to talk to.
He's such a nut that it might help you get your creative juices flowing.
Whatever works. Thanks. I'll see you later.
Good luck!
8 What is Anthony's problem in this scene?
a. He's having trouble creating a slogan.
b. He wants to take a new job at a travel agency.
c. He doesn't know where to get the supplies he needs.
8 If you are temporarily unable to be creative, how can you express this problem?
a. I'm blocked. b. I liked the first one."
c. I see what you mean"
8 How does Tiffany try to help Anthony at first?
a. She tries brainstorming some ideas with him.
b. She tells him that his first idea is very good.
c. She tells him to go to lunch and she will think of a slogan for him.
8 Tiffany and Anthony don't create a good slogan. What does Tiffany suggest next?
a. She suggests that Anthony get a different job.
b. Tiffany suggests that Anthony talk to people around the office.
c. She suggests that he use his first idea because it's the best one.
8 What is Tiffany's attitude in this scene?
a. Tiffany is cold and rude
b. She's helpful and supportive.
c. She seems to be annoyed and
impatient.
6 What does Anthony do when he's having some problems with his work?
a. He tells his boss that the job is too difficult.
b. He pretends that everything is fine.
c. He asks a co-worker for help.
7. If you think your co-worker is having some problems, how can you express that you'd like to
help?
a. Tell us where.
b. What's the matter" c. I'll see you later.
8 Which two words are an example of a rhyme?
a. near, far
b. hassle, travel
c. where, there
9 How does Anthony feel about dropping in on his co-workers?
a. He's afraid he may bother them if they're busy.
b. He wants to drop in, but Tiffany tells him nobody does that at AdRad.
c. He enjoys going to visit his co-workers without telling them in advance.
10. What does Anthony decide to do?

a. He's going to drink some juice and try to think some more.
b. He's going to talk to Rick.
c. He decides to drop in on Ellen.
8.6 DISCUSS SENSITIVE ISSUES
TIFF. Rick, do you have a second?
RICK. Sure, Tiff, what's on your mind?
TIFF. There's something important I need to talk to you about.
ANTHONY I can go somewhere else if you two want to talk.
RICK.
No, stay right where you are. We've got no secrets.
TIFF. Rick, you probably don't even realize it, but Im uncomfortable with the way you sometimes
treat me in meetings.
RICK. You're uncomfortable? Talk to Miles. He's in agony.
TIFF. I'm serious, Rick. At first I let it pass, but it's becoming a problem.
RICK. Im sorry. Tiff. I had no idea I was doing anything to make you uncomfortable.
ANT. Maybe Ill get a cup of coffee.
TIFF. You may not realize it, but when you interrupt me, or answer for me in a meeting, it makes it
seem as though what I have to say isn't important.
RICK. Gee, Tiff, I think maybe you're making too big a deal out of nothing. I don't mean to make it
look that way.
TIFF What you mean to do is beside the point. The fact is, you do it, and I think it hurts my
credibility.
RICK You know how I am in the give-and-take of a meeting, I get into the middle of it.
TIFF And that's fine, up to a point. But when you start monopolizing the meeting, I feel like I might
as well not even be there. "
RICK All you have to do is jump in and Ill shut up, honest.
TIFF I can't do that. I hate to interrupt people.
RICK Even if they've interrupted you?
TIFF That's right. Rick. I don't want to work this way anymore.
RICK You don't mean that you're thinking of resigning?
TIFF Let's not get melodramatic. What Im saying is I feel like it's damaging our working
relationship.
RICK OK, how about if we meet each other half way?
TIFF
How do you propose we do that?
RICK
Ill do my best to not interrupt you, but if I do, you interrupt me back.
TIFF
No, that's just shifting the responsibility to me, and the way I see it, it's your problem, not
mine.
RICK.
You've got a point. OK, I promise I won't cut you off anymore, no matter how excited I
get.
TIFF.
That sounds pretty good. And if you do interrupt me again, what then?
RICK.
Ill buy you lunch at The Hungry Lizard.
TIFF.
I'll settle for a coffee at Cool Beans.
RICK.
It's a deal.
TIFF.
Thanks, Rick.
RICK.
No problem, Tiff. I'll see you later.
TIFF.
OK, Rick.
QUESTIONS
1. Who opens the discussion in this scene and how?
a. Tiffany does, by asking Rick if he has a second. b. Rick does, by saying, "Whats on your mind?'
c. Anthony does, by getting up to go for coffee.
9. What polite action does Anthony take during the discussion?
a. He offers to get coffee for everyone.
b. He offers to leave the cube so that Rick and Tiffany can talk more privately.
c. He offers suggestions to help Tiffany and Rick understand each other.
3 What is the subject of this discussion?
a. Tiffany doesn't like Rick to interrupt her during meetings.
b. Rick thinks that Tiffany is hurting his credibility.
c. Rick thinks that Tiffany is monopolizing the meetings.
9. What is a good phrase to use if you want to compromise with someone?

a. "Let's meet each other halfway." b. That's beside the point." c. "Don't be melodramatic."
10. Which of the following is an example of cutting someone off?
a. You interrupt a colleague who hasn't finished speaking.
b. You call the office to reschedule your meeting.
c. You resign from your job because you can't get along with a colleague.
6. Why does Anthony go out for a cup of coffee?
a. He wants to let Tiffany and Rick talk privately.
b. Tiffany asked him to get her a cup
c. He's feeling very sleepy and wants a caffeine boost.
7. Suppose your client makes a rude comment, and your boss tells you to let it pass. What does your
boss want you to do?
a. Ask the client to apologize.
b. Ignore the comment or pretend you didn't hear it.
c. Make a rude comment back to the client.
8. Why does Rick interrupt Tiffany during meetings?
a. He gets excited and has a lot to say.
b. He wants her to resign from her job.
c. He wants to further credibility and embarrass her.
9. What does Rick suggest that Tiffany do about the problem?
a. He says that Tiffany should tell him to shut up.
b. He suggests that Tiffany jump up and down every time he interrupts her.
c. He says that Tiffany should interrupt him in the same manner.
10. Tiffany and Rick make a deal. What are the terms of their deal?
a. If Rick interrupts her again, he has to buy her a coffee at Cool Beans.
b. If Tiffany takes Rick to lunch at The Hungry Lizard, Rick will stop interrupting her.
c. Rick won't interrupt anymore if she promises to stop yelling at him.
8.7 ASSERT AUTHORITY
RICK: Hi, Ellen. What's up?
ELLEN Come on in, Rick. Would you mind closing the door?
RICK Sure. Why all the secrecy?
ELLEN No secrecy. I just don't want to be interrupted.
RICK Uhuh. Sounds like I'm going to get chewed out.
ELLEN Rick, can you be serious for five minutes?
RICK Ill try, but you know me, Boss.
ELLEN You know that Miles has given notice? He's going to work for Cool Beans.
RICK Cool.
ELLEN Not cool at all. That's going to leave us scrambling to fill his position. RICK Just stuff a shirt
and prop it up in the meeting room. That'll be fine. ELLEN Listen, Rick, I don't have time for fooling
around.
RICK: OK, Ellen, Im at your service. What do you need done?
ELLEN: I need you to wrap up your work on the Food Forum project.
RICK: No problem. I'll have it done in plenty of time.
ELLEN: Rick, we're already a week past deadline. I have to nail down a final date now. RICK: How
about a week from today?
ELLEN: Not good enough. I have a meeting with Terrence Landis Monday morning.
RICK: Then when do you need it?
ELLEN: I'll need it by Friday noon in order to have time to get ready for the meeting.
RICK: Gee, Ellen, I don't know. That's kind of tight.
ELLEN: I know it is Rick, and I'd like to give you more time, but Im up against the wall.
RICK: OK, Chief, you'll have it by noon on Friday.
ELLEN: Thanks, Rick.
RICK: As the wharf boss said in On the Waterfront, Lets go to work!
Answer the following questions
10) What does Rick think this meeting is about?
a. Rick thinks that perhaps Ellen is going to reprimand him.
b. He thinks maybe Ellen will offer him Miles's old job.

c. Rick thinks Ellen's angry at him for chewing gum.


11) Why does Ellen ask Rick to close the door?
a. She doesn't want to be interrupted while she's talking to Rick.
b. She wants to yell at Rick and she doesn't want anyone else to hear her.
c. She wants to tell Rick secret.
11) Suppose you are in a meeting, and your boss asks you to be serious for five minutes. What do
you need to do?
a. Concentrate on the importance of the meeting.
b. Tell a few good jokes to help everyone lighten up.
c. Look at your watch and don't talk for exactly five minutes.
11) Which is the best way to tell a colleague that you've resigned from your job?
a. "I'm going to get chewed out."
b. "No secrecy."
c. "I've given notice."
11) How does Rick react to the news that Miles has given notice?
a. He doesn't believe the news b. He becomes very serious and expresses concern. c. He's not
bothered at all.
6) What does Ellen actually want to discuss at this meeting with Rick?
a. Ellen wants Rick to schedule a meeting with Mi. Landis.
b. Ellen wants him to finish up the Food Forum project ASAP.
c. She's asking Rick to extend the deadline for the Food Forum project.
7) How does Ellen feel about Miles's resignation?
a. She's not bothered at all.
b. She thinks it's very cool that he's leaving.
c. She thinks it will be difficult to find someone to do his job.
8) If your client asks you to nail down a date for a meeting, what do you need to do?
a. Give your client three or four possible dates for the meeting.
b. Choose a specific date for the meeting and notify your client.
c. Secure the calendar to the wall so it won't blow away when the window's open.
9) When does Ellen need the Food Forum work from Rick?
a. by 12:00 on Friday b. by noon on Monday
c. a week from today
10) What is Rick's response to Ellen's request?
a. He's happy that Ellen has given him more time.
b. He says that he can't possibly complete the work by Friday.
c. He'd like more time but promises to finish by the deadline.
8.8 NETWORKING
TIFFANY Wow, what a long day!
ANTHONY No kidding. Are you getting ready to leave?
TIFFANY No. Ive got some things to do.
ANTHONY Do you work late a lot?
TIFFANY Sometimes. But this isn't work.
ANTHONY What are you doing?
TIFFANY I'm writing a paper for a course Im taking. I dont have a computer at home.
ANTHONY Do they mind if you do that kind of work in the office?
TIFFANY Oh, no. As long as I do it on my own time, Ellen says it's fine. And I bring in my own
paper to print it on.
ANTHONY Are you taking courses for fun, or working toward a degree?
TIFFANY: Im working on an M.B.A. I'd like to open my own agency some day.
ANTHONY: Wow, that's impressive. You know, I took a couple of business courses and enjoyed
them. Id like to take more some day.
TIFFANY Why not start now? AdRad will pay tuition for work-related courses.
ANTHONY Even for a new employee?
TIFFANY Yeah, it's one of the benefits. Didnt you read the manual? ANTHONY I
just skimmed through it. I havent had much time recently.
TIFFANY Well, the courses are great and you meet a lot of interesting people that can help you in
your career.
ANTHONY In a college class?
TIFFANY Sure. Actually, I heard about this job from one of my professors.
ANTHONY Seriously?

TIFFANY Really. A lot of the teachers are tied into local businesses. It's great for networking.
ANTHONY It wouldn't hurt me to meet some people.
TIFFANY And most of the students are professionals working to advance their skills.
I've made lots of contacts in the advertising business through my classes.
ANTHONY Is the program hard to get into?
TIFFANY Yes, but I think if you've come this far in your career, you've probably got the credentials
to be accepted.
ANTHONY Do you know who I should talk to about applying?
TIFFANY Why don't you come to class with me tomorrow night? I can introduce you to Professor
Cassandra and show you around.
ANTHONY That would be great. Are you sure you dont mind?
TIFFANY Not at all. Class starts at seven. We can leave from here and grab something to eat first.
ANTHONY Thanks, Tiffany. I'll see you tomorrow.
TIFFANY Good night.
QUESTIONS:
1 Tiffany and Anthony are talking in Tiffany's cube. What time is it?
a. It's probably about 5:00 p.m. because they're talking about going home.
b. It must be about noon since they're planning to get some lunch.
c. It seems to be early in the morning as they've just arrived at the office.
2) Why is Tiffany planning to stay at the office?
a. Tiffany needs to use the computer for some college work.
b. She wants to work late so that she can earn some extra money.
c. Tiffany is finishing Anthony's work for him.
12) Why is Tiffany taking courses?
a. She wants to get an MBA degree and start her own business.
b. She takes courses for fun.
c. Ellen told Tiffany she has to take the courses.
12) Where can you find information about the benefits your company offers?
a. in any newspaper b. in the employee manual c. in a college class
12) If you want to meet and talk with people who can help you advance your career, how can you
express this?
a. "That's impressive."b. "I take courses just for fun."
c. "I need to do some
networking."
6) What do you know about Tiffany's work habits?
a. She always works late, including today. b. She never works late
c. She sometimes works
late
7) Why does Tiffany write her college papers at the office?
a. She doesn't want to buy paper for her printer at home.
b. Tiffany writes her papers when she's bored by the work at the office.
c. Tiffany doesn't have computer at home.
8) If a colleague asks you to skim through a report before a meeting, what do you need to do?
a. Count the pages in the report and sign it at the bottom.
b. Read every word and be prepared to discuss every detail.
c. Read the report quickly, looking for the main points.
9) How do you know that Tiffany has used networking as a way to help her career?
a. She says that she heard about her present job from college professor.
b. She says that she got this job through an employment agency.
c. She says that the only way to get a good job is by reading the newspaper ads.
10) Tiffany invites Anthony to go to class with hex tomorrow night. What are they going to do first?
a. They're going to order dinner from the comer restaurant to eat at the office.
b. Tiffany and Anthony are going to have a quick dinner.
c. They're going to go to a restaurant for a relaxed, seven-course meal.

1-6
CHAPTER 1: INTRODUCTION
Exporting and the Management of Risk

1. The Meeting of Minds


THE PROBLEM
An exporter and a buyer negotiate together. At some point there is a "meeting of minds: their
discussion becomes an agreement - with important legal consequences for both sides. This is a
dangerous moment for first-time exporters: they know their local market but exporting poses new
problems in production, delivery and, above all, pricing. A hasty agreement can cause heavy losses.
THE PRINCIPLE: Once scope (the goods to be
delivered) and price (the price to be paid) are
agreed, the bare bones of a legally enforceable
agreement are in place. Before reaching such
agreement, the exporter must be sure that the
goods can be delivered exactly as promised and
that the price covers the full cost of exporting.

Nguyn tc:
Mt khi hng ho c chuyn giao v gi s
phi thanh ton c cc bn tha thun, th cc
quy nh trong hp ng s tr nn c hiu lc
cung ch. Trc khi k kt hp ng, nh xut
khu phi m bo rng hng ho c giao
theo ng nh tha thun v gi c phi tnh n
tt c cc chi ph lin quan n xut khu.

rehearsal
IN MORE DEPTH
Let us start with a company and a product. Office Enterprises makes office furniture: its main lines
are desks and filing cabinets. The company is located in a country we can call Verbena, a small
island republic, somewhere in the tropics. Office Enterprises was founded ten years ago by Alec
Patel. So far, Patel has sold products only on the domestic market.
At a seminar in 1995, Patel meets Juliana Gomez, owner of Esperanza Trading. Esperanza Trading
is an import-export company located in Esperanza, a developing country, also in the tropics.
Gomez sees a potential market for Patel's office furniture in Esperanza. A negotiation begins. The
two negotiators quickly reach an agreement, a ''meeting of minds" as lawyers call it: Office
Enterprises will supply 30 leather-covered executive chairs for which Esperanza Trading will pay
$9.000.1 "Everything else," they say, "we can agree when the time comes.
This agreement, although nothing is in writing and no details have been worked out, is a contract:
each side has commitments to the otherboth have rights, and both have duties. What are these
rights and duties? Office Enterprises has the duty to deliver the chairs and the right to collect
payment. Esperanza Trading's situation is exactly complementary: it has the right to receive the
chairs and the duty to pay for them. In contract language, the scope of the contract is 30 chairs, and
the price is $9.000.
Scope against pricethat is the essence of the export contract. Let's look more closely at scope,
price, and the associated risks.
SCOPE

PRICE

Lets look more closely at scope, price, and associated risks.


First, scope: the product. An exportable product will normally be mature, in other words, the
manufacturer should have experience in making the product and enough production capacity in
coping with the size of the order, quality assurance problems should already be solved.
Closely related to scope is Delivery. The exporter must have access to safe and timely means of
delivery: for example, the export of cut flowers will certainly lose money unless the grower is
certain of regular and reliable air shipment. Unfortunately, exporters sometimes contract to supply
goods but fail to think about the problems of delivering their goods until after the contract is
signed. By then it is too late: a bad name in the trade or an expensive lawsuit are the common
results of this lack of foresight.
1
: Most of the deals in this book are denominated in Verbena dollars (V$). This imaginary has no
steady value and is liable to float from chapter to chapter.
And finally price. Does the contract price cover the exporters costs and leave a reasonable profit
margin. Answering this question calls for careful and knowledgeable pricing. There are two pricing
models are worth mentioning: the free market and the loaded market model. First the free-market
approach.
In a market that is free, a manufacturer calculates export prices by adding:

a. The cost of making the goods in the factory;


b. An appropriate portion of the overhead costs of the factory (e.g.,if the export deal is worth
2% of annual sales, the export price should include roughly 2% of annual overhead costs);
c. The extra costs associated with exporting (e.g., the cost of international faxes and telephone
calls, additional freight costs, the administrative cost of preparing the full export
documentation, the cost of waiting perhaps ninety days for payment rather than the usual
thirty, and so on);
d. A profit margin (high enough to make a fair profit but low enough to make the goods
competitive in the intended market.)
The resulting price is a fair reflection of the manufacturer's costs, plus a reasonable expectation of
profit. Charging a lower price immediately erodes profit, the erosion that quickly leads to losses.
Situation
Verbena Fan is a successful producer in the domestic market. It is looking for new markets and sees good
potential sales in Esperanza.
First Calculations
The wholesale price of the product is $3 cheaper in Verbena than the wholesale price of a comparable product
in Esperanza. Negotiations with an importer in Esperanza begin. To secure the business, Verbena Fan quotes
an attractive price of $22. The contract is signed.
$23
Wholesale price of
$20
similar product in
Wholesale price of Esperanza
fan in Verbena

$22
Export price low enough
to beat competition in
Esperanza

The Learning Process


During manufacture and shipping, additional costs continually arise. When payment is later than expected,
Verbena Fan must borrow from the bank, further increasing costs Warranty claims are more expensive
internationally than they are locallymore costs
$23
When the extra
costs of export
production emerge,
the real wnole sale
price is higher.

$25
When payment is
made later than
expected, the cost of
capital drives up the
wholesale price still
further.

$26
After warranty claims
are met, the true
wholesale price
emerges.

The Outcome
An expected profit of up to $2 per fan turns into a actual loss of $4
$4
Loss per fan

THE ANATOMY OF AN EXPORT LOSS

The arithmetic of exporting is often sobering: the manufacturers export price is likely to be
appreciably higher than the price he charges locally- and it may well be more than any buyer is
prepared to pay. But why? What are the extra costs that drive export prices uneconomically high?
These costs fall into three categories:
Direct additional costs;
Intangible management costs;
The cost of capital.
Direct Additional Costs
Some additional costs are easily identified. Some examples: international telephone calls are clearly
more expensive than local ones; costly foreign travel is neces'sary for face-to-face negotiation; packaging must often be upgraded to withstand a sea journey or rough handling. Extremely important are
the extra costs of meeting warranty claims: a warranty repair that costs a few dollars to make in
Verbena will cost far more when the full international costs are added in.2

Intangible Management Costs


Other costs are less tangible: for example,
misunderstandings can arise if foreign languages
are involved; management time must be invested
in completing export formalities: obtaining the
certificate of origin or the export license,
negotiating the transport contract, collecting a
letter of creditall are time-consuming activities.

Chi ph qun l v hnh


C nhng chi ph khc rt kh nhn thy: v
d, hp ng vit bng ngoi ng, nu nh
xut khu hiu sai c th dn n bi thng;
b phn qun l phi mt nhiu thi gian lo
th tc chng t xut khu nh chng th
xut x hoc giy php xut khu, ri phi
m phn hp ng vn chuyn, m tn dng
th - tt c u cn n nhiu ngi tham gia
v cng ty phi mt tin tr lng cho h.

The Cost of Capital


The cost of capital must also be considered: let's take an example. Patel is charging $9,000 for 30
chairs. Perhaps $1,000 of this is expected profitthe remaining $8,000 are his costs. In his own
country, Patel is paid within thirty days, so, assuming he pays his own suppliers and his workforce on
time, he has a debt of $8,000 for about a month. At 15% annual interest, that will cost him about
$100. If he has to wait three months for payment, his debt will cost him $300. Higher interest rates
(in some countries banks charge 45%) and longer waiting periods will quickly wipe out his expected
profit.
Precise calculations are often difficult: correct allocation of overhead or an accurate allowance for
the cost of delay in payment depend on reliable business data and considerable management
expertise. Let's assume, though, that reliable data is available to the exporter. A sober review of the
facts then indicates whether exporting is likely to be profitable or not. If not, thenlike all bad deals
exporting should be avoided.
What then is the "loaded" market? In practice very few markets offer the free and stable conditions
we have just discussedin most markets factors beyond supply and demand, cost and profit
influence price. These distortions are of two main types: promotional and macroeconomic.
Promotional Loading
In order to promote a product in a new market exporters often slash prices: to gain a foothold in the
market, the exporter decides to trade for a short while- at a loss. The exporter assesses first what
price will be attractive in the export market and then offers the goods at that pricewhether it
creates a profit or not.
_________________________________________
See Chapter 3, Section 1 for a detailed example.
Macroeconomic Loading
In developing countries, pricing is sometimes distorted by an urgent need to earn foreign currency: if
the price is to be paid in foreign currency, the exporter offers goods at unrealisiically low prices.
Export incentive schemes also influence pricing: exporters sometimes decide to sell accost price (or
below) and to take the incentive paid by their own government as their "profit." Such distorted
pricing is dictated more by economic than by purely commercial considerations.
Many factors influence export pricing. To keep things simple, however, when this book speaks of
"price"; it means the free-market price.
The major problem of export pricing is now apparent: the additional costs, if correctly calculated,
often increase the exporter's price until he is not competitive in any foreign market. For many wouldbe exporters the crucial question is alwayswill I make a profit from exporting? Only careful
calculation can answer that questionand the manufacturer must be wary of entering a legally
binding agreement until the answer is clear.
Let us return, then, to Office Enterprises and the export of the chairs. Assume that Patel is
conducting his business wisely, in other words:
He can produce the chairs without problems of quality or quality:
He has access to effective transportation:
He is calculating his price on the "free and stable" model.

Will he make a profit? It seems likely. Now he must consider the risks of doing export business and
find a means of coping with them.
CASE STUDY: A Good Deal?
Study the scenario below, and then answer the questions. If your answer is "No give your reasons.
In July 1992, Joe Anderson started a company in Verbena to manufacture foot balls. His workshop has the
capacity to make 500 footballs a week working one eight-hour shift five days a week. At present (May 2010) he
is selling 1,200 footballs a week on the Verbenan market. Because of the overtime shifts necessary and
because of problems with the supply of leather quality is unreliable about 100 balls a week are returned to the
factory. Anderson replaces these returned balls, immediately and without question. Andersons price structure
(in Verbena dollars) is:
Cost of labor and materials per ball
$3
Cost of running the business per week $1,200.00
Selling price per ball (no discounts)
$4.25
Anderson is now approached by Juliana Gomez of Esperanza Trading. She wants to buy 500 footballs a
week for 6 months: she orders a price per ball of $4.20- take it or leave it.
Assume that the government of Verbena offers no export incentives and there are no foreign exchange
problems.
1.
How much is the cost of a foot ball?
2.
Is Anderson making a profit at present? Yes, but a small profit.
3.
Does he have the manufacturing capacity to handle this order? No.
4.
Is his product mature?
No, because of too many returns.
5.
If he accepts the deal will he make money on it?
Probably not. He will have problems all round.
6. Why is this a good contract for Anderson?
A. The product is normally be immature
B. The manufacturer should have experience in making the product
C. The manufacturer should have enough production capacity in coping with the size of the order.
D. The quality assurance problems should already be solved.
PRACTICE: Translate into Vietnamese
Contract for fertilizer
No: 01-93/ XYZ- ABC
Date: Sep. 07 1999
Between: ..............
Address:.............
Tel:
Telex:................Fax:................
Represented by Mr................. Hereinafter called
The Buyer
And: ................
Address:.............
Tel:......................
Telex:...................Fax:................... Represented by
Mr........... Hereinafter called The Seller
It is mutually agreed between both sides to sign
this contract with terms and specifications
specified hereunder:
It is mutually agreed between both sides to sign
this contract with terms and specifications
specified hereunder:
ARTICLE 1: COMMODITY &
SPECIFICATION
1.1 Commodity: UREA FERTILIZER
1.2 Origin: INDONESIA
1.3 Specification: - Nitrogen: 46% min.

- Moisture: 0.5% max.


- Biuret: 1.0% max.
- Color: White
- Free flowing: treated with Anti- Caking
1.4 Packing: - 50 kg net in Polypropylen Woven
bag with polythylene inner liner - 2% of total bag
as empty spare bags to be supplied free of charge
ARTICLE 2: UNIT PRICE - QUANTITY &
TOTAL AMOUNT
2.1 Unit price: USD 178/ MT C&F Hochiminh
City Port
2.2 Quantity: 10,000 MT ( plus or minus 10% at
seller's option)
2.3 Total amount: USD 1,780,000 (+/- 10% at
seller's option)
Say: US Dollars one million seven hundred eighty
thousand.
ARTICLE 3: SHIPMENT - DELIVERY
3.1 Time of shipment: not later than September
1993
3.2 Port of loading: Indonesia main ports
3.3 Destination port: Hochiminh City Port
3.4 Notice of shipment:
Within 2 days after the sailing date of carrying
vessel to S.R Vietnam, the Seller shall notify by
cable to the Buyer the following information:
+ L/C number
+ Amount
+ Name and nationality of the vessel
+ Bill of Lading number/ date
+ Port of loading
+ Date of shipment
+ Expected date of arrival at discharging port
3.5 Shipping mark:
UREA
46% NITROGEN MINIMUM
1% BIURET MAXIMUM
0.5% MOISTURE MAXIMUM
50 KGS NET
USE NO HOOKS
MADE IN INDONESIA
One side printed in green color
3.6 Discharging terms:
When Notice of Readiness tendered before noon,
laytime shall be commenced from 13:00 on the
same date,
- When Notice of Readiness tendered afternoon,
laytime shall be commenced from 8:00 on next
date
3.7 Discharging term: 900MT/ day WWDSHEX
EIU
Dem/ Des: USD 2,000/ half
ARTICLE 4: PAYMENT
4.1 By irrevocable Letter of Credit at sight forn
B/L date for the full amount of the conntract value
4.2 L/C Beneficiary: KOLON
INTERNATIONAL CORP.
45 Mugyo- Dong, Chung Gu, Seoul - Korea

4.3 L/C advising Bank: KOREA FIRST BANK


Seoul - Korea
4.4 Bank of Opening L/C: VIETCOMBANK/
EXIMBANK
4.5 Time of opening L/C: within Sep. 15 1999
4.6 Payment documents:
Payment shall be made upon receipt of the
following documents:
- 3/3 of clean on board Bill of Lading marked
FREIGHT PREPAID
- Commercial invoice in triplicate
- Packing list in triplicate
- Certificate of origin issued by manufaturer
- SUCOFINDO's Certificate on quality/ weight
- One copy of sailing telex/ shipping advice
- Remark: the shipping document acceptable
- 1/3 B/L ( the top copy ) and transport documents
sent by DHL
ARTICLE 5: FORCE MAJEURE
Strike, sabotage, which may be occures in Origin
Country shall be considered as Force Majeure
ARTICLE 6: ARBITRATION
6.1 In the execution course of this contract, all
disputes not reaching at amicable agreement shall
be settled by the Economic Arbitration board of
Hochiminh City under the rules of the
International Chamber of Commerce whose
awards shall be final and binding both parties
6.2 Arbitration fee and other related charges shall
be borne by the losing party, unless otherwise
agreed.
ARTICLE 7: PENALTY
7.1 To delay shipment/ delay payment
In case delay shipment/ delay payment happens,
the penalty for delay interest will be based on
annual rate 15 percent
7.2 To delay opening L/C:
In case delay opening L/C happens, the Seller has
the right to delay shipment
7.3 To cancellation of contract
If Seller or Buyer want to cancelled the contract,
5% of the total contract value would be charged as
penalty to that party.
ARTICLE 8: GENERAL CONDITION
8.1 By signing this contract, previous
correspondence and negotiations connected
herewith shall be null and void
8.2 This contract comes into effect from signing
date, any amendment and additional clause to
these conditions shall be valid only if made in
written form and duty confirmed by both sides.
8.3 This contract is made in 6 Ennglish originals,
each side keeps 3.
PRACTICE: Translate into Vietnamese
Contract for fertilizer

Hp ng phn bn (bn ting Vit)

No: 01-93/ XYZ- ABC


Date: Sep. 07 1999
Between: ..............
Address:.............
Tel:
Telex:................Fax:................
Represented by Mr................. Hereinafter called
The Buyer
And: ................
Address:.............
Tel:......................
Telex:...................Fax:................... Represented
by Mr........... Hereinafter called The Seller
It is mutually agreed between both sides to sign
this contract with terms and specifications
specified hereunder: (OLD ENGLISH)

Hp ng phn bn
S: 01-93/XYZ- ABC
Ngy 07/08/1999
Gia:..........
a ch:.....
in thoi:.........
Telex:...........Fax:.........
Do ng ................ lm i din
Di y gi l Bn Mua
V:.................................
a ch:.................
in thoi:...............
Telex:.................. Fax:................
Do ng ..................... lm i din
Di y gi l : Bn Bn

ARTICLE 1: COMMODITY &


SPECIFICATION
1.1 Commodity: UREA FERTILIZER
1.2 Origin: INDONESIA
1.3 Specification:
- Nitrogen: 46% min.
- Moisture: 0.5% max.
- Biuret: 1.0% max.
- Color: White
- Free flowing: treated with Anti- Caking
1.4 Packing: - 50 kg net in Polypropylen Woven
bag with polyethylene inner liner - 2% of total
bag as empty spare bags to be supplied free of
charge)
ARTICLE 2: UNIT PRICE - QUANTITY &
TOTAL AMOUNT
2.1 Unit price: USD 178/ MT C&F Hochiminh
City Port
2.2 Quantity: 10,000 MT ( plus or minus 10% at
seller's option)
2.3 Total amount: USD 1,780,000 (+/- 10% at
seller's option)
Say: US Dollars one million seven hundred
eighty thousand.
ARTICLE 3: SHIPMENT - DELIVERY
3.1 Time of shipment: not later than September
1993
3.2 Port of loading: Indonesia main ports
3.3 Destination port: Hochiminh City Port
3.4 Notice of shipment:
Within 2 days after the sailing date of carrying
vessel to Socialist Republic of Vietnam, the Seller
shall notify by cable to the Buyer the following
information:
+ L/C number
+ Amount
+ Name and nationality of the vessel
+ Bill of Lading number/ date

iu 1: Hng ho v quy cch k thut


1.1 Tn hng: Phn ur
1.2 Ngun gc: Indonesia
1.3 Qui cch k thut:
- Nitrogen ( m) : 46% ti thiu
- m : 0,5% ti a
- Biuret: 1,0% ti a
- Mu sc: trng
- Ht ri: c x l bng Anti- Caking
1.4 ng gi: 50 kg khng k bao PP c lp
trong bng PE 2% tng s bao dng lm bao d
phng ( bao khng) c cung cp min ph

Hai bn tho thun k hp ng vi nhng


iu kin v qui cch c nu ra di y:

iu 2: n gi- S lng - Tng gi tr


2.1 n gi: 178,00 USD/ MT C&F cng H
Ch Minh
2.2 S lng: 10.000 MT (+/- 10% tu theo la
chn ca bn Bn)
2.3 Tng tr gi: 1.780.000 USD ( +/- 10% tu
theo la chn ca Bn Bn)
Ghi bng ch: Mt triu by trm tm mi
ngn USD
iu 3: Gi v giao hng
3.1 Thi gian gi hng: khng tr hn thng 9
nm 1999
3.2 Cng bc hng: nhng cng chnh
Indonesia
3.3 Cng n: Cng tp H Ch Minh
3.4 Thng bo gi hng:
Trong vng 02 ngy sau ngy khi hnh
ca tu vn ti n nc CHXHCN Vit Nam,
bn Bn s phi thng bo cho bn Mua bng
in tn nhng thng tin sau y:
+ L/C s...
+ Gi tr
+ Tn v quc tch tu

+ Port of loading
+ Date of shipment
+ Expected date of arrival at discharging port
3.5 Shipping mark:
UREA
46% NITROGEN MINIMUM
1% BIURET MAXIMUM
0.5% MOISTURE MAXIMUM
50 KGS NET
USE NO HOOKS
MADE IN INDONESIA
One side printed in green color
3.6 Discharging terms:
When Notice of Readiness tendered before
noon, laytime shall be commenced from 13:00 on
the same date,
- When Notice of Readiness tendered afternoon,
laytime shall be commenced from 8:00 on next
date
3.7 Discharging term: 900MT/ day WWDSHEX
EIU
Dem/ Des: USD 2,000/ half

+ Cng bc hng
+ Ngy gi hng
+ Ngy d kin tu n cng d hng
3.5 K m hiu vn ti: k m hiu ca bn Bn
UREA
46% NITROGEN MINIMUM
1% BIURET MAXIMUM
0.5% MOISTURE MAXIMUM
50 KGS NET
USE NO HOOKS
MADE IN INDONESIA
Mt bn phi sn mu xanh l cy.
3.6 Nhng iu kin d hng:
khi thng bo sn sng c gi ti trc 12:00
gi tra, thi gian d hng bt u t 13:00 gi
cng ngy.
Khi thng bo sn sng d hng c gi ti vo
bui chiu, thi gian d hng s bt u t 8:00
gi sng ca ngy hm sau

ARTICLE 4: PAYMENT
4.1 By irrevocable Letter of Credit at sight forn
B/L date for the full amount of the conntract
value
4.2 L/C Beneficiary: KOLON
INTERNATIONAL CORP.
45 Mugyo- Dong, Chung Gu, Seoul - Korea
4.3 L/C advising Bank: KOREA FIRST BANK
Seoul - Korea
4.4 Bank of Opening L/C: VIETCOMBANK/
EXIMBANK
4.5 Time of opening L/C: within Sep. 15 1999
4.6 Payment documents:
Payment shall be made upon receipt of the
following documents:
- 2/3 of clean on board Bill of Lading marked
FREIGHT PREPAID
- Commercial invoice in triplicate
- Packing list in triplicate
- Certificate of origin issued by manufaturer
- SUCOFINDO's Certificate on quality/ weight
- One copy of sailing telex/ shipping advice
- Remark: the shipping document acceptable
- 1/3 B/L ( the top copy ) and transport
documents sent by DHL

iu 4: Thanh ton
4.1 Bng L/C khng hu ngang, tr tin ngay t
ngy cp vn n ng bin cho tng tr gi
hp ng
4.2 Ngi th hng L/C: KOLON
INTERNATIONAL CORP. 45 Mugyo Dong,
Chung Gu, Seuol - Korea
4.3 Ngn hng thng bo L/C : KOREA FIRST
BANK
Seoul - Korea
4.4 Ngn hng m L/C : VIETCOMBANK/
EXIMBANK
4.5 Tthi hn m L/C: trong ngy 15/09/1999

3.7 iu kin d hng: 900 MT/ ngy


(WWDSHEX EIU U) ngy lm vic tt tri
khng k ch nht v ngy l khng c tnh k
c khi s dng
Tin pht/ tin thng: 2 000 USD/1000 USD

4.6 Chng t thanh ton: Vic thanh ton s phi


thc hin khi nhn c nhng chng t sau
y:
- 2/3 vn n ng bin xp hng hon ho c
ghi cc tr trc
- Ho n thng mi 03 bn
- Phiu ng gi hng ho 03 bn
- Giy chng nhn xut x/ chng th ngun
gc do ngi sn xut cp
- Giy chng nhn s lng/ cht lng cu
SUVOVINDO
- Mt bn telex ca tu v thi gian khi hnh /
phiu thng bo gi hng
-Nhn xt: chng t vn chuyn s c chp
nhn
- 1/3 b vn n ng bin ( bn gc) v nhng

chng t vn ti c gi n bn mua bng


DHL ( th tc hnh trc tip trao tay)
ARTICLE 5: FORCE MAJEURE (MAJOR
FORCE)
Strike, sabotage, which may be occures in Origin
Country shall be considered as Force Majeure

iu 5: Bt kh khng
nh cng, ph hoi c th xy ra bt c nc
xut x hng ho s c xem nh trng hp
bt kh khng

ARTICLE 6: ARBITRATION
6.1 In the execution course of this contract, all
disputes not reaching at amicable agreement shall
be settled by the Economic Arbitration board of
Hochiminh City under the rules of the
International Chamber of Commerce whose
awards shall be final and binding both parties
6.2 Arbitration fee and other related charges shall
be borne by the losing party, unless otherwise
agreed.

iu 6: Trng ti
6.1 Trong qu trnh thc hin hp ng ny, mi
tranh chp khng c tho thun ho gii s
phi c gii quyt bng mt hi ng Trng
ti kinh t ca Tp H Ch Minh theo nhng lut
l ca Phng Thng mi quc t. Quyt nh
ca Hi ng trng ti kinh t s phi l chung
thm v rng buc c hai bn
6.2 L ph trng ti v nhng chi ph lin h
khc do bn thua kin chu, tr khi c nhng
tho thun khc

ARTICLE 7: PENALTY
7.1 To delay shipment/ delay payment
In case delay shipment/ delay payment happens,
the penalty for delay interest will be based on
annual rate 15 percent
7.2 To delay opening L/C:
In case delay opening L/C happens, the Seller has
the right to delay shipment
7.3 To cancellation of contract
If Seller or Buyer want to cancelled the contract,
5% of the total contract value would be charged
as penalty to that party.
ARTICLE 8: GENERAL CONDITION
8.1 By signing this contract, previous
correspondence and negotiations connected
herewith shall be null and void
8.2 This contract comes into effect from signing
date, any amendment and additional clause to
these conditions shall be valid only if made in
written form and duty confirmed by both sides.
8.3 This contract is made in 6 Ennglish originals,
each side keeps 3.

iu 7: X pht
7.1 i vi vic gi hng chm tr/ vic thanh
ton chm tr : trong trng hp vic gi hng
hoc thanh ton chm tr xy ra, tin pht do s
chm tr phi chu li s da trn li sut hng
nm 15%
7.2 i vi vic chm tr m L/C: trong trng
hp vic chm tr m L/C xy ra, bn bn c
quyn gi hng chm tr
7.3 Hu b hp ng:
Nu bn mua hoc bn bn hu b hp ng, 5%
tng gi tr hp ng s phi c tnh l tin
pht cho bn
iu 8: iu kin chung
8.1 Bng vic k hp ng ny, nhng vn bn
giao dch v nhng m phn trc y theo
s khng c gi tr v v hiu
8.2 Hp ng ny c gi tr k t ngy k, mi
iu khon sa i b sung cho nhng iu kin
ny s ch c gi tr khi c thc hin bng vn
bn v ngha v c 2 bn xc nhn
8.3 Hp ng ny c lp thnh 06 bn gc
bng ting Anh, mi bn gi 03 bn

Contract for fertilizer


No: 01-93/ XYZ- ABC
Date: Sep. 07 1999
Between: ..............
Address:.............
Tel:
Telex:................Fax:................
Represented by Mr................. Hereinafter called The Buyer
And: ................
Address:.............
Tel:......................
Telex:...................Fax:................... Represented by Mr........... Hereinafter called The Seller

It is mutually agreed between both sides to sign this contract with terms and specifications
specified hereunder:
ARTICLE 1: COMMODITY & SPECIFICATION
1.1 Commodity: UREA FERTILIZER
1.2 Origin: INDONESIA
1.3 Specification: - Nitrogen: 46% min.
- Moisture: 0.5% max.
- Biuret: 1.0% max.
- Color: White
- Free flowing: treated with Anti- Caking
1.4 Packing: - 50 kg net in Polypropylen Woven bag with polythylene inner liner - 2% of total
bag as empty spare bags to be supplied free of charge
ARTICLE 2: UNIT PRICE - QUANTITY & TOTAL AMOUNT
2.1 Unit price: USD 178/ MT C&F Hochiminh City Port
2.2 Quantity: 10,000 MT ( plus or minus 10% at seller's option)
2.3 Total amount: USD 1,780,000 (+/- 10% at seller's option)
Say: US Dollars one million seven hundred eighty thousand.
ARTICLE 3: SHIPMENT - DELIVERY
3.1 Time of shipment: not later than September 1993
3.2 Port of loading: Indonesia main ports
3.3 Destination port: Hochiminh City Port
3.4 Notice of shipment:
Within 2 days after the sailing date of carrying vessel to S.R Vietnam, the Seller shall notify by
cable to the Buyer the following information:
+ L/C number
+ Amount
+ Name and nationality of the vessel
+ Bill of Lading number/ date
+ Port of loading
+ Date of shipment
+ Expected date of arrival at discharging port
3.5 Shipping mark:
UREA
46% NITROGEN MINIMUM
1% BIURET MAXIMUM
0.5% MOISTURE MAXIMUM
50 KGS NET
USE NO HOOKS
MADE IN INDONESIA
One side printed in green color
3.6 Discharging terms:
When Notice of Readiness tendered before noon, laytime shall be commenced from 13:00 on
the same date,
- When Notice of Readiness tendered afternoon, laytime shall be commenced from 8:00 on
next date
3.7 Discharging term: 900MT/ day WWDSHEX EIU
Dem/ Des: USD 2,000/ half
ARTICLE 4: PAYMENT
4.1 By irrevocable Letter of Credit at sight forn B/L date for the full amount of the conntract
value
4.2 L/C Beneficiary: KOLON INTERNATIONAL CORP.
45 Mugyo- Dong, Chung Gu, Seoul - Korea
4.3 L/C advising Bank: KOREA FIRST BANK
Seoul - Korea
4.4 Bank of Opening L/C: VIETCOMBANK/ EXIMBANK
4.5 Time of opening L/C: within Sep. 15 1999
4.6 Payment documents:
Payment shall be made upon receipt of the following documents:

- 3/3 of clean on board Bill of Lading marked FREIGHT PREPAID


- Commercial invoice in triplicate
- Packing list in triplicate
- Certificate of origin issued by manufaturer
- SUCOFINDO's Certificate on quality/ weight
- One copy of sailing telex/ shipping advice
- Remark: the shipping document acceptable
- 1/3 B/L ( the top copy ) and transport documents sent by DHL
ARTICLE 5: FORCE MAJEURE
Strike, sabotage, which may be occures in Origin Country shall be considered as Force
Majeure
ARTICLE 6: ARBITRATION
6.1 In the execution course of this contract, all disputes not reaching at amicable agreement
shall be settled by the Economic Arbitration board of Hochiminh City under the rules of the
International Chamber of Commerce whose awards shall be final and binding both parties
6.2 Arbitration fee and other related charges shall be borne by the losing party, unless
otherwise agreed.
ARTICLE 7: PENALTY
7.1 To delay shipment/ delay payment
In case delay shipment/ delay payment happens, the penalty for delay interest will be based on
annual rate 15 percent
7.2 To delay opening L/C:
In case delay opening L/C happens, the Seller has the right to delay shipment
7.3 To cancellation of contract
If Seller or Buyer want to cancelled the contract, 5% of the total contract value would be
charged as penalty to that party.
ARTICLE 8: GENERAL CONDITION
8.1 By signing this contract, previous correspondence and negotiations connected herewith
shall be null and void
8.2 This contract comes into effect from signing date, any amendment and additional clause to
these conditions shall be valid only if made in written form and duty confirmed by both sides.
8.3 This contract is made in 6 Ennglish originals, each side keeps 3.
FOR THE BUYER
FOR THE SELLER
Hp ng phn bn (bn ting Vit)
Hp ng phn bn
S: 01-93/XYZ- ABC
Ngy 13/08/1999
Gia:..........
a ch:.....
in thoi:.........
Telex:...........Fax:.........
Do ng ................ lm i din
Di y gi l Bn Mua
V:.................................
a ch:.................
in thoi:...............
Telex:.................. Fax:................
Do ng ..................... lm i din
Di y gi l : Bn Bn
Hai bn tho thun k hp ng vi nhng iu kin v qui cch c nu ra di y:
iu 1: Hng ho v quy cch k thut
1.1 Tn hng: Phn ur
1.2 Ngun gc: Indonesia
1.3 Qui cch k thut:
- Nitrogen ( m) : 46% ti thiu
- m : 0,5% ti a
- Biuret: 1,0% ti a

- Mu sc: trng
- Ht ri: c x l bng Anti- Caking
1.4 ng gi: 50 kg khng k bao PP c lp trong bng PE 2% tng s bao dng lm bao d
phng ( bao khng) c cung cp min ph
iu 2: n gi- S lng - Tng gi tr
2.1 n gi: 178,00 USD/ MT C&F cng H Ch Minh
2.2 S lng: 10.000 MT (+/- 10% tu theo la chn ca bn Bn)
2.3 Tng tr gi: 1.780.000 USD ( +/- 10% tu theo la chn ca Bn Bn)
Ghi bng ch: Mt triu by trm tm mi ngn USD
iu 3: Gi v giao hng
3.1 Thi gian gi hng: khng tr hn thng 9 nm 1999
3.2 Cng bc hng: nhng cng chnh Indonesia
3.3 Cng n: Cng tp H Ch Minh
3.4 Thng bo gi hng:
Trong vng 02 ngy sau ngy khi hnh ca tu vn ti n nc CHXHCN Vit Nam, bn
Bn s phi thng bo cho bn Mua bng in tn nhng thng tin sau y:
+ L/C s...
+ Gi tr
+ Tn v quc tch tu
+ Cng bc hng
+ Ngy gi hng
+ Ngy d kin tu n cng d hng
3.5 K m hiu vn ti: k m hiu ca bn Bn
3.6 Nhng iu kin d hng: khi thng bo sn sng c gi ti trc 21:00 gi tra, thi
gian d hng bt u t 13:00 gi cng ngy. Khi thng bo sn sng d hng c gi ti vo bui
chiu, thi gian d hng s bt u t 8:00 gi sng ca ngy hm sau
3.7 iu kin d hng: 900 MT/ ngy ( EEDSHESEIU) ngy lm vic tt tri khng k ch
nht v ngy l khng c tnh k c khi s dng
Tin pht/ tin thng: 2 000 USD/1000 USD
iu 4: Thanh ton
4.1 Bng L/C khng hu ngang, tr tin ngay t ngy cp vn n ng bin cho tng tr gi
hp ng
4.2 Ngi th hng L/C: KOLON INTERNATIONAL CORP.
45 Mugyo Dong, Chung Gu, Seuol - Korea
4.3
Ngn
hng
thng
bo
L/C
:
KOREA
FIRST
BANK
Seoul - Korea
4.4 Ngn hng m L/C : VIETCOMBANK/ EXIMBANK
4.5 Tthi hn m L/C: trong ngy 15/09/1999
4.6 Chng t thanh ton: Vic thanh ton s phi thc hin khi nhn c nhng chng t sau
y:
- 3/3 vn n ng bin xp hng hon ho c ghi cc tr trc
- Ho n thng mi 03 bn
- Phiu ng gi hng ho 03 bn
- Giy chng nhn xut x do ngi sn xut cp
- Giy chng nhn s lng/ cht lng cu SUVOVINDO
- Mt bn telex ca tu v thi gian khi hnh / phiu thng bo gi hng
- 1/3 b vn n ng bin ( bn gc) v nhng chng t vn ti c gi n bn mua bng
DHL ( th trc tip trao tay)
Ghi ch: Chng t vn ti ca bn th ba c chp nhn
iu 5: Bt kh khng
nh cng, ph hoi c th xy ra bt c nc xut x hng ho s c xem nh trng hp
bt kh khng
iu 6: Trng ti
6.1 Trong qu trnh thc hin hp ng ny, mi tranh chp khng c tho thun ho gii s
phi c gii quyt bng mt hi ng Trng ti kinh t ca Tp H Ch Minh theo nhng lut l ca
Phng Thng mi quc t. Quyt nh ca Hi ng trng ti kinh t s phi l chung thm v rng
buc c hai bn

6.2 L ph trng ti v nhng chi ph lin h khc do bn thua kin chu, tr khi c nhng tho
thun khc
iu 7: X pht
7.1 i vi vic gi hng chm tr/ vic thanh ton chm tr : trong trng hp vic gi hng
hoc thanh ton chm tr xy ra, tin pht do s chm tr phi chu li s da trn li sut hng nm
15%
7.2 i vi vic chm tr m L/C: trong trng hp vic chm tr m L/C xy ra, bn bn c
quyn gi hng chm tr
7.3 Hu b hp ng: Nu bn mua hoc bn bn hu b hp ng, 5% tng gi tr hp ng
s phi c tnh l tin pht cho bn
iu 8: iu kin chung
8.1 Bng vic k hp ng ny, nhng vn bn giao dch v nhng m phn trc y theo
s khng c gi tr v v hiu
8.2 Hp ng ny c gi tr k t ngy k, mi iu khon sa i b sung cho nhng iu
kin ny s ch c gi tr khi c thc hin bng vn bn v ngha v c 2 bn xc nhn
8.3 Hp ng ny c lp thnh 06 bn gc bng ting Anh, mi bn gi 03 bn
i din bn mua
i din bn bn

2. Exporting - Where are the Risks?

7-10

THE PROBLEM
What risks face the exporter beyond the risks of doing normal local business? And what safeguards
exist - to protect the exporter's interests?
THE PRINCIPLE
Exporting creates risks for everyone involved: governments, exporters and buyers alike. For the
exporter, non-payment is the major risk: insurance. a bank guarantee or, most beneficially, a letter of
credit offer proteciion. Problems in making delivery are best tackled by agreements tailored to the
exporter's needs.
IN MORE DEPTH
In every export deal, there are four principal parties: the exporter, the importer, and the governments
of the two countries involved. Each party faces a series of risks and should take protective measures.
Government: The government represents the interests of its people. These interests do not always
coincide with the interests of an exporter who wants to maximize profit. All countries take measures
to protect what they see as their best interests. One obvious example is the trade in weapons:
countries such as Germany strictly control the export of weapons to areas of potential conflicts,
international arms embargoes against countries perceived as aggressive are common. 4 In such a case,
the threat to the national interest is obvious. Similariy, in time of famine, a government normally
prohibits the export of foodregardless of the potential profits of an exporter.
Foreign exchange is another area where shortages often occur and where governments act to
protect the interests of the country at large. Where a government sees a risk, it has little choice
but take action to protect the country. The export license, phytosanirary certificate, certificate of
origin, and many similar documents are the direct result. And governments not only restrict; they
also promote with direct incentive, tax credits, retention schemes, and so on. In practice, the
individual exporter can do little to influence government policy or to alter public law, the
instrument that the government uses to express its will. In regulating the relations between
themselves, however, the exporter and the importer have a great deal of freedom; profitable use
of this freedom is, in effect, the subject of this book.
The Exporter
For the exporter, every deal poses risks. The most obvious risk is the risk of non-paymentwhat
happens if the goods are delivered but the buyer fails to pay? This is a risk in every kind of
business, but it is particularly acute in exporting: the buyer is a long way off; he can make excuses
that are difficult to check.
------------------------------------------------------

Until early 1994, the countries in the western alliance used the COCOM (Coordinating
Committee on Multilateral Export Controls) rules to control the export of weapons or strategic
equipment such as computers to the Warsaw Pact countries.
Some typical examples:
- The goods never arrived;
- The goods arrived damaged;
- The central bank has no foreign exchange to make payment;
- A government regulation makes payment impossible.
Or he can simply disappear. Almost as damaging as non-payment is late payment: if, as sometimes
happens, the exporter hopes for payment within thirty days but is not paid for eighteen months, then
money must be borrowed from the bank: an expected profit can vanish in a matter of weeks.
And there are other problems too. The crucial moment for the exporter in any deal is the moment
of delivery: as soon as delivery has successfully taken place, the exporter's main duties are
discharged and the right to collect payment takes effect. But many things can delay delivery. For
an example, let's go back to the Office Enterprises deal: Alec Patel is selling chairs made in
Verbena to a company in Esperanza. Verbena is an island, so the chairs must go by sea. Who is
responsible for organizing transport? If we assume that Patel and Gomez agreed FOB delivery 5,
then the buyer, Gomez, must nominate a ship and Patel must load the goods on board. But what
if the expected ship fails to arrive? The chairs will stand at the docks, rotting and rusting, earning
nothing, even though Patel must pay to his suppliers the money he spent in manufacturing the
chairs. A long delay will hurt him financially.
How can the exporter protect himself? The most obvious course is to deal only with trading
partner's who are known to be trustworthyand solvent. Unfortunately this strategy is not
always practicable, in particular, the first business with a new partner is always risky. Two
valuable mechanisms, however, protect the exporter against the risk of non-payment: thirdpany security and the letter of credit.
Third-Party Security
The exporter can often secure a promise from a third party that if the buyer fails to pay, the invoice
will be paid anyway. Such a promise may be given by an insurance companyin this case the
exporter takes out an export credit insurance policy to cover the greater part of the risk.
Unfortunately, however, this kind of insurance is not available in all countries. Alternatively, the
promise is given by a bank in the form of a bank guaranteethe buyer's bank guarantees that if the
buyer fails to pay, the bank will pay instead. The disadvantages here are that such guarantees are
expensive and that buyers are reluctant to establish them.
Letter of Credit
A letter of credit, if the terms are properly negotiated, ensures payment on delivery of the
goods. As soon as the goods are shipped, the exporter takes the shipping documents to an
agreed bank, often in his neighborhood. If the shipping documents are in order, the bank pays
the agreed sum immediately. The letter of credit is obviously an ideal arrangement for the
exporter, and it is the basis of most export trade around the world.
But what about the other risks, the failure of the ship to arrive which we mentioned earlier, or
unreasonable complaints made by the buyer when he finally receives the goods? Before asking how
exporters protect themselves in such cases, let us look at the risks faced by the buyerthe importer.
The Importer
Caveat emptor is an old principle of law: buyer beware. This is easy enough in a vegetable market or
when one is buying a used car, but internationally it is difficult for the buyer to be sufficiently wary.
The dangers are obvious: late delivery of the goods, delivery of goods that are inadequate in quantity
or in quality, failure by the exporter to make necessary repairs or to supply spare parts when things
go wrong. How is the buyer to limit such risks when his best weapon refusal to payis taken out of
his hands, in most cases, by the mechanism of the letter of credit.
---------------------------------------------------------------------------5
FOB Free on board delivery means delivery takes place when the goods cross the ships rail.
For full details of FOB and other terms of trade, see Chapter 1, section 6 below.

In some cases, in particular when purchasing capital equipment, the buyer asks for a
performance guarantee. Like the payment guarantee, this is a promise made by a bankin this
case though, it is a promise to compensate the buyer if equipment fails to function as specified.
Another safeguard is the retention. If goods are delivered subject to a warranty period of, say.
six months, many buyers ask for a retention: they retain perhaps 5% of the contract price until
the goods are no longer under warranty: they finally pay this 5% but only if no warranty
claims are in the pipeline. However, neither the guarantee nor the retention is common in
simple agreements for the export of goods. There has to be something more. The answer lies,
as we shall see in the next section, in the contract and in the law the private law that
supplements the agreement between the parties.

CASE STUDY
A RISKY BUSINESS
Verbena Knits export sweaters and other traditional knitwear made of synthetic fibers. An importer
from Esperanza contracts with Verbena Knits for a consignment of pullovers. The order is large:
about 12% of Verbena Knits annual turnover. Terms:
- Payment by confirmed, irrevocable, at-sight letter of credit;
- Letter of credit to be opened four weeks before delivery due
- Delivery: FOB Port Verbena
- Delivery date: 8 weeks after signing contract (Manufacture takes 4 weeks.)
- Defects liability period (warranty): 6 months from acceptance by buyer.
Below is a schedule of events during contract performance. At each stage there is some risk to
Verbena Knits. State the risk and then evaluate its seriousness in each case.
Step 1: Ordering Raw Materials
A local supplier has been ordered to provide Verbena with necessary materials.
The risk: ................................................................................................
SERIOUS
MODERATE
NEGLIGIBLE
Step 2: Manufacture and delivery
Verbena Knits manufactures the goods and delivers them to the ship.
The risk: ................................................................................................
SERIOUS
MODERATE
NEGLIGIBLE
Step 3: Collection of the letter of credit
Verbena Knits presents the shipping documents to the bank and asksmanufactures the goods and
delivers them to the ship.
The risk: ................................................................................................
SERIOUS
MODERATE
NEGLIGIBLE
Step 4: Open Package Inspection and Warranty Period
Verbena Knits inspects the goods on their arrival in Esperanza. Then the defects liability period
begins.
The risk: ................................................................................................
SERIOUS
MODERATE
NEGLIGIBLE
Step 1: Verbena knits has ordered materials before the letter of credit is open. If the letter of
credit is not opened or if opening is delayed, Verbena Knits will have unnecessary raw
materials on its hands. This could be expensive. Risk serious.
Step 2: Until he has collected payment, the seller always runs the risk of non-payment.
However, with the letter of credit mechanism, this risk is small. Risk- neglibible.
Step 3: Everything now depends on the correctness of shipping documents. If the seller has
correct documents, he will almost certainly paid. But many sellers present incorrect
documents to the bank. Risk-Moderate
Step 4: Again everything depends on how well the seller has done his job. Correct goods will
be accepted. Even so, open package inspection is a difficult time for the seller if the buyer has
changed his mind about the order, this is when he tries to make trouble. Risk Moderate.
Translate into Vietnamese
Contract for Newsprinting paper
Contract ( No 205 TL)
Between:
Vietnam Scientific- Production Union
Geodesy and Cartograhpy
Lang Trung - Dong Da - Ha Noi - Vietnam
Tel: 42.846829 Telex: 294887 Vietco VT
Hereinafter called the Buyer

Hp ng giy in bo (bn ting Vit)


HP NG GIY IN BO
HP NG S 205 TL
of Ngy 1 thng 12 nm 1999
Gia:
Lin hip Khoa hc sn xut Trc a Bn
a ch: Lng Trung - ng a - H Ni - Vit
Nam

And:
BOO SON Co., LTD
RM. 306, DONGHWA BLDG
19-2, NONHYUN - DIONG, KANGNAM - KU
SEOUL, KOREA
Cable address: TWOHANDCO, SEOUL,
KOREA
Hereinafter called Seller
It has been agreed that Buyer buys and Seller
sells on the terms and conditions as follows:

in thoi: 42.846829
Telex: 294887 Vietco VT
Fax: 84-4-56446
Di y gi l ngi Mua
V:
Cng ty BOO SON, LTD
a ch: RM. 306, DONGHWA BLDG
19-2, NONHYUN - DIONG, KANGNAM - KU
SEOUL, KOREA
a ch in tn: TWOHANDCO, SEOUL,
KOREA
Di y gi l Ngi Bn
Hai bn tho thun: Ngi Mua mua v ngi
Bn bn cc mt hng vi cc iu khon sau:

ARTICLE
1:
DESCRIPTION
SPECIFICATION- QUALITY- QUANTITY
1. Description: NEWSPRINTING PAPER
2. Country of origin: CHINA
3. Maker's name:
4. Quality/ Specification: Substance: 49 +/2 g/m2
Ro IL 787 mm width
5. Quantity: 200 MT +/- 5%
6. Packing: EXPORT STANDARD
7. Marking:
Substance: 49 g/m2 +/-2
Destination: Haiphong Port
8. Destination:
HAIPHONG PORT
ARTICLE II: PRICE
Price to be understood CIF Hai Phong port
including Seaworthy packing
Unit price: USD 535/MT
Total amount: USD 107,000.00
Say: United States Dollar one hundred and
seven thousand only
ARTICLE III: DELIVERY TIME
40 days after L/C received
ARTICLE IV: PAYMENT
By irrevocable Letter of Credit in U.S
Dollar within 180 days with 0.8% of dividend
( in favour of ) each the Seller and payable and
payable on presentation to the Bank for Foreign
Trade of Vietnam of the following documents,
each in three copies:
- Clean on board Bill of Lading
- Commercial Invoice
- Certificate of weight and/or quantity
- Certificate of Quantity issued by the
Seller and/or the Maker
- Certificate of Origin issued by Chamber
of Commerce and/or the Seller
- Insurance Policy
- Receipt of Shipmaster acknowledging it
duly having received 3 sets of non- negotiation
shipping documents as above mentioned

iu 1: Mt hng, quy cch, cht lng


v s lng
1. Mt hng: Giy in bo
2. Nc xut x: Trung Quc
3. Tn ngi sn xut:
4: Cht lng v qui cch: nh lng 49
+/- 2 gam/m2
Cun kh rng 787 mm
5. S lng: 200 MT ( tn mt) +/- 5%
6. ng gi: t tiu chun xut khu
7. K m hiu: Substance: 49 g/m2 +/-2
Destination: Haiphong Port
8. Cng n: Cng Hi Phng
iu 2: Gi c
Gi CIF cng Hi Phng bao gm c tin
bao b ng gi c th i bin c
n gi: USD 535/MT
Tng tr gi: 107.000,00USD
Bng ch: Mt trm linh by nghn la
M chn
iu 3: Thi gian giao hng
40 ngy sau khi nhn c th tn dng
(L/C)
iu 4: Thanh ton
Bng th tn dng khng hu ngang tr
bng la M trong vng 180 ngy vi 0,8%
tin li cho ngi Bn khi xut trnh vi Ngn
hng Ngoi thng Vit Nam b chng t sau,
mi loi ba bn:
- Vn n sch xp hng
- Ho n thng mi
- Giy chng nhn trng lng v/hoc s
lng
- Giy chng nhn do ngi Bn v/hoc
ngi sn xut cp
- Giy chng nhn xut x do Phng
Thng mi hoc do ngi Bn cp
- Giy chng nhn bo him
- Bin lai ca thuyn trng thng bo
nhn c 3 b chng t gi hng khng chuyn
nhng c nh nu trn L/C c m c
gi tr trong vng 15 ngy sau khi xp hng.

- Letter of Credit will be valid for 15 days


after loading completed. The Buyer and the Sller
will bear bank charges in their respective country
but charges for amendment or extension of L/C
will be borne by party that requires.
ARTICLE
V:
INSURANCE
/
SHIPMENT
1. Insurance :
Insurance for the contracted goods will be
covered by the Seller by All Risk Policy
2. Notice of shipment:
- Pre- advice of shipment: Before shipment
of the goods the Seller shall advice by cable/telex
the Buyer of estimated time of shipment and
name of carrying vessel
- Final advice of shipment: within 24 hours
after shipment the Seller shall advice by
cable/telex : Contract No, quantity, gross weight,
net weight, measurement, number of packages,
invoice value, name of carrying vessel, Bill of
Lading number, sailing date for insurance
purpose
ARTICLE VI: PORT OF DICHARGE
AND INSPECTION
The Buyer will be entitled to have the
goods inspected by Vinaconntrol at the
destination, if any discrepancy arises in respect
of quantity and quality the Buyer will first lodge
claim by cable with the Seller, then within 90
days from the date of discharge will make a
formal claim with supporting documents, such
claim shall be setlled by the Seller within 30 days
from its receipt of the Buyer's formal claim
ARTICLE VII: FORCE MAJEURE
Neither party shall be held responsible for
delay of failure of performance of obligations
provided for herein when such delay or failure is
caused by strike, fire, flood, Act of God,
earthquake or any laws, rules,or regulations of
any governmental authority or other conditions
beyond its control which can not be forecast or
provided against and provided one or both parties
are subject to such obligation.
The party wishing to claim relief by reason
of any of the said circumstances shall notify the
other party in writing of the circumstance its
commencement and ceasation and then deliver a
certificate issued by the Chamber of Commerce
at the place where the event or events occured as
evidence thereof; In the event of delay caused by
such force majeure exceeding 60 days each party
shall have the right to cancel his contract, unless
otherwise agreed, in which case neither party
shall have the right to claim damages

Ngi Bn v ngi Mua s chu chi ph ngn


hng tng ng nc mnh, chi ph sa i
hoc gia hn L/C theo yu cu ca bn no th
bn y chu

iu 5: Bo him v giao hng


1. Bo him: bo him ca hng ho do
Ngi bn chu vi iu kin Mi Ri Ro
2. Thng bo giao hng:
- Thng bo trc khi giao hng: Trc khi
gi hng, ngi bn s thng bo cho ngi Mua
bng in hoc telex v thi gian giao hng d
tnh v tn tu vn chuyn.
- Thng bo cui cng v giao hng :
Trong vng 24 gi sau khi gi hng, Ngi bn
s thng bo bng in hoc telex v: s hp
ng, s lng, trng lng c b, trng lng
tnh, kch thc (dung tch), s kin, gi tr ho
n, tn tu vn chuyn, s vn n, ngy tu ri
cng...
iu 6. Kim tra ti cng d hng
Ngi
Mua
c
quyn
nh
VINACONTROL kim tra hng cng n, nu
c s khng khp nhau v s lng v cht
lng th trc tin Ngi Mua s gi in khiu
ni cho ngi Bn, sau trong vng 90 ngy k
t ngy d hng ngi Mua phi lm khiu ni
chnh thc i bi thng cng cc ti liu km
theo, ngi Bn phi gii quyt cho ngi Mua
trong vng 30 ngy nhn c yu cu chnh
thc i bi thng ca ngi Mua
iu 7: Trng hp bt kh khng
Khng bn no phi chu trch nhim v s
tr hon hoc s khng thc hin c nhng
ngha v vi iu kin l s tr hon hoc s
khng thc hin c nhng ngha v xy ra
do nh cng, ho hon, l lt, tc ng ca thin
nhin, ng t, hoc nhng lut l qui tc, qui
nh ca cc nh chc trch, hoc nhng iu
kin khc khng th d on hoc lng trc
c
Bn yu cu khiu ni v thit hi do bt k
trng hp no nu s thng bo cho bn
bng vn bn v theo gi mt giy chng
nhn do Phng Thng mi ti ni xy ra s vic
cp, nh l chng c ca vic . Khi s tr hon
do trng hp bt kh khng nu trn m vt
qu 60 ngy, mi bn ca hp ng c quyn hu
b hp ng ny, trong trng hp khng bn
no c quyn khiu ni cui cng v nhng thit
hi
iu 8: Trng ti
Hp ng ny chu s chi phi ca
Incoterms 1990. Nhng tranh chp pht sinh t
hp ng ny m hai bn khng gii quyt bng
ARTICLE VIII: ARBITRATION
thng lng s c gii quyt bi Trng ti
This contract will be governed by the Thng mi Quc t ti Paris, theo cc qui ch

provision of Incoterms 1990. If any dispute that xt x ca n


arises under this contract can not be settled by an
iu 9: Cc iu kin khc
amicable agreement between the two sides, the Ngi Mua s phi lm th tc bo lnh ti ngn
matter shall be settled by the Internatiional hng Ngoi thng Vit Nam
Commercial Arbitration in Paris in accordance
with its rules
ARTICLE IX: OTHER CONDITIONS
The Buyer shall give a guarantee
pursuant to procedure at the Bank for
Foreign Trade of Vietnam
Contract for Newsprinting paper
Contract ( No 205 TL)
Between:
Vietnam Scientific- Production Union of Geodesy and Cartograhpy
Lang Trung - Dong Da - Ha Noi - Vietnam
Tel: 42.846829 Telex: 294887 Vietco VT
Hereinafter called the Buyer
And:
BOO SON Co., LTD
RM. 306, DONGHWA BLDG
19-2, NONHYUN - DIONG, KANGNAM - KU
SEOUL, KOREA
Cable address: TWOHANDCO, SEOUL, KOREA
Hereinafter called Seller
It has been agreed that Buyer buys and Seller sells on the terms and conditions as follows:
ARTICLE 1: DESCRIPTION - SPECIFICATION- QUALITY- QUANTITY
1. Description: NEWSPRINTING PAPER
2. Country of origin: CHINA
3. Maker's name:
4. Quality/ Specification: Substance: 49 +/- 2 g/m2
Ro IL 787 mm width
5. Quantity: 200 MT +/- 5%
6. Packing: EXPORT STANDARD
7. Marking:
Substance: 49 g/m2 +/-2
Destination: Haiphong Port
8. Destination:
HAIPHONG PORT
ARTICLE II: PRICE
Price to be understood CIF Hai Phong port including Seaworthy packing
Unit price: USD 535/MT
Total amount: USD 107,000.00
Say: United States Dollar one hundred and seven thousand only
ARTICLE III: DELIVERY TIME
40 days after L/C received
ARTICLE IV: PAYMENT
By irrevocable Letter of Credit in U.S Dollar within 180 days with 0.8% of dividend ( in
favour of ) each the Seller and payable and payable on presentation to the Bank for Foreign Trade of
Vietnam of the following documents, each in three copies:
- Clean on board Bill of Lading
- Commercial Invoice
- Certificate of weight and/or quantity
- Certificate of Quantity issued by the Seller and/or the Maker
- Certificate of Origin issued by Chamber of Commerce and/or the Seller
- Insurance Policy

- Receipt of Shipmaster acknowledging it duly having received 3 sets of non- negotiation


shipping documents as above mentioned
- Letter of Credit will be valid for 15 days after loading completed. The Buyer and the Sller
will bear bank charges in their respective country but charges for amendment or extension of L/C
will be borne by party that requires.
ARTICLE V: INSURANCE / SHIPMENT
1. Insurance :
Insurance for the contracted goods will be covered by the Seller by All Risk Policy
2. Notice of shipment:
- Pre- advice of shipment: Before shipment of the goods the Seller shall advice by cable/telex
the Buyer of estimated time of shipment and name of carrying vessel
- Final advice of shipment: within 24 hours after shipment the Seller shall advice by cable/telex
: Contract No, quantity, gross weight, net weight, measurement, number of packages, invoice value,
name of carrying vessel, Bill of Lading number, sailing date for insurance purpose
ARTICLE VI: PORT OF DICHARGE AND INSPECTION
The Buyer will be entitled to have the goods inspected by Vinaconntrol at the destination, if
any discrepancy arises in respect of quantity and quality the Buyer will first lodge claim by cable
with the Seller, then within 90 days from the date of discharge will make a formal claim with
supporting documents, such claim shall be setlled by the Seller within 30 days from its receipt of the
Buyer's formal claim
ARTICLE VII: FORCE MAJEURE
Neither party shall be held responsible for delay of failure of performance of obligations
provided for herein when such delay or failure is caused by strike, fire, flood, Act of God, earthquake
or any laws, rules,or regulations of any governmental authority or other conditions beyond its control
which can not be forecast or provided against and provided one or both parties are subject to such
obligation.
The party wishing to claim relief by reason of any of the said circumstances shall notify the
other party in writing of the circumstance its commencement and ceasation and then deliver a
certificate issued by the Chamber of Commerce at the place where the event or events occured as
evidence thereof; In the event of delay caused by such force majeure exceeding 60 days each party
shall have the right to cancel his contract, unless otherwise agreed, in which case neither party shall
have the right to claim damages
ARTICLE VIII: ARBITRATION
This contract will be governed by the provision of Incoterms 1990. If any dispute that arises
under this contract can not be settled by an amicable agreement between the two sides, the matter
shall be settled by the Internatiional Commercial Arbitration in Paris in accordance with its rules
ARTICLE X: OTHER CONDITIONS
The Buyer shall give a guarantee pursuant to procedure at the Bank for Foreign Trade of Vietnam
FOR THE SELLER
FOR THE BUYER
Hp ng giy in bo (bn ting Vit)
HP NG GIY IN BO
HP NG S 205 TL
Ngy 1 thng 12 nm 1999
Gia:
Lin hip Khoa hc sn xut Trc a Bn
a ch: Lng Trung - ng a - H Ni - Vit Nam
in thoi: 42.846829
Telex: 294887 Vietco VT
Fax: 84-4-56446
Di y gi l ngi Mua
V:
Cng ty BOO SON, LTD
a ch: RM. 306, DONGHWA BLDG
19-2, NONHYUN - DIONG, KANGNAM - KU
SEOUL, KOREA
a ch in tn: TWOHANDCO, SEOUL, KOREA

Di y gi l Ngi Bn
Hai bn tho thun: Ngi Mua mua v ngi Bn bn cc mt hng vi cc iu khon sau:
iu 1: Mt hng, quy cch, cht lng v s lng
1. Mt hng: Giy in bo
2. Nc xut x: Trung Quc
3. Tn ngi sn xut:
4: Cht lng v qui cch: nh lng 49 +/- 2 gam/m2
Cun kh rng 787 mm
5. S lng: 200 MT ( tn mt) +/- 5%
6. ng gi: t tiu chun xut khu
7. K m hiu: Substance: 49 g/m2 +/-2
Destination: Haiphong Port
8. Cng n: Cng Hi Phng
iu 2: Gi c
Gi CIF cng Hi Phng bao gm c tin bao b ng gi c th i bin c
n gi: USD 535/MT
Tng tr gi: 107.000,00USD
Bng ch: Mt trm linh by nghn la M chn
iu 3: Thi gian giao hng
40 ngy sau khi nhn c th tn dng (L/C)
iu 4: Thanh ton
Bng th tn dng khng hu ngang tr bng la M trong vng 180 ngy vi 0,8% tin li
cho ngi Bn khi xut trnh vi Ngn hng Ngoi thng Vit Nam b chng t sau, mi loi ba
bn:
- Vn n sch xp hng
- Ho n thng mi
- Giy chng nhn trng lng v/hoc s lng
- Giy chng nhn do ngi Bn v/hoc ngi sn xut cp
- Giy chng nhn xut x do Phng Thng mi hoc do ngi Bn cp
- Giy chng nhn bo him
- Bin lai ca thuyn trng thng bo nhn c 3 b chng t gi hng khng chuyn
nhng c nh nu trn L/C c m c gi tr trong vng 15 ngy sau khi xp hng. Ngi
Bn v ngi Mua s chu chi ph ngn hng tng ng nc mnh, chi ph sa i hoc gia hn
L/C theo yu cu ca bn no th bn y chu
iu 5: Bo him v giao hng
1. Bo him: bo him ca hng ho do Ngi bn chu vi iu kin Mi Ri Ro
2. Thng bo giao hng:
- Thng bo trc khi giao hng: Trc khi gi hng, ngi bn s thng bo cho ngi Mua
bng in hoc telex v thi gian giao hng d tnh v tn tu vn chuyn.
- Thng bo cui cng v giao hng : Trong vng 24 gi sau khi gi hng, Ngi bn s thng
bo bng in hoc telex v: s hp ng, s lng, trng lng c b, trng lng tnh, kch thc
(dung tch), s kin, gi tr ho n, tn tu vn chuyn, s vn n, ngy tu ri cng...
iu 6. Kim tra ti cng d hng
Ngi Mua c quyn nh VINACONTROL kim tra hng cng n, nu c s khng khp
nhau v s lng v cht lng th trc tin Ngi Mua s gi in khiu ni cho ngi Bn, sau
trong vng 90 ngy k t ngy d hng ngi Mua phi lm khiu ni chnh thc i bi thng
cng cc ti liu km theo, ngi Bn phi gii quyt cho ngi Mua trong vng 30 ngy nhn c
yu cu chnh thc i bi thng ca ngi Mua
iu 7: Trng hp bt kh khng
Khng bn no phi chu trch nhim v s tr hon hoc s khng thc hin c nhng
ngha v vi iu kin l s tr hon hoc s khng thc hin c nhng ngha v xy ra do nh
cng, ho hon, l lt, tc ng ca thin nhin, ng t, hoc nhng lut l qui tc, qui nh ca
cc nh chc trch, hoc nhng iu kin khc khng th d on hoc lng trc c
Bn yu cu khiu ni v thit hi do bt k trng hp no nu s thng bo cho bn bng
vn bn v theo gi mt giy chng nhn do Phng Thng mi ti ni xy ra s vic cp, nh l
chng c ca vic . Khi s tr hon do trng hp bt kh khng nu trn m vt qu 60 ngy,
mi bn ca hp ng c quyn hu b hp ng ny, trong trng hp khng bn no c quyn
khiu ni cui cng v nhng thit hi

iu 8: Trng ti
Hp ng ny chu s chi phi ca Incoterms 1990. Nhng tranh chp pht sinh t hp ng
ny m hai bn khng gii quyt bng thng lng s c gii quyt bi Trng ti Thng mi
Quc t ti Paris, theo cc qui ch xt x ca n
iu 9: Cc iu kin khc
Ngi Mua s phi lm th tc bo lnh ti ngn hng Ngoi thng Vit Nam
Ngi Bn
Ngi Mua

11-17
3. Risk, the Contract, and the Law
THE PROBLEM
The law offers protection to both exporter and importer. What is this law? And how can
the two parties ensure that they achieve the best possible protection?
THE PRINCIPLE
Law exists in two forms, public and private. Public law regulates the relationship between
the citizen and the state. Private law regulates relationship between private citizens (or
companies). Most provisions of the private law are disposivethe parties to a contract are
free to change or ignore them. A well written contract clarifies exactly what the parties have
agreed and, supplementary to their agreement, which law they have chosen to fill in any
gaps. Contract law belongs to the private law.
A negotiated, written contract is a key safeguard against the risks of exporting.
IN MORE DEPTH
Successful trade depends on peaceful and orderly movement of goods and money
between communities. In the modem world, the main safeguard of peace and order is
probably the law. Within most societies, law exists in two forms, public and private. The
public law is imposed by a government within a specific territory: the citizen or foreigner
within this territory is obliged to obey; private law regulates the rights of individual
citizens among themselves. (Not all legal systems make this absolute distinction, but it
helps our present purpose. The public law of a country controls, for example, taxation,
immigration, crime, use of foreign exchange, and such matters. Private law controls,
typically, contracts of sale, employment contracts, contracts to lend money, and so on.
One branch of private law particularly concerns us here, contract law. which looks at the
agreements citizens or companies make with each other.
When Patel agreed 10 sell Gomez chairs for $9,000, the two of them entered a contract. A
contract is an agreement enforceable of law: both sides can ask a court to enforce their rights,
and it will do so. (Not all agreements are contracts: if a teenager agrees with his parents to
come home before midnight and is late; he is not in breach of contract: his agreement is not a
contract, because it is not. for various reasons, legally enforceable.) The essence of an
enforceable agreement is that the parties, when they made it, intended to be legally bound by
their promises. Since Patel and Gomez clearly intended tins, they have a contract.
A contract is an exchange of rights and duties within the framework of the private law. These
rights and duties are specially created by the two sides and apply only to them. This is clear if
we look at the $9.000 Gomez agrees to pay: until she reached her agreement with Patel, he
had no claim against her for any sum of moneyand. of course, she had no right to claim
delivery of thirty chairs. So we can say that, in reaching a deal, each side surrenders to the
other certain clearly specified rightsfor example, the right of Gomez to keep her $9,000.
Each party retains, of course, all rights not expressly given up. Any right that we can legally
waive is called a disposive rightwe are free to dispose of it. Most of the rights of an
exporter under the private law are disposive although we shall come to some exceptions,
rights that cannot be given away. In principle, though, the parties are free to agree anything as
long as it affects only the two of them. This principle is known freedom of contract and it is
well established in most legal systems.
We have already said that the minimum contract (scope in exchange for price) is enforceable
but contains too many uncertainties. In practice, how do businesspeople regulate things more
effectively? There are three basic approaches: reliance on trade practices; use of general
conditions; and the conclusion of a negotiated, written contract.

Trade Practices
Some tradesfor example, the diamond trade in Antwerphave well established rules
familiar to everyone in the business; two dealers need agree nothing more than scope and
price. Similarly, rice merchants in Southeast Asia seldom enter elaborate agreementsthe
rules are too well known to both sides.
General Conditions
More common is the second approach: the use of general conditions of sale or of purchase.
General conditions work in this way: a buyer sends an order to an exporter. Somewhere on
the order are the words: 'This order is subject to our General Conditions of Purchase as
printed on the back of this Order Form." When the exporter sends the order confirmation for
the invoice) it, in turn, bears the words: "All goods are supplied subject to our General
Conditions of Sale as printed on the back of this Order Confirmation." You have probably
seen such general conditions; they are usually in very small print and regulate every
foreseeable problem in favor of the party who drafted them.7 The problem here is obvious:
each side says, "My conditions apply." But neither side has agreed to the other's conditions.
In such a situation, the two sides have very different expectations, and disputes are inevitable.
If a dispute goes before a court, the judge must give one set of conditions preference. But
which? The answer is unpredictable: and unpredictability is another name for risk. Exporting
on the basis of general conditionsespecially if the buyer does not agree to them in
advance--is unnecessarily risky for the exporter.
The Negotiated, Written Contract
The third approach to export agreements is the most professional and the safest: negotiating
the terms of the agreement and putting them in writingthe negotiated written contract. The
advantages are obvious. First, clarity: all the crucial issues are resolved during negotiation,
making disputes unlikely. Then workability: both sides know what they have to do and are
confident that they can do it: this creates a good working relationship. And finally
enforceability: if a dispute arises, both sides can reread the contract and find a clear statement
of their mutual rights and duties. Usually the dispute can be resolved without the help (and
expense) of the courtspeople seldom go to law when the case is clear.
The mention of lawyers brings us to the main problem with contracts: because they are normally
drafted by a lawyer, they are expensive and sometimes difficult to understand. These problems are
not insoluble: in the following chapters you will find advice on many common provisions found in
export contracts. That will help you with most of the "jargon." You will also find a "model sales
contract." Using a model contract for your own export business has a number of advantages: by
completing the various clauses, you ensure that you have negotiated all the essentials; by using the
options in the model contract, you gain flexibility during negotiations; and by establishing a sound
legal relationship, you help things runs smoothly in future. (If you are in doubt, you should ask a
lawyer to check the final version of your contract.)
The best safeguard against the risks of exporting is a contract that is clear, workable and enforceable.
What You Should Know
1. Law has two branches, public and private.
2. A contract operates within the sphere of private law.
3. Most rights and duties under the private law are disposive; the parties can agree to set them aside.
4. The parties to a contract create new, legally enforceable rights and duties that exist only between
the two of them.
5. The parties cannot set aside rights or duties under the public law.
6. In principle, the parties are free to choose which national private law applies to their contract.
7. If a particular trade has strong, well understood conventions, the parties often agree only the
minimum contract: scope and price.
8. Trade is often conducted on the basis of general conditions of sale or purchase; this often leads to
conflict between sets of conditions.
9. The safest and most satisfactory basis for concluding an export agreement is the negotiated written
contract. A model contract can offer useful guidance.
--------------------------------------7
The problem of conflicting sets of general conditions, the so-called "Battle of the Forms." is
discussed in more detail in Chapter 4, Section 3.

What You ShouId Know


1. Law has two branches, public and private.
2. A contract operates within the sphere of private law.
3. Most rights and duties under the private law are disposive; the parties can agree to set them aside.
4. The parties to a contract create new, legally enforceable rights and duties that exist only between the
two of them.
5. The parties cannot set aside rights or duties under the public law.
6. In principle, the parties are free to choose which national private law applies to their contract.
7. If a particular trade has strong, well understood conventions, the parties often agree only the
minimum contract: scope and price.
8. Trade is often conducted on the basis of general conditions of sale or purchase: this often leads to
conflict between sets of conditions.
9. The safest and most satisfactory basis for concluding ah export agreement is the negotiated written
contract. A model contract can offer useful guidance.
CONCEPT REVIEW
A Tax-Free Contract
Alec Patel's company, Office Enterprises, in Verbena is selling office furniture to an importer in
Esperanza. The parties agree that "The law of Verbena applies." Patel, however, wants to ensure that
he is not liable for tax under the tax law of Esperanza; therefore, Patel's lawyer tries to put this clause
in the export contract:
All income taxes or other tax obligations created as a result of
this contract shall be assessed and regulated exclusively according to the Verbenan tax law
in force at the time of assessment.
1. Is Office Enterprises now free of Espcranzan income taxes?
YES
NObecause tax law is public law and the panics cannot set it aside
NObecause the clause is worded too weakly
2. Does the clause below create a "tax-free contract" for Office Enterprises?
The Buyer shall compensate and save harmless the Seller from all
taxes assessed against the Seller by the government: of the
Buyer's country.
YES NO
YES, UNLESS ____________
1. No. The parties to a contract cannot set aside public law such as tax law.
2. Yes- unless the buyer goes bankrupt or unless there is a law in the buyers country forbidding
such clauses in contracts.
Translate into Vietnamese
Mu hp ng chuyn giao cng ngh
TRADEMARK LICENSE AGREEMENT
Between:
A) Information about Licensor
And:
B) Vietnam Forest Corporation (VINAFOR), a
company organized and existing under the laws
of the Socialist Republic of Vietnam (hereinafter
called the Licensee.
(Detailed information about party B)

Gia:
A) Thng tin v Cp Php:
B) Tng cng ty Lm nghip Vit Nam
(VINAFOR), mt cng ty t chc v tn ti theo
php lut ca nc Cng ho x hi ch ngha
Vit Nam (sau y gi l "cp php" (thng tin
chi tit v bn B)

Trong khi , ngi cp php. l ch s hu ca


Giy chng nhn ng k nhn hiu do Cc S
Whereas the licensor is the owner of Trademark
hu cng nghip ca Vit Nam (Cc S hu tr
Registration Certificate which is issued by the
tu ") cho cc thng hiu" ON "(" Thng
National Office of Industrial Property of Vietnam hiu ") cho ng c chu k: Trong khi Lisensor
(NOIP) for the Trademark UNION.
ng cp giy php quyn s dng ti Vit
(the Trademark) for motor cycles: and
Nam c cp php, do c hai bn ng nh
sau:
Whereas the Lisensor agrees to license the right
to use in Vietnam to the Licensee.
Now, therefor both parties agree as follows:

Article 1: Grant of the license


1.1 The Licensor hereby grants to the Licensee,
and the Licensee hereby accepts the license (the
License) to use the Trademark under
Certificate in the Territory.
1.2 The Licensor shall have the right to grant the
license to any third party in the territory of
Vietnam other than the Licensee herein.

iu 1: Cp giy php 1.1 Cp Php s h tr


c cp php, v c cp php hng chp
nhn giy php ("Giy php") s dng thng
hiu theo Giy chng nhn trong Lnh th. 1.2Cp Php c quyn cp giy php cho bt k bn
th ba trn lnh th ca Vit Nam khc so vi
cc ti liu ny c cp php.

Article 2: Object of the license


The Licensee is entitled to apply the Trademark
to motor cycles which are imported in CKD
and/or IKD form from the Licensor then
assembled and sold in Vietnam.

iu 2: i tng ca giy php c cp php


c quyn p dng cc thng hiu n chu k
ng c nhp khu trong suy thn v / hoc hnh
thc IKD t Cp Php sau lp rp v bn ti
Vit Nam. iu 3: Lnh th Giy php c hiu
lc trong ton b lnh th ca nc Cng ho x
Article 3: Territory
hi ch ngha Vit Nam ("Lnh th"). iu 4:
The License is effective in the entire territory of
Thi hn tha thun ny s khng c hiu lc
the Socialist Republic of Vietnam (the
cho n khi chm dt hp ng cung cp ph
Territory).
tng thay th ca Lin minh ng c chu k.
iu 5: Sa i, nh ch v hu b 5.1 Khi yu
Article 4: Term
cu ca mt trong hai bn, Hip nh c th c
This agreement shall be invalid until termination sa i, b sung bng vn bn. Vic sa i, b
of the contract for supplying spare parts of Union sung phi c ch k ca ngi i din php l
motor cycle.
ca hai bn.
5,2 Hip nh phi c chm dt trong cc
Article 5: Amendment, suspension and
trng hp sau y: - Ht thi hn hp ng
cancellation
cung cp ph tng cho xe my Lin minh. b 5.1 Upon the request of either party, the
Cc quyn s hu cng nghip ca Cp Php b
Agreement may be amended or supplemented in nh ch hoc hy b. c - Vic thc hin Hip
writing. Any amendment or supplement must be nh l ngn chn mt s kin bt kh khng. S
signed by the legal representatives of the both
kin bt kh khng bao gm cc s kin ngoi s
parties.
kim sot ca cc bn, bao gm, nhng khng
5.2 The Agreement shall be terminated in the
gii hn, hnh vi ca Thin Cha, nh cng, bo
following cases:
lon, chin tranh v cc s kin tng t.
a - Expiry of contract for supplying parts for
Union motor cycles.
b - The industrial property rights of the Licensor
are suspended or cancelled.
c - The performance of the Agreement is
prevented by a force majeure events. Force
majeure events include events beyond the control
of the parties including, but not limited to, acts of
God, strikes, riots, war and similar events.
Article 6: Obligations of the Licensor
6.1 The Licensor hereby represents that it is true
and legal owner of the Trademark and the grant
of the License of the Trademark shall not
infringe the industrial property rights of any third
party. The Licensor shall be responsible, at his
own expenses, to resolve any dispute with any
third party arising from the grant of the License
under this Agreement.
6.2 The Licensee shall be responsible to take all
necessary and appropriate measures, at his own
expenses, to prosecute infringements of the
Trademark by any third party.
The Licensor shall have the obligation to fully

iu 6: Ngha v ca Cp Php 6,1 Cp Php


hng i din cho rng l ng s tht v
php l ch s hu nhn hiu hng ho v cp
giy php nhn hiu hng ho khng c xm
phm quyn s hu cng nghip ca bt k bn
th ba. Cp Php s chu trch nhim, chi ph
ring ca mnh, gii quyt bt k tranh chp
vi bt k bn th ba pht sinh t vic cp Giy
php theo Hip nh ny. 6.2 c cp php phi
chu trch nhim thc hin tt c cc bin php
cn thit v thch hp, chi ph ring ca mnh,
truy t cc hnh vi xm phm nhn hiu hng
ho bi bt k bn th ba. Cp Php c ngha v
hon ton hp tc v h tr c cp php trong

cooperate with and assist the Licensee in any


such matter.
Article 7: Obligations of the Licensee
7.1 The Licensee shall ensure that the quality of
the Product assembled by the Licensee shall not
be lower than those manufactured by the
Licensor. The method to determine the quality of
the Product shall be mutually agreed by the
Licensor and the Licensee.
7.2 The Licensee is entitled to use the Trademark
only in the Socialist republic of Vietnam.
7.3 The Licensee is not permitted to transfer the
Trademark to any third party.
7.4 The Licensee shall have the obligation to
identify the Licensor on the Product or...
7.5 The Licensee shall be responsible for
submitting this Agreement to the NOIP for
registration and paying all relevant fee within
fifteen (15) days from the date of signing this
Agreement.
Article 8: Dispute Resolution
Any dispute, breach, controversy or claim arising
out of or in connection with this Agreement shall
be firstly settled amicably between two parties. If
the dispute cant be settled amicably, either party
has the right to submit the dispute to
international Organization foe settlement.
Article 9: Implementing Provisions
9.1 This Agreement is made on the basis of
equality and voluntarism. The two parties pledge
to comply strictly with the terms and conditions
of the Agreement.
9.2 The Agreement shall be made in six (6) sets
in English which shall be equal force. Each party
shall keep three (3) sets in English.

bt k vn no .
iu 7: Ngha v ca ngi c cp php 7,1
Cc cp php phi m bo rng cht lng ca
sn phm c lp rp bng cch cp php
khng c thp hn so vi nhng sn xut bi
Cp Php. Cc phng php xc nh cht
lng sn phm s c hai bn tho thun Cp
Php v c cp php. 7,2 cp php c quyn
s dng nhn hiu hng ho ch trong cc nc
cng ha x hi ch ngha Vit Nam. 7,3 c
cp php l khng c php chuyn nhng
thng hiu cho bt k bn th ba. 7.4 Vic cp
php c ngha v xc nh Cp Php sn phm
hoc ... 7,5 cp php s c trch nhim trnh Hip
nh ny Cc S hu tr tu ng k v thanh
ton ht cc khon ph c lin quan trong thi
hn mi lm (15) ngy, k t ngy k kt Hip
nh ny.

iu 8: gii quyt tranh chp Mi tranh chp, vi


phm, tranh ci hoc khiu ni pht sinh t hoc
lin quan n Hip nh ny c trc ht l
gii quyt mt cch hu ngh gia hai bn. Nu
tranh chp khng gii quyt c mt cch hu
ngh, mt trong hai bn c quyn a v tranh
chp quc t T chc gii quyt k th.
iu 9: Thc hin Quy nh 9,1 Hip nh ny
c thc hin trn c s bnh ng, tnh
nguyn. Hai bn cam kt thc hin ng cc iu
khon v iu kin ca Hip nh. 9,2 Hip nh
c thc hin trong su (6) b bng ting Anh
c c bng lc lng. Mi bn gi ba (3) b
bng ting Anh.

Mu ting Anh:
TRADEMARK LICENSE AGREEMENT
Between:
A) Information about Licensor
And:
B) Vietnam Forest Corporation (VINAFOR), a company organized and existing under the laws of the
Socialist Republic of Vietnam (hereinafter called the Licensee.
(Detailed information about party B)
Whereas the licensor is the owner of Trademark Registration Certificate which is issued by the
National Office of Industrial Property of Vietnam (NOIP) for the Trademark UNION.
(the Trademark) for motor cycles: and
Whereas the Lisensor agrees to license the right to use in Vietnam to the Licensee.
Now, therefor both parties agree as follows:
Article 1: Grant of the license

1.1 The Licensor hereby grants to the Licensee, and the Licensee hereby accepts the license (the
License) to use the Trademark under Certificate in the Territory.
1.2 The Licensor shall have the right to grant the license to any third party in the territory of Vietnam
other than the Licensee herein.
Article 2: Object of the license
The Licensee is entitled to apply the Trademark to motor cycles which are imported in CKD and/or
IKD form from the Licensor then assembled and sold in Vietnam.
Article 3: Territory
The License is effective in the entire territory of the Socialist Republic of Vietnam (the Territory).
Article 4: Term
This agreement shall be invalid until termination of the contract for supplying spare parts of Union
motor cycle.
Article 5: Amendment, suspension and cancellation
5.1 Upon the request of either party, the Agreement may be amended or supplemented in writing.
Any amendment or supplement must be signed by the legal representatives of the both parties.
5.2 The Agreement shall be terminated in the following cases:
a - Expiry of contract for supplying parts for Union motor cycles.
b - The industrial property rights of the Licensor are suspended or cancelled.
c - The performance of the Agreement is prevented by a force majeure events. Force majeure events
include events beyond the control of the parties including, but not limited to, acts of God, strikes,
riots, war and similar events.
Article 6: Obligations of the Licensor
6.1 The Licensor hereby represents that it is true and legal owner of the Trademark and the grant of
the License of the Trademark shall not infringe the industrial property rights of any third party. The
Licensor shall be responsible, at his own expenses, to resolve any dispute with any third party arising
from the grant of the License under this Agreement.
6.2 The Licensee shall be responsible to take all necessary and appropriate measures, at his own
expenses, to prosecute infringements of the Trademark by any third party.
The Licensor shall have the obligation to fully cooperate with and assist the Licensee in any such
matter.
Article 7: Obligations of the Licensee
7.1 The Licensee shall ensure that the quality of the Product assembled by the Licensee shall not be
lower than those manufactured by the Licensor. The method to determine the quality of the Product
shall be mutually agreed by the Licensor and the Licensee.
7.2 The Licensee is entitled to use the Trademark only in the Socialist republic of Vietnam.
7.3 The Licensee is not permitted to transfer the Trademark to any third party.
7.4 The Licensee shall have the obligation to identify the Licensor on the Product or...
7.5 The Licensee shall be responsible for submitting this Agreement to the NOIP for registration and
paying all relevant fee within fifteen (15) days from the date of signing this Agreement.
Article 8: Dispute Resolution
Any dispute, breach, controversy or claim arising out of or in connection with this Agreement shall
be firstly settled amicably between two parties. If the dispute cant be settled amicably, either party
has the right to submit the dispute to international Organization foe settlement.
Article 9: Implementing Provisions
9.1 This Agreement is made on the basis of equality and voluntarism. The two parties pledge to
comply strictly with the terms and conditions of the Agreement.
9.2 The Agreement shall be made in six (6) sets in English which shall be equal force. Each party
shall keep three (3) sets in English.
Mu ting Vit:

Cng ho x hi ch ngha Vit Nam


c lp - T do - Hnh phc
HP NG CHUYN GIAO CNG NGH
(S:.... /HCGCN)
- Cn c chng... phn... ca B lut dn s.
- Cn c ngh nh s 63/CP ngy 28/10/1996.
- Cn c thng t s 3055/BKHCNMT ngy
31/12/1996.
(i vi trng hp lut iu chnh l lut Vit
Nam)
Hm nay, ngy... thng... nm 2000, chng ti
gm:
Bn chuyn giao: (bn A)
- Tn doanh nghip:
- Tr s chnh:
- in thoi:
- Ti khon s:
- i din l:
- Theo giy u quyn s (nu c):

Socialist Republic of Vietnam


Independence - Freedom - Happiness
TECHNOLOGY TRANSFER AGREEMENT
(No. :.... / HDCGCN)
- Pursuant to Chapter ... the ... of the Civil Code.
- Pursuant to Decree No. 63/CP dated
28/10/1996. - Pursuant to Circular No.
3055/BKHCNMT on 31/12/1996. (For the case
law governing the law of Vietnam) Today, on ...
May ... in 2000, we are: The transferor: (side A) Name: - Head Office - Tel: - Account No: Representatives are: - The authorization number
(if any):
Licensees: (side B) - Name: - Head Office - Tel: Account No: - Representatives are: - The
authorization number (if any):
The two sides pledged to the following amounts

Bn nhn chuyn giao: (bn B)


- Tn doanh nghip:
- Tr s chnh:
- in thoi:
- Ti khon s:
- i din l:
- Theo giy u quyn s (nu c):
Hai bn cam kt cc iu khon sau
iu 1: i tung chuyn giao
- Tn (sng ch, gii php hu ch, nhn hiu
hng ho, b quyt cng ngh):
- c im cng ngh:
- Kt qu p dng cng ngh:
- Cn c chuyn giao (s vn bng bo h nu
c):
iu 2: Cht lng, ni dung cng ngh
- Cng ngh t tiu chun g?
- M t ni dung v tnh nng ca cng ngh:
iu 3: Phm vi v thi hn chuyn giao
- Phm vi: c quyn hay khng c quyn? S
dng trong lnh th no?
- Thi hn chuyn giao: Do hai bn tho thun
ph hp vi thi hn m i tng chuyn giao
c bo h (nu c).
iu 4: a im v tin chuyn giao
1. a im:
2. Tin :
iu 5: Thi hn bo hnh cng ngh

Article 1: to be assigned - Name (invention,


utility solution, trademark, trade secret): Technology Features: - The results of applying
the technology: - Pursuant to the transfer (of
degree of protection if any): Article 2: The
quality, content and technology - what
technology standards? - Describe the content and
features of the technology: Article 3: Scope and
time of delivery - Scope: Monopoly or
exclusive? Use of territory? - Time of delivery:
As the mutually agreed time limit that matches
the object transfer protection (if any).
Article 4: Location and schedule a delivery.
Location: 2. Schedule: Article 5: The warranty
period technology Article 6: Price of technology
transfer and payment methods - Rates Available:
- Payment: Article 7: The scope and extent of
confidentiality of the parties Article 8: The
obligation to protect the technology of
communication and the communication
nhanchuyen Article 9: Acceptance of the results
of technology transfer Article 10: Improved
technology transfer of the transferee of any

iu 6: Gi chuyn giao cng ngh v phng


thc thanh ton
- Gi chuyn giao:
- Phng thc thanh ton:

improvement for licensees technology transfer of


ownership of the transferee.

iu 7: Phm vi, mc gi b mt ca cc
bn
iu 8: Ngha v bo h cng ngh ca bn
giao v bn nhnchuyn giao
iu 9: Nghim thu kt qu chuyn giao cng
ngh
iu 10: Ci tin cng ngh chuyn giao ca
bn nhn chuyn giao
Mi ci tin ca bn nhn chuyn giao i vi
cng ngh chuyn giao thuc quyn s hu ca
bn nhn chuyn giao.
iu 11: Cam kt ca bn chuyn gao v o
to nhn lc cho thc hin cng ngh chuyn
giao
- S lung:
- Thi gian:
- Chi ph o to:
iu 12: Quyn v ngha v ca cc bn
1. Bn chuyn giao
- Cam kt l ch s hu hp php ca cng ngh
chuyn giao v vic chuyn giao cng ngh s
khng xm phm quyn s hu cng nghip ca
bt k bn th 3 no khc. Bn chuyn giao c
trch nhim, vi chi ph ca mnh, gii quyt mi
tranh chp pht sinh t vic chuyn giao cng
ngh theo hp ng ny.
- C ngha v hp tc cht ch v gip bn
nhn chuyn giao chng li mi s xm phm
quyn s hu t bt k bn th 3 no khc.
- ng k hp ng chuyn giao cng ngh.
- Np thu chuyn giao cng ngh.
- C quyn/khng c chuyn giao cng ngh
trn cho bn th 3 trong phm vi lnh th quy
nh trong hp ng ny.
2. Bn nhn chuyn giao
- Cam kt cht lng sn phm sn xut theo
cng ngh nhn chuyn nhng khng thp hn
cht lng sn phm do bn chuyn giao sn
xut. Phng php nh gi cht lng do hai
bn tho thun.
- Tr tin chuyn giao theo hp ng.
- Khng c php/c php chuyn giao li
cho bn th 3 cng ngh trn.
- Ghi ch xut x cng ngh chuyn giao trn
sn phm.
- ng k hp ng (nu c tho thun).
iu 13: Sa i, nh ch hoc hu b hp
ng

Article 11: Commitments of the transfer of


personnel training for the implementation of
technology transfer - Quantity: - Time: - Cost of
training:
Article 12: Rights and obligations of the parties
1. The transferor - Commitment is the legal
owner of the technology transfer and technology
transfer will not infringe industrial property
rights of any other third party. The transferor is
responsible, with their costs and settle any
disputes arising from technology transfer under
this contract.
- Be obliged to cooperate closely and assist
licensees against any infringement of property
rights from any other third party. - Registration of
technology transfer contracts. - Tax payment
technology transfer. - Having the right / not
transfer the technology to third party within the
territory specified in this contract.
2. Licensees - Commitment to quality products
produced by the transfer of technology does not
lower the quality of products produced by the
transferor. Quality assessment method shall be
mutually agreed upon. - Transfer payments under
the contract. - Not allowed / permitted to transfer
back to the third party technologies. - Note the
origin of technology transfer products. - Sign a
contract (if agreed).

Article 13: To amend, suspend or cancel the


contract, the Contract may be amended and

Hp ng c th b sa i, b sung theo yu cu
bng vn bn ca mt trong cc bn v c i
din hp php ca cc bn k kt bng vn bn.
Cc iu khon sa i, b sung c hiu lc t
thi im c sa i.
Hp ng b chm dt trong cc trng hp sau
y:
- Ht thi hn ghi trong hp ng.
- Quyn s hu cng nghip b nh ch hoc hu
b.
- Hp ng khng thc hin c do nguyn
nhn bt kh khng nh: thin tai, bi cng, biu
tnh, ni lon, chin tranh v cc s kin tng
t.
iu 14: Trch nhim do vi phm hp ng
Bn no vi phm hp ng phi chu pht hp
ng v bi thng cho bn kia ton b thit hi
theo quy nh ca...
iu 15: Lut iu chnh hp ng
Hp ng ny c iu chnh bi lut ca
nc...
iu 16: Trng ti
Mi tranh chp pht sinh t hp ng ny phi
c gii quyt trc ht thng qua thng
lng, ho gii. Trong trng hp khng gii
quyt c th cc bn c quyn kin n trng
ti quc t ti...

supplemented by the written request of one of the


parties and legal representatives of the
Contracting Parties in writing. The revised terms,
additional effect from time it is modified. The
contract was terminated in the following cases: The term specified in the contract. - Industrial
property rights are suspended or canceled. Contracts were not achieved due to force majeure
such as natural disasters, strikes, demonstrations,
riots, war and similar events.
Article 14: Liability for breach of contract that
violates the contract agreement shall be subject
to fines and compensation for all damage beyond
the provisions of ... Article 15: Governing Law
This contract is a contract governed by the laws
of the country ... Article 16: Arbitration Any
dispute arising from this contract must be settled
first by negotiation and conciliation. In case no
settlement, the parties can sue to international
arbitration in ...
Article 17: Term of contract enforcement is built
on the basis of equality and voluntariness. The
two sides pledged to comply with and complete
the terms of this contract. The contract shall be
made ... (A) in English ... (A) in the Vietnamese
language has equal value. Each party shall
keep ... (A) to implement.

iu 17: iu khon thi hnh


Hp ng c xy dng trn c s bnh ng
v t nguyn. Hai bn cam kt thc hin ng v
y cc iu khon trong hp ng ny.
Hp ng c lp thnh... (bn) bng ting
Anh... (bn) bng ting Vit c gi tr nh nhau.
Mi bn gi... (bn) thi hnh.
Cng ho x hi ch ngha Vit Nam
c lp - T do - Hnh phc
HP NG CHUYN GIAO CNG NGH
(S:.... /HCGCN)
- Cn c chng... phn... ca B lut dn s.
- Cn c ngh nh s 63/CP ngy 28/10/1996.
- Cn c thng t s 3055/BKHCNMT ngy 31/12/1996.
(i vi trng hp lut iu chnh l lut Vit Nam)
Hm nay, ngy... thng... nm 2000, chng ti gm:
Bn chuyn giao: (bn A)
- Tn doanh nghip:
- Tr s chnh:
- in thoi:
- Ti khon s:
- i din l:

- Theo giy u quyn s (nu c):


Bn nhn chuyn giao: (bn B)
- Tn doanh nghip:
- Tr s chnh:
- in thoi:
- Ti khon s:
- i din l:
- Theo giy u quyn s (nu c):
Hai bn cam kt cc iu khon sau
iu 1: i tung chuyn giao
- Tn (sng ch, gii php hu ch, nhn hiu hng ho, b quyt cng ngh):
- c im cng ngh:
- Kt qu p dng cng ngh:
- Cn c chuyn giao (s vn bng bo h nu c):
iu 2: Cht lng, ni dung cng ngh
- Cng ngh t tiu chun g?
- M t ni dung v tnh nng ca cng ngh:
iu 3: Phm vi v thi hn chuyn giao
- Phm vi: c quyn hay khng c quyn? S dng trong lnh th no?
- Thi hn chuyn giao: Do hai bn tho thun ph hp vi thi hn m i tng chuyn giao c
bo h (nu c).
iu 4: a im v tin chuyn giao
1. a im:
2. Tin :
iu 5: Thi hn bo hnh cng ngh
iu 6: Gi chuyn giao cng ngh v phng thc thanh ton
- Gi chuyn giao:
- Phng thc thanh ton:
iu 7: Phm vi, mc gi b mt ca cc bn
iu 8: Ngha v bo h cng ngh ca bn giao v bn nhnchuyn giao
iu 9: Nghim thu kt qu chuyn giao cng ngh
iu 10: Ci tin cng ngh chuyn giao ca bn nhn chuyn giao
Mi ci tin ca bn nhn chuyn giao i vi cng ngh chuyn giao thuc quyn s hu ca bn
nhn chuyn giao.
iu 11: Cam kt ca bn chuyn gao v o to nhn lc cho thc hin cng ngh chuyn
giao
- S lung:
- Thi gian:
- Chi ph o to:
iu 12: Quyn v ngha v ca cc bn
1. Bn chuyn giao
- Cam kt l ch s hu hp php ca cng ngh chuyn giao v vic chuyn giao cng ngh s
khng xm phm quyn s hu cng nghip ca bt k bn th 3 no khc. Bn chuyn giao c
trch nhim, vi chi ph ca mnh, gii quyt mi tranh chp pht sinh t vic chuyn giao cng ngh
theo hp ng ny.

- C ngha v hp tc cht ch v gip bn nhn chuyn giao chng li mi s xm phm quyn


s hu t bt k bn th 3 no khc.
- ng k hp ng chuyn giao cng ngh.
- Np thu chuyn giao cng ngh.
- C quyn/khng c chuyn giao cng ngh trn cho bn th 3 trong phm vi lnh th quy nh
trong hp ng ny.
2. Bn nhn chuyn giao
- Cam kt cht lng sn phm sn xut theo cng ngh nhn chuyn nhng khng thp hn cht
lng sn phm do bn chuyn giao sn xut. Phng php nh gi cht lng do hai bn tho
thun.
- Tr tin chuyn giao theo hp ng.
- Khng c php/c php chuyn giao li cho bn th 3 cng ngh trn.
- Ghi ch xut x cng ngh chuyn giao trn sn phm.
- ng k hp ng (nu c tho thun).
iu 13: Sa i, nh ch hoc hu b hp ng
Hp ng c th b sa i, b sung theo yu cu bng vn bn ca mt trong cc bn v c i
din hp php ca cc bn k kt bng vn bn. Cc iu khon sa i, b sung c hiu lc t thi
im c sa i.
Hp ng b chm dt trong cc trng hp sau y:
- Ht thi hn ghi trong hp ng.
- Quyn s hu cng nghip b nh ch hoc hu b.
- Hp ng khng thc hin c do nguyn nhn bt kh khng nh: thin tai, bi cng, biu tnh,
ni lon, chin tranh v cc s kin tng t.
iu 14: Trch nhim do vi phm hp ng
Bn no vi phm hp ng phi chu pht hp ng v bi thng cho bn kia ton b thit hi theo
quy nh ca...
iu 15: Lut iu chnh hp ng
Hp ng ny c iu chnh bi lut ca nc...
iu 16: Trng ti
Mi tranh chp pht sinh t hp ng ny phi c gii quyt trc ht thng qua thng lng,
ho gii. Trong trng hp khng gii quyt c th cc bn c quyn kin n trng ti quc t
ti...
iu 17: iu khon thi hnh
Hp ng c xy dng trn c s bnh ng v t nguyn. Hai bn cam kt thc hin ng v y
cc iu khon trong hp ng ny.
Hp ng c lp thnh... (bn) bng ting Anh... (bn) bng ting Vit c gi tr nh nhau. Mi
bn gi... (bn) thi hnh.
Bn A

Bn B

Translate into English


Translate into English
CONTRACT FOR THE PURCHASE OF
RICE
No.018VNF/1999
Between
GALLUCK LIMITED
Flat A.3/F, Causeway Tower,
16 -22 Causeway Road
Causeway Bay HONGKONG

HP NG MUA BN GO
S 018/NVF-GL 1999
Gia GALLUCK LIMITED
Phng A.3/F, Causeway Tower,
16 -22 ng Causeway
Vnh Causeway HONGKONG
Tel: 8479900, 8976422: Fax: 4839200
Telex: 57889 WSGTC HK ( sau y gi l

Tel: 8479900, 8976422: Fax: 4839200


( hereinafter called the Buyer)
And
HANOI FOOD EXPORT IMPORT
COMPANY
40 Hai Ba Trung Street, Hanoi
VIETNAM
Tel: 328999, Telex: 328492 - VNF VT
Email :
WWW.VINAFOODHN@Yahoo.com
(hereinafter called the Seller)
It has been mutually agreed to the sale
and purchase of rice on the terms and
conditions as follows:
1. Commodity: Vietnamese White Rice
2. Specification:
- Brokens: 35% max
- Moisture: 14,5%
- Foreign matter: 0,4%
- Crop: 2009-2010
3. Quantity: 100,000 MT more or less 5%
at Seller's option
4. Price: 200 USD per metrric ton net for
June - Sepember 2009 shipments,
aDunnage,
bamboomat
for
Shipowner's/Buyer's account
b-Shore tally to be at Seller's account
c-Vessel's tally to be at Buyer's/
Shipowner's account
d- All export duties, taxes, levied in the
country of origin to be at Seller's account
e- All import duties, taxes, levied in the
country of destination and outside Vietnam shall
be for Buyer's account.

ngi Mua)
V
Cng ty xut nhp khu lng thc H Ni
40 ng Hai Ba Trung , H Ni
VIETNAM
Tel: 328999, Telex: 328492 - VNF VT
a ch in tn : VINAFOOD HANOI
( sau y gi l ngi Bn)
Hai bn cng ng i vi hp ng mua
v bn go trn c s iu kin nh sau:
1. Hng ho: Go trng Vit Nam
2. Quy cch phm cht:
- Tm: ti a 35%
- Thu phn: ti a 14,5%
- Tp cht: ti a 0,4%
- Go v ma 1998-1999
3. S lng: 100.000 MT trn di 5%
theo s la chn ca ngi bn
4. Gi c: 2USD mt MT( tnh) giao hng
thng 6 n thng 9- 1999
a- Lt hng, phn ci tnh vo ti khon
ca ch tu/ ngi mua
b- Chi ph kim kin trn cu cng i
c tnh vo ti khon ca ngi bn (do ngi
bn chu)
c- Chi ph kim kin trn tu c tnh vo
ti khon ca ngi mua/ ch tu
d- Tt c cc khon thu xut khu nc
xut x do ngi bn chu
e- Tt c cc khon thu nhp, thu khc
nc n ... v cc nc bn ngoi Vit Nam s
c tnh vo ti khon ca ngi mua

5. Time of shipment: 20 25 days after


L/C opening date
6. Packing: Rice to be packed in single jute
new bags of 50 kgs net each, about 50.6 kgs
gross each, hand-sewn at mouth with jute twine
thread suitable for rough handling and sea
transportation. The Seller will supply 0.2% of
new jute bags free of charge out of quantity of
bags shipped
7. Insurance: To be arranged by the Buyer
8. Inspection and fumigation
a- The certificate of quality, weight and
packing issued by Vinacontrol at loading port to
be final and for Seller's account
b- Fumigation to be effected on board the
vessel after completion of loading with expenses
to be at Seller's account. But expenses for crew
on shore during the fumigation period including
transportation, accommodation and meals at
hotel for Ship owner's account
c- Time for fumigation not to count as
laytime
9. Loading terms:

5. Thi hn giao hng: 20-25 ngy sau


ngy m L/C
6. Bao b: Go phi c ng trong bao
ay mi trng lng tnh mi bao 50kg, khong
50,6 kg c b, khu tay ming bng ch ay xe
i thch hp cho vic bc vc v vn ti ng
bin; ngi bn s cung cp 0,2% bao ay mi
min ph ngoi tng s bao c xp trn tu.
7. Bo him: Ngi mua s chu
8. Kim tra v xng khi:
a- Giy chng nhn cht lng, trng
lng v bao b do Vinacontrol cp cng xp
hng ha tnh cht chung thm v chi ph do
ngi bn chu
c- Thi gian xng khi khng tnh l thi
gian xp hng
9. Cc iu khon v xp hng:
a. Ngi mua s thng bo ETA ca con
tu v cc ni dung chi tit ca n 15 ngy ( sau
khi tu nh neo) v thuyn trng s thng bo
ETA ca tu, khi lng s c xp ln tu v
nhng thng tin cn thit khc 72/48/24 gi
trc khi tu n cng xp hng

a- Buyer shall advise vessel's ETA and its


particulars 15 days and Captain shall inform
vessel's ETA, quantity to be loaded and other
necessary imformation 72/48/24 hours before the
vessel's arrival at loading port
b- Laytime to commence at 1.pm if N.O.R
given before noon and at 8. AM next working
day if NOR given in the afternoon during office
hours. In case, vessel waiting for berth due to
congestion, time commence to count 72 hours
after N.O.R submitted
c- Loading rate: 800 MT per weather
working day of 24 consecutive hours Sundays,
holidays excepted even if used, based on the use
of at least four to five normal working
hatches/holds and all cranes /derricks and
winches available in good order, if less than
prorata
d- Seller shall arrange one safe berth of one
safe port for the vessel of 10,000 - 20,000 MT
capacity to load the cargo
e- Time between 17.00 PM on Saturday
and the day preceeding a holiday until 8.AM next
working day not to count as laytime even if used
f- Before submitting N.O.R., the vessel
must be in free pratique. Immediately after vessel
at berth, captain shall request Vinacontrol to
inspect the hatches/holds and issue a cetificate
certifying the hatches/ holds are clean, dry, free
from harmful factions and suitable for goods
loading with such expensses to be at ship owner's
account and time not to count as laytime
g- Demurrage/Despatch of any, to be as per
C/P rate
But maximum 4,000/ 2,000 USD per day
or prorata and to be settled directedly between
Seller and Buyer within 90 days after B/L date
h- For the purpose of obtaining shipping
Documents such as:
- Commercial Invoices
- Cetificate of quality, weight and packing
- Certificate of origin
The responsible party shall Cable/ Telex/
Fax advising shipment particulars within 24
hours after completion of loading
In order for the Buyer to obtain insurance,
a Bill of Lading shall be issued immediately after
completion of loading and before fumigatiooon
and provided immediately to the Buyer
i- In case, cargo is ready for shipment as
scheduled in this contract, but the Buyer fails to
nominate the vesel to load, then all risks,
damages, and associated expenses for cargo to be
borne by the Buyer based on the Seller's actual
claim. In the event no cargo is available to be
loaded on the nominated vessel at the loading
port, then dead freight to be paid by Seller based
on Buyer's actual claim and the Buyer will

b- Thi gian xp hng bt u tnh t 1h


tra nu NOR c trao trc bui tra v t 8h
sng ca ngy lm vic tip theo nu nh NOR
c trao vo bui chiu trong gi lm vic,
trong trng hp tu i th neo v cng tc
nghn th thi gian xp hng c tnh sau 72 gi
k t khi trao NOR
c- Tc xp hng: 800 MT mi ngy lm
vic lin tc 24h thi tit cho php lm vic , ch
nht, ngy ngh c tr ra thm ch nu c s
dng, trn c s c t nht t 4 n 5 hm
tu/hm hng lm vic bnh thng v tt c cc
cn cu/cn trc v cun dy ti sn sng trong
trng thi tt, nu t hn th tnh theo t l
d- Ngi bn s thu xp mt a im b
neo an ton ti mt cng an ton cho con tu c
sc cha t 10.000 MT - 20.000 MT bc hng
e- Khong thi gian t 17h chiu th by
v ngy trc mt ngy ngh cho n 8 sng ca
ngy lm vic tip theo khng tnh l thi gian
xp hng thm ch c s dng
f- Trc khi trao NOR, con tu phi c
giy qu cng, ngay sau khi tu cp cng ( b
neo) , thuyn trng s yu cu Vinacontrol kim
tra cc hm tu/hm hng v cp giy chng
nhn cc hm tu/hm hng sch kh, khng c
tc nhn gy hi v thch hp ch lng thc
v nhng chi ph nh vy s c tnh vo ti
khon ca ch tu v thi gian khng tnh l thi
gian xp hng
g- Pht xp hng chm/ thng xp hng
nhanh nu c, s theo nh mc quy nh trong
hp ng thu tu chuyn; nhng ti a l
4.000/2.000 USD mt ngy hoc tnh theo t l
v phi c gii quyt ( thanh ton ) trc tip
gia ngi mua v ngi bn trong vng 90 ngy
k t ngy k B/L
h- c c nhng chng t giao hng
nh:
-Cc ho n thng mi
- Giy chng nhn cht lng, trng lng
v bao b
- Giy chng nhn xut x
Bn c trch nhim phi thng bo cc chi
tit v giao hng bng in tn /telex/fax trong
vng 24h sau khi hon thnh giao hng
Vn n s c cp ngy sau khi hon
thnh vic giao hng v trc khi xng khi v
c giao ngay cho ngi mua mua bo him
i- Trong trng hp hng ho sn sng
xp ln tu nh c d nh trong hp
ng ny nhng ngi mua khng ch nh tu
bc hng th tt c ri ro, thit hi, nhng chi
ph c lin quan n hng ho do ngi mua chu
trn c s i bi thng thc t ca ngi
bn ;ngc li, nu khng hng ho bc ln
tu c ch nh cng bc hng, th cc
khng s do ngi bn tr trn c s bn i bi

submit the following documents to Vietcombank


for receiving P.B:
( time counted : 20 -25 days from L/C opening
date):
- N.O.R. with seller's signature
- Report signed by the Captain and the
Seller confirming that the vessel has already
arrived at the port to receive the
cargo but the Seller has no cargo to load
- Vietcombank's confirmation

thng thc t ca ngi mua v ngi mua s


xut trnh nhng chng t sau cho Vietcombank
nhn P.B. ( thi gian c tnh t 20-25 ngy
k t ngy m L/C)
- NOR c ch k ca ngi bn
- Bin bn c k gia thuyn trng v ngi
bn xc nhn rng con tu c ch nh
n cng xp hng nhn s hng trong hp
ng nhng ngi bn khng c hng bc ln
tu xc nhn ca Vietcombank

10. Payment:
a- After signing the contract, the Buyer or
the Buyer's nominee ( SHYE LIAN( HK)
MANUFACTURING CO.LTD OR OTHER
NOMINEE) will telex asking the Seller to open
P.B. of 1% of total L/C amoount at Vietcombank
Hanoi within two days thereof the Seller open
P.B. and in form the Buyer, then, four days after
receiving Vietcombank 's confirmation, the
Buyer will open a telegraphic, irrevocable and
confirmed L/C which is in conformity with this
contract by an international first class bank at
sight with T.T.R. acceptable for 40,000 MT in
favour of Vinafood Hanoi through the Bank for
Foreign Trade of Vietnam
For 60,000 MT the Buyer or Buyer's
nominee will open a telegraphic, irrevocable and
transferable at sight L/C which is in conformity
with this contract with T.T.R. accepable. In case,
the Seller requests the confirmation of L/C, the
L/C will be confirmed for Seller's account
In the event that the Buyer fails to open
L/C four days after receiving confirmation from
Vietcombank then the Seller shall collect P.B.
from the Vietcombank and then the contract is
automatically cancelled
The Seller will collect the P.B. against
presentation of shipping documents at
Vietcombank
b- Presentation of the following documents
to the Bank for Foreign Trade of Vietnam,
payable within 3-5 banking days after reciept of
the telex from Vietcombank cetifying that
documents have been checked in conformity
with the L/C terms:
- Full set of Clean on board B/L in three
( 3) originals marked Freight to collect
- Commercial invoice in three (3) folds
- Certificates of quality, weight and
packing issued by Vinaconntrol to be final at
loading port in six ( 6) folds
- Certificate of fumigation issued by
VIetnam Chamber of Commerce in six (6) folds
- Phytosanitary certificate issued by the
Competent authority of Vietnam in six (6) folds
- Cable/ Telex/ Fax advising shipment
Particulars within 24 hours after completion of

10. Thanh ton:


a- Sau khi k kt hp ng ny, ngi mua
hoc ngi bn c ch nh ca ngi mua
( SHYE LIAN(HK)- MANUFATURING
CO.LTD hoc ngi c ch nh khc) s telex
ngh ngi bn m P.B. vi 1% tng gi tr
LC ti Vietcombank H Ni trong vng 2 ngy
ngi bn s m P.B. v thng bo cho ngi
mua, sau , 4 ngy sau khi nhn c xc nhn
ca Vietcombank, ngi mua s m mt L/C
c xc nhn khng hu ngang bng in tn
ph hp vi hp ng ny ti ngn hng quc t
hng nht thanh ton bng T.T.R c th chp
nhn c i vi 40.000 MT cho Vinafood
Hanoi hng qua ngn hng Ngoi thng Vit
Nam
i vi 60.000 MT ngi bn cng chp
nhn rng ngi mua hoc ngi ch nh ca
ngi mua s m mt th tn dng thanh ton
ngay c th chuyn nhng c khng hu
ngang bng in bo khng ph hp vi hp
ng ny c th chp nhn vi chuyn tin bng
in. trong trng hp ngi bn yu cu xc
nhn L/C, L/C s c xc nhn vi chi ph ca
ngi bn.
Trong trng hp bn ngy k t ngy
ngi mua nhn c xc nhn ca
Vietcombank, nhng L/C khng c m th
ngi bn s thu hi P.B t Vietcombank v sau
hp ng t ng c hu b.
Ngi bn s thu hi P.B trn c s xut
trnh cc chng t vn ti cho Vietcombank
b- Vic xut trnh nhng chng t sau y
cho ngn hng Ngoi thng Vit Nam, c
thanh ton trong vng 3-5 ngy lm vic ca
ngn hng sau khi nhn c bc telex c
kim tra t Vietcombank chng t rng nhng
chng t ny c kim tra v ph hp vi
cc iu khon ca L/C
- Mt b y vn n sch xp hng
ln tu ba bn gc c ghi Cc ph tr sau
- Ho n thng mi lm thnh ba bn
- Giy chng nhn cht lng, trng lng
v bao b do Vinacontrol cp cng bc hng s
c gi tr php l cui cng c lm thnh su
bn
- Nhng chi tit thng bo gi hng bng

loading
11. Force Majeure:
The Force Majeure( exemptions) clause of
the international Chamber of Commerce (ICC
publication No. 421) is hereby incorporated on
this contract
12. Arbitration:
Any discrepancies and/or disputes arising
out or in connection with this contract not settled
amicably shall be referred to Arbitration
accordance with the Rules and Practices of the
International Chamber of Commerce in Paris or
such other place agreed by both sides
13. Other terms:
Any amendment of the terms and
conditions of this contract must be agreed to by
both sides in writting
This contract is made in 06 originals in the
English language, three for each party
This is subject to the Buyer's final
confirmation by telex (June 18th, 1999 latest)
Made in Hanoi, on 9th June, 1999

in tn/Telex/Fax trong vng 24h sau khi hon


thnh vic bc hng
11. Bt kh khng
iu khon bt kh khng ca Phng
Thng mi quc t ( ICC n phm s 421) theo
hp ng ny c kt hp thnh 1 b phn
trong hp ng ny
12. Trng ti:
Bt c s khc bit v/hoc tranh chp no
pht sinh t v trong quan h vi hp ng ny
m khng c gii quyt bng thng lng s
phi a ra x theo lut v tp qun trng ti ca
Phng Thng Mi quc t Paris hc nhng
ni khc do hai bn tho thun
13. Cc iu khon khc:
Bt c s sa i iu khon v iu kin
no ca hp ng ny phi c hai bn tho
thun bng vn bn
Hp ng ny c lm thnh 6 bn gc
bng ting Anh, 3 bn cho mi bn
Hp ng ny ph thuc vo xc nhn cui
cng ca ngi mua bng telex ( 18 thng 6 nm
1999 l mun nht)
c lm H Ni, ngy 9 thng 6 nm 1999

CONTRACT FOR THE PURCHASE OF RICE


No.018VNF/1999
Between
GALLUCK LIMITED
Flat A.3/F, Causeway Tower,
16 -22 Causeway Road
Causeway Bay HONGKONG
Tel: 8479900, 8976422: Fax: 4839200
( hereinafter called the Buyer)
And
HANOI FOOD EXPORT IMPORT COMPANY
40 Hai Ba Trung Street, Hanoi VIETNAM
Tel: 328999, Telex: 328492 - VNF VT
Email : WWW.VINAFOODHN@Yahoo.com (hereinafter called the Seller)
It has been mutually agreed to the sale and purchase of rice on the terms and conditions
as follows:
1. Commodity: Vietnamese White Rice
2. Specification:
- Brokens: 35% max
- Moisture: 14,5%
- Foreign matter: 0,4%
- Crop: 2009-2010
3. Quantity: 100,000 MT more or less 5% at Seller's option
4. Price: 200 USD per metrric ton net for June - Sepember 2009 shipments,
a- Dunnage, bamboomat for Shipowner's/Buyer's account
b-Shore tally to be at Seller's account
c-Vessel's tally to be at Buyer's/ Shipowner's account
d- All export duties, taxes, levied in the country of origin to be at Seller's account
e- All import duties, taxes, levied in the country of destination and outside Vietnam shall be for
Buyer's account.
5. Time of shipment: 20 - 25 days after L/C opening date

6. Packing: Rice to be packed in single jute new bags of 50 kgs net each, about 50.6 kgs gross
each, hand-sewn at mouth with jute twine thread suitable for rough handling and sea transportation.
The Seller will supply 0.2% of new jute bags free of charge out of quantity of bags shipped
7. Insurance: To be arranged by the Buyer
8. Inspection and fumigation
a- The certificate of quality, weight and packing issued by Vinacontrol at loading port to be
final and for Seller's account
b- Fumigation to be effected on board the vessel after completion of loading with expenses to
be at Seller's account. But expenses for crew on shore during the fumigation period including
transportation, accommodation and meals at hotel for Ship owner's account
c- Time for fumigation not to count as laytime
9. Loading terms:
a- Buyer shall advise vessel's ETA and its particulars 15 days and Captain shall inform vessel's
ETA, quantity to be loaded and other necessary imformation 72/48/24 hours before the vessel's
arrival at loading port
b- Laytime to commence at 1.pm if N.O.R given before noon and at 8. AM next working day if
NOR given in the afternoon during office hours. In case, vessel waiting for berth due to congestion,
time commence to count 72 hours after N.O.R submitted
c- Loading rate: 800 MT per weather working day of 24 consecutive hours Sundays, holidays
excepted even if used, based on the use of at least four to five normal working hatches/holds and all
cranes /derricks and winches available in good order, if less than prorata
d- Seller shall arrange one safe berth of one safe port for the vessel of 10,000 - 20,000 MT
capacity to load the cargo
e- Time between 17.00 PM on Saturday and the day preceeding a holiday until 8.AM next
working day not to count as laytime even if used
f- Before submitting N.O.R., the vessel must be in free pratique. Immediately after vessel at
berth, captain shall request Vinacontrol to inspect the hatches/holds and issue a cetificate certifying
the hatches/ holds are clean, dry, free from harmful factions and suitable for goods loading with such
expensses to be at ship owner's account and time not to count as laytime
g- Demurrage/Despatch of any, to be as per C/P rate
But maximum 4,000/ 2,000 USD per day or prorata and to be settled directedly between Seller
and Buyer within 90 days after B/L date
h- For the purpose of obtaining shipping Documents such as:
- Commercial Invoices
- Cetificate of quality, weight and packing
- Certificate of origin
The responsible party shall Cable/ Telex/ Fax advising shipment particulars within 24 hours
after completion of loading
In order for the Buyer to obtain insurance, a Bill of Lading shall be issued immediately after
completion of loading and before fumigatiooon and provided immediately to the Buyer
i- In case, cargo is ready for shipment as scheduled in this contract, but the Buyer fails to
nominate the vesel to load, then all risks, damages, and associated expenses for cargo to be borne by
the Buyer based on the Seller's actual claim. In the event no cargo is available to be loaded on the
nominated vessel at the loading port, then dead freight to be paid by Seller based on Buyer's actual
claim and the Buyer will submit the following documents to Vietcombank for receiving P.B:
( time counted : 20 -25 days from L/C opening date):
- N.O.R. with seller's signature
- Report signed by the Captain and the Seller confirming that the vessel has already arrived at
the port to receive the
cargo but the Seller has no cargo to load
- Vietcombank's confirmation
10. Payment:
a- After signing the contract, the Buyer or the Buyer's nominee ( SHYE LIAN( HK)
MANUFACTURING CO.LTD OR OTHER NOMINEE) will telex asking the Seller to open P.B. of
1% of total L/C amoount at Vietcombank Hanoi within two days thereof the Seller open P.B. and in
form the Buyer, then, four days after receiving Vietcombank 's confirmation, the Buyer will open a
telegraphic, irrevocable and confirmed L/C which is in conformity with this contract by an

international first class bank at sight with T.T.R. acceptable for 40,000 MT in favour of Vinafood
Hanoi through the Bank for Foreign Trade of Vietnam
For 60,000 MT the Buyer or Buyer's nominee will open a telegraphic, irrevocable and
transferable at sight L/C which is in conformity with this contract with T.T.R. accepable. In case, the
Seller requests the confirmation of L/C, the L/C will be confirmed for Seller's account
In the event that the Buyer fails to open L/C four days after receiving confirmation from
Vietcombank then the Seller shall collect P.B. from the Vietcombank and then the contract is
automatically cancelled
The Seller will collect the P.B. against presentation of shipping documents at Vietcombank
b- Presentation of the following documents to the Bank for Foreign Trade of Vietnam, payable
within 3-5 banking days after reciept of the telex from Vietcombank cetifying that documents have
been checked in conformity with the L/C terms:
- Full set of Clean on board B/L in three ( 3) originals marked Freight to collect
- Commercial invoice in three (3) folds
- Certificates of quality, weight and packing issued by Vinaconntrol to be final at loading port
in six ( 6) folds
- Certificate of fumigation issued by VIetnam Chamber of Commerce in six (6) folds
- Phytosanitary certificate issued by the Competent authority of Vietnam in six (6) folds
- Cable/ Telex/ Fax advising shipment Particulars within 24 hours after completion of loading
11. Force Majeure:
The Force Majeure( exemptions) clause of the international Chamber of Commerce (ICC
publication No. 421) is hereby incorporated on this contract
12. Arbitration:
Any discrepancies and/or disputes arising out or in connection with this contract not settled
amicably shall be referred to Arbitration accordance with the Rules and Practices of the International
Chamber of Commerce in Paris or such other place agreed by both sides
13. Other terms:
Any amendment of the terms and conditions of this contract must be agreed to by both sides in
writting
This contract is made in 06 originals in the English language, three for each party
This is subject to the Buyer's final confirmation by telex (June 18th, 1999 latest)
Made in Hanoi, on 9th June, 1999
For the Seller
For the Buyer
Director
Managing Director
(signed/sealed)
(signed)
Nguyen Duc
S.Y.Chan
Hp ng mua bn go (bn ting Vit)
HP NG MUA BN GO
S 018/NVF-GL 1999
Gia GALLUCK LIMITED
Phng A.3/F, Causeway Tower,
16 -22 ng Causeway
Vnh Causeway HONGKONG
Tel: 8479900, 8976422: Fax: 4839200
Telex: 57889 WSGTC HK ( sau y gi l ngi Mua)
V
Cng ty xut nhp khu lng thc H Ni
40 ng Hai Ba Trung , H Ni VIETNAM
Tel: 328999, Telex: 328492 - VNF VT
a ch in tn : VINAFOOD HANOI ( sau y gi l ngi Bn)
Hai bn cng ng i vi hp ng mua v bn go trn c s iu kin nh sau:
1. Hng ho: Go trng Vit Nam
2. Quy cch phm cht:
- Tm: ti a 35%
- Thu phn: ti a 14,5%
- Tp cht: ti a 0,4%

- Go v ma 1998-1999
3. S lng: 100.000 MT trn di 5% theo s la chn ca ngi bn
4. Gi c: 2USD mt MT( tnh) giao hng thng 6 n thng 9- 1999
a- Lt hng, ci tnh vo ti khon ca ch tu/ ngi mua
b- Chi ph kim kin trn cu cng i c tnh vo ti khon ca ngi bn (do ngi bn
chu)
c- Chi ph kim kin trn tu c tnh vo ti khon ca ngi mua/ ch tu
d- Tt c cc khon thu xut khu nc xut x do ngi bn chu
e- Tt c cc khon thu nhp, thu khc nc n ... v cc nc bn ngoi Vit Nam s
c tnh vo ti khon ca ngi mua
5. Thi hn giao hng: 20-25 ngy sau ngy m L/C
6. Bao b: Go phi c ng trong bao ay mi trng lng tnh mi bao 50kg, khong 50,6
kg c b, khu tay ming bng ch ay xe i thch hp cho vic bc vc v vn ti ng bin;
ngi bn s cung cp 0,2% bao ay mi min ph ngoi tng s bao c xp trn tu.
7. Bo him: Ngi mua s chu
8. Kim tra v xng khi:
a- Giy chng nhn cht lng, trng lng v bao b do Vinacontrol cp cng xp hng ha
tnh cht chung thm v chi ph do ngi bn chu
c- Thi gian xng khi khng tnh l thi gian xp hng
9. Cc iu khon v xp hng:
a. Ngi mua s thng bo ETA ca con tu v cc ni dung chi tit ca n 15 ngy ( sau khi
tu nh neo) v thuyn trng s thng bo ETA ca tu, khi lng s c xp ln tu v nhng
thng tin cn thit khc 72/48/24 gi trc khi tu n cng xp hng
b- Thi gian xp hng bt u tnh t 1h tra nu NOR c trao trc bui tra v t 8h sng
ca ngy lm vic tip theo nu nh NOR c trao vo bui chiu trong gi lm vic, trong trng
hp tu i th neo v cng tc nghn th thi gian xp hng c tnh sau 72 gi k t khi trao
NOR
c- Tc xp hng: 800 MT mi ngy lm vic lin tc 24h thi tit cho php lm vic , ch
nht, ngy ngh c tr ra thm ch nu c s dng, trn c s c t nht t 4 n 5 hm tu/hm
hng lm vic bnh thng v tt c cc cn cu/cn trc v cun dy ti sn sng trong trng thi
tt, nu t hn th tnh theo t l
d- Ngi bn s thu xp mt a im b neo an ton ti mt cng an ton cho con tu c sc
cha t 10.000 MT - 20.000 MT bc hng
e- Khong thi gian t 17h chiu th by v ngy trc mt ngy ngh cho n 8 sng ca
ngy lm vic tip theo khng tnh l thi gian xp hng thm ch c s dng
f- Trc khi trao NOR, con tu phi c giy qu cng, ngay sau khi tu cp cng ( b neo) ,
thuyn trng s yu cu Vinacontrol kim tra cc hm tu/hm hng v cp giy chng nhn cc
hm tu/hm hng sch kh, khng c tc nhn gy hi v thch hp ch lng thc v nhng chi
ph nh vy s c tnh vo ti khon ca ch tu v thi gian khng tnh l thi gian xp hng
g- Pht xp hng chm/ thng xp hng nhanh nu c, s theo nh mc quy nh trong hp
ng thu tu chuyn; nhng ti a l 4.000/2.000 USD mt ngy hoc tnh theo t l v phi c
gii quyt ( thanh ton ) trc tip gia ngi mua v ngi bn trong vng 90 ngy k t ngy k B/L
h- c c nhng chng t giao hng nh:
-Cc ho n thng mi
- Giy chng nhn cht lng, trng lng v bao b
- Giy chng nhn xut x
Bn c trch nhim phi thng bo cc chi tit v giao hng bng in tn /telex/fax trong vng
24h sau khi hon thnh giao hng
Vn n s c cp ngy sau khi hon thnh vic giao hng v trc khi xng khi v c
giao ngay cho ngi mua mua bo him
i- Trong trng hp hng ho sn sng xp ln tu nh c d nh trong hp ng
ny nhng ngi mua khng ch nh tu bc hng th tt c ri ro, thit hi, nhng chi ph c lin
quan n hng ho do ngi mua chu trn c s i bi thng thc t ca ngi bn ;ngc li,
nu khng hng ho bc ln tu c ch nh cng bc hng, th cc khng s do ngi
bn tr trn c s bn i bi thng thc t ca ngi mua v ngi mua s xut trnh nhng chng
t sau cho Vietcombank nhn P.B. ( thi gian c tnh t 20-25 ngy k t ngy m L/C)
- NOR c ch k ca ngi bn

- Bin bn c k gia thuyn trng v ngi bn xc nhn rng con tu c ch nh


n cng xp hng nhn s hng trong hp ng nhng ngi bn khng c hng bc ln tu
xc nhn ca Vietcombank
10. Thanh ton:
a- Sau khi k kt hp ng ny, ngi mua hoc ngi bn c ch nh ca ngi mua
( SHYE LIAN(HK)- MANUFATURING CO.LTD hoc ngi c ch nh khc) s telex ngh
ngi bn m P.B. vi 1% tng gi tr LC ti Vietcombank H Ni trong vng 2 ngy ngi bn s
m P.B. v thng bo cho ngi mua, sau , 4 ngy sau khi nhn c xc nhn ca Vietcombank,
ngi mua s m mt L/C c xc nhn khng hu ngang bng in tn ph hp vi hp ng ny
ti ngn hng quc t hng nht thanh ton bng T.T.R c th chp nhn c i vi 40.000 MT cho
Vinafood Hanoi hng qua ngn hng Ngoi thng Vit Nam
i vi 60.000 MT ngi bn cng chp nhn rng ngi mua hoc ngi ch nh ca ngi
mua s m mt th tn dng thanh ton ngay c th chuyn nhng c khng hu ngang bng
in bo khng ph hp vi hp ng ny c th chp nhn vi chuyn tin bng in. trong trng
hp ngi bn yu cu xc nhn L/C, L/C s c xc nhn vi chi ph ca ngi bn.
Trong trng hp bn ngy k t ngy ngi mua nhn c xc nhn ca Vietcombank,
nhng L/C khng c m th ngi bn s thu hi P.B t Vietcombank v sau hp ng t ng
c hu b.
Ngi bn s thu hi P.B trn c s xut trnh cc chng t vn ti cho Vietcombank
b- Vic xut trnh nhng chng t sau y cho ngn hng Ngoi thng Vit Nam, c thanh
ton trong vng 3-5 ngy lm vic ca ngn hng sau khi nhn c bc telex c kim tra t
Vietcombank chng t rng nhng chng t ny c kim tra v ph hp vi cc iu khon ca
L/C
- Mt b y vn n sch xp hng ln tu ba bn gc c ghi Cc ph tr sau
- Ho n thng mi lm thnh ba bn
- Giy chng nhn cht lng, trng lng v bao b do Vinacontrol cp cng bc hng s c
gi tr php l cui cng c lm thnh su bn
- Nhng chi tit thng bo gi hng bng in tn/Telex/Fax trong vng 24h sau khi hon thnh
vic bc hng
11. Bt kh khng
iu khon bt kh khng ca Phng Thng mi quc t ( ICC n phm s 421) theo hp
ng ny c kt hp thnh 1 b phn trong hp ng ny
12. Trng ti:
Bt c s khc bit v/hoc tranh chp no pht sinh t v trong quan h vi hp ng ny m
khng c gii quyt bng thng lng s phi a ra x theo lut v tp qun trng ti ca
Phng Thng Mi quc t Paris hc nhng ni khc do hai bn tho thun
13. Cc iu khon khc:
Bt c s sa i iu khon v iu kin no ca hp ng ny phi c hai bn tho thun
bng vn bn
Hp ng ny c lm thnh 6 bn gc bng ting Anh, 3 bn cho mi bn
Hp ng ny ph thuc vo xc nhn cui cng ca ngi mua bng telex ( 18 thng 6 nm
1999 l mun nht)
c lm H Ni, ngy 9 thng 6 nm 1999
Ngi bn
Ngi mua
Gim c
Gim c iu hnh
( k/ng du)
( k)
Nguyn c
Eddy.S.Y.Chan

19-24
CHAPTER 1
Negotiating Delivery
Problem in negotiating delivery
In many export negotiations, the two sides fail to discuss important aspects of delivery. This
creates a risky, and uncertain situation if there is a delay or if delivery does not go according

to plan. How can the exporter be sure that all the necessary delivery provisions are in the
contract?
The Principle.
The exporter and the buyer should negotiate delivery systematically, making all necessary
decisions and discussing how they will solve any problems that might arise. A step-by-step
overview of the delivery procedure is an important aid to planning.
In more depth
When an exporter and a buyer negotiate delivery, certain questions always arise. What is the
date of delivery? Where must the goods be sent? Who pays for transportation? But other
questions are often overlooked. One example: the transfer of risk. When exactly does the risk
of owning the goods- the risk of losing them, the risk of injury to an innocent passer-by when do such risks pass from the exporter to the buyer?
To make things clear, well use a case based on the following scenario:
Ayshe Aziz owns Double-A Limited., a company in Verbena that manufactures hair treatment
products. A buyer from Esperanza, Tony Mino, visits Aziz to discuss the export of a trial
consignment: 100 cartons of standard shampoo and 100 cartons of shampoo for dry hair. If
the shampoo sells well, more orders will follow.
The idea of working in steps looks simple, but it seldom works out in practice: decisionmaking processes are nearly always recursive.(Recursive means that a process constantly
loops back, comparing and connecting, and then recomparing and reconnecting various
stages.) A logical, step-by-step sequence is suggested here to simplify discussion of the idea.
After an overview of the five negotiating steps in this section, the following sections look at
the issues in detail.

Step 1
TIMING
Date of
delivery,
&results
of delay

Step 2
LOCATION
Place of
delivery
&alternatives

Step 3
TRANSPORT
Mode(s) of
transport
to be used

Step 4
RISK, TITLE
AND
INSURANCE
Transfer
of
ownership.
and
insurance

Step 5
TERMS OF
TRADE
Incoterm to
be used.

Step 1: Timing: When Must Delivery Take Place?


The first question most negotiators tackle is when? In our scenario, Aziz and Mino are certain
to discuss a delivery schedule:
The date of dispatch from the factory;
The date of loading onto a ship;
The date when the goods should arrive in Esperanza.
The date of delivery lies at the heart of a sales contract because it is the key to many contract events
as we shall see in the next section. Although most negotiators fix this date, they often forget the
"what-if?" questions: What if Aziz is late in sending the goods? What //there is delay in loading the
goods onto the ship? What if the ship arrives late? What if the goods arrive late in Esperanza? These
are questions of delay. Some kinds of delay may be excusable: for example, delay of a day or two,
especially over a weekend, is often no problem for the buyer. A more serious case: if war breaks out,
or if Aziz' factory is swept away by a hurricane, then both sides must accept that delivery will be late
(or may not take place at all). Again, Aziz' failure to deliver is excusable. But if delivery is late and
there is no reasonable excuse, what then? Delay will cost Mino money: can he reclaim part of his
losses from Aziz? And, if so, how much? All these questions arise from the fundamental question
when? And, as we saw in the Introduction, if the contract provides no answers, then the answers are
found in the applicable lawoften to the surprise of both parties. Accordingly, good negotiators
regulate such matters in their agreement.8

Step 2: Location: What is the Place of Delivery?


The question of where delivery takes place is not as simple as it seems on the surface. An easy case
first: if I order a pizza from the local pizzarto-go, it is "delivered" when it reaches my house. If I buy
a piano and the music store asks a specialist company to transport it, the piano is, again, delivered
when it reaches my address. Things are different, however, if/ organize transport of the piano. In that
case, delivery takes place when my friends arrive with their van at the music shop to pick up the
piano. The shop will not accept liability for what my friends might do to the piano once it has left the
store. This is a fair principle: the exporter should have no liability for the goods when they are
beyond his control.
Most international trade works on that principle: control and responsibility go together. One common
pattern is for the exporter to transport the goods to the docks in his own country and for the importer
to organize transport on from there. (This is the pattern of FOB delivery, as we shall see later.') Such
an arrangement is usualh cheaper than if the exporter tries to organize door-to-door transportation.
But, under so-called FOB deliver)', where does "delivery" take place? At Point A, B. C or D?

The answer in our case (FOB delivery) is B. But the parties are free to arrange anything that suits
them. The place of delivery is doubly important to the exporter because the date of payment normally
depends on the place and time delivery. At this point, too, risk and ownership often pass.10
----------------------------------------------------------------------------------------------8
See Chapter 1. Section 2 below for detailed information.
9
See Chapter 1. Section 6 below for delivery under Incoterms
10
For detailed information on risk and ownership, sec Section 3 below.
Step 3: Transport
The first question about transport is howl What mode of transport is most appropriate? From an
island like Verbena, two modes of transport are available: ships and aircraft. It is unlikely that Mino
will ask Aziz to ship the shampoo by air: air transport is too expensive. Sea transport is, then, the
more appropriate. When goods travel by sea, they are often shipped by container. The advantages of
containers are well known (lower risk of pilferage, easy traceability, smoother handling), but the
economics of containerization depend largely on the size of the consignment. In practice, each
consignment should be roughly one container load: a little more, and two containers will be needed
at double the cost; somewhat less and the carrier is paid to transport thin air. 200 cartons of shampoo
are not a large enough order to justify a container; if Aziz is a good negotiator, she will suggest that
Mino increase the size of the order to create a container-load, or that he order different products to
fill up the container.
Inland transport is made by road, by rail, by barge, by mail, or by a mixture: the choices are familiar.
For the goods to arrive safely, correct packaging and shipping marks are essential. Such matters are
often made the subject of a separate clause in the export contract because claims arising from delay
or damage can be settled only if it is clear who is responsible for packing and marking.
Transportation poses a third, altogether different kind of problem: documentation. Whatever means
of transport is chosen, correct documentation is essential. If payment is made by letter of creditas
is often the case then the bank must refuse to pay if the shipping documents are in any way
incorrect.11
Step 4: Transfer of Risk, Transfer of Ownership, Insurance

At the point of delivery, risk generally passes from the exporter to the buyer. What is the "risk" that
passes? First, the risk of loss or damage. If the goods are smashed by a fork-lift, stolen by a stevedore
or damaged by a downpourone side must bear the loss. Similarly if the goods cause harm to a third
partyfor example, a consignment of corrosives left in the sun explodes and severely burns a
passer-bywho pays? Negotiators often decide, for the sake of simplicity, that these risks are
transferred at the point of delivery, and this, as we shall see, is the standard arrangement under the
so-called Incoterms.
Obviously the issues of risk and insurance go hand in hand. A prudent businessman who faces a risk,
arranges insurance.
Transfer of ownership (or title as it is often called) can take place at any point between the signature
of the contract and final payment for the goods. In international trade, these two points are often
widely separate; the parties must decide what they want.12
Step 5: Terms of Trade
All the decisions that Aziz and Mino make about the delivery of their shampoo have been made
millions of times before. For this reason, the business community has developed a kind a shorthand
for standard delivery situations. Some of these shorthand expressions, FOB (free on board), for
example, or CIF (cost, insurance and freight) are familiar to most businesspeople. Others, such as
DDU or FCA are less well known. The advantages of using such terms are obvious: if Aziz offers the
shampoo for $20 a canon FOB (Port Verbena), then Mino knows that she will transport the goods to
the ship's rail at her own risk and cost. When the goods cross the ship's rail, risk as well as the cost of
freight and insurance pass to him. He also knows that he is responsible for nominating the ship that
will be used. And so on. One term covers a great deal of decision-making.
With patterns of trade, means of transportation, and communications changing so rapidly, usage of
terms of trade naturally develops differently in different parts of the world; international trade,
however, needs agreed, standardized terminology. These standards are provided by the International
Chamber of Commerce in Paris in its set of 13 Incoterms (International Commercial Terms) issued
most recently in 1990.13
------------------------------------------------------------------------------------------------------------------------------------11
For more information on these problems, see Section 4 of this chapter and Chapter 2 on payment
12
For detailed information, sec Section 5 below.
13
For detailed information, see Section 6 below
CASE STUDY
Agreed on Paper
Study the scenario, and then answer the questions.
Verbena Paper makes disposable paper plates, cups and napkins for hot-dog and hamburger stands.
John Merrit, the factory manager, is negotiating for raw paper to be delivered to his factory for
manufacture into paper products. The supplier is Wendell Paper Industries of Esperanza. Wendell
and Verbena Paper have agreed in principle a trial delivery of 40 tons of raw paper.
Which of the following decisions should the two parties make in negotiating the delivery clause? (If
the issue raised is not an aspect of delivery as outlined above, the answer is No.)
1.
The quality of the paper. No.
2.
The place of delivery.
Yes
3.
The transfer of risk.
Yes
4.
What to do if the ship named by buyer does not arrive. Yes
5.
Whether or not to ship goods in a container. Yes
6.
What delays in delivery will be excusable. Yes
7.
When payment is due.
No
8.
Who must insure the goods up to what point. Yes
9.
How disputes will be settled.
No
10.
An Incoterm.
Yes
11.
What means of transport will be used.
Yes

12.

The transfer of title.

Yes

(I) 2 . TIMING

25-36

THE PROBLEM
Naming a delivery date is the first step in negotiating the timing of an export deal. Complex
issues concerning coming into force, delay and compensation for delay must also be
negotiated. What are the main considerations in drafting provisions about timing and delay?
THE PRINCIPLE
Because exports are often subject to official approvals, the delivery date in many contracts
depends on the receipt of the last approval. If delivery is late, the delay is classified into one
of two categories, excusable and non-excusable. Excusable delay often involves a grace
period and is nearly always subject to a force majeure provision 14 . Any losses to the buyer
caused by non-excusable delay must be compensated. The amount of compensation is usually
set in advance in a so-called liquidated damages provision.
IN MORE DEPTH
Getting the delivery date right is a matter of managerial know-how: the exporter must know
how long it takes to obtain supplies, manufacture the goods, package them, arrange preshipment inspection and transport them to the agreed point of delivery. First time exporters
often set delivery dates that are hopelessly optimistic and pay a heavy penalty for their

mistake. The buyer, for his part, must know exactly whenthe goods are needed: too early a
date ties up money in unused goods, while delivery too late may mean big losses, especially
if the goods are to be resold.
As far as the contract is concerned, the delivery date triggers many contract events: at this
time, the exporter fulfills his primary duties under the contract; payment normally becomes
due: risk, and often title, pass to the buyer: delayas well as any compensation to be paid by
the exporteris reckoned from the planned date of delivery. What should the exporter know
about this key date?
Naming the Date
The simplest way to fix delivery is to use a straightforward calendar date: 13th August 1995,
for example. Export contracts are not always so simple, however. For example, let's say Aziz
and Mino meet in Verbena in December and agree that Aziz will sell shampoo to Mino.
Already it is clear to them both that a certain amount of government red-tape is unavoidable:
an export license, a foreign exchange permit, and a certificate of origin are necessary.
Because shampoo is a health-care product, special certification is necessary in the buyer's
country. How long will it take to obtain the necessary documentation? Because nobody is
sure, the parties often plan for the contract to come into existence in two steps: step one is on
signature (the signature date): step two is when all the preconditions for the sale have been
met (the date of coming into force).
The date of coming into force is not usually a calendar date, but the date on which the last
precondition is met. Common preconditions are:
Receipt of import and/or export approval;
Receipt of foreign exchange approval from a central bank;
Issuance of a letter of credit or bank guarantee;
Making of a down-payment by the buyer;
Issuance of an insurance policy:
Issuance of a certificate of origin;
Delivery by the buyer of plans, drawings or other documentation.

Negotiators often agree a cut-off date: if the contract has not come into force within a certain
time, for example three months from signature, then it becomes null and void.
---------------------------------------------------------------------------------------------------------------14
The terms "grace period" and "force majeure" are explained in the following pages

A cut-off date is common in fixed-price contracts: a long delay can make the price unrealistic. A
typical wording:
Coming Into Force
This agreement shall come into force after execution by both parties on the date of the last
necessary approval by the competent authorities in the country of the Seller and the Buyer.
If the contract has not come into force within ninety days of execution, it shall become null and
void.
How does the date of coming into force affect the delivery date? The delivery date is normally fixed
for a certain number of days after the contract has come into force. Let's return to our example: the
central bank in Mino's country, Esperanza, often takes months to allocate foreign exchange for
imports. Let's say it takes Aziz four weeks to schedule production, manufacture and ship an order.
(Let's also assume that Aziz cannot supply Mino's shampoo from stock because he wants a special
color.) Naturally Aziz is reluctant to begin manufacturing Mino's shampoo until his order is definite.
Accordingly she fixes the date of delivery four weeks (her manufacturing period) after the date of
coming into force. That way. she knows exactly where she stands. So Aziz' contract reads:
The date of delivery shall be twenty eight days after the date of coming force of the contract.
Timing and "Time is of the Essence" Clauses
How important is strict adherence to the agreed deliver) date.' Sometimes, punctuality is essential. If
you order a birthday cake to be delivered on your birthda;. 28th Juneand the cake arrives on the
29th. it is too late. You no longer want the cake, and you can legitimately refuse to accept it. In a
contract requiring absolute punctuality, lawyers sa\ that "time is of the essence of the contract"if
the time is not kept, the buyer has the right to send back the goods and refuse payment.
Is time normally "of the essence" in commercial life? Most legal systems say "No." Late delivery is a
nuisance, but it is rarely fatal to the buyer's purposes. This is so, even if the contract contains a clause
such as:
Time is and shall be of the essence of this contract.
Despite this clear wording, a judge may decide that time is not of the essence and that the buyer
cannot terminate the contract. But late delivery still has expensive results for the exporter, as we shall
see in a moment.
One other point is worth making on the precise meaning of delivery dates. Let's say a contract comes
into force on 25th November: delivery is fixed thirty days after coming into forceChristmas Day in
many places! Must the exporter deliver on a public holiday? Normally not. Delivery takes place,
under most legal systems, on the next working day after the agreed time. The parties can change this
if they wish, but few contracts do so.
In some contracts the exporter has the further duty to notify the buyer that delivery has taken place.
The exact form of this notification varies from contract to contract, depending in part on the place of
delivery, on the method of payment, and on the needs of the buyer.
Excused Delay and the Grace Period
Aziz and Graham, a customer in Nonamia, have done business together for some years. In their
regular contracts is this clause15 on late delivery:
For each week of late delivery the Seller shall pay the Buyer 0.1% cf the contract price.

At present, Aziz and Graham are negotiating delivery of 400 cartons of hair conditioner. Graham
wants delivery on 20th May. Aziz doubts that she can achieve this date and offers 20th June. Aziz
won't give an earlier date because she risks paying the agreed "penalty" if she is late. Graham is
reluctant to accept the later date; he wants the earliest delivery possible. As skillful negotiators, Aziz
and Graham decide to fix the earlier date as the delivery date, but to waive the payment of a penalty
for a month creating a one-month grace period.

15

There is a full explanation of such "penalty" clauses below.


Their contract now reads:
If delivery is not effected within one month of the agreed delivery date, then the Seller shall pay the
Buyer 0.1% of the contract price.
The effect of a one-month grace period is not at all the same as a delivery date set for one month
later: the exporter has an early, good-faith target to meet, and the buyer can exert considerable moral
pressure before the mechanism of the "penalty" takes over. And there are clear advantages to both
sides if early delivery is possible: the buyer gets the goodsand the exporter receives paymentup
to a month earlier than planned. These advantages are achievedunusuallywithout additional
risks.
Excused Delay and Force Majeure
Good faith is essential in business lifebut it does not always assure success. If disaster strikes in
the form of a hurricane or an earthquake, the exporter may be unable to deliver on time, or at all.
Such natural disasters are sometimes called "acts of God" and, by long tradition, acts of God excuse
performance of a contract. In recent times, lawyers have argued that other unavoidable events should
also excuse performance: war, for example, fire, or new government regulations. Most recently, some
contracts have added strikes, lockouts and labor unrest to the list. Taken together, all such
unavoidable circumstances are called force majeure (a French expression meaning a superior
power). The principle behind force majeure is clear: if the exporter shows absolute good faith but
simply cannot deliver the goods, then his duties under the contract can be suspended or perhaps
terminated altogether. A typical contract wording:
If either party is prevented from, or delayed in, performing any duty under this contract by an event
beyond his reasonable control, then this event shall be deemed force majeure, and this party shall
not be consider in default and no remedy, be it under this contract or otherwise, shall be available to
the other party.
Force majeure events include, but are not limited to: war (whether war is declared or not), riots,
insurrections, acts of sabotage, or strikes, or other labor unrest; newly introduced laws or
Government regulations; delay due to Government action or inaction; fire, explosion, or other
unavoidable accidents; flood, storm, earthquake, or other abnormal natural event.
The force majeure clause, like other contract provisions, is negotiable; the parties can decide what
excuses and what does not excuse performance. In monsoon countries, for example, contracts often
include the statement:
Force majeure events do not include monsoon rains

Any problems the two sides foresee can be mentioned in the contract as excusing, or not excusing,
performance.
If a force majeure condition continues for months, life becomes difficult for both sides, so contracts
often regulate the force majeure period, in particular the right of one (or both) parties to terminate
the contract.
If either party is prevented from, or delayed in, performing any duty under this Contract, then this
party shall immediately notify the other party of the event, of the duty affected,and of the expected
duration of the event.
If any force majeure event prevents or delays performance of any duty under this Contract for more
than sixty days, then either party may on due notification to the other party terminate this
Contract.
The diagram below shows three possible outcomes of force majeure:

Two outcomes here are satisfactory: resumption of delivery, and orderly termination of the
contract. But the situation is unclear and risky for both sides if they failed to regulate their
rights in the event of force majeure.
UNEXCUSED DELAY AND BUYERS REMEDIES
We must now make some difficult, but important, legal distinctions and see how different
legal systems cope with the problem of giving the buyer some remedy for any unexcused
delay he suffers.
First, the generally accepted principle: if one party to a contract causes harm or loss to the
other, then the law will find a way to redress this harm or loss. When an exporter delivers
late, this normally causes some loss or damage to the buyer; maybe the buyer cannot use a
piece of equipment as soon as expected or must keep one of his own customers waiting. The
law provides two remedies for such damage.
-

The court may order the exporter to fulfill his obligayions: this means issuing a decree of
specific performance requiring the exporter to make a delivery as agreed or
The court may require the exporter to pay the buyer compensatory damages- a sum of money
that will fully and adequately compensate the buyer for any measurable loss.
In addition, the court may allow the buyer to cancel the contract- though this does nothing to
enforce his rights.

Which choice is the court likely to make? In the Introduction we saw that no contract is complete in
itselfevery contract is subject to some national law. National laws fall into two main families 16:
those that derive from the English common law and those that derive from the Roman civil law. One
difference between these families is their choice of remedy: common-law countries (England, the
United States, most of the British Commonwealth and ex-Commonwealth) prefer to award damages,
while civil-law countries (most other countries) usually enforce performance.
The concept of enforced performance presents no problems: the judge simply orders the party in
default to perform as promised. Damages are a more complex issue. Damages are sums of money
paid to compensate an injured party for some kind of "damage." In setting a figure for compensatory

damages for late delivery, the courts usually ask three questions, looking for the answer "Yes" in
each case:
Did the loss provably follow from the breach?
Was the loss reasonably close to the breach in the chain of events?
Was the loss "mitigated"in other words, did the buyer take reasonable steps to keep the loss as
small as possible?
Let's look at a scenario to see the practical effect of these questions::
Scenario: Aziz has agreed to deliver a consignment of shampoo to Mino on 30th May. By 30th July,
she has still not delivered. This delay causes problems for Mino: he has a contract to deliver the
shampoo to a chain store in Esperanza in early June. The chain store writes angrily to Mino
demanding some explanation. Mino does not reply. In mid-July the chain store writes to Mino again
saying that his failure to deliver the shampoo is the latest in a long chain of failures, and that they
want no more dealings with him. The loss of this customer costs Mino $300,000 a year. Mino
consults a lawyer about claiming damages from Aziz. The lawyer explains that to claim damages
from Aziz, Mino will have to show that the loss of the $300,000 was due to Aziz' failure to deliver
(which it was in small part), that the loss of the customer was closely and immediately connected
with Aziz' failure to deliver (which is arguable), and that he did everything in his power to mitigate
the loss (which he did not). It is not likely that a court would order Aziz to pay a large sum in
compensatory damages.
Court proceedings to claim compensatory damages, especially internationally, are expensive, the
results are uncertain, and law suits destroy the working relationship between the parties. Accordingly
most international contracts specify the consequences of typical breaches such as late delivery. The
two sides simply negotiate a "lump-sum" that the exporter will pay if delivery is late. This sum is
sometimes called liquidated damages and sometimes penalty. What is the difference between these
terms?
(For further information on the families of law, see Chapter 4, Section 2.)
Liquidated Damages
Normally the exporter and the buyer agree a fair figure, a lump sum to be paid per day (week
or month) of late delivery. This "best guess" is called liquidated damages. If delivery is sixty
days late, the exporter pays sixty-days damagesno questions asked. That is the principle
behind such clauses: payment of liquidated damages avoids expensive discussion. Two whatif questions arise about lump sums, however: first, what if the buyer's losses are much lower
than anticipated? Nothing changes: the exporter must still pay. And what if the buyer's losses
are much higher? Again, in principle, nothing changes: the exporter pays the agreed sum, and
the matter is settled.
Sometimes courts raise or lower obviously unjust figures. For example, the Chinese Foreign
Economic Contract Law empowers a court or arbitral agency to reduce or increase in an
appropriate amount the amount of liquidated damages...if it is substantially more or less than
the resulting loss; French law allows a change if the figure is "manifestly excessive or
ridiculously low."
Penalties
Damages are paid to compensate one pany for a lossa real loss in the case of compensatory
damages, a pre-esgmated loss in the case of liquidated damages. There is. in practiced, a third
possibility: sometimes a buyer tries to force the exporter to deliver punctually by imposing an
agreed penalty. A penalty clause simply says: "Deliver on time, or you will be punished."
Sometimes the figure fixed for the penalty is very high. The distinction is clear: the purpose
of a penalty is not to compensate but to punish, or, more correctly, to use the threat of
punishment to achieve acceptable performance.
This distinction between a penalty and a provision for payment of liquidated damages is
important in common-law thinking; Most common-law countries classify lump-sum clauses
include of three types according to the motive behind them. How does this work? In
reviewing a late delivery clause, the judge asks if it is (a) a fair pre-estimate (liquidated
damages); (b) an attempt to terrorize (a penalty); or (c) an attempt by the exporter to fix a

compensation figure so low that, in effect, it relieves him of responsibility for late delivery
(the quasi-indemnity). If it is a penalty,
the common-law judge simply refuses to enforce it. If it is a liquidated damages provision,
the common-law judge (like his civil-law counterpart) enforces the clause. If it is a quasiindemnicy, the common-law judge uses some discretion: a seller who uses his power over the
buyer (perhaps he is a monopoly supplier) to fix an outrageously low figure is behaving
immorallyor "unconscionably" as lawyers express it. The courts will not enforce a clause
they consider to be "unconscionable." The three motives in summary form:
LIQUIDATED DAMAGES PENALTY

QUASI -INDEMNITY

MOTIVE: To
compensate the
buyer fairly for any
delay in delivery
Enforceable
everywhere but subject
to increase or decrease
in some legal systems

MOTIVE: To relieve
the exporter of
liability for deiay in
delivery
Enforceable
everywhere but open
to challenge as
"unconscionable

MOTIVE: To
terrorize the exporter
into punctual
delivery
Not enforceable in
English law or other
common law systems

To be practical: how do you know, as an exporter, if a clause in your contract with your
customer is an enforceable liquidated damages provision or an unenforceable penalty? Let's
see how an English (or common-law) judge might proceed in a specific case. First the clause:
Liquidated Damages
If the Seller fails to supply any of the Goods within the time period specified in the Contract,
the Buyer shall notify the Seller that a breach of contract has occurred and shall deduct from
the Contract Price per week of delay, as liquidated damages, a sum equivalent to one half
percent of the delivered price of the delayed Goods until actual delivery up to a maximum
deduction of 10% of the delivered price of the delayed Goods.
To decide if this provision is a penalty or a liquidated damages clause, the common-law judge
first studies the wording. The heading is "Liquidated Damages" and "liquidated damages" is
mentioned in the text, but this is not decisive. The judge then asks some questions: Was the
figure0.5% per week up to a maximum of 10%agreed as a fair and reasonable estimate
of the loss the buyer might suffer? How was the figure calculated? Did the two sides discuss
or debate it? If the figure is fair, the judge enforces the clause; if it is unfairly high, the judge
will decide that its real purpose is to "terrorize" the exporter and refuse to enforce the clause.

CONCEPT REVIEW
MAIN FORCE
Read this Coming Into Force provision; then answer the question.
This contract shall come into force after approval by the governments of the Seller and the
Buyer, however at the latest by 31st December 2007.
Does this provision mean:
A. That the contract will come into force on 31st December 2007 even if the two governments have
not approved it? Or
B. That the contract will become null/ nil/ nought and void if it has not come into force by 31st
December 2007?
A B
The answer is B. A contract cannot come into force without government approval if such approval
is required by public law.
CASE STUDY
A Fine Contract

Study the conract clause below, and then answer the questions.
Fine Payable
If the Seller fails to deliver the Goods at the fixed date, a fine shall be imposed upon him for
the period of delay, until delivery is completed. The fine shall be as follows:
2% for the first week, or any part of it.
4% for the second week, or any part of it.
6% for the third week, or any part of it.
8% per week for the fourth week, or part of it, and for all succeeding weeks.
The fine shall be calculated'on the total contract value.
1. The clause uses the word "fine." Does that tell you for certain what kind of clause you are looking
at? (Penalty clause or liquidated damages clause?) YES NO
2. After how long a delay does the exporter lose 100% of the contract price?
.......WEEKS
3. Do you think this clause is a penalty clause or a liquidated damages clause?
PENALTY LIQUIDATED DAMAGES
4. If an English judge applying English law looks at this clause, will it be enforceable?
YES NO
1.
2.
3.
4.

The word fine suggests, but does not prove, that the clause seeks to impose a penalty.
14 weeks.
Penalty clause. The sum bears no relation to any anticipated loss.
No. English judges do not- in principle- enforce penalty clauses. (But some caution is needed:
the judge will decide according to all the merits of the cause.)

CASE STUDY
Force Majeure
Verbena Jute makes sacks, sackcloth, and other jute products. Its standard contract includes this
definition of an event:
If either party is prevented from, or delayed in, performing any duty under this Contract by an
event beyond his reasonable control, then this event shall be deemed force majeure...
The word control needs some thought. An event is beyond the control of the exporter (a) if he
could not have foreseen it; (b) if he could not have influenced it, and (c) if he could not have
taken reasonable steps to avoid the problems that were likely to arise.
1. A volcanic eruption buries the factory in ash. (Yes)
2. The annual flooding of the River Vero ruins some of the jute intended for use in making
sacks. (No)
3. A ban is issued on the export of jute products by a newly elected government. (Yes)
4. A ban is issued on the export of jute products by a government that has been preparing
legislation on this subject for five years. (Questionable)
5. The workforce at the factory go on strike. (Questionable)
6. The dock workers in Port Verbena go on strike. (Yes)
7. A lockout (Background: The workers have been striking for one day or a week. The
management locks the workers out of the factory until they agree to end the strikes. (Probably
no)
8. Shortage of supplies (Background: The exporter cannot get the raw jute he needs from the
supplier because of a shipping delay.) (No)
9. Shortage of supplies (Background: The exporter cannot get the raw jute he needs from the
supplier because the Central Bank will not give him foreign exchange to pay the supplier. (Yes)
10.
A fire burns down the factory. (Yes)
3. Place of Delivery
THE PROBLEM
In normal speech, the word "delivery" means the arrival of goods at their destination, but this is not
the accepted meaning in contract language. Considerable confusion can arise if the parties fail to
clarify what they mean by the place of delivery.
THE PRINCIPLE

The place of delivery is the point at which the exporter passes responsibility for the goods to the
buyer. This is usually in the country of the exporter; if sea transport is used, delivery normally takes
place at the docks; in the case of land or container transport, delivery normally takes place when the
goods are handed over to the carrier. Delivery also takes place in the country of the exporter in the
case of CIF and CIP contracts,19 even though the exporter must bear the costs of freight and
insurance through to the named destination.
IN MORE DEPTH
We saw in the introduction to this chapter that delivery can take place at a number of places between
the manufacturer's factory and the buyer's warehouse. If the buyer sends a truck to collect the goods
from the factory, delivery takes place at the factory. If the manufacturer puts the goods on his own
truck and drives them to the buyer's warehouse, delivery takes place at the warehouse. Both of these
arrangements are, however, rare in international trade. Normally delivery takes place at some
intermediate place along the line of transportation. It is useful, in this context, to ask what the law
says if the parties agree nothing between themselves. Under most national laws, a contract for the
sale of goods abroadassuming transportation by shipis normally considered as an FOB (Free on
Board) contract: delivery takes place when the goods cross the rail of the ship nominated by the
buyer. This is perfectly reasonable: from the buyer's point of view it is often cheaper to arrange sea
transportation with a carrier and an insurer in his own country; from the exporter's viewpoint, he has
no control over the goods once they are on board the ship chosen by the buyer, so he should have no
responsibility. It is also fair that the exporter, who has money tied up in the goods, should be paid
when the goods leave his country. But the matter is disposive: the parties can make any arrangement
they wish. If an FOB contract is agreed, then the contract contains wording such as:
The terms FOB, CIF and so onthe thirteen Incotermsare the subject of Section 6 below.
Delivery of the Goods shall be made FOB (Mombasa).
The term FOB is always followed, as in this example, by the name of the port where delivery will
take place. (The name of the port is sometimes generalized into, for example, "Kenyan port" or
"English east-coat port.")
One common arrangement causes considerable confusion internationallythe so-called CIF
contract. CIF stands for Cost, Insurance and Freight. In a CIF contract, the exporter must pay the full
costs plus the freight charges plus insurance up to the named place of destination, usually a port. For
example:
Delivery of the Goods shall be made CIF (Durban).
The exporter pays all the costs up to the port of arrival, Durban. But where does delivery take place?
Delivery takes place when the goods cross the ship's rail in the port of shipment, exactly as in an
FOB contract. The point is forcefully made in the ICC handbook dealing with Incoterms:
Since the point for the division of costs refers to the country of destination, the "C"-lerms are
frequently mistakenly believed to be arrival contracts, whereby the seller is not relieved from any
risks or costs until the goods have actually arrived at the agreed point. However, it must be stressed
over and over again dial the 'C'-terms are of the same nature as the "F"-terms in that the seller fulfills
the contract in the country of shipment or dispatch. Thus, the contracts of sale under the "C"-tcrms,
like the contracts under the "F"-terms, fall under the category of shipment contracts -:1
The issue is crucialon delivery, risk (as well as ownership in main cases) passes and payment
usually falls due. The point is so often misunderstood, that many contracts include additional
wording on the place of delivery. For example, the Model Contract suggested in this book uses the
following wording for CIF contracts:
Delivery of the Goods shall be made [INCOTERM]. The scheduled date of delivery shall be [DATE
OF DELIVERY]. Risk and title to the Goods shall pass from the seller to the buyer on delivery.
The place of delivery under this Contract is [PORT OF SHIPMENT].
One final consideration on the subject of place. What happens if the ship named by the buyer is late?
The goods are ready, but the exporter, through no fault of his own, cannot deliver. The careful
exporter makes a special provision to cover this problem.21 For example:
------------------------------------------------------------------------------------------------------20
Incoterms 1990. p. 1 1. There is a full discussion of the Incoterms in .Section 6 below,
21
If payment in such a case is made by Letter of Credit, il is very important for die exporter thai
ihe let the Letter of Credit allow subslitution of the warehouse receipt for the bill of lading

If the vessel named by the Buyer fails to arrive on or before the agreed delivery date, then the Seller
may at his discretion deliver the goods to a bonded warehouse in the port of Mombasa, and shall be
deemed to have fulfilled his delivery obligations under this contract.
CASE STUDY
Dead on Time

In preliminary talks, Bangladesh Steel Exporting agrees with All Africa Metal to deliver goods to
Lagos on or before 13th August 1995. When the contract is drafted, it mentions the date as agreed
13th August 1995. Because the Nigerian company has no shipping agent in Bangladesh, it asks for a
CIF contract under Incoterms 1990. The delivery terms are accordingly agreed in the contract as
follows:
Delivery CIF (Lagos) on or before 13th August 1995.
Trouble is now almost certain. Why?
Trouble is likely because under this contract delivery will take place on or before August 13 th
in Bangladesh not, as the buyer evidently intended, in Lagos. The expression CIF (Lagos)
means that, in addition to making delivery in Bangladesh, the exporter must pay the cost of
insurance and freight on to Lagos.
What You Should Know
1. The place (and time) of delivery must be unambiguously agreed because many contract events
(including payment and transfer of risk and title) are tied to delivery.
2. The place of delivery should not be confused with the destination of the goods.
3. Delivery of goods under most export contracts takes place in the country of the exporter, at the
docks in the case of sea transport, and when the goods are handed over to the carrier in most other
cases.
4. CIF and CIP contracts are especially confusing since they name the point of destination, e.g., CIF
(Lagos). Lagos, in this example, is the point up to which the exporter is responsible for costs, not the
place of delivery.
5. TRANSPORTATION: Vn chuyn
MC: Good morning, ladies and gentlemen.
First of all may I say thank you for coming.
Our group takes great pleasure to talk about transportation, especially about the
transportation in foreign trade.
First, Mr Thang and Miss Thoa will discuss the problem in transportation. Next Mr
Hao and Miss Tam will explain some solutions to the problem. And finally, Miss
Mai and Mr Hoang will discuss some case studies involved.
Now, to begin, Mr Thang and Miss Thoa please.
THE PROBLEM
For the exporter, transportation has two aspects: the physical
safety of goods which means appropriate packaging and
correct marking and correct documentation.
Unless the shipping documents are in perfect order, prompt
payment under a letter of credit is difficult or impossible. What
are the dangers?

Vn
Nh xut khu trc vn vn chuyn
cn ch n hai kha cnh: an ton hng
ha c th l ng gi v ghi k m hiu
cng nh bo m b chng t phi
khp vi nhau. Nu cc chng t vn
chuyn khng trng khp v xp theo th

THE PRINCIPLE
The parties should state in their contract what packaging
should bear.
The exporter must follow the agreement scrupulously or
payment may be delayed.
The exporter should ensure that the shipping documents
correspond exactly with the conditions of the letter of credit
and that the bill of lading is clean, otherwise, again, payment
can be seriously delayed.
Once the mode of transport (road, rail, air or ship) has been
negotiated, three aspects of transportation feature in the
contract: packaging, shipping marks, and shipping
documents.
First, packaging. One primary duty of the exporter is to ship
the goods in suitable packaging.
Most national laws don't say clear rules for this.
Rather than rely on the law, the exporter and the buyer
usually specify the contract what packaging they consider
adequate. A typical clause:

t th vic thanh ton s ko di v c khi


khng th thc hin. V vy ri ro s l g?
NGUYN TC
Cc bn cn ghi r trong hp ng trn
bao b phi ghi nhng g.
Nu nh xut khu khng thc hin ng
theo hp ng, thanh ton c th b tr
hon.
Nh xut khu phi m bo rng cc
chng t vn chuyn phi khp vi th tn
dng v vn n phi "sch", nu khng,
ngn hng s c c tr hon thanh ton.
Mt khi m phn xong phng thc vn
ti (ng b, ng st, ng hng
khng, tu bin), chng ta cn phi ch
trng n ba ni dung lin quan n vn
chuyn ghi trong hp ng: bao b, k m
hiu, v cc chng t vn chuyn.
u tin, ng gi. Mt trong nhng
nhim v chnh ca ngi xut khu l
vn chuyn hng c ng gi ph hp.
Nhiu quc gia khng c lut l r rng v
quy cch ng gi.
Thay v da vo php lut, nh xut khu
v nhp khu thng c th ha ng gi
trong hp ng. iu khon tiu biu s
nh sau y:

"Goods are to be packed in new, strong, wooden cases suitable for long-distance ocean
transport and are to be well protected against dampness, shock, rust, or rough handling.
The SELLER shall be liable for any damage to or loss of the Goods attributable to
improper or defective packaging."
Hng ha phi c ng gi trong thng g mi, chc chn v ph hp cho vn chuyn hng hi
ng di v phi c bc, lt chng m. sc, hoen r hay bc d khng cn thn. Ngi bn phi
chu trch nhim trc mi tn tht hng ha do ng gi khng ph hp hay thiu st.
This wording makes the requirements clear, and
it puts the blame firmly on the shoulders of the
exporter if packaging is inadequate.
Three packaging problems are worth mentioning
here even though they are matters of public law
and outside the direct scope of the contract:
Packaging of dangerous goods is subject to
special regulations in all countries.
The exporter should ask for instructions from the
buyer if dangerous goods are in question.
Some national laws require fumigation of all
containers entering the country.
Agriculture-based, developed economies (such
as that of Australia) tend to place severe
restrictions on packaging materials. Hay, straw
and rice husks are often forbidden; wooden
packaging must often be fumigated.
If in doubt, the exporter should consult the buyer
or the consulate of the importing country.
Shipping Marks

Ngn ng phi nu tht r yu cu, v nu bao b


khng ng quy cch, nh xut khu chnh l
ngi phi gnh ht trch nhim.
Ba vn lin quan n ng gi cn c
cp y mc d l nhng vn lin quan
n cng php v khng thuc lnh vc hp
ng:
Bao b ca hng nguy him phi tun th cc
quy nh ca nh nc tt c cc quc gia.
Nh xut khu nn nh ngi nhp khu ch dn
c th nu mnh cha bit r hng ha quy
nh chc ch v bao b hay khng.
Mt s lut quc gia yu cu xng khi kh
trng ca tt c cc container nhp cnh.
Cc nn kinh t pht trin da trn nng nghip
(nh Australia) c nhng hn ch rt nghim
ngt v vt liu ng gi.
C kh, rm r v tru thng b cm; vt liu
ng gi bng g phi c xng khi kh trng.
Nu nghi ng, xut khu nn tham kho kin
ca ngi mua hoc lnh s qun ca nc nhp

Shipping marks, like the address on an envelope,


must be tightly controlled. The two sides should
discuss exactly what is required. A typical list of
marks in all export contract looks like this:

khu. Vn chuyn Marks nhn hiu vn chuyn,


ging nh a ch trn phong b, phi c kim
sot cht ch. Hai bn cn tho lun v chnh xc
nhng g l cn thit. Mt danh sch in hnh
ca cc nhn hiu trong hp ng xut khu ail
trng nh th ny:

On the surface of each package delivered under this Contract shall be marked: the
package number, the measurements of the package, gross weight, net weight, the
lifting position, the letter of credit number, the words THE RIGHT SIDE UP,
HANDLE WITH CARE, KEEP DRY, and the marks DNP/ 36/Q.
Trn mi kin hng c giao theo hp ng ny phi ghi k m hiu bao gm s th t,
kch thc, trng lng th, trng lng tnh, v tr nng ca kin hng, s L/C, thm nhng
t ph bin khc nh XIN NG CHIU, Cn THN KHI BC D, CN NI KH
RO, v nhng m s nh DNP/ 36/Q.
Some of these marks are concerned with
Mt s cc nhn hiu c lin quan vi xc nh
identifying the goods, some with handling (e.g ,
cc hng ho, x l (v d, trng lng v "Right
weight and "Right Side l'p"). and some with
Side l'p"). v mt s quy nh ca chnh ph (v
government regulations (e.g., Indonesian practice d nh Indonesia thc hnh yu cu hng ho
requires that goods sold under a letter of credit
bn ra theo th tn dng phi c s lng tn
must bear the number of the credit on the
dng trn bao b, thanh ton theo th tn dng c
packaging; payment under the letter of credit
th kh khn nu iu ny khng c thc
may be difficult if this is not done.) Once
hin.) Sau khi tha thun c t, xut khu
agreement has been reached, the exporter should phi c nghim ngt cn thn v vic in tt c
be scrupulously careful about printing all the
cc du hiu cn thit: nu khng, chng ta s
necessary marks: otherwise, as we shall see in
thy trong phn tip theo, ngn hng c th t
the next section, the bank may refuse to pay
chi tr tin theo th tn dng.
under the letter of credit.
Shipping Documents
We must now glance ahead and discuss briefly
payment by letter of credit. The exporter has
fulfilled his major duties under most export
contracts when he passes to the carrier correct
contract goods. At this point, he is entitled to
payment. The problem is, of course, that goods
are usually passed to a carrier in the exporter's
own country weeks, or months, before the
importer has the chance to examine them. To
allow payment at this early stage, international
commerce has developed the letter of credit.
How does the letter of credit work?24 In brief, the
buyer arranges with a bank in the exporter's
country to pay a certain sum of money (usually
the total invoice price) as soon as the goods are
shipped. Obviously the exporter must prove to
the bank that shipment has taken place as agreed
with the buyer. As proof the bank accepts the
shipping documents. The text of the letter of
credit contains a list of shipping documents,
sometimes a very detailed list. After the bank is
satisfied that the shipping documents tendered by
the exporter are exactly in order, it pays the
agreed sum. What, then, are these shipping
documents?

Vn chuyn ti liu Chng ti by gi phi lt


qua trc v tho lun v mt thi gian ngn
thanh ton bng th tn dng. Nh xut khu
hon thnh ngha v theo hu ht cc hp ng
xut khu ln ca ng khi ng chuyn hng ho
vn chuyn hp ng chnh xc. Ti thi im
ny, ng c quyn thanh ton. Vn l, tt
nhin, hng ho thng c thng qua cho hng
trong tun t nc ca bn xut khu, hoc vi
thng, trc khi nhp khu c c hi xem xt.
cho php thanh ton giai on ny u,
thng mi quc t pht trin ca tn dng
th. Th tn dng lm vic nh th no? 24 Tm
li, ngi mua thu xp vi mt ngn hng nc
xut khu phi tr mt s tin nht nh (thng
l gi tng ho n) ngay sau khi hng ho c
vn chuyn. R rng l nh xut khu phi chng
minh cho ngn hng rng l hng c thc
hin theo tho thun vi ngi mua. Mt bng
chng, ngn hng chp nhn cc ti liu vn
chuyn. Cc vn bn ca tn dng th c cha
mt danh sch chng t vn chuyn, i khi mt
danh sch rt chi tit. Sau khi ngn hng c
hi lng rng cc ti liu vn chuyn u thu
ca nh xut khu l chnh xc theo th t, n tr
tin s tin tha thun. , Sau , cc ti liu
ny vn chuyn?

--------------------------------------------------------------------------------------24
Chapter 2, Section 4 deals with the letter of credit in detail
The most important shipping document is issued by the carrier when the exporter hands over
the goods ior transportationit goes under many names, but in general we can call it the
waybill. Waybills fall into two groups with slightly different rules attached to them. The first
type is the traditional marine bill of lading which is used for transport by ship. The second
type includes shipping documents issued by airlines (the air waybill), by railways (the rail
consignment note), and by road hauliers (the road consignment note). Since many goods
today are containerized, and since containers move by road, rail, ship and air, a combined
transport bill of lading is used to cover multi-mode transport. On the next pages you will see
a blank example of each type of document mentioned above.
A Marine Bill of Lading (p. 45)
Most marine bills of lading today use the dual purpose form (marine/combined transport)
shown below rather than the traditional form reserved purely for ships. (For a completed
marine bill of lading, see the Concept Review: Barnacle Bill below.)
An Air Waybill (p.46)
The air waybill is issued by an airline when it takes over the goods from the exporter.
A Rail Consignment Note (p. 47)
If goods are shipped by rail, the railroad company issues a rail consignment note. Although
there is a standard international form (the so-called CIM form), most rail consignment notes
in developing countries look more like the example shown.
A Road Consignment Note (p. 48)
A trucking company issues a road consignment note on taking over the goods. Of all the
shipping documents, the road consignment note is the least standardized. The example below
shows the typical entries.
A Combined Transport Bill of Lading (p. 49)
"Combined transport" is the most common term for shipment in a container since trucks,
trains, ships and planes can all handle containers.

An Airway Bill

A rail Consignment Note

A Road Consignment Note

A Combined Transport Bill of Lading

The Marine Bill of Lading and Other Transport Documents


The distinction between marine bills of ladding and the other transport documents is sometimes
important as we shall now see. The marine bill of ladding is the traditional document used for shipment
by sea. A marine B/L must indicate that the goods have been loaded on board a named vessel, a stamp
on the face of the B/L confirms this:

The marine bill of lading is special: if the parties so wish, it can be made a negotiable document (in
other words, it can be sold or bought). Why would anyone buy a bill of lading? Simply because the
person who holds a bill of lading owns (or has title to) the goods described. This is an important aspect
of commodity trading: a cargo for example, the cargo of an oil tanker loaded in the Gulf may be sold
several times during its voyage. If such a sale is foreseen, the parties make the bill of lading negotiable;
if, however, the consignee (i.e., in most cases the buyer) intends to receive the goods personally, there
is no reason for a negotiable bill of lading.
In practice, how do you make a bill of lading negotiable? And how can you tell if a bill is negotiable or
not? The answer lies in the first few lines of document. First an example of a negotiable bill of lading
(Typing the word Order or blank in the Consignee box makes the bill of lading negotiable.
Incidentally, the use of the word Order means that the shipper must endorse the bill (sign it on the

back). But when you write the name of a person or an organization in the Consignee box, the bill is not
negotiable. )

Then the first few lines of a non-negotiable bill:

The difference lies simply in the use of the word "Order" in the Consignee box. Typing the
word "Order" makes the bill of lading negotiable. Incidentally, the use of the word "Order"
means that the shipper must endorse the bill (sign it on the back).
Clean Shipping document.
Export goods are examined frequently on their journey from buyer to seller. There is often a
pre-shipment inspections; customs officers examine the goods at every border. A carrier, of
course, examines not the goods themselves, but their packaging and general appearance. If
anything is wrong, the carrier notes the deficiency on the face of the bill of lading or other
shipping document. The carrier might note, for example
Contents leaking
Packaging soiled by contents
Packaging broken/ holed / torn/ damaged
Packaging contaminated
Goods damaged/ scratched
Goods chafed/ torn/ deformed
Packaging badly dented
Packaging damaged contents exposed
Insufficient packaging
What effect does such a note have? In 1989 the International Chamber of Commerce issued a
pamphlet entitled Clean Transport Documents (Publication No. 473). This pamphlet
distinguishes between cleun documents and claused (or unclean) documents. The remarks in
a claused document make it unacceptable to a bank; a letter of credit will not be paid against
a claused shipping document.
Sec Chapter 3, Sections 1 and 2 for detailed information on inspection
Not all notes, however, are considered to be "clauses." For example:
Second-hand/reconditioned packaging materials used Packaging
repaired/mended/resewn/coopered Unprotected Unboxed
Such remarks are not enough make the bill of lading "unclean." To avoid disputes, the two
sides to the contract often agree that the letter of credit will specify "clauses" that, in their
particular line of business, would be unacceptable. For example, in shipping iron products,
the parties might agree that no rust at all is allowed; thus the clause "Some rust spots" would
result in an unclean transport document.

One situation that sometimes arises is dangerous for the exporter. The carrier is taking over
goods at the exporter's factory. The carrier examines the packaging critically and decides to
write the clause "Insufficient packaging." An argument breaks out. To resolve the argument,
the exporter offers the carrier an "indemnity"a sum of money (or a promise of such a sum)
to cover any losses the carrier might incur if the buyer complains about the condition of the
goods when they arrive. This is very close to a bribe. Clean Transport Documents comments:
Courts in several countries have ruled that the carrier who accepts such an indemnity...is an
accomplice in deceit or fraud on the buyer and the indemnity itself is illegal and void (p. 7).
The payment of an "indemnity" could result in prosecution for fraud.
CASE STUDY
Barnacle Bill
Study the Bill of Lading below and then answer the questions below.

1. If a letter of credit required a "Marine Bill of Lading," would this document be acceptable?
YES
NO
2. If YES, how do you know? .................................................................
It is stamped with a shipped on board stamp, and a vessel is named.
3. A marine bill of lading is sometimes negotiable. If this is a marine bill of lading, is it
negotiable? '
YES
NO IT IS NOT A MARINE BILL OF LADING
4. If YES or NO, how do you know? .........................................................
The consignee box in a negotiable B/L is made out To Order.
What You Should Know
1. The contract should specify the type of packaging and the shipping marks agreed by the
parties.
2. On delivery, the exporter receives from the carrier the most importan all the shipping
documents, the bill of lading (or consignment note).

3. Each mode of transport has a characteristic shipping document: the marine bill of lading,
the air waybill, the rail consignment note, and tl road consignment note are the most
common. Combined transport (container transport) uses a combined transport bill of lading.
4. Under certain circumstances, a marine bill of lading can be made intc negotiable
document.
5. The marine bill of lading, to be acceptable as a shipping document under a letter of credit,
must bear the notation that the goods have been shipped on board a named vessel.
6. Payment under a letter of credit depends largely on the correctness i the shipping
documents.
7. Payment under a letter of credit may be delayed if the letter of credit repeats exactly the
contractual packaging requirements but the exporter has failed to meet them.
8. The carrier will note any defects in the packaging, weight or general appearance of the
goods on accepting them from the exporter. (The carrier does not inspect the goods
themselves, only the packaging.) be acceptable under a letter of credit, all shipping
documents must b "clean," i.e., free of notes about defects.
55-64
5. RISK, TITLE AND INSURANCE
THE PROBLEM
Risks to ones property must be insured, but insurance of exported goods is a difficult field
for the layman. The exporter must be able to decide what kind of policy or insurance cover is
necessary, and what risks must be covered.
THE PRINCIPLE
Most exporters prefer an open cover arrangement, with the goods valued and insured from
point-to-point. The exporter should consult a broker to ensure that all expected risks are
covered.
MORE DEPTH
We have already said that risks usually pass on delivery. Two risks are involved in the sale of
goods: the risks of goods injuring a third party and the more significant risk of loss or
damage. These risks are normally covered by insurance.
Transfer of Title
Ownership (title) is a complicated problem. National laws do not agree on a point when
ownership of goods passes from exporter to buyer. The range is wide: from signature of
contract to final payment. The matter is, however, disposive Many exporters like to keep
legal ownership of goods until full payment is made, seeing ownership as security for payment. Many "hire purchase" agreements work like that: the buyer pays in installments, but
owns the goods only when the last installment is paid. In international trade, however,
ownership is of doubtful value. If Aziz sends shampoo to Elsperanza and the invoice is not
paid, ownership is of little practical value: she is unlikely to recover the goods since they
must pass through two sets of customs on their trip home: if she sells the goods in Esperanza,
she will get little for them. In any case, her costs will probably exceed the money she
recovers. Accordingly, since ownership is of little practical value, many contracts specify
that:

Insurance: Who Should Insure?


Marine insurance is first found in Italy in the 1300's. Originally, it covered only
transport in ships (still called adventures by insurers). Today, however, most marine insurance
policies include the Transit Clause which covers the goods from the exporter's warehouse to
the buyer's warehouse -often with a long stretch overland at each end of the journey. Since
merchandise is at risk at all times during its journey, it is advisable to insure the goods at
every stage. Two players are involved here: exporter and buyer. Which is responsible for
arranging insurance cover?
In deciding who should insure, there are two schools of thought. The first sees the
point of delivery as decisive; up to delivery the exporter insures: after delivery the beyer
does. The second approach lies behind C Term (CIF, CIP): the buyer often has problem
insuring for goods that may not yet exist and that, in many cases, are located in a distant
country. It is often easier for the exporter to arrange insurance: first, many exporters have a
standing arrangement with an insurance company; secondly, they can readily declare to an
insurer the necessary details of their products.
The choices are clearit is up to the two sides to reach agreement on the terms that
best meets their needs. One important note, however:
The buyer should note that under the CIF term the seller is only required to obtain
insurance on minimum coverage.26
"Minimum coverage" is the so-called Cargo Clause C discussed below. Cargo Clause C is
designed for insuring bulk cargonot machinery, textiles, paper or other high risk cargoes. A
buyer who wants more than minimum coverage must negotiate this with the exporter.
Normally insurance cover under CIF (and CIP) contracts is for the value of the goods plus
10% (the extra 10% allows for the expected profit of the buyer); cover is generally in the
currency of the contract.
------------------------------------26
Incoterms 1990, p.50.
In a CIF (or CIP) contract, the goods are delivered to the buyer at the port (or place) of
shipment. On delivery, the goods enter the buyer's area of risk. The insurance cover held by
the exporter runs to the port or place of arrival. This is a problem: how does an insurance
policy held by the exporter help the buyer if the goods are damaged or lost during shipment?
The answer is assignment. By endorsing the certificate of insurance, the exporter can assign
(transfer) the full rights to the buyer. If necessary, this can be done even after goods are lost.27
Policy, Certificate, or Letter of Insurance?
An insurance policy is a familiar document to most people: fire insurance, vehicle insurance,
life insurancemost of us have such policies. For international trade, however, the full
policy presents certain problems:

The preparation of a policy of insurance lakes some little (= considerable, Ed.) time,
particularly if there arc a number of underwriters or several insurance companies, and
when documents require to be tendered with promptness on the arrival of a steamer in
order thai expense may not be incurred through delay in unloading..., it is not always
practicable to obtain actual policies of insurance. In order to facilitate business in
circumstances such as these, buyers arc accordingly in ihe habit of accepting brokers'
cover notes and certificates of in insurance instead of insisting on policies.28
What is a "certificate of insurance"? Many exporters have an agreement with an insurance
company covering all their shipments over a period of time. Hach individual shipment is
covered by a certificate of insurance, not by a full policy. (A full policy can normally be
issued for an individual consignment if the buyer wants this.) A certificate of insurance:
States in outline the cover offered;
Gives the details of the individual shipment.
Under English law at least, the effect of a certificate of insurance is virtually identical with
that of a full policy. In addition to the certificate of insurance, there is also the so-called letter
of insurance. This is simply a letter from the exporter to the buyer stating that the goods are
insured. It has no legal force except as evidence in a law suit against the exporter.
Types of Insurance policy: Floating Policy and Open Cover.
Sometimes an exporter deal is unique special equipment is built and shipped in an unusual
way to an unfamiliar destination. In such a situation, the exporter (usually with the help of a
broker) negotiates a special insurance policy. Normally, however, an exporter with many
similar contracts finds it time-consuming and expensive to arrange a new insurance policy for
each consignment. One answer to this problem is the floating policy, another is the open
cover.
Lets look first at what the floating policy and open cover have in common. Both offer the
exporter insurance cover on all shipments over a period of time. In both cases a ceiling is set
on the overall figure for example $1 million. As each individual shipment is made, the
exporter declares the value of the shipment, and the ceiling is automatically reduced by that
amount. Thus 10 shipments worth $100,000 each would reduce a $1 million cover to zero.
As each shipment is made, it is covered by a Certificate of Insurance. Often the exporter has a
pad of these certificates and simply fills out a new one for each shipment.
------------------------------------------------------------------------27
In some countries, the policy bought by the exporter names the buyer as the insured party.
28
Judgment in Wilton, Holqaie & Co. v. Belgian Grain and Produce Co (1920) 2 KB l.8
Insurers have various ways of limiting claims under such cumulative agreements. Generally
claims are kept down by:
- A limit per bottom ( A bottom is a ship);
- Limit per locality. (the expoters warehouse is a locality. A warehouse may contain
several consignments awaiting shipment. If they are all destroyed, the locality limit
will probably bite).
Insurance companies also generally add the Institute Maintenance of Class Clauses: this
requires that all ships used by the exporter are in a certain class in the shipping register.
In terms of the insurance cover offered, the floating policy and the open cover are, in effect,
identical. The logistical differences between the two kinds of cover, however, have led the
business community today to prefer the open cover. The first advantage of the floating policy
is that it is set up for a particular time and automatically expires unless renewed; the open
cover is open-ended: it does not expire, although there are provisions for cancellation on due
notice. Thus the open cover is marginally more convenient. The second difference is more
fundamental: an open cover is not an insurance policy at all it is an agreement by an
insurance company to issue an insurance policy if the insured asks for one. Normally the

insured does not ask for a full policy; he simply creates a Certificate of Insurance with the
knowledge that if he wants a policy he can get one at any time including, and this is very
important, after a loss. This arrangement is less formal and less time-consuming but
extremely reliable: that is its attraction for the exporter.
Types of Insurance Policy: Valued and Unvalued
When the exporter insures goods, does he declare their value to the insurer or not? In
practice, he may or he may not: both alternatives are possible. If the value is not stated (the
unvalued policy), then the value can be established after a loss; naturally, the exporter must
prove his figures precisely. As long as the figure does not exceed the total cover under the
policy, the insurer will pay. The alternative is the valued policy: the exporter states the value
of the goods on the insurance document. This has a decisive advantage: the pre-stated figure
can include not only the cost of the goods but also the profit the exporter hoped to make on
them. For this reason, valued policies are most in favor today.

There is a problem here though: what happens if the exporter seriously overvalues the goodsmust the insurance company pay the declared value? The answer is "No." The exporter

must behave with the utmost good faith or the policy is void. A classic case from 1874: an
English company sent goods to Russia and valued them at three times their cost, knowing that
the goods would sell at a huge profit in Russia. The company said nothing to the insurer
about the wide margin between cost and stated value. The goods were lost at sea. Was the
insurance company obliged to pay? The court ruled that the exporter should have disclosed
the wide margin to the insurerthe exporter had not acted with the utmost good faith and did
not recover under the policy.29 The lesson for the exporter is clear: the insurer must be told
everything of special significance about each shipment. The penalty for not disclosing
important information is no coverage at all.
Types of Insurance Policy: Time and Voyage
Goods can be insured between two dates <a time policy) or between two places (a voyage
policy). Most exporters prefer the voyage approach. Insurers, however, dislike insuring goods
for an unlimited time period: a shipment intended to start in January and finish in February
might drag on until December. For this reason, most policies are "mixed"the goods are
insured between two places but only within a given time frame. The time frame can usually
be extended, but only against a higher premium.
------------------------------------------------------29
Ionides v. Pender (1874) LR 9QB 531
A Marine Insurance Policy: What Does It Cover?
Most modern insurance policies are based on the Lloyd's Marine Policy. This document is
simply a schedule that lists: the policy number; the names of the assured (insured) and the
ship; the voyage and/or period of insurance; the goods insured (and possibly their value); the
sum insured; the premium; special conditions and warranties; and a list of clauses to be
attached. It is this attached list of clauses that specifies the cover provided. Of greatest
importance among the "clauses attached" is the Cargo Clause. It has three versions: A, B, and
C.
Cargo Clause A works reductively. It starts with a 100% cover"all risks"but steadily
reduces this cover by means of various exclusions. Cargo Clauses B and C, on the other hand,
work cumulatively. They start with little or no cover and specifically add risks that are
covered.
Whichever version is chosen, the so-called General Exclusion Clause excludes a number of
risks, in particular:
Willful misconduct of the assured. The results of any wrong act deliberately carried out by the
assured are not covered.
Ordinary leakage, loss of weight or normal wear and tear. If a volatile oil normally loses
10% of its volume in a month, this lossand any similar, normally anticipated lossis not
covered.
Improper packaging. Damage resulting from improper packing or preparation is not covered.
To discover what is improper, the courts usually refer to what is customary in a particular
trade.
Inherent vice in the goods. Some goods are inherently dangerous. A cargo of hay, for
example, may catch fire because of spontaneous combustion. That is an "inherent vice" and
the loss of the hay is not covered.
Delay. In general, losses caused by delay are not covered.
Insolvency of the owners (etc.) of the vessel. If a journey ends prematurely because the
shipping line goes bankrupt, extra costs (further shipment for example) are not covered.
Use of Nuclear Weapons. If cargo is damaged through the use of nuclear weapons, the
insured will probably be worrying about more than his cargo. Even so, this risk to the goods
is not covered.
In addition, all three Cargo Clauses contain the Unseaworthiness and Unfitness Exclusion
Clause. This clause says that goods shipped in an unseaworthy vessel are not insured. Since
few laymen can know if a ship is seaworthy or not, the clause is softened: cover is withdrawn
only if the insured knew about the unseaworthiness.
Losses resulting from war, from strikes or from terrorism are also excluded, but here the
difference between a reductive and a cumulative approach is important. If the War Exclusion
Clause (or the Strike Exclusion) clause is deleted from Cargo Clause A, then these risks are

covered. For Cargo Clauses B or C it is necessary to add the so-called Institute War Clauses
or Institute Strikes Clauses to the policy if these risks are to be covered. We should now look
at Cargo Clauses B and C to see what exactly they cover:
Cargo Clause B covers:
1.1 Loss of or damage to the subject-matter insured attributable to:
1.1.1 fire or explosion,
1.1.2 vessel or craft being stranded, ground, sunk or capsized,
1.1.3 overturning or derailment of land conveyance,
1.1.4 collision or contact of vessel craft or conveyance with any external object other than
water,
1.1.5 discharge of cargo at a port of distress,
1.1.6 earthquake, volcanic eruption or lightning.
1.2 Loss of or damage to the subject-matter insured caused by:
1.2.1 general average sacrifice,30
1.2.2 jettison or washing overboard.
----------------------------------------------------------------------------------------------------30
General average sacrifice refers to a situation in which a ship must make a "sacrifice" (e.g.,
throwing part of the cargo in the sea) in order to preserve the ship and the rest of the cargo.
The cost of such a sacrifice is shared by all the parties involved. (See Schmillhoff, p. 520+.)
1.2.3 entry of sea-, lake-, or river-water into vessel, craft, hold, conveyance,
container, liftvan or place of storage.
1.3 Total loss of any package lost overboard or dropped whilst loading on to, or
unloading from, a vessel or craft.
Cargo Clause C covers:
1.1 Loss of or damage to the subject-matter insured attributable to:
1.1.1 fire or explosion,
1.1.2 vessel or craft being stranded, grounded, sunk or capsized,
1.1.3 overturning or derailment of land conveyance,
1.1.4 collision or contact of vessel craft or conveyance with any external object other
than water,
1.1.5 discharge of cargo at a port of distress,
1.2 Loss of or damage to the subject-matter insured caused by:
1.2.1 general average sacrifice,
1.2.2 jettison.
Below paying a claim for loss, insurers study the circumstances fully.
They examine the insurance document to check that the lost or damaged goods were correctly
described. If the description and the goods are materially different, the insurer may refuse to
pay. In one famous case, an exporter bought leather flying jackets from the British
government. The jackets were twenty years old, but they had never been used. The exporter
described the goods as "new men's clothing in bales." When the goods were stolen, the
insurer refused to pay because of material misdescription. The court agreed: the description
was inaccurate.31 In general, the insured must disclose any fact "which would influence the
judgment of a prudent insurer in fixing the premium or accepting the risk."32
Some policies allow for innocent misdescription with a "held covered" clause: under given
conditions, the goods are held (= considered) to be covered. An example: an exporter bought
second-hand machinery in order to export it. On the insurance document the goods were
described simply as "machinery." When the goods were lost, the insurer refused to pay,
pleading material misdescription. The policy contained, however, a "held covered" clause:
"held covered at premium to be arranged. The court ordered the insurance company to pay,
but allowed it an extra premium.33
In summary, always remember the cardinal principal of insurance:
A contract of marine insurance is a contract based upon the utmost good faith, and, if
the utmost good faith be not observed by either party, the contract may be avoided by
the other party.34

------------------------------------------------------------------------------------31
Anglo-African Merchants v. Bay ley (1970) 1 QB 311, 319-320.
32
Schmiuhoff, p. 503.
33
Greenock SS. Co. v. Maritime Insurance Co. (1903) 1 KB. 367.
34
Marine Insurance Act. (UK) 1907, 17.
CASE STUDY
TAKE OVER
Pacific Exports is a new company founded in Verbena to export textiles. The company anticipates
sales of about $500,000 during its first year of operations, with most orders between $1,000 and
$30,000. Since Verbena is an island, consignments of goods always travel by ship. The company
wants advice on the best kind of insurance for its CIF contracts. What would you recommend among
the choices below? In each case be ready to give your reasons.
1. Tailor-made policies
Floating policy
Open cover
...Because there is no need for a full insurance policy to be negotiated for each order.
2. Valued policy
Unvalued policy
...Because this allows claims for the loss of expected profit if the goods are destroyed or damaged.
3. Voyage policy
Time policy Time and voyage policy
...Because this policy maintains insurance cover on the goods even if there is a delay.
4. Cargo Clause A (All risks) Cargo Clause B Cargo Clause C
Debatable. Because for the exporter, Cargo Clause C is cheapest. Furthermore, nothing more is
required under CIF contracts. However, the buyer may be very unhappy if the texttiles are lost and
the insurance arranged by the exporter fails to offer the expected compensation. The exporter and the
buyer should discuss this issue.
5. Institute War Clauses YES NO depends on __
Depends on route and political situation.
6. Institute Strikes Clauses YES NO depends on __
Depends on social and political situation. Normally cover against strikes is recommended.

6. TERMS OF TRADE: INCOTERMS


THE PROBLEM
Although the purpose of ICC Incoterms is to
standardize terms of trade worldwide, many
business people do not know what these
terms mean or the nature of their rights and
duties under an Incoterm contract.

CC VN Mc d mc ch ca ICC
Incoterms l tiu chun ha cc iu khon
thng mi trn ton th gii, nhiu doanh nhn
khng bit nhng iu khon ny c ngha l tnh
cht ca cc quyn v ngha v ca mnh theo
mt hp ng Incoterm.

THE PRINCIPLE
The ICC publication, Incoterms 1990, gives
full and clear information about the rights
and duties of buyer and exporter in Incoterm
contracts. Ignorance of these terms can be
expensive.

NGUYN TC n phm ICC, Incoterms 1990,


cung cp thng tin y v r rng v quyn v
ngha v ca ngi mua v xut khu trong hp
ng Incoterm. Khng bit cc iu khon ny
c th tn km.

IN MORE DEPTH
World trade depends to an increasing extent of
standardization: international weights and
measures are metric: many contracts are priced in
U.S. dollars; letter of credit follow standard
rules. Misunderstandings can be expensive:
anything that makes them likely less likely is
welcome.

Su hn v
Thng mi th gii ph thuc vo mt mc
ngy cng tng ca tiu chun: trng lng quc
t v cc bin php c s liu: nhiu hp ng
c gi bng la M, th tn dng theo quy tc
tiu chun. S hiu lm c th tn km: bt c
iu g m lm cho h c th t c kh nng c
cho n. Incoterms Mi ba Mt ngun tin gy
nhm ln quc t l iu kin giao hng. Chng

The Thirteen Incoterms


One source of international confusion are
delivery conditions. We have already looked at a
number of problems and seen how national laws
vary in their preferred solutions. To clarify the
situation, the International Chamber of
Commerce (ICC) issued as early as 1936
standardized terms- the so-called International
Commercial Terms or Incoterms. Over the years,
the ICC has updated the Incoterms as the nature
of commerce has changed- increased use of
aircraft, the introduction of containers, electronic
document transfer and so on.- all have required
new or revised terms. The latest issue of
Incpterms is the 2010 revision.
In establishing the 13 Incoterms, the ICC has
looked at the most common variations in an
arrangement for delivery and established for
each variation the exact duties of the exporter
and the buyer. In setting up the 13 terms, the
ICC has taken into account three variables:
- Where along the transportation route
delivery takes place;
- What means of transport is used; and
- What costs the exporter might pay after
the point of delivery.
The 13 terms are grouped in four categories:
E-terms, F-terms, C-terms and D-terms. The
E-term deals with deliveries at the exporters
factory. The F-terms all concern delivery
within the exporters country. The C-terms
involve delivery in the exporters country,
with extra costs for the exporter after
delivery. D-terms take care of delivery
outside the exporters country. A table gives
us an overview:
QUESTION: Explain EXW, CFR, DDU
EXW is one of the E-terms in the Incoterms.
It stands for Ex-work, a method of delivery,
where the exporter is free from charge when
exporter notifies buyer of availability of
goods at exporters premises (factory or
warehouse). Then the exporter is not
responsible for transport or any other costs.

ti xem xt mt s vn v nhn thy nh


th no lut php quc gia khc nhau trong cc
gii php a thch ca h. lm r tnh hnh,
Phng Thng mi quc t (ICC) ban hnh sm
nht l 1936 v tiu chun ha ci gi l thng
mi quc t iu khon ny hoc Incoterms.
Trong nhng nm qua, ICC cp nht
Incoterms nh bn cht ca thng mi thay
i tng s dng tu bay, vic gii thiu cc
thng cha, chuyn giao ti liu in t v vv.
Tt c u c yu cu mi hoc c sa i, b
sung cc iu khon. Cc vn mi nht ca
Incpterms l bn sa i 2010.

Thnh lp 13 Incoterms, ICC xem xt cc bin


th ph bin nht trong mt s sp xp giao hng
v thit lp cho mi bin th cc nhim v chnh
xc nhng nc xut khu v ngi mua. Trong
vic thit lp trong 13 thut ng, ICC a vo
ti khon ba bin: - dc theo tuyn ng vn
chuyn giao hng din ra - phng tin vn ti
c s dng; v chi ph xut khu c th tr tin
sau khi cc im giao hng. 13 thut ng c
nhm li thnh bn loi: cc iu kin in t,
cc iu kin nhm F, C iu kin v iu kin
D. Cc giao dch E-di vi vic giao hng ti nh
my xut khu. F-v tt c cc mi quan tm
phn phi trong nc xut khu. C-thut ng lin
quan n phn phi trong nc xut khu, vi
chi ph thm cho cc nh xut khu sau khi giao
hng. D iu kin chm sc cung cp bn ngoi
nc xut khu. Mt bng cho chng ta mt ci
nhn tng quan: CU HI: Gii thch EXW,
CFR, DDU EXW l mt trong cc iu khon E
trong Incoterms. N l vit tt ca Ex cng vic,
mt phng php giao hng, xut khu l min
ph t ph khi xut khu thng bo cho ngi
mua sn c ca hng ho ti c s xut khu (nh
my hoc kho). Sau , xut khu khng chu
trch nhim vn chuyn, hoc bt k cc chi ph
khc.
CFR l mt trong nhng C-iu khon trong
Incoterms. N l vit tt ca Chi ph vn ti, mt
phng php giao hng, xut khu c min ph
khi hng ha vt qua lan can tu. Sau , xut
khu chu trch nhim i vi tu vn ti v vn
chuyn hng ha.

CFR is one of the C-terms in the Incoterms. It


stands for Cost and Freight, a method of delivery,
where the exporter is free from charge when the
goods pass the ships rail. Then the exporter is
responsible for ship transport and freight.
THE PROBLEM
Although the purpose of ICC Incoterms is to standardize terms of trade worldwide, many
business people do not know what these terms mean or the nature of their rights and duties under
an Incoterm contract.

THE PRINCIPLE
The ICC publication, Incoterms 1990, gives full and clear information about the rights and duties
of buyer and exporter in Incoterm contracts. Ignorance of these terms can be expensive.
IN MORE DEPTH
World trade depends to an increasing extent of standardization: international weights and
measures are metric: many contracts are priced in U.S. dollars; letter of credit follow standard
rules. Misunderstandings can be expensive: anything that makes them likely less likely is
welcome.
The Thirteen Incoterms
One source of international confusion are delivery conditions. We have already looked at a
number of problems and seen how national laws vary in their preferred solutions. To clarify the
situation, the International Chamber of Commerce (ICC) issued as early as 1936 standardized
terms- the so-called International Commercial Terms or Incoterms. Over the years, the ICC has
updated the Incoterms as the nature of commerce has changed- increased use of aircraft, the
introduction of containers, electronic document transfer and so on.- all have required new or
revised terms. The latest issue of Incpterms is the 2010 revision.
In establishing the 13 Incoterms, the ICC has looked at the most common variations in an
arrangement for delivery and established for each variation the exact duties of the exporter and
the buyer. In setting up the 13 terms, the ICC has taken into account three variables:
- Where along the transportation route delivery takes place;
- What means of transport is used; and
- What costs the exporter might pay after the point of delivery.
The 13 terms are grouped in four categories: E-terms, F-terms, C-terms and D-terms. The E-term
deals with deliveries at the exporters factory. The F-terms all concern delivery within the
exporters country. The C-terms involve delivery in the exporters country, with extra costs for
the exporter after delivery. D-terms take care of delivery outside the exporters country. A table
gives us an overview:
QUESTION: Explain EXW, CFR, DDU
EXW is one of the E-terms in the Incoterms. It stands for Ex-work, a method of delivery, where
the exporter is free from charge when exporter notifies buyer of availability of goods at
exporters premises (factory or warehouse). Then the exporter is not responsible for transport or
any other costs.
CFR is one of the C-terms in the Incoterms. It stands for Cost and Freight, a method of delivery,
where the exporter is free from charge when the goods pass the ships rail. Then the exporter is
responsible for ship transport and freight.
TERM
TYPE

SHORT
FORM

FULL
FORM

ETERMS

EXW

Ex-work

F-TERMS FCA
FAS
FOB
CTERMS

CFR
CIF
CPT
CIP

POINT OF DELIVERY

When exporter notifies buyer of


availability of goods at
exporters premises, he is free
from responsibility
Free Carrier When goods are handed over to
the carrier
Free
When goods are alongside the
Alongsi-de ship, ready for loading
Ship
Free On
When the goods pass the ships
Board
rail at the port of loading
Cost and
When the goods pass the ships
Freight
rail at the destination
Cost,
When the goods pass the ships
Insurance
rail
and Freight
Carriage
When the goods are handed over
Paid To
to the carrier
Carriage
When the goods are handed over

TRANSPO COST
RT
AFTER
DELIVERY
None
None

Any

None

Ship

None

Ship

None

Ship

Freight to
destination
Freight and
Insurance to
destination
Freight to
destination
Freight and

Ship
Any
Any

DTERMS

DAF
DES

and
Insurance
Paid
Delivered
At Frontier
Delivered
Ex-Ship

DEQ

Delivered
Ex-Quay

DDU

Delivered
Duty
Unpaid
Delivered
Duty Paid

DDP

to the carrier

insurance to
destination

When the goods are cleared for


export at a named frontier
When the ship carrying the
goods arrives at the port of
destination
When the goods are on the quay
at the port of destination, and
cleared for import
When the goods are available to
the buyer at a named destination,
duty unpaid
When the goods are available to
the buyer at a named destination,
duty paid

Incoterms obviously save a great deal of work in


contract drafting. Compare the two versions of
the delivery clause below:
The equipment listed in Annex 1 shall be
delivered FOB (Beira) (Incoterms 1990).
For the equipment listed in Annex 1 the price is
for delivery free on board the carrying vessel
designated by the Buyer at the port of Beira
including the cost of packing, as well as
expenses incurred before loading the equipment
on board the carrying vessel.
The first wordingusing an Incoterrrtis more
than simple shorthand: it incorporates six pages
of the ICC booklet Incoterms 1990 specifying
numerous duties of both buyer and exporter. The
exporter, for example, must "Deliver the goods
on board the vessel named by the buyer..." and
'pay all costs relating to the goods until such time
as they have passed the ship's rail."36
A word of caution on Incoterms: the 1990
Incoterms are radically new. Some old terms
have disappeared: FOT and FOR (Free On Truck
and Free on Rail) have been replaced by FCA;
C&F has been renamed CFR. Further, some
traditional terms now have very restricted
meanings: FOB, for example, applies only to
transport by ship; for other means of transport,
the correct "FOB equivalent" is now FCA. Also
remember that Incoterms apply only to
international trade; for trade within a country,
Incoterms are not appropriate.
Two questions often arise about Incoterms: first,
is it necessary to state in the contract that FOB,
CIF, and so on are Incoterms? And secondly,
what happens if the "small print" of Incoterms
1990 conflicts with a provision of the contract?
Let's look at these issues.

Any

None

Ship

None

Ship

None

Any

None

Any

None

Incoterms r rng l tit kim rt nhiu cng vic


son tho hp ng. So snh hai phin bn ca
cc iu khon giao hng di y: Cc thit b
c lit k trong Ph lc 1 c giao FOB
(Beira) (Incoterms 1990). i vi cc thit b
c lit k trong Ph lc 1, gi giao hng min
ph trn tu thc hin theo ch nh ca ngi
mua ti cng Beira bao gm c chi ph ng gi,
cng nh chi ph pht sinh trc khi ti cc trang
thit b trn tu thc hin.

Incoterms obviously save a great deal of work in contract drafting. Compare the two versions of the
delivery clause below:
The equipment listed in Annex 1 shall be delivered FOB (Beira) (Incoterms 1990).

For the equipment listed in Annex 1 the price is for delivery free on board the carrying vessel
designated by the Buyer at the port of Beira including the cost of packing, as well as expenses
incurred before loading the equipment on board the carrying vessel.
The first wordingusing an Incoterrrtis more than simple shorthand: it incorporates six pages of
the ICC booklet Incoterms 1990 specifying numerous duties of both buyer and exporter. The
exporter, for example, must "Deliver the goods on board the vessel named by the buyer..." and 'pay
all costs relating to the goods until such time as they have passed the ship's rail."36
A word of caution on Incoterms: the 1990 Incoterms are radically new. Some old terms have
disappeared: FOT and FOR (Free On Truck and Free on Rail) have been replaced by FCA; C&F has
been renamed CFR. Further, some traditional terms now have very restricted meanings: FOB, for
example, applies only to transport by ship; for other means of transport, the correct "FOB
equivalent" is now FCA. Also remember that Incoterms apply only to international trade; for trade
within a country, Incoterms are not appropriate.
Two questions often arise about Incoterms: first, is it necessary to state in the contract that FOB, CIF,
and so on are Incoterms? And secondly, what happens if the "small print" of Incoterms 1990 conflicts
with a provision of the contract? Let's look at these issues.
Specifying Incoterms
Is the specification, "Incoterms 1990," really needed? In fact, it is necessary because FOB and CIF
are also common terms in many countries with different commercial traditions, for example in the
United States.37 Unfortunately, American and ICC usage of the terms do not agree: for example in the
U.S.:
The term FOB or "free on board," may be used with reference to the seller's city, the buyer's city, or
an intermediate city. It may also be used with reference to a named carrier, vessel, car or other
vehicle.38
------------------------------------------------------------------------------------36
Incoterms pp. 138-140.
37
See UCC 2-320 to 322. The UCC is the Uniform Commercial Code of the United Slates. It will be
referred to many times in the following pages. For more information on the Code, see Chapter 4.
Section 2.
38
Anderson, p. 349.

FURTHER READING
INCOTERMS 2010
The new INCOTERMS 2010 became effective
January 1, 2011.
Incoterms--which is an abbreviation for
International Commercial terms--are a series of
sales terms.
They are published by the International Chamber
of Commerce (ICC) and are widely used in
commercial transactions.
In addition to providing a set of rules for the
interpretation of commonly used trade terms,
INCOTERMS 2010 accomplish the following:
(a) significantly revises Group D listed in
INCOTERMS 2000;
(b) reduce Incoterms from four groups to two
groups, allowing trade experts to choose the most

INCOTERMS 2010
INCOTERMS 2010 c hiu lc t ngy 1 -12011.
Incoterms - l mt t vit tt vi cc iu
kin thng mi quc t - l mt lot cc iu
khon bn hng.
Incoterms c cng b bi Phng Thng mi
quc t (ICC) v c s dng rng ri trong
cc giao dch thng mi.
Ngoi vic cung cp mt b quy tc gii thch
cc iu kin giao hng thng c s dng,
INCOTERMS 2010 hon thnh sau y:
(a) iu chnh li bng D hp l hn so vi
INCOTERMS 2000,
(b) gim Incoterms t bn nhm cn hai nhm,
cho php thng mi cc cc nh xut nhp khu
la chn cc quy tc thch hp nht lin quan
n phng thc vn ti; v

suitable rule related to the mode of transport; and


(c) reduce the absolute number of Incoterms from
13 to 11.
Moreover, INCOTERMS 2010 offer additional
guidance which assists users in selecting the most
appropriate Incoterm for each transaction.
The revised terms also spell out rules regarding
the use of electronic procedures; detail
information on security-related clearances for
shipments; and offer advice with respect to
domestic trade.
What are Incoterms?
Incoterms or International Commercial terms are
a series of sales terms. They are published by the
International Chamber of Commerce (ICC) and
are widely used in international commercial
transactions. The purpose of Incoterms is to
provide a set of international rules for the
interpretation of commonly used trade terms in
international transactions. They closely
correspond to the U.N. Convention on Contracts
for the International Sale of Goods. The first
Incoterms were issued in 1936. The most recent
Incoterms were updated in 2010 and became
effective January 1, 2011.
Who needs to understand Incoterms?
Government trade officials as well as many
private sector parties should understand
Incoterms. Such private sector parties include:
exporters, importers, trade finance professionals,
export compliance specialists, customs brokers,
freight forwarders, insurers, international credit
professionals, and sales and purchasing
managers.
What are Incoterms used for?
Incoterms assist trade practitioners in interpreting
the most commonly used international trade
terms. Using correct Incoterms in an international
transaction reduces considerably uncertainties
arising from the different interpretation of such
terms in different countries. They apportion
international trade transaction costs and
responsibilities between buyers (importers) and
sellers (exporters) and reflect modern-day
transportation practices. Incoterms assist in
significantly reducing misunderstandings among
traders and thereby minimizing trade disputes and
litigation. However, their scope is limited to
matters related to the international rights and
obligations of the parties involved in the contract
of sale with respect to the delivery of the goods
sold. Thus, they apply to the contract of carriage,

(c) lm gim s lng ca Incoterms t 13


xung cn 11 iu khon.
Hn na, INCOTERMS 2010 cung cp hng
dn b sung ny s h tr ngi dng trong vic
la chn cc Incoterm thch hp nht cho mi
giao dch. Cc iu khon sa i cng gii
thch r rng cc quy tc lin quan n vic s
dng cc th tc in t, thng tin chi tit lin
quan n an ninh thng quan cho cc l hng v
cung cp li khuyn i vi thng mi trong
nc.

Incoterms l g? Incoterms hoc cc iu khon


thng mi quc t l mt lot cc iu khon
bn hng. H c cng b bi Phng Thng
mi quc t (ICC) v c s dng rng ri
trong cc giao dch thng mi quc t. Mc
ch ca Incoterms l cung cp mt tp hp cc
quy tc quc t cho vic gii thch cc iu kin
thng mi thng c s dng trong cc giao
dch quc t. H cht ch tng ng ca Cng
c Lin hp quc v Hp ng Mua bn Quc
t Hng ho. Incoterms u tin c ban
hnh vo nm 1936. Incoterms gn y nht
c cp nht trong nm 2010 v tr thnh c
hiu lc t ngy 01 thng 1 nm 2011. Ai cn
hiu Incoterms? Chnh ph quan chc thng
mi cng nh nhiu bn khu vc t nhn nn
hiu Incoterms. Nh vy bn khu vc t nhn
bao gm: xut khu, nhp khu, cc chuyn gia
ti chnh thng mi, cc chuyn gia ph hp
xut khu, mi gii hi quan, giao nhn vn ti
hng ha, cng ty bo him, cc chuyn gia tn
dng quc t, v doanh s bn hng v qun l
thu mua.

Incoterms dng lm g? Incoterms h tr hc


vin thng mi trong vic gii thch cc iu
khon thng mi quc t c s dng ph
bin nht. S dng Incoterms chnh xc trong
mt giao dch quc t lm gim ng k s
khng chc chn pht sinh t vic gii thch
khc nhau t ng nh vy cc nc khc nhau.
Phn b chi ph giao dch thng mi quc t v
trch nhim gia ngi mua (nhp khu) v
ngi bn (xut khu) v phn nh tp qun vn
ti hin i. Incoterms gip gim ng k s
hiu lm gia cc thng nhn v do gim
thiu tranh chp thng mi v tranh chp. Tuy
nhin, phm vi ca h c gii hn trong cc
vn lin quan n quyn v ngha v quc t
ca cc bn tham gia vo hp ng mua bn i
vi vic cung cp cc hng ho bn. V vy,
h p dng i vi cc hp ng vn chuyn,
khng phi l hp ng mua bn.

not the contract of sale.


Why were the INCOTERMS 2000 revised?
INCOTERMS 2010 are the updated version of
INCOTERMS 2000. INCOTERMS 2010
have been developed as a result of an extensive
review of current shipping practices and trends in
an effort to keep up with the rapid expansion of
world trade. The key drivers for this update
include: a need for improved cargo security,
changes to the Uniform Commercial Code in
2004 that resulted in a deletion of U.S. shipment
and delivery terms, and new trends in global
transportation.
How do INCOTERMS 2010 differ from
INCOTERMS 2000?
In addition to providing a set of rules for the
interpretation of commonly used trade terms,
INCOTERMS 2010 significantly revise Group
D listed in INCOTERMS 2000.
The five INCOTERMS 2000 listed in Group D
included the following:
DAF Delivered At Frontier
DES Delivered Ex Ship
DEQ Delivered Ex Quay
DDU
Delivered Duty Unpaid
DDP
Delivered Duty Paid
INCOTERMS 2010 contain the following
categories:
DAT
Delivered At Terminal
DAP
Delivered At Place
DDP
Delivered Duty Paid
Moreover, INCOTERMS 2010 reduce the
number of Incoterm groupings from four to two,
allowing trade experts to choose the most suitable
rule related to the mode of transport.
The 13 INCOTERMS 2000 contained four
essential categories of Incoterms. They were:
Group E Departure
Group F Main carriage unpaid
Group C Main carriage paid
Group D Arrival.
The two main categories of INCOTERMS 2010
are now organized by modes of transport. Used in
international as well as in domestic contracts for
the first time, the new groups aim to simplify the
drafting of contracts and help avoid
misunderstandings by clearly stipulating certain
obligations of buyers and sellers.
Group 1. Incoterms that apply to any mode of
transport are:
EXW
Ex Works
FCA
Free Carrier
CPT
Carriage Paid To
CIP
Carriage And Insurance Paid To
DAT
Delivered At Terminal
DAP
Delivered At Place
DDP
Delivered Duty Paid

Ti sao cc INCOTERMS 2000 sa i?


INCOTERMS 2010 l phin bn cp nht ca
INCOTERMS 2000. INCOTERMS 2010
c pht trin nh l kt qu ca mt s
xem xt m rng hot ng vn chuyn hin ti
v xu hng trong mt n lc theo kp vi s
m rng nhanh chng ca thng mi th gii.
Cc trnh iu khin cho bn cp nht ny bao
gm: mt nhu cu ci thin an ninh hng ha,
thay i lut thng mi thng nht vo nm
2004 dn n vic xa mt l hng ca M v
cc iu khon giao hng, v xu hng mi
trong giao thng vn ti ton cu.
Lm th no INCOTERMS 2010 khc
nhau t INCOTERMS 2000? Ngoi vic cung
cp mt tp hp cc quy tc cho vic gii thch
cc iu kin thng mi thng c s dng,
INCOTERMS 2010 ng k xem xt li bng
D c lit k trong INCOTERMS 2000.
Nm INCOTERMS 2000 c lit k trong
bng D bao gm nhng iu sau y: DAF Giao
ti bin gii DES Delivered Ex Ship DEQ
Delivered Ex Quay DDU Delivered Duty DDP
cha tr INCOTERMS Delivered Duty Paid
2010 bao gm cc loi sau: DAT Giao Ti ga
DAP Giao Ti Ni DDP Delivered Duty Paid
Hn na, INCOTERMS 2010 gim s lng
cc nhm Incoterm 4-2, cho php cc chuyn gia
thng mi la chn cc quy tc thch hp
nht lin quan n phng thc vn ti.
13 INCOTERMS 2000 c bn loi thit yu
ca Incoterms. l: Tp on E - F Tp on
khi hnh - vn chuyn cha thanh ton chnh
nhm C - vn chuyn tr Nhm D - Lt. Hai
loi chnh ca INCOTERMS 2010 c t
chc theo cc phng thc vn ti. c s
dng trong quc t cng nh trong hp ng ln
u tin trong nc, cc nhm mi nhm mc
ch n gin ha vic son tho hp ng v
gip trnh nhng hiu lm bng cch quy nh
r ngha v nht nh ca ngi mua v ngi
bn.
Nhm 1. Incoterms m p dng cho bt k
phng thc vn ti l: EXW Ex Works FCA
CPT nh cung cp min ph vn chuyn tr tin
vn chuyn CIP v bo him tr tin DAT Giao
Ti DAP ga Giao Ti t DDP Delivered Duty
Paid Nhm 2. Incoterms c p dng i vi bin
v vn ti ng thu ni a ch: FAS min ph
Cng vi tu FOB Free On Ban CFR Chi ph v
vn ti chi ph CIF, bo him, v vn ti Hn
na, hai nhm c lit k trn lu gim s
lng Incoterms 13-11 . Cui cng,
INCOTERMS 2010 cung cp thm hng dn
hu ch v lm r ngha v. V d, cc iu
khon sa i cng gii thch r rng quy nh
v vic s dng cc th tc in t, thng tin chi
tit lin quan n an ninh thng quan cho cc l
hng v cung cp li khuyn i vi thng mi
trong nc.

Group 2. Incoterms that apply to sea and


inland waterway transport only:
FAS
Free Alongside Ship
FOB
Free On Board
CFR
Cost And Freight
CIF
Cost, Insurance, and Freight
Further, the two new groupings listed above note
a reduction of the number of Incoterms from 13
to 11.
Finally, INCOTERMS 2010 provide additional
helpful guidance and clarify obligations. For
instance, the revised terms also spell out rules
regarding the use of electronic procedures; detail
information on security-related clearances for
shipments; and offer advice with respect to
domestic trade.
Can I still use the INCOTERMS 2000?
According to the International Chamber of
Commerce, all contracts made under
INCOTERMS 2000 remain valid even after
2011. In addition, although the ICC recommends
using INCOTERMS 2010 after 2011, parties to
a contract for the sale with respect of the delivery
of goods can agree to use any version of
Incoterms after 2011. It is important, however, to
clearly specify the chosen version
INCOTERMS 2010, INCOTERMS 2000, or
any earlier version.
Where can I obtain a copy of the new
INCOTERMS 2010?
You can purchase a copy of the new
INCOTERMS 2010 from the ICC website.
Where can I learn more about the new
Incoterms?
There are a number of private sector and
government organizations that offer workshops,
webinars, and seminars related to the new
Incoterms. For webinars and other events related
to Incoterms and many other topics of tradecraft
education that are being offered by the U.S.
Commercial Service and its partners in support of
the Presidents National Export Initiative, you
may visit our Trade Events Search Database.
INCOTERMS AND THE EXPORTER
International Commercial Terms, known as
Incoterms, are internationally accepted
terms defining the responsibilities of
exporters and importers in the arrangement
of shipments and the transfer of liability
involved at various stages of the transaction.
Incoterms do not cover ownership or the
transfer of title of goods. It is crucial to agree
on an Incoterm at the start of a
negotiation/quotation of a sale, as it will
affect the costs and responsibilities involved
in shipping, insurance and tariffs. The new
Incoterms 2010 rules were revised by the

Ti c th vn s dng INCOTERMS 2000?


Theo Phng Thng mi quc t, tt c cc hp
ng c thc hin theo INCOTERMS 2000
vn c hiu lc ngay c sau nm 2011. Ngoi ra,
mc d ICC khuyn co s dng INCOTERMS
nm 2010 sau khi nm 2011, cc bn tham gia
hp ng bn hng i vi vic giao hng c th
ng s dng bt k phin bn ca Incoterms
sau nm 2011. iu quan trng l, tuy nhin,
quy nh r INCOTERMS phin bn la chn
2010, INCOTERMS 2000, hoc bt k phin
bn no trc . Ti c th c c mt bn
sao ca INCOTERMS mi 2010? Bn c th
mua mt bn sao ca INCOTERMS mi 2010
t trang web ca ICC. Ti c th tm hiu thm
v Incoterms mi? C mt s ca khu vc t
nhn v cc t chc chnh ph cung cp hi
tho, hi tho, hi tho lin quan n Incoterms
mi. i vi cc hi tho v cc s kin khc
lin quan n Incoterms v nhiu ch khc
tradecraft gio dc ang c cung cp bi
thng mi Hoa K v cc i tc trong h tr
ca Sng kin xut khu quc gia ca Tng
thng, bn c th truy cp vo c s d liu
thng mi S kin Tm kim ca chng ti.

INCOTERMS V CC hin xut khu thng


mi quc t, c gi l "Incoterms", c quc
t chp nhn cc iu khon xc nh trch
nhim ca cc nh xut khu v nhp khu trong
vic b tr cc l hng v chuyn giao trch
nhim tham gia cc giai on khc nhau ca
giao dch. Incoterms khng bao gm quyn s
hu hoc chuyn giao quyn s hu hng ho.
iu quan trng l ng trn Incoterm mt s
khi u ca mt cuc thng lng / bo gi
bn, v n s nh hng n chi ph v trch
nhim tham gia bo him, vn chuyn v thu
quan. Cc Incoterms 2010 quy nh c sa
i, b sung do Phng Thng mi quc t v s
tr thnh c hiu lc t ngy 1 thng 1 nm
2011. Bn iu kin c loi b (DAF,
DEQ, DES, DDU) v hai c thm vo: Giao
ti Place (DAP) v Giao ti Terminal (DAT). Cc

International Chamber of Commerce and will


become effective January 1, 2011. Four
terms were eliminated (DAF, DEQ, DES,
DDU) and two were added: Delivered at
Place (DAP) and Delivered at Terminal
(DAT).
The modifications affect obligations, risk
transfer, and cost sharing for the seller and
buyer, resulting in better clarification and
application of the eleven (11) Incoterms, and
consistent with the way global trade is
actually conducted since the last update in
2000.
In any sales transaction, it is important for
the seller and buyer to agree on the terms of
sale and know precisely what is included in
the sale price. Exporters should choose the
Incoterm that works best for their company,
but also be prepared to quote on other
terms.
See VEDP FastFacts- Responding to
Inquiries
Inexperienced exporters may want to use the
Incoterm Ex Works (EXW), because this
term carries the least burden for them. Under
EXW, an exporters responsibility ends at
their facilitys loading dock, which includes
making the goods available for pick up and
providing any product information needed for
filing the Electronic Export Information (EEI).
The importers agent (i.e. their designated
U.S. freight forwarder) will arrange and pay
for the pre-carriage, shipping, insurance and
any additional costs from the exporters door.
A sale based on the Incoterm CIF, on the
other hand, requires the exporter to arrange
and pay for the pre-carriage, shipping, and
insurance to a named port. In this case, the
sale price (invoice) includes not only the
(C)ost of goods, but also (I)nsurance and
(F)reight costs that the importing buyer pays
the exporting seller.

thay i nh hng n ngha v, chuyn giao


ri ro, v chia s chi ph cho ngi bn v ngi
mua, kt qu l lm r v ng dng (11)
Incoterms mi mt, v ph hp vi thng mi
ton cu l thc s thc hin k t khi cp nht
cui cng trong nm 2000.
Trong bt k giao dch bn hng, iu quan
trng l ngi bn v ngi mua ng v cc
iu khon ca bn hng v bit chnh xc
nhng g c bao gm trong gi bn. Xut
khu nn chn Incoterm lm vic tt nht cho
cng ty ca h, nhng cng c chun b
trch dn cc iu khon khc. Xem VEDP
FastFacts-p ng Yu cu xut khu thiu kinh
nghim c th mun s dng "Ex Works"
Incoterm (EXW), bi v thut ng ny mang
gnh nng cho h. Theo EXW, trch nhim ca
xut khu kt thc ti dock ti c s ca h,
trong bao gm hng ho c sn nhn v
cung cp bt k thng tin sn phm cn thit cho
vic np n Thng tin xut khu in t (EEI).
Cc i l nhp khu (tc l ch nh M giao
nhn vn ti hng ha) s sp xp v chi tr cho
tin vn chuyn, bo him, vn chuyn v cc
chi ph b sung t ca xut khu. Bn da trn
Incoterm "CIF", mt khc, i hi nh xut khu
sp xp v tr tin cho vic vn chuyn tin,
vn chuyn v bo him cho cng. Trong trng
hp ny, gi bn hng (ho n) bao gm khng
ch l ost (C) ca hng ho, nhng cng c (I)
nsurance v (F) reight chi ph m ngi mua
nhp khu tr tin cho ngi bn xut khu.

Khi ch nh Incoterm trn ho n thng mi


hoc bo gi cho ngi mua, thi hn phi c
theo sau bi thnh ph hoc cng np / x, chng
hn nh "Nh my EXW, Richmond, VA" hay
"CIF Rotterdam". S dng a ch thc t l tt
hn trnh bt k s nhm ln hoc hiu sai.
Thng tin lin lc trong sut ton b qu trnh l
rt quan trng. V d, trong tc phm V d,
ngi gi hng phi thng bo cho nh nhp
khu khi hng ho sn sng v sau khi h
c chn bi nh cung cp dch v la chn
ca nhp khu. Giao nhn vn chuyn hng ha
ca ngi xut khu thng xuyn cung cp tu
v ngy i thuyn, hoc dch v vn chuyn
hng ha khng s dng, v ha n bt k i
dng ca vn n hoc s ha n ng hng
khng cc bn thng bo cc tha thun v
When designating the Incoterm on a
tnh trng l hng (mc d v mt k thut theo
commercial invoice or a quotation to the
Ex Works cc nc xut khu ca trch nhim
buyer, the term should be followed by the city kt thc ti bn tu bc xp,). Incoterm nng n
nht i vi xut khu l Delivered Duty Paid
or port of load/discharge, such as EXW
(DDP), bi v tt c cc tha thun v chi ph
Factory, Richmond, VA or CIF Rotterdam.
ca nh xut khu chu, thng l vi s h tr
Using the actual address is better to avoid
ca cc i l (chuyn hng ha v cc nh mi
any confusion or misinterpretation.
gii hi quan).
Communication throughout the entire
Vi DDP, xut khu phi chu mi ri ro v chi
process is crucial. For example, under Ex
ph vn chuyn, bao gm c nhim v v thu
Works, the shipper should notify the importer quan, cho n khi nhn hng th ngi nhp
khu, thng l ti nh my hoc kho ca nh
when the goods are ready and after they
nhp khu. K t khi DDP i din cho cc
have been picked up by the importers
ngha v ti a cho ngi bn, n khng c
selected carrier. The exporters freight
khuyn co cho cc cng ty mi xut kh
forwarder often provides the vessel and sail

date, or air cargo service used, and any


ocean bill of lading or airway bill number to
keep the parties informed of the
arrangements and status of the shipment
(even though technically under Ex Works the
exporters responsibility ends at their loading
dock).
The most burdensome Incoterm for the
exporter is Delivered Duty Paid (DDP),
because all arrangements and costs are
borne by the exporter, usually with the
assistance of agents (freight forwarders and
customs house brokers). With DDP, the
exporter bears all risks and costs of
transportation, including duties and tariffs,
until the goods are received by the importer,
usually at the importers factory or
warehouse. Since DDP represents the
maximum obligation to the seller, it is not
recommended for companies that are newto-export.

Case Study
TERMS OF TRADE
Which of the following terms are correctly used according to Incocerms 19907 If your answer is
"No," give your reasons. (Note: .There may be more than one correct answer in each section.
1. A contract requiring the exporter to send the conntact goods by road from Kenva to Zambia with
freight paid by the exporter.
a. C&F Lusaka
YES
NO
b. CFR Lusaka
YES
NO
c. CPTLusaka YES
NO
d. CFR Nairobi
YES
NO
e. FOT Nairobi
YES
NO
2. A contract requiring an exporter in Mozambique to deliver the contract goods in Beira.
Mozambique, for shipment by sea to Dares Salaam, Tanzania.
a. FAS Beira
YES
NO
b. FOB Beira
YES
NO
c. FCA Beira
YES
NO
d. FOB Dares Salaam
YES
NO
3. A contract requiring an exporter in Ethiopia to send the contract goods by air for delivery in
Windhoek, Namibia
a. CIF Windhoek
YES
NO
b. CIP Windhoek
YES
NO
c. DDU Windhoek
YES
NO
d. DES Windhoek
YES
NO
1. a. No. Not a 1990 Incoterm b. No. Ship term only
c. Yes
d. No. CFR is not to Nairobi e. No. Not an Incoterm
2. a. Yes
b. Yes
c. Yes
d. No. Shipment is in Beira
3. a. No. Shipment only term b. Yes
c. Yes
d. No. Ship only term
Delivery where?

Translate into Vietnamese


Sample 2. CONTRACT FOR LUBRICANTS.
CONTRACT No 01292
Singapore December 29th, 19..
This contract is made between Vietnam National Petroleum Export Import Corporation
(PETROLIMEX) 1, Kham Thien, Hanoi (Socialist Republic of Vietnam) Cable address: "Petrolimex
Hanoi" (hereinafter reference to as BUYER) and AGIP PETROLI S. p. A. Singapore Branch
(reference to as SELLER) whereby it is agreed as follows:
1. Object of the Contract
SELLER undertakes to deliver lo BUYER in Vietnam .on CFR basis the following lubricants:
Item
01

Lubricants
GRMU3

02

CRMU3

Quantity
858 DRUMS x
180 KG
(154.44 MT)
858 DRUMS x
180 KG
(154.44 MT)

CFR HCM
850
USD/MT

CFR HP

870USD/MT

The above prices are expressed in US dollars per metric ton net CFR port of Vietnam, deliveries as
per Art. 6 below, and remain fixed during the term of this contract and provided that an Irrevocable
L/C in respect thereof has been notified to Seller by Singapore Indosuez Bank prior to 31/10/19 ..
2. Specification of Lubricants
The specification of lubricants in drums supplied under this Contract shall conform to the
specifications set out in Appendix 1 attached to hereto, which is an integral part of this Contract;
Origin of products will be Italy, Holland or Singapore at SELLER'S option.

3. Packaging
Packaged products will be delivered in AGIP standard new steel drums, of about 1.2/1.0 mm
thickness. The drums will be filled at 180 kg not weight.
4. Payment
4.1. SELLER will be paid by .Irrevocable L/C opened by Vietcombank'Hanoi and advised to Seller
through Indosuez Bank in Singapore payable at sight against first presentation of full set of shipping
documents
4.2 SELLER shall effect first shipment within 30 days from date SELLER receives notification of
irrevocable L/C
4.3. All costs of L/C in Singapore shall be for SELLER'S account
4.4. All L/C amendment's cost (if any) caused by the failure of the Buyer to follow the terms and
conditions of payment will be for BUYER'S account
4.5. The under mentioned documents will be forwarded to BUYER'S Bank immediately after loading
date
a) Signed commercial invoice in 3 originals
b) Clean "Shipped on Board" Ocean Bill of Lading in complete set of at least 3 original 3 nonnegotiable copies signed made out to order of "Vietcombank" Hanoi
c) Quality/Quantity certificate issued by the Chamber of Commerce in triplicate
d) Packing List in triplicate
e) Confirmation of cable advise for shipment in triplicate
f) Receipt of shipmaster acknowledging due receipt of all documents in triplicate non - negotiable
copies of each document, for handing same over to PETROLIMEX Haiphong or PETROLIMEX
Hochiminh City
5. Penalties
In case of delay in payment (if any), BUYER shall remit to SELLER interest calculated from the
date of presentation of documents to the bank in Singapore to the date of effective receipt of due
amount. The interest will be calculated at LIBOR RATE (6 months) plus 1.5 per cent
6. Deliveries
Products will be delivered in partial shipments to be agreed upon.
In case of, transshipment SELLER shall give to BUYER all necessary detail and information
7. Insurance
Insurance shall be effected by BUYER.
8. Delivery Terms
CFR Vietnamese ports as per Art. 1. Goods to be delivered in partial shipments accordance with Art.
6
9. Claims
In case of non - conformity of the quality of the products actually delivered by SELLER with the
Contract specifications, any claim concerning the quality of the goods must be presented to SELLER
within three months from the date of delivery.
No claims shall be accepted by SELLER party after expiry of the above period
20. Contingencies
Should any circumstances arise which prevent the complete or partial fulfillment by any of the
parties of their respective obligations under this contract, namely: fire, ice conditions or any other
acts of the elements, war, military operations of any character, blockade, prohibition of export or
import or any other circumstances beyond the control of the parties, the time stipulated for the
fulfillment of the obligations shall be extended for a period equal to that during which such
circumstances last.
If the such circumstances last for more than 20 days, any delivery or deliveries which are to be
performed under this contract within that period may be cancelled on the declaration of either
party, and if the above circumstances last for more than. 40 days, neither party shall have the
right to make a demand upon the other Party for compensation for any possible damage.
A party unable to meet its obligations under this Contract shall immediately advise the other party
the time of commencement and the termination of the circumstances preventing the fulfillment of its
obligations.
Certificates issued by the respective Chamber of Commerce of SELLER'S or BUYER'S country shall be
sufficient proof of such circumstances and their duration.
11. Arbitration

All disputes and differences which may arise out of the present contract or in connection with it shall
be settled, if possible, in an amicable way.
In the event that it is not possible to settle them in an amicable way, the parties shall refer the matter
to Arbitration in the International Chamber of Commerce in Paris
12. Other Conditions
12.1 Neither Party is entitled to transfer is right and obligations under the present Contract to a third
party without the other Party's previous written consent
12.2 After the signing of the present Contract, all previous negotiations and correspondence between
the Parties in connection with it shall be considered null and void
12.3 All amendments and additions to the present Contract are valid only if they are made out in
writing and signed by both Parties
12.4 All taxes, customs and other duties levied in Vietnam on the contracted Products shall be for
BUYER'S account.
SELLER:
BUYER:
AGIP PETROLI S.p.A
PETROLIMEX
(Signed)
(Signed)
Patrick FOK
Nguyen Manh
Lubricants Manager
Vice General Director
APPENDIX 1
Product:
Agip Gr Mu3
NLGI consistency:
3
Worked penetration: 230 dmm
ASTM dropping point:
195 C degrees.
CHAPTER 2: NEGOTIATING PRICE & PAYMENT
2.1. Export Pricing Strategies
THE PROBLEM
In many negotiations, as soon as the exporter
states a price, the buyer begins to demand
concessions about delivery time, method of
payment, and so on. Concessions that can
quickly make the deal unprofitable. How can the
exporter avoid the "price trap"?

Trong

THE PRINCIPLE
The exporter must perceive and preserve the Nh
interdependence of every aspect of an export
negotiation. A price quotation is based on a set of
assumptions about delivery, payment and
warranty terms. The contract price must reflect
any change in. or renegotiation of, these
assumptions.
IN MORE DEPTH
Exporting is not difficult; the problem is making money at it. Sometimes first-time
exporters fail to understand how the many terms of a contract relate to each other: a longer
warranty period, fur example, creates higher coststhe contract price should reflect these
costs. An extension of the payment period creates higher costs again the contract price
should reflect the extension. In fact. virtually every problem that the two sides normally
negotiate has a bearing on price. Mostly the buyer's suggestions tend to raise the price, but
a lowering of the price is possible too. Let's use an example to study this relationship
between price and other contract terms in more detail.
Scenario: Verbena Electric hopes to export its best-selling product: small domestic electric fans,
from Verbena to Esperanza. A market study in Esperanza shows that fifteen brands of fan are

available in Esperanza, none of them made in Esperanza itself. Models range from expensive,
electronically controlled fans imported from Europe to cheap plastic products imported from
Nonamia. In every case, the price strikes the export manager of Verbena Electric, John
Royalstone as high: his own fans will be competitive. Royalstone begins discussions with the
purchasing manager or Esperanza Electrical Importing, Alice Smart. Smart is particularly
interested in one of Royalstone's products, a three-speed, 180 o revolving tan with a graceful,
modem design. Negotiation begins.
Early on, Smart introduces the question of price: Whats the price of a fan like that? Royalstone
is an old hand at negotiation: he knows that when he states a price, it must be for precisely denned
goods delivered under precisely defined circumstances. He offers a unit price of $22 and makes it
clear that this price is based on the following assumptions:
The size of the order is 3.000 items:
The specification of the fan is identicalexcept for color: 1.000 will be delivered in sold. 1.000 in
black. 1.000 in red. ..
No additional packaging or safely warnings are required beyond what is normal in Verbena;
Delivery is FOB (Port Verbena):
Payment is by irrevocable, confirmed, at-sight letter of credit;
Delivery takes place three weeks from the dale that Royalstone receives advice that the letter of
credit has been opened;
The warranty period on the fans is three months from the date of delivery.
Smart sees that she is dealing with an experienced exporter. She begins to discuss the items on
Royalstone's list.
Order Size
Smart is not sure she can handle 3,000 fans: she would prefer to order fewer, test the market, and
order more later if things go well. Royalstone makes two points: first Smart's transport costs will
increase on a smaller.order, because 3,000 units is one container load; second, the unit price will
increase on a smaller order. An order of 1.000 fans for example would cost $25 eachnot $22.
Specifications
Smart likes the color range, but she wonders if the price would be lower if she ordered only one
color. Royalstone is ready to cut his price by 50c per fan if the whole order is the same color.
Packaging
Unfortunately, Esperanza has strict rules about packaging and safety: labeling of electrical
products. Smart shows Royalstone the regulations. After a few phone calls, Royalstone calculates
that meeting Esperanzan standards will add at least 40c to the cost of each fan.
Incoterm
Smart says that she would prefer CIF delivery, Esperanza City. Royalstone tells her that the cost of
insurance and freight between Pon Verbena and Esperanza City is $520 on an order of 3,000 items:
somewhat less on an order of 1,000. Smart also wonders what the effect would be of collecting the
fans ex works; The EXW price, loaded in a coniainer is $21.75a small saving,
Terms of Payment
Smart says that she dislikes letters of credit and prefers to trade on open account30 days
net, with a 2% discount for payment within ten days. Royalsione explains to her how trading
on open account will increase his costs: he will need export credit insurance, and he will have
to wait for Smart's check to clear. Based on experience, clearance will lake 45 days. His price
will rise to $26 per fan on an order for 3,000, FOB Port Verbena.
Smart is unhappy both about the cost of the letter of credit and about Royalstone's additional
price if she refuses to open one. She suggests that she pays 25% of the price with order, and the
remaining 75% on open account. Royalstone has no ready answer to that proposal. He quickly
recalculates his price: it would be below $26, probably by $1.10.
Date of Delivery
When Smart questions delivery three weeks after the opening of the letter of creditRoyalstone
again replies with figures: if she wants the goods sooner, he can arrange itbut only by working an
exrra shift with extra costs involved. His price would have to be somewhat higher.
Warranty Period
Royalstone is not worried about the quality of his fans, but he knows from experience thai a threemonth warranty on an FOB delivery produces very few claims for defectsabout two claims per
thousand fans. A six-month warranty, however, is more costlyabout ten claims per thousand fans.
His normal policy is to mail a replacement fan in the event of a claimwhich costs him about $40
for the fan, the packing and the postage. If Smart asks for a six-month warranty, it will add 30c per
fan to Royalstones costs.

In this lengthy example, all negotiating decisions bear directly on the price of the product. Naturally
other points are open to negotiation; this is just a sampling. But the general point is clear: a manager
like Royalstone who knows his product and who has thoroughly analyzed his costs is unlikely to lose
money on an export dealunless, of course, he decides to do so. If Royalstone is eager to win Smart
as a regular customer, he may be ready to sell to her at a loss first time around. Or his factory may be
so short of work that he is prepared to accept any jobeven a loss-maker. Or the Verbenan
government may make exporting so attractive with export incentives that Royalstone can trade at a
loss but still show a profit at the end of the day.
The general point is this: a good manager knows that almost every decision made during a
negotiation influences pricean excellent manager can put a dollars--and-cents figure on this
influence.
CASE STUDY
In a Jam
Gorm Trading exports canned foods from Verbena. Gorm is negotiating of 600 cases of apricot jam
by road to a neighboring country. Gorms price per case is $20. The price is based on delivery FCA
with no special packaging or labeling. The jam has a six-month expiry date stamped on the label.
Payment will be by irrevocable, confirmed, at-sight letter of credit. Delivery date is two days after
the opening of the credit. Decide what influence each change listed below will have on the price per
case.
(A) NO CHANGE
(E) MINIMAL DECREASE
(B) MINIMAL INCREASE
(F) APPRECIABLE DECREASE
(C) APPRECIABLE INCREASE
(G) LARGE DECREASE
(D) LARGE INCREASE
1. Reduction of the order from 600 cases to 300 cases.
2. Delivery EXW (Exporter must have the goods ready for collection in his warehouse.)
3. Replacement of single flavor (apricot jam( by a range of 10 flavors, some of which are exotic.
4. Change of labeling to show exact nutritional values and ingredients (not normally specified by
Gorm).
5. Change of payment from letter of credit to open account payment due 45 days from date of
invoice.
6. Replacement of a single delivery with delivery in ten installments of 60 cases over a period of one
year.
7. Increase of the expiry period from six months from date of manufacture to two years.
1. C.

2. E

3. B-C

4. C

5. C

6. C

7. C

Translate into Vietnamese


FORM 3: ABCS CONTRACT
ABC CORPORATION, as SELLER, confirms having sold to BUYER the following goods by
contract made on the date below and on the terms and conditions SET FORTH HEREUNDER AND
ON THE REVERSE SIDE HEREOF.
BUYER
DATE
CONTRACT NO
BUYER'S
REFERENCE NO.
GOODS
QUANTITY UNIT PRICE TOTAL
AMOUNT
SHIPMENT:
Time of Shipment Transshipments permitted/not permitted
Port of Loading Partial shipments permitted/not permitted
Port of Destination
PACKING:
MARKING:
PAYMENT:
The letter of credit shall bear this Contract's number as reference
INSURANCE
To be covered by Buyer/Seller
Insured Amount
Condition
INSPECTION:
OTHER TERMS & CONDITIONS:
ACCEPTED ON ....................20...

BY:
.............................................(BUYER)...;.......................(SELLER)
Please sign and return one copy.
SEE TERMS AND CONDITIONS ON REVERSE SIDE
1.October
ABC'S CONTRACT
GENERAL TERMS AND CONDITIONS
1) Shipment or delivery Giao hng
The obligations of Seller to ship or deliver the goods specified on the face of this Contract ("Goods")
by the time or within the period specified on the face of this Contract shall be subject to the
availability of the vessel or the vessel's space. Trch nhim ca bn Bn chuyn giao hng c ghi
trong Hp ng (gi l hng ha) ng hay trong thi hn quy nh trong hp ng ty thuc vo
tnh hnh thu tu hay din tch ch hng trn tu.
If, under the terms of this Contract, Buyer is to secure or arrange for the vessel or vessel's space,
Buyer shall secure or arrange for the necessary vessel or vessel's space on berth terms basis and give
Seller shipping instructions within a reasonable time prior to shipment, including but not limited to
the name and detailed schedule of the vessel. Theo iu kin hp ng, nu bn Mua lo vic thu tu
hay mua ch trng trn tu, th phi bo m gi ch hng st thnh tu v khng chen vi hng
ha ca ngi khc, ng thi phi bo cho bn bn bit cc chi tit vn chuyn trong khong thi
gian hp l trc khi chuyn hng, trong bao gm tn, lch chi tit ca tu bin, vv If Buyer
fails to give such instructions within a reasonable time prior to shipment, Seller may, at its sole
discretion and at Buyer's risk and account, arrange for the vessel or the vessel's space and make
shipment of the Goods, without prejudice and in addition to any other rights and remedies Seller may
have under this Contract or at law or in equity or otherwise. Nu bn mua khng thng bo cc thng
tin va ni trong thi hn hp l, bn bn c th ty nghi, v Bn mua s chu mi ri ro, chi ph,
thu tu hay t ch trn tu v vn chuyn hng, m bn kia khng c khiu ni v i thm
quyn hn khc b p m theo hp ng ny hay theo lut nh hay theo tp qun, vv. bn bn
c th c.
Trong trng hp chuyn giao hng tng phn, bt c trng hp tr ni hay khng giao mt phn
th s khng b xem l vi phm hp ng ny v khng c suy ra l bn mua c quyn hy hp
ng hay t chi chp nhn ton b nhng ln giao hng khc.
In case of shipment or delivery installments, any delay or failure in shipment of one installment shall
not be deemed a breach of this Contract giving rise to a right of Buyer to cancel this Contract or
refuse to accept performance with respect to other installments.
2) Payment
If payment for the Goods shall be made by a letter of credit, Buyer shall establish, in favor of Seller,
an irrevocable letter of credit through a prime bank of good international repute immediately after
the conclusion of this Contract in a form and upon terms satisfactory to Seller. If Buyer fails to make
any due payment, to establish a letter of credit or otherwise to perform its obligations hereunder,
Seller may demand that Buyer provide, within a reasonable time, adequate assurance satisfactory to
Seller of the due performance of this Contract and may delay delivery until such assurance is given.
Nu thanh ton c thc hin bng L/C, bn mua phi m L/C khng th hy ngang m bn bn l
ngi th hng ti 1 ngn hng hng nht c ting trn quc t ngay sau khi k kt hp ng ny
theo hnh thc v iu kin ng theo yu cu ca bn bn.
Nu bn mua khng chu thanh ton ng hn, m tn dng th, hay ni cch khc, thc hin nhng
ngha v di y, bn bn c th yu cu bn mua, trong thi hn hp l, cung cp s bo m y
theo yu cu ca bn bn v bn bn c th hon giao hng cho n khi no bn mua thc hin
bo m thanh ton nh ni.
Buyer shall pay the price specified on the face of this Contract without set-off counterclaim,
recoupment or other similar rights which Buyer may have against Seller and which shall be exercised
in separate proceedings between Buyer and Seller. Bn mua phi thanh ton gi ghi c th trn hp
ng ny khng c tr gi thoi thc, hay nhng trng hp tng t m bn mua c th thc
hin gy kh khn cho bn bn, v nhng quyn ny bn bn v bn mua ch c s dng trc
khi k kt hp ng m thi.
Any new, additional or increased freight rates, surcharges (bunker, currency, congestion or other
surcharges), taxes, customs duties, export or import surcharges or other governmental charges, or

insurance premiums, which may be incurred by Seller with respect to the Goods after the
conclusion of this Contract shall be for the account of Buyer and shall be reimbursed to Seller by
Buyer on demand. Nu c thm khong tng gi cc vn chuyn, ph thu ( hng, i ngoi
t, tc ng hay nhng ph ph khc), thu, thu quan, ph thu XNK hay cc loi l ph ng cho
chnh ph, hay mua bo him lin quan n hng ha, m bn bn phi tr sau khi c hp ng
ny, m l ra bn mua phi chu v phi c bn mua hon li cho bn bn theo yu cu.
If Buyer fails to pay for the Goods in accordance with this Contract, Buyer shall pay to Seller as
liquidated damages and not as a penalty overdue interest at the rate of the lower of eighteen percent
(18%) per annum or the maximum interest rate permitted by the laws of Buyer's country, calculated
from the date for such payment until the actual date of payment calculated on the 360 day-a-year
basis for the actual number of days elapsed. Nu bn mua khng thanh ton theo ng hp ng ny,
bn mua phi chu bi thng trn c s hp l v khng c pht c tnh cht rn e hay pht
chiu l theo kiu n nh mc pht thp hn li sut 18% nm tnh trn li sut thanh ton n qu
hn hay mc li sut ti a m lut php ca nc ngi mua cho php, tnh k t ngy phi thanh
ton cho n ngy thc s thanh ton theo nm lch 360 ngy bit s ngy thc t qu hn thanh
ton.
3) Force Majeure
If the performance by Seller of its obligations hereunder is directly or indirectly affected or
prevented by force majeure, including but not limited to Acts of God, flood, typhoon, earthquake,
tidal wave, landslide, fire, plague, epidemic, quarantine restriction, perils of the sea, war declared or
not or threat of the same civil commotion, blockade, arrest or restraint of government, rulers or other
labor dispute, explosion, accident or breakdown in whole or in part of machinery, plant,
transportation or loading facility, governmental request, guidance, order or regulation, unavailability
of transportation or loading facility, bankruptcy or insolvency of the manufacturer or supplier of the
Goods, or any other causes or circumstances whatsoever beyond the reasonable control of Seller or
manufacturer or supplier of the Goods, then Seller shall not be liable for loss or damage, or failure of
or delay in performing its obligations under this Contract and may, at its option, extend the time of
shipment or delivery of the Goods or terminate unconditionally and without liability the unfulfilled
portion of this Contract to the extent so affected or prevented.
4) Default
Because S + V
Because of Noun phrase
Because the consignment was delayed, the seller had to be liable for compensation.
Because of the delayed consignment, the seller had to be liable for compensation.
In case that the consignment was delayed, the seller would be liable for compensation.
In case of the delayed consignment, the seller had to be liable for compensation.
In case of (i) Buyer's failure to perform any provision of this Contract; (ii) Buyer's inability to pay its
debts generally as they become due; (iii) Buyer's bankruptcy or insolvency or (iv) appointment of a
trustee, receiver or liquidator of Buyer of any material part of Buyer's assets or properties ("Events of
Default"), Seller may, at its sole discretion, (i) terminate this Contract or any part thereof; (ii) declare
all obligations of Buyer immediately due and payable; (iii) resell the Goods; (iv) hold the Goods for
Buyer's account and risk; (v) pospone the shipment of Goods; or (vi) stop the Goods in transit, and
Buyer shall reimburse Seller for all losses, damages arising directly or indirectly from such Events of
Default.
The rights and remedies of Seller hereunder are cumulative and in addition to Seller's rights, powers
and remedies existing at law or in equity or otherwise.
5) Intellectual property rights
Nothing herein contained shall be construed as transferring any patent, trademark, utility model,
design, copyright, mask word or any other intellectual property rights in the Goods, as such rights
being expressly reserved to the true and lawful owners thereof.
Seller shall be neither responsible nor liable for any infringement or unauthorized use with regard to
any patent, trademark, utility model, design, copyright, mask work or any other intellectual property
rights.
6) Warranty, claim

Unless expressly stipulated on the face of this contract, seller makes no warranty or condition,
expressly or impliedly, 'as to the fitness or suitability of the goods for any particular purpose or use
or the merchantability thereof.
If any warranty exists. Seller's liability shall be limited to replacement or repair of the defective
Goods.
Any claim by Buyer of whatever nature arising under or in relation to this Contract shall be made by
registered airmail within thirty (30) days after the arrival of the Goods at the port of destination, or
solely in respect to a claim alleging the existence of a latent defect in the Goods, within six (6)
months after the arrival of the Goods at the port of destination, and any such claim shall contain full
particulars with evidence certified by an authorized surveyor.
7) Limitation
Seller shall not be responsible, whether in contract or warranty, tort or on any other basis, to Buyer
for any special, incidental, consequential, indirect or exemplary damages, and in no event shall
Seller's total liability on any or all claims from Buyer exceed the price of the Goods.
8) General
(1) All disputes, controversies or differences arising out of or in relation to this Contract or the
breach thereof which cannot be settled by mutual accord without undue delay shall be settled by
arbitration in Tokyo, Japan, in accordance with the rules of procedure of the Japan Commercial
Arbitration Association; the award of arbitration shall be final and binding upon both parties, and
judgment on sucli award may be entered in any court or tribunal having jurisdiction thereof; this
Contract shall be, in all respects, governed by and construed in accordance with the laws of Japan;
the trade terms herein used, such as FOB, CFR and CIF, shall be interpreted in accordance with
"INCOTERMS 2000".
(2) The failure of Seller at any time to require full performance by Buyer of the terms hereof -shall
not affect the right of Seller to enforce the same; the waiver by Seller of any breach of any provision
of this Contract shall not be construed as a waiver of any succeeding breach of such provision or
waiver of the provision itself.
(3) This Contract constitutes the entire agreement between the parties hereto and supersedes all prior
or contemporaneous communications, agreements or undertakings with regard to the subject matter
hereof; this Contract may not be modified or terminated except by a written agreement of Seller and
Buyer.
(4) Buyer shall not transfer or assign this Contract or any part thereof without Seller's prior written
consent.
2.2 THE FIVE STEPS IN NEGOTIATING PAYMENT
THE PROBLEM
For the exporter, the great fear is non-payment. Most developed countries offer export-insurance, to
cover this and other risks, but such insurance is rare in developing countries. How can the exporter
create payment terms that ensure payment?
THE PRINCIPLE
Payment is a more orderly process than delivery. Thanh ton cn phi tin hnh theo ng trnh t
Every successful payment provision stipulates hn giao hng.
the flow: When and Where of payment. In Tt c cc quy nh v thanh ton cn phi nu r
addition it specifies what delay in payment, if chi tit: Thi gian v im thanh ton. Ngoi ra
any, is excusable, and the consequences of cng cn phi ghi c th kh nng thanh ton tr,
unexcusabie delay.
nhng trng hp no c min tr trch
nhim, v khng min tr trch nhim.
IN MORE DEPTH
In negotiating payment, the sxporter should keep five Steps in mind, five issues that the export
agreement must adequately cover.

STEP 1
MODE OF PAYMENT
How will payment be

STEP 2
TIMING
What is the
date of

STEP 3
PLACE OF
PAYMENT
Where must the
money be before

STEP 4
DELAY
What delay
in payment
is
excusable?

STEP 5
RESULT OF
DELAY
What are the
results of nonexcusable delay
in payment

made

payment?

payment is
considered
complete?

Step 1. Mode of Payment


Most international trade is conducted on a cash basisgoods against cash. Sometimes,
however, goods are traded against goods (barter trade), and sometimes the exporter gives the
buyer a creditthe buyer can pay by installments over a period of time. Barter and credit
transactions are a subject in themselves. Here we shall look only at cash transactions.
Trade within a country is based on a mixture of trust and the close proximity of courts of law.
International business is not so blessed: trust is rare, and courts are far away and
unpredictable. Payment is. therefore, tightly controlled. Four approaches to payment are
common:
Payment on open account with no security;
Payment on open account secured by export credit insurance;
Payment on open account secured by a payment guarantee; and
Payment by letter of credit.
In private life, small purchases (in a supermarket, for example) are sold cash on delivery. If
you buy household furniture, you will usually receive the invoice with a certain amount of
time to pay itcash against invoice. Cash against invoice is the typical open account
transaction. If, however, the furniture store distrusts you, it will ask for a 100% prepayment
as securitycash with order: that way they are completely safe.
All these transactions have exact equivalents in export trade. Obviously, however, the word
"cash" in the international context does not usually mean coins and notes. (Occasionally,
perhaps, a buyer pays for goods by giving the exporter a briefcase full of money, but such
payments generally reflect a wish to escape scrutiny by the central bank or other authorities.)
To the exporter cash normally means checks (cheques) or bank transfers.

Exporters who are paid on open account are seriously at risk. The problem is obvious: if
anything goes wrongif the check is not honored by the bank for example, or if the buyer
files for bankruptcy or simply disappearsthe exporter is in a poor position to claim
payment. One solution is to ask for 100% prepaymentas in the furniture store example
above. The buyer, however, is unlikely to agree to this arrangement.
There are two common approaches to providing the exporter with an acceptable level of
security: one approach is to persuade a third party to pay the epxorter if the buyer fails to do
so. A typical third party is a bank which may issue a bank guarantee, paid for by the buyer.
An alternative third party is an insurance that issues an export credit insurance policy
covering the risk of non-payment: in this case, the exporter pays the costs. The second
approach is to position the money the money with a bank in the country of the xporter by
means of letter of credit, and to allow the exporter collect the money when the goods are

delivered. The letter of guarantee, export credit insurance, and the letter of credit each of
these approaches is complex enough to require a section in its own right.
Step 2. Timing
In negotiating any cash-against-invoice payment- whether secured or not- it is important to
consider the time/payment structure. Payment against invoice is rarely made immediately.
Most buyers wait a while before paying: the delay gives them use of what is, in fact, the
exporters money. The exporter, of course, suffers from delay: he must borrow money,
perhaps at a high rate of interest, until he is paid. To speed up payment, most exporters offer a
discount for early payment, for example 1% discount if payment is made within 30 days of
the date of invoice. This discount is often attractive for both buyer and exporter: the buyer
saves on the invoice price, while the exporter substantially, improves his cash flow. If the
parties say nothing at all, then payment is due, in most jurisdictions on delivery.
The date of payment for a single sale is simply regualated. In an ongoing contract- delivery
involving partial shipments, periodic shipments, or a spare parts supply contract, for
example- the aprties must negotiate a chain of dates. These are calendar dates (for example,
30th June) or interval times (for example, within 30 days of the date of invoice).
Step 3. Place of Payment
When Tony Mino instructs his bank in F.speranza to pay Double-A Ltd. in Verbena, he begins
a chain of events that often takes months to complete. Perhaps the National Bank of
Esperanza has no funds to make foreign transfers; perhaps inefficiency delays payment. To
avoid the dangers of slow payment, exporters try to protect themselves with a clause like this:
Payment shall be deemed to have been made only when the contract is paid into the
sellers bank account and is at the sellers full disposal.
In fact, this is not unreasonable: under the Vienna Sales Convention, for example, payment is
normally deemed to be made onl\ when the cash is available at "the seller's place of business"
(Article 57) Negotiators must work this out carefully -the conflicts of interest are clear:

POINT AT WHICH MONEY IS DEEMED TO BE PAID


When the buyer
When the buyer pays
When the buyers bank When funds reach the
instructs the bank to
the money into his
transfers funds?
sellers bank account?
pay?
bank ?
BUYER PREFERS

SELLER PREFERS

The decision is important because late payment is subject to payment of interest: the cost of
any delay along the payment route properly belongs to the buyer.
Step 4. Delay
As with delivery, delay in payment might be excused during a grace period, though this is
unusual. More commonly, a force majeure event excuses delay. In fact, the force majeure
excuse for delay seldom makes sense in the context of payment; most exporters try to resist
it. In principle, any payment made after the agreed date of payment is in delay.
Step 5. Results of Delay.
What happens when payment is late? It is generally agreed in most legal systems that the
exporter has a right to be compensated for losses due to late payment. What happens in
practice depends on the payment agreement negotiated by the parties. Let's start with the
worst case: payment on open account, with no security and with no agreement on late
payment. In this case, the exporter tries to exert pressure on the buyer but this is difficult.
The exporter writes letters, makes telephone calls, waits and hopes. Every day that payment
is late costs moneylosses that the exporter can, in practice, do little aboutwithout

beginning legal action. Considerably better is the situation of the exporter whose contract
with the buyer regulates late payment. A typical contract clause:
Delayed Payment
If payment of any sum payable is delayed, the Buyer shall be entitled to receive interest on
the amount unpaid during the period of delay. The interest shall be at an annual rate three
percentage points above the discount rate of the central bank in the Seller's count ry.
When the exporter is finally paid, the interest payable is simply added to the outstanding sum.
For force majeure, sec Chapter 1, Section 2. The force majeure clause suggested by the
International Chamber of Commerce, for example, states that payment of interest on overdue
sums payable to the seller is not excused by force majeure.
Even better for the exporter is an agreement with the buyer to strengthen the payment
provisions with a payment guarantee. This guarantee, as you will see in Section 3 below,
obliges a bank to pay if the buyer is more than a given time, say two months, in delay.
The best solution, of course, is to create a payment regulation which makes late payment
impossiblethe confirmed, irrevocable, at-sight letter of credit. Nothing is better for the
exporter.
What You Should Know
1. Payment should be negotiated so that the exporter secures prompt, correct payment.
2. Payment on open account is often timed so that early payment secures a discount for the buyer;
this benefits the exporter by improving cash flow.
3. The exporter prefers the place of payment to be his own bank account; payment is not deemed to
be made until the money is at his disposal.
4. In most contracts nothing, not even force majeure, excuses late payment.
5. Late payment causes harm to the exporterthe bank interest he must pay while waiting For his
money. This interest should be compensated to him by the buyer under the terms of the contract.
CASE STUDY
Missing Terms
Study the price and payment clause below. It is taken from an export contract that lost the exporter a
great deal of money. What is missing?
The price payable for the Contract Goods as specdified in Annex A is $400,000.
1. Does the clause specify how payment will be made?
YES NO
2. Does the clause specify when payment is due?
YES NO
3. Does the clause say where the money must be before the buyer is deemed to have paid?
YES NO
4. Does the clause define delay in payment?
YES NO
5. Does the clause mention the consequences of delay?
YES NO
6. What is payment due if the parties say nothing in their agreement?
The answer to questions 1-5 is No. A contract like this relies heavily on the applicable law
to fill in the gaps: the exporter often finds himself very unhappy with the decisions that the
law makes.
Question 6: If the parties say nothing, payment is usually due on delivery.
CONCEPT REVIEW
Below is the first part of a payment guarantee issued in standard bank form. Study it, and then
answer the questions.
Payment Guarantee No. 76542/92
Reference is made to the order No. WEX 344 K placed with you as suppliers by MultiImport for the supply of integrated circuits.
According to the conditions of this order, the Buyer has to furnish a payment guarantee in
the amount of USD 500,000.
By order of the Buyer, we, Big Bank of Euroland, hereby establish this guarantee and
undertake irrevocably to pay to you without request or inspection any outstanding amount
not exceeding USD 600,00.
We say United States Dollar six hundred thousand only upon your first written demand
stating that the Buyer has failed to effect the outstanding payment at maturity.
Our liability under this guarantee will expire as soon as this document is returned to us,

latest however, by 31st December 2006.


GIY BO M THANH TON S 76542/ 92
Giy bo m ny c pht hnh cn c vo n t hng s WEX 344 K gi cho qu
Ngi, m Multi-Import l nh cung cp vi mch cho thn ch ca chng ti.
Theo cc iu kin ca n t hng ny, bn mua phi cung cp giy bo m thanh ton
c gi tr 500,000 USD. Theo lnh ca bn mua, ngn hng Big Bank of Euroland ca
chng ti nay pht hnh giy bo m ny v m trch khng c thoi thc vic thanh
ton cho qu ngi i vi bt c khon tin o hn khng vt qu 600 USD m khng
c thc mc hay tm c tr hon.
C th vn bn yu cu u tin thanh ton s tin su trm ngn USD phi nu r bn mua
khng thc hin thanh ton khi o hn. Tuy nhin giy bo m ny s ht hiu lc
ngay khi chng t ny c tr li cho chng ti chm nht l ngy 31/12/2006.
1. Who is the principal?
SELLER
BUYER
BANK
2. Who is the guarantor?
SELLER
BUYER
BANK
3. Who is the beneficiary?
SELLER
BUYER
BANK
4. Is this a demand guarantee?
YES
NO
5. If the buyer fails to pay, is payment secure?
YES
NO
1. The buyer (Multi-import)
3. The exporter (unnamed)

2. The bank (Big Bank of Euroland)


4. Yes
5. Yes

Translate into Vietnamese


A Example 4.
CONTRACT FOR GARMENT PROCESSING
GENERAL TERMS

HP NG GIA CNG MAY MC

AND CONDITIONS
ON BASIS OF C.M.P.
No: 08/GEN-ELLEN/19 ..
Party A: VIETNAM NATIONAL GENERAL
EXPORTIMPORT CORPORATION
(GENERALEXIM)
46, Ngo Quyen Street
Hanoi, S.R of Vietnam
Hereinafter called
"Party A"
Party B: ELLEN CO. LTD
1508 - 1510 Star House,
Salisbury Road, Kowloon, Hongkong
Hereinafter called
"Party B"
A. The Contract
1. Party A undertakes to manufacture the
garments specified in the separate contract or
appendix of the contract (to be) signed by both
the parties in accordance with the present general
terms and conditions also for the delivery time
stated in the above mentioned contract or its
appendix.

A. Hp ng
1. Bn A chu trch nhim sn xut hng may
mc c ghi r trong 1 hp ng ring hay ph
lc ca hp ng do 2 bn k kt theo ng cc
iu khon v iu kin chung, trong c n
nh thi gian giao hng.

2. Party A shall be responsible for the delivery


time provided that all materials and accessories
to be supplied by party B arrive at Haiphong port
in reasonable time prior to starting production of
a new style
3. Any factories to be used for production of
orders by Party A shall be approved/accepted by
Technicians from Steilmann.

B. Material supply
1. Party B and Steilmann will be responsible for supplying all the fabric materials (shell / lining /
Acrylic Boa / pocketing lining) and accessories in due time for starting production together with the
following extra items:
- Fabric materials
2%
- Zipper, shoulder pad and special label
1.0%
- Fusing
2%
- Buttons, eyelet, stopper and padding
3.0%
- Size label, Hangtags, thread
5.0%
- Others items not mentioned above and the wastage will be confirmed later.
All the above-mentioned fabric material's and accessories' wastage are only for replacement of any
defective items. After the factory fulfils all the orders and quantity, these wastage percentages can be
retained by the factory.
2. Party B shall be responsible for sending the import documents 3 days before vessel carrying the
goods referred to in A3 hereof ETA; as soon as the materials/accessories have arrived in the port, part
A shall be responsible for applying for the import-license the tax-free permit, and take the goods out
of Customs to the factory within 10 days
3. After the arrival of the materials in Party A's factories, the factories should inform Party B and
then both parties shall jointly check the contents of each carton and bale within one week and shall
prepare the Checking Report - which should be signed by both parties and passed to Party B
immediately.
4. Party A shall be responsible for the fabrics and accessories from the date of receipt until the date of
shipment and shall compensate party B the full invoice value for any loss or damage (Force majeure
excepted)
C. Sewing instruction and inspection
1. Party B will supply the original samples, sketches, sewing instructions and paper patterns to party
A's factories from 5 to 7 days before Party A starts production of each style/order enabling the
factories to make a sample.
2. Party A's factories should make 3 counter samples based on supply instruction and paper pattern
and send for Party B's technician to evaluate.
3. Party A's factories should show Party B's technician the marker for each style and must have the
said technician's approval before cutting.
4. In case of more or less consumption of shell material or lining, accessories, the technician's
consent in writing is required before cutting is made; otherwise party B will charge back all the value
in the absence of the technician's consent aforesaid
5. Any problem against paper pattern and sewing should be advised to B's technician immediately
before production proceeds.
6. An authorized representative from party B will come to inspect the goods during production and
before shipment.

7. Party A's factories shall inform party B and their technician that they may make the final
inspection 2 days before Shipping; if after inspection is made garments have been rejected, factories
still have time to repair and maintain the delivery date.
8. After finished garments delivery, Party A's- factories should send 2 samples (small size) of each
style to Party B as shipment samples
9. In the event Party A produce an unacceptable quality standard, or damage the fabric which has
been delivered by Steilmann, it is herewith agreed that party A should pay for the fabric and
accessories cost against the full invoice value; the quality standards are based on the approved;
sample confirmed by Party B or the Steilmann technician (in this case technician shall give technical
guidance)
D. Shipment
1. Delivery time of each style shall be within 30- 45 days (depending on the quality of each
style/order to be processed) after Party A's factories receive fabric materials/accessories in complete
sets.
2. Party A shall inform Party B of the estimated time the finished products will be ready for loading 7
days prior to such estimated time.
3. For appointed Air Forwarder : Schenker
All the original shipping documents including original Air Way bill, original certificate of origin;
original invoice and packing-list should be sent to Schenker at the time when goods depart.
4. For appointed sea forwarder: Eac-Saigon Shipping Service Ltd.; All the shipping documents
included inspection certificate issued by Steilmann technicians.
E. Payment
All the payments shall be made by irrevocable Letter of Credit at sight. The Letter of Credit must be
established 30 days before shipment.
F. Arbitration
1. The two parties shall amicably settle all the disputes arising during the performance of the
contract. Should no settlement of disputes or such difference of opinion be made amicably, then the
disputes and difference of opinion shall be settled in accordance with the Arbitration Regulations of
the Foreign Trade Arbitration Organization of a third country mutually agreed by the parties.
2. The decision of the said arbitration shall be final and binding upon both parties.
This General terms and conditions of basis of C.M.P is made in English in six copies. Each party
keeps three copies of equal validity with effect from the signing date; party A should send one copy
to its factories for reference.
Made in Hanoi, on the 5th, August, 19 ..
FOR/AND ON BEHALF OF SIDE A
FOR/AND ON BEHALF OF SIDE B
Ellen Co. LTD

Generalexim

(Signed)

(Signed/sealed)

D. Ellen

Thanh Tung

General Manager

Dep-General Director

Annex no: 01
TO THE GENERAL TERMS
AND CONDITIONS ON BASIS OF C.M.P
No: 08/Gen-ELLEN/19 ..
Party A: VIETNAM NATIONAL. GENERAL EXPORT-IMPORT
CORPORATION (GENERALEXIM)
46, Ngo Quyen street.
Hanoi, S.R. of Vietnam (Hereinafter called "Party A")
Party B: ELLEN CO.LTD
1508-1510 Star House,

Salisbury Road, Kowloon, Hongkong (Hereinafter called "Party B")


Today 5th, Aug., 19 ..., the two Parties have agreed to sign this Annex to the above-mentioned
Contract on the following terms concerning the materials and accessories for the processing of the
commodity:
Article I: MATERIALS.AND ACCESSORIES FOR
THE PROCESSING OP THE COMMODITY
Side B shall supply all the materials and accessories to side A as following calculation (Based on
CIF HAIPHONG or C1F NOIBAI)
- Fabric: 100,000 Metres
- Accessories: worth 100,000.00 USD
Article II: TIME OF DELIVERY
All the materials and accessories supplied by Side B must be delivered at Haiphong Port 10 days
prior to starting production for each style, from the end of September, 19 .. to the end of November
19 .. and to address:
- Consignee and Notify party:
VIETNAM NATIONAL GENERAL EXPORT IMPORT CORPORATION,
46, NGO QUYEN STREET, HANOI. S.R. OF VIETNAM
Other conditions not mentioned in this annex are to be performed as those in the contract No:
08/GEN-ELLEN/19 ..
FOR/AND ON BEHALF OF SIDE A FOR/AND ON BEHALF OF SIDE B
Annex no: 02
TO GENERAL TERMS
AND CONDITIONS ON BASICS OF C.M.P
No: 08/Gen - Ellen/19...
Party A: . Vietnam National General Export
Import corporation 46, Ngo Quyen Street, Hanoi-Vietnam
(Hereinafter called "Side A")
Party B: Ellen Co.LTD
1508-1510 Star House
Salisbury Road, Kowloon, Hongkong (Hereinafter called "Side B")
Today 5th. August, 19..., the two Parties have agreed to sign this annex to the above mentioned
contract on the following terms and conditions concerning the commodity and quantity, price and
time of delivery
1. Article I:
Commodity
Quantity
C.M.P price
Amount
Jacket Style
3%
(USD/FOB Haiphong
No:
or Noibai)
54011-2
3,270
2,40
7,848.00
54011-5
3,357
2,40
8,056.80
54423
2,758
2,10
5,791.80
Total
9,385 Pieces
USD
21,696.60
(CMP price side A undertakes for packing such as: outer carton, plastic bands and or/PE bag/ctn
sticky tape only)
2. Article II: Time of delivery
Shipment time of finished products from November 19 ... to end of December 19 ....
3. Article III: Country of destination: Germany
Other conditions not mentioned in this annex are to Be performed as those in the Contract No:
08/GEN - ellen/19 ...
FOR/AND ON BEHALF OF SIDE A
FOR/AND ON BEHALF OF SIDE B

Translate into English


CNG HA X HI CH NGHA VIT NAM
c lp T do Hnh phc
HP NG GIA CNG T HNG
S: /HGC
- Cn c Php lnh HKT ngy 25-9-1989 ca Hi ng Nh nc.
- Cn c Ngh nh s 17 ngy 16-1-1990 ca Hi ng b trng quy nh chi tit vic thi
hnh Php lnh HKT.
- Cn c............. (ch , th l ca ngnh tiu, th cng nghip).
Hm nay, ngy........ thng........ nm ........
Ti.......................................... (a im k kt).
Chng ti gm c:
Bn A (Bn t hng):
- Tn doanh nghip (hoc c quan): ........................................................................................
- a ch: ......................................................................................................................
- in thoi: ................................................................................................................
- Ti khon s:........................................ M ti ngn hng: ...................................................
- i din l ng (b):............................................ Chc v: ....................................
- Giy y quyn s:...................................................................................................... (nu c).
Vit ngy...................... Do............................. chc v............................................... k.
Bn B (bn sn xut gia cng):.................................................................................................
- Tn doanh nghip (hoc c quan): ......................................................................................
- a ch: ....................................................................................................................
- in thoi: ..............................................................................................................
- Ti khon s:................................... M ti ngn hng: ......................................................
- i din l ng (b):....................................... Chc v: ......................................................
- Giy y quyn s:.................................................................................................. (nu c).
Vit ngy.......................... Do................ chc v ........................................k.
Hai bn thng nht tha thun lp hp ng vi ni dung nh sau:
iu 1: i tng hp ng:
1. Tn sn phm hng ha cn sn xut: .....................................................
2. Quy cch phm cht:
- ..............................................................................................
- .............................................................................................
-.............................................................................................
iu 2: Nguyn vt liu chnh v ph:
1. Bn A c trch nhim cung ng nguyn vt liu chnh gm
a- Tn tng loi:................ S lng: .....................cht lng; ....................................
b- Thi gian giao:.................. Ti a im: .................................(Kho bn B)
c- Trch nhim bo qun: bn B chu mi trch nhim v s lng, cht lng cc nguyn liu
do bn A cung ng v phi s dng ng loi nguyn liu giao vo sn xut sn phm.
2. Bn B c trch nhim cung ng cc ph liu sn xut:
a- Tn tng loi:............... s lng:.............. n gi(hoc quy nh cht lng theo hm
lng, theo tiu chun).
b- Bn A cung ng tin trc mua ph liu trn. Tng chi ph
l:
.................................................
iu 3: Thi gian sn xut v giao sn phm:
1. Bn B bt u sn xut t ngy ............................
Trong qu trnh sn xut bn A c quyn kim tra v yu cu bn B sn xut theo ng mu
sn phm tha thun bt u t ngy a nguyn liu vo sn xut (nu cn).
2. Thi gian giao nhn sn phm:
Nu giao theo t th:
a- t 1: ngy........................... a im: ............................
b- t 1: ngy.......................... a im: .............................
c- t 1: ngy........................... a im: ............................

Nu bn A khng nhn ng thi gian s b pht lu kho l:


Nu bn B khng giao hng ng thi gian, a im s phi bi thng cc chi
ph:..............................
iu 4: Cc bin php bo m hp ng (nu cn)
iu 5: Thanh ton:
Tha thun thanh ton ton b hay tng t sau khi nhn hng.
Thanh ton bng tin mt hay chuyn khon: .....................................................
iu 6: Trch nhim do vi phm hp ng:
1. Vi phm v cht lng: (lm li, gim gi, sa cha, bi thng nguyn vt liu v.v).
2. Vi phm s lng: nguyn vt liu khng h hng phi bi thng nguyn liu theo gi hin
thi
3. K hp ng m khng thc hin: b pht ti 12% gi tr hp ng.
4. Vi phm ngha v thanh ton: bi thng theo t l li sut ngn hng v.v
iu 7: Th tc gii quyt tranh chp hp ng
1. Hai bn cn ch ng thng bo cho nhau bit tin thc hin hp ng, nu c vn bt
li pht sinh cc bn kp thi bo cho nhau bit v ch ng bn bc gii quyt trn c s thng
lng m bo hai bn cng c li (c lp bin bn).
Article 7: Procedure for dispute settlement
1. The two sides should inform each other of progresses achieved while executing the contract.
If there is any trouble arising, either side should be notified and discuss with the other side about the
resolution on the basis of mutual benefit (the minutes should be transcribed).
2. Trng hp c vn tranh chp khng t thng lng c, hai bn thng nht chuyn
v vic n ta n l c quan c thm quyn gii quyt nhng v tranh chp ny. In case that
there is any dispute that cannot be settled, it is agreed that the case will call for the courts authority.
3. Cc chi ph v kim tra, xc minh v l ph trng ti do bn c li chu. Expenses for
verification and arbitration shall be at the faulty sides account.
iu 8: Cc tha thun khc (nu cn)
iu 9: Hiu lc ca hp ng:
Hp ng ny c hiu lc t ngy.................... n ngy .......................
Hai bn s t chc hp v lp bin bn thanh l hp ng sau .................. ngy. Bn A c
trch nhim t chc vo thi gian, a im thch hp.
Hp ng ny c lm thnh bn c gi tr nh nhau, mi bn gi......... bn.
I DIN BN A
Chc v:
K tn
(ng du)

I DIN BN B
Chc v:
K tn
(ng du)

3. Third-Party Security for Payment


THE PROBLEM
Accepting a personal check or trading on open
accountboth are dangerous for the exporter.
What kind of third-party security reduces the
exporter's risk?
THE PRINCIPLE
Third-party security takes two forms: export credit insurance allows the exporter to recover the major
part of the contract price if the buyer fails to pay after, say, six months. The buyer may also approach
a bank and ask for a bank guaranteethe bank will pay the contract price if the buyer fails to do so.
IN MORE DEPTH
Risk and costthey rise and fall together. Some risks are simply too high to be acceptable. For
example, let's say Red Bean Exports has an export order for 2,000 tons of red beans. If this
represents 0.1% of annual turnover and the buyer fails to pay, Red Bean will not go bankrupt. If,
however, 2,000 tons is 40% of turnover, failure of the buyer to pay could destroy the company.
Where risks are significant, the exporter seeks ways to minimize themeven though costs will rise.

A classic strategy for reducing risk is to spread it by means of a third partyan insurance company,
for example. Export credit insurance is one route to security; the bank guarantee is another.
Export Credit Insurance
International trade is fiercely competitive. Exporters compete not only on quality, price and delivery
terms; they also compete in the area of credit: "If you buy from me, I will allow you 180 days to
pay." Such an offer can make or break a deal. However, extending credit in this way is risky. The
buyer may go bankrupt, or he may sell the goods he receives and disappear. Political difficulties too
can block payment: civil war, famine, lack of foreign exchange, and so onthe list is a long one.
To stimulate exports and protect the exporter against major risks, some countries set up a special type
of insurance: it does not insure goods, but it insures the exporter against the risk of non-payment.
Most traditional exporting nationsthe European countries, for exampleoffer such insurance.
Zimbabwe is an example of a developing country that helps its exporters in this way. (It is worth
stressing that export credit insurance is not a charity but a commercially viable proposition; export
credit insurance companies commonly report up to 15% profit on their business.)
To buy such insurance, the exporter explains the details of the business to an insurance company and
receives a quotation. Sometimes the insurer refuses to quote. This may mean that the insurer has used
its network to run some checks on the buyer and found the buyer uncreditworthy. This is a sign to the
exporter that the business is risky. (It might also mean that the insurer has checked on the exporter
and found some problems: a criminal record, perhaps, or a history of unpaid insurance premiums.)
Export insurance premiums vary according to the type of goods exported, the creditworthiness of the
buyer, the political stability of the buyer's country, and so on. Figures mentioned to the author by the
Zimbabwe Credit Insurance Corporation are attractive, howevera typical policy costs between
0.5% and 1% of the invoice price.
Attractive as it is, export credit insurance has certain clear limitations: there is always a long wait
between the time when the buyer fails to pay and the time when insurance company compensates the
exportersix months is typical. And when compensation is paid, it is unlikely to cover 100% of the
original invoice price. However, with export credit insurance, the exporter is covered against the
worst.
If your country offers export credit insurance, you should certainly consider using it for trade with
customers you know only slightly and for single transactions that represent a high proportion of your
turnover. Further, many buyers are reluctant to spend money on a payment guarantee or to tie up
money in a letter of creditin a buyer's market, export credit insurance may give the exporter a
competitive edge.
Payment Guarantee
What is a "guarantee"? Let's say I promise to pay you S 1,000. You are not sure that I have the
money, so you tell me to find a friend, a guarantor (in the export trade normally a bank), to make a
second promise: the guarantor will pay the beneficiary (you) if the principal (me) fails to keep the
original promise. If you do not get the SI,IKK) from me, you will get it from the hank. The
relationship is a triangle.

The terminology of guarantees is confused. A guarantee (in the present sense) is sometimes called a
bond or a surety. There are technical differences among the three terms, but you can normally ignore
them. Another problem is that the word guarantee is commonly used to mean warranty or defects
liabilitywhen you buy a watch it may come with a so-called "guarantee." In general, try to avoid
this confusion by using the word guarantee only within the triangular relationship shown above.

Guarantees are commonly used in four business situations; in each case one party is particularly at
riskhe has performed but the other side has not yet responded. Of particular interest here is the
payment guarantee, but you will often meet the other guarantees in export business.
Risk 1: Non-paymentPayment Guarantee
For the exporter there is one major risk: not being paid. A payment guarantee simply commits the
bank to pay if the buyer defaults. The payment guarantee is usually for 100% of the contract price.
Risk 2: RevocationTender Guarantee
Procurement contracts, especially at government level, are put up for tender or bid. An exporter may
well bid on a contract to supply goods or materials to a government department or agency. Invariably
this department asks for a tender guarantee (or bid bond). If the would-be exporter withdraws his
tender, then the tender guarantee is forfeit. This guards the department against the risk of a project
falling behind because a tender is withdrawn.44 A normal figure for a tender guarantee is between
1.5% and 5% of the contract price.
Risk 3: Non-PerformancePerformance Guarantee
If you are selling goods on an FOB basis, you are unlikely to meet the performance guarantee. If,
however, you offer services as well as goods, the performance guarantee can be important. It simply
says that if you work badly or not at all, then the guarantor will pay, within stated limits, the costs of
your failure to perform. A normal figure for a performance guarantee is between 5% and 10% of the
contract price.
Risk 4: Losing PrepaymentPrepayment Guarantee
Manufacturers often ask for an advance payment, especially if items are custom-made for the buyer.
Making this prepayment is a risk for the buyer until the items arrive in working order. The advance
payment guarantee promises the buyer that the bank will return advance payments if the exporter
fails to deliver. The guarantee is normally for 100% of the prepayment, decreasing as deliveries are
made.
In most guarantees, the bank agrees to pay "on first demand" and "without demur or objection" (or a
similar wording). This promise can be taken literally: the moment that the beneficiary demands
payment under the guarantee, the bank will pay. (Naturally the bank will immediately withdraw the
money it has paid from the account of the principal.) Such guarantees are called "demand
guarantees": there are no serious, objective conditions the beneficiary must meet before claiming
payment of the guarantee. This can quickly lead to abuse, and many court cases arise from demand
guarantees. Let's take a typical scenario.
44
Under the laws of many countries that derive their legal thinking from England, an offer can be
withdrawn at any time before acceptance. See Chapter 4, Section 3 for more information.
Scenario: Esperanza Trading, the buyer, asks Big Bank to issue a payment guarantee in favor of
Office Enterprises, the exporter. The bank complies. Two days after the agreed payment date,
Esperanza Trading has not yet paid. Office Enterprises accordingly asks the bank to pay the money.
The bank first notifies Esperanza Trading that it is about to pay. Esperanza says that the goods were
defective and tells the bank to withhold payment. The bank looks again at the text of the guarantee:
"We undertake to pay you on your first written demand without cavil or demur...." The bank says it
will pay, regardless of the quality of the goods. Angrily, Verbena Trading asks a judge for an
injunction (= an order forbidding something) to forbid the bank from , making payment. Judges
normally refuse to grant such injunctions. A I demand guarantee is exactly thata guarantee paid on
demand.
The problem of a beneficiary falsely or improperly demanding payment is also a serious one. If the
bank has agreed to pay, it will pay unless there is evidence of blatant fraud. If demand guarantees are
so risky, perhaps a conditional guarantee would be preferable.
A conditional guarantee contains serious, objective conditions that must be met before payment by
the bank is possible. These conditions cannot refer to the condition of delivered goodsthe bank has
no way of evaluating such things. The ICC tried in two pamphlets. Uniform Rules for Contract
Guarantees (1978) and Model Forms for Issuing Contract Guarantees (1982) to set up objective
conditions that a bank might find workable. It suggested three. The bank would pay if the claim were
supported by:
A decision of the court of first instance (a decision by a judge);
An arbitral award (a decision by a court of arbitration);
The approval of the Principal in writing to the claim.

It is not likely that any beneficiary would agree to objective conditions as harsh as thisand so most
bank guarantees are of the "demand" kind. In fact, because guarantees run into trouble so often, and
because they are expensive to set up, few exporters ask for them as security for payment: the letter of
credit is much preferred.45
The most recent thinking on demand guarantees suggests a "counter-guarantee" that works like this.
If I, as exporter, demand payment of a guarantee issued by the buyer's bank for, let's say SIOO.OOO,
I must at the same time post a countcrguarantee, also for SIOO.OOO in favor of the buyer. The buyer
can collect this money if it can be proved that I collected the original guarantee improperly. For
details, see ICC Publication No. 458, Uniform Rules for Demand Guarantees.
CASE STUDY
Stand and Deliver
Below is the first part of a payment guarantee issued in standard bank form. Study it, and then
answer the questions.
Payment Guarantee No. 76542/92
Reference is made to the order No. WEX 344 K placed with you as suppliers by Multi-Import for the
supply of integrated circuits.
According to the conditions of this order, the Buyer has to furnish a payment guarantee in the
amount of USD 600,000. By order of the Buyer, we, Big Bank of Euroland, hereby establish this
guarantee and undertake irrevocably to pay to you without demur or objection any outstanding
amount not exceeding USD 600,000
say United States Dollar six hundred thousand only
upon your first written demand stating that the Buyer has failed to effect the outstanding payment at
maturity. Our liability under this guarantee will expire as soon as this document is returned to us,
latest however, by 31st December 1996.
1. Who is the principal? SELLER BUYER BANK
2. Who is the guarantor? SELLER BUYER BANK
3. Who is the beneficiary?
SELLER BUYER 3BANK
4. Is this a "demand" guarantee? YES NO
5. If the buyer fails to pay, is payment secure?
YES NO
What You Should Know
1. Export credit insurance covers the risk of non-payment.
2. Guarantees are designed to reduce contractual risks.
3. The payment guarantee reduces the risk of non-payment. The tender guarantee reduces the risk of
the revocation of an offer; the performance guarantee reduces the risk of non-performance or
inadequate performance by the exporter; the advance payment guarantee reduces the risk of losing
prepayments.
4. If a bank issues a "demand guarantee," it must pay the guarantee sum on first demand without
question. Since most payment guarantees are of this type, they are dangerous for the principal (the
buyer) and are seldom used; the letter of credit is far more common.

2.4. LETTER OF CREDIT (p.87)


PROBLEM
Letters of credit are issued in many forms for many purposes. Some offer first class security for the
exporter: some are little belter than a personal check. What letter of credit terms should the exporter
try to negotiate?
PRINCIPLE
Most Lellers of credit are irrevocablethey cannot be
withdrawn. Exporters prefer the letter of credit to be
confirmed (i.e., payable by a local bank on first
presentation of correct shipping documents) and payable
at sight (i.e., payable immediately).
IN MORE DEPTH

Hu ht L/C thuc loi khng hy ngang


ngha l bn mua khng th thay i.
Nh xut khu thng ngh L/C xc
nhn (ngha l ngn hng nc xut
khu chu trch nhim thanh ton ngay
khi xut trnh b chng t hp l ln u)
v c th tr ngay.

The ideal type of payment from the epxorters point of


view is the irrevocable confirmed, at-sight letter of
credit. The first attempt to standardize them was made in
1933 when the International Chamber of Commerce
issued the Uniform Customs and Practice for
Documentary Credits (UCP). Parties to a contract can
agree to use the UCP rules, and many do. Typically a
contract stipulates

The Buyer, on receipt of the Confirmation of Order


from the Seller, shall at least 20 days prior to the
date of delivery open a confirmed, irrevocable letter
of credit. This credit shall be subject to Uniform
Customs and Practice for Documentary Credits,
2006 Revision, ICC Publication No. 600.
20% of the credit shall be available against the
Sellers draft accompanied by invoice; the remaining
80% shall be available against the Sellers draft
accompanied by the shipping documents.

A letter of credit is a binding agreement by a


bank to pay a certain sum of money when the
exporter presents the necesiary documents to the
bank. In a supermarket purchase, goods are
exchanged for money; in a letter of credit
situation documents are exchanged for money
that is why letters of credit are formally called
documentary credits. The letter of credit is issued
by an issuing bank at the request of the buyer.
The issuing bank is in the country of the buyer,
so it normnlly instructs a bank in the country of
the exporter- the advising bank- to advise the
exporter that the letter of credit has been opened.
The advising bank will also handle all the
necessary paperwork when the exporter tries to
collect payment.

Phng thc thanh ton l tng i vi


nh XK l L/C khng hy ngang, xc
nhn v tr ngay. Vo nm 1933 ICC ln
u tin tiu chun ha bng UCP.
Cc bn k kt hp ng c th tha
thun s dng UCP, v c nhiu ngi
lm nh th. Tiu biu mt hp ng c
th quy nh:

Bn mua, ngay khi nhn c th chp nhn


n t hng ca bn bn, trong thi hn ti
thiu 20 ngy trc ngy giao hng, phi m
L/C khng th hy ngang, xc nhn.
L/C ny theo ng UCP 600, n hnh nm
2006.
20% s c thanh ton ngay khi bn bn
xut trnh hi phiu km vi ha n; 80%
cn li s c thanh ton ngay khi bn Bn
xut hi phiu km theo b chng t.

The process of issuing a letter of credit takes place as follows


- Exporter and buyer sign a contract
- The buyer asks a local bank to open a letter of credit
- The issuing bank asks a bank in the exporters country to advise the exporter that the letter of credit
has been opened
- The advising bank advises the exporter that the letter of credit has been opened.
- In the next step, the exporter ships the goods. When the exporter passes the goods to the carrier, he
receives shipping documents.
- He presents these documents to the bank as evidence that the goods have been shipped.
- The advising bank checks the correctness of the documents and sets the payment procedure in
motion. The payment procedure depends on the type of credit: sometimes the advising bank merely
sends the documents to the issuing bank and acts as a channel for payment; in other cases, the
advising (or confirming) bank pays immediately over the counter.
- The advising bank notifies the issuing bank that the credit has been presented and forwards the
shipping documents
- The issuing bank transfers necessary funds to the advising bank.
Two principles serve tomake the letter of credit safer:: (autonomy, and (b) strict compliance.
Autonomy (p.90)
The letter of credit is an agreement by a bank to pay money against documents: it is a separate
agreement from the sales contract and is unconnected with it. The ICC Uniform Custom and
Practice for Documentary Credits (UCP) makes this clear:
Credits, by their nature, are separate transactions from the sales or other contract(s) on which they
may be based and banks are in no way concerned with or bound by such contract(s) even if any
reference whatsoever to such contract(s) is included in the credit In credit operations all parties
concerned deal in documents, and not in goods, services and/or other performances to which the
documents may relate.
This means that the bank is obliged to paywhatever the disputes between the buyer and the
exporter. For example, in one leading case, Discount Records bought phonograph records from an
exporter. Payment was by letter of credit issued by Barclays Bank. The exporter delivered a mix of

cassettes, eight-track cartridges and other non-contractual goods. Discount Records tried to get an
injunction to stop Barclays from paying under the letter of credit. The court refused.
A Ietter of credit is like a bill of exchange given for the price of goods. It ranks as cash and must be
honored. No set off or counterclaim is allowed to detract from it. The exporter will be paid
although later action in the courts may oblige him to make good any damage he has caused the
buyer.

Strict Compliance
The buyer also has a safeguard: the bank will pay only if the shipping documents are exactly in line
with the buyer's instructions. For example, let's say an FOB sales contract agrees that the exporter
can deposit the goods in a warehouse if the ship arrives late and that this counts as delivery. This
agreement has no direct bearing on the letter of credit: if the letter of credit requires a bill of lading
and makes no mention of a warehouse receipt, then the bank simply cannot pay against a warehouse
receipt.
Banks must follow their instructions strictly, as is shown in another landmark case. Dawson bought
vanilla beans from Indonesia. Dawson instructed an American bank to open a letter of credit. One of
the required shipping documents was a certificate of quality issued by experts." The bank paid the
exporter. The beans, when they arrived, were rubbish. The certificate of quality was signed, however,
by only one "expert." Thus, because the bank had not strictly followed the instructions from Dawson,
it could not collect from Dawson the money it had paid to the exporteran expensive mistake for
the bank.
How often do banks refuse payment? According to Bradgate, "over 50% of documents presented to
banks under documentary credit transactions are rejected on first presentation". Figures quoted to the
author by banks in some African countries go much higher: some banks report rejecting 90% of first
applications for payment under letter of credit.
What happens when a bank refuses to pay under a letter of credit?
First the bank will cite a "discrepancy," some aspect of the documentation that is not in line with the
terms of the credit. A checklist of commonly cited discrepancies makes depressing reading.
Once the bank has indicated the discrepancies, the exporter can proceed in one of three ways:
- Provide the missing paperwork or correct errors;
- Ask the buyer to instruct the bank to change the terms of the Ietter of credit- i.e., to issue an
amendrnent;
- Ask the bank to process the letter of credit with the discrepancies but to pay only when (and if) the
issuing bank permits payment.
If, as often happens, the letter of credit is near its expiry date. There may be no time for the exporter
to provide the missing prices. In this case, the exporter (or the advising bank) must contact the buyer
asking the buyer to instruct the issuing bank to extend the date of the credit. Whenever an
amendment is necessary, the purpose of the letter of credit is largely defeated-the buyer is now
firmly in control of payment. Extra bank costs are a further burden on the exporter. In general, the
exporter is advised to exercise scrupulous care in providing the documentation called for by the
letter of credit.
Discrepancies Reported by Banks (p.92)
Problems with the Letter of Credit
* Documents required by the credit are missing.
* Documents required to be signed are not signed.
* The credit amount is exceeded.
* The credit has expired.
* Documents are not presented within the required time.
* Shipment was short.
* Shipment was late.
Problems with the Bill of Lading
* The bill of lading is "unclean"it has comments on it relating to damage to or other
deficiencies in the goods.
* A marine bill or lading is required, but the bill does not state that the goods were "shipped on
board" a named vessel.
* The bill of lading shows shipment between ports other than those specified in the credit.
* The bill of lading shows that the goods were shipped on deck. This is normally forbidden
unless the credit expressly allows ii.
* The bill of ladding offers no evidence that freight was paid by the exporter (if this was
required).
* There is no endorsement (if endorsement is necessary).
Problems with Insurance

* The insurance document is not of the type specified in the credit (e.g., a certificate of
insurance is produced while the credit calls for a policy).
* The insurance risks are not those specified in the credit. This is forbidden unless the credit
expressly allows it.
* The sum insured is below the figure required.
* Insurance cover does not begin on or before the date of the transport document.
Inconsistencies among the Documents
* Discription of the goods on the invoice and in the credit are differrent.
* Weights differ beetween two documents.
* Marks and numbers differ between two documents.
THE LETTER OF CREDIT: Confirmed and Unconfirmed
The mechanism of the simplest letter of credit is this:
- Buyer instructs an Issuing Bank to issue a Letter of Credit in favor of the SELLER.
Because the advising bank is normally in the buyers country, the exporter likes the issuing bank to
instruct the advising bank in the exporters own country to make actual payments under the letter of
credit.
- Buyer instructs an Issuing Bank to instruct an Advising Bank to pay under a Ltter of Credit in favor
of the SELLER.
If the advising bank knows the exporter well, it may pay all of the value of the credit over the
counter. But such payments are always made with recourse. With recourse? Lets say that the
issuing bank finds a problem with the documents and refuses to send funds to the advising bank to
cover payment; in that case, the advising bank has recourse to the exporter. In plain words: the
advising bank gets its money back from the exporter. A confirming bank is in a different position. It
is asked to confirm the credit.
- Buyer instructs an Issuing Bank to instruct a Confirming Bank to pay under a Letter of Credit
in favor of the SELLER.
Under this arrangement, the bank in the exporters country confirms the credit. A confirming bank
has an absolute obligation to pay the exporter according to the terms of the credit. If the credit is
payable at sight, the bank pays must pay at sight without recourse. What happens, though, if the bank
pays the exporter, and the issuing bank finds something wrong with the documents? Then the
confirming bank- not the exporter- has a problem: it has paid the money to the exporter and has no
way of recovering it. Exporters prefer this arrangement for obvious reasons; among the traditional
trading nations of the world, it is the norm.
Unfortunately, problems can arise when very small banks or banks in countries with severe foreign
currency shortages try to instruct a bank in the exporters country to confirm a letter of credit. Lets
say the Frudge and Gurgle Bank in Nonamia asks Superbank International in New York to confirm a
letter of credit in favor of an American exporter of computers. If Superbank advises the exporter that
the letter of credit has been opened, and confirms the credit, then Superbank must pay the exporter as
soon as the computers leave New York bound for Nonamia.
What happens when Superbank forwards the documents to Fudge and Gurgle and asks for funds to
cover the payment? Perhaps nothing at all. Or perhaps there is a delay of months or even years
before the funds arrive. For this reason, banks are sometimes reluctant to confirm letters of credit,
especially those from obscure banks. Or they may ask for reconfirmation: in our example, Fudge
and Gurgle must find a well-known bank to confirm to Superbank that funds will be transferred- if
not by Fudge and Gurgle, then by the reconfirming bank. The costs of such reconfirmation can be
high.
How can the exporter be sure that the letter of credit is confirmed by the bank in his own country?
When the text of the letter of credit arrives, it comes with a covering letter.
The stand-by letter of credit should also be mentioned at this stage. This originated in the U.S.
because banking law in some states forbids banks to issue payment guarantees. Under a payment
guarantee a bank agrees to pay if the buyer fails to do so. The stand-by letter of credit is set up in
exactly the same way: the buyer agrees to pay in the normal way- if the payment is not made, the
exporter can be apid under the stand-by letter of credit.
THE AT-SIGHT LETTER OF CREDIT AND THE ALTERNATIVES
When a letter of credit is issued, the terms under which it can be paid are stated. UCP offers four
choices, the first of which is clearly preferable for the exporter.
SETTLEMENT BY SIGHT PAYMENT
In this variation, the exporter presents the necessary documents to the paying bank (normally a
confirming bank); the bank checks the documents. If they are in order, the bank pays the full face
value of the letter of credit. This is usually what the exporter wants. Theo th loi ny, nh XK xut

trnh cc chng t cn thit cho ngn hng thanh ton (thng l ngn hng xc nhn); ngn hng
ny s kim tra chng t. Nu cc chng t sp xp ng th t v ng cc chi tit, ngn hng s
thanh ton ton b gi tr ghi trn tn dng th. y chnh l loi m nh XK mong i.
SETTLEMENT BY DEFERRED PAYMENT
In settlement by deferred payment, the letter of credit is not payable until a number of days (180 days
perhaps) after delivery. Payment is safe, but it delayed. The letter of credit cannot be paid, but it has
an obvious value: if the exporter needs ready money, he can realize some part of this value- probably
most of it. The exact figure he can discuss with any bank. On the face of it, this arrangement is less
advantageous for the exporter than settlement by payment, but circumstances may make such a deal
necessary. THANH TON TR CHM. Thanh ton bng phng thc tr chm l loi LC phi ch
n mt s ngy (180 ngy) sau khi giao hng chng hn. Thanh ton nh th an ton nhng thng
phi mt thi gian ch i. LC cha thanh ton nhng n vn c gi tr: nu nh XK cn tin ngay,
anh ta c th c c mt phn gi tr - c khi c c ton b. Con s chnh xc l bao nhiu cn
ty vo kh nng thuyt phc ca anh ta. Nhn thong qua, cch thu xp ny t c li cho nh XK
hn so vi thanh ton ngay, nhng c mt s hon cnh cn thit phi thanh ton chm.
SETTLEMENT BY ACCEPTANCE
The procedure takes place as follows:
- The seller presents to the accepting bank the documents and a bill of exchange (time draft) drawn
usually on the buyer.
- The accepting bank agrees to pay the bill when it matures.
- If the seller needs money immediately, he can exchange the letter of credit for cash (at a discount)
with any agreeable bank.
So far the bank has paid cash to the exporter against the documents. Another approach is to use a bill
of exchange. A bill of exchange is like a check (cheque); it allows the beneficiary (the exporter) to
make a draft for a given sum of money on me buyer. In international trade, this bill of exchange is
usually a time draft it can be collected only after a certain date. That is obviously a danger for the
exporter. Accordingly the accepting bank will accept the bill of exchange and agree to pay it at full
face value when it falls due. A bill of exchange that is accepted can be negotiated, i.e., sols at a
discount to any bank if the exporter needs ready money.
SETTLEMENT BY NEGOTIATION
The seller presents to the negotiating bank the documents and a bill of exchange drawn usually on
the buyer.
The negotiating bank negotiates the bill (i.e., pays it at a discount)
In this final method of settlement, the bank with whom the exporter deals is called the negotiating
bank. In settlement by negotiation a bill of exchange again allows the exporter to make a draft on the
buyer, but this bill must be negotiated- the advising (or other) bank has no authority to pay it at its
full face value. This kind of settlement is the least satisfactory for the exporter, and in practice it is
rarity.
The Letter of Credit and Its Associated Documentation
There are no rules as to what documents a letter of credit may or rnay not require. The bank must
simply check that the documents specified in the letter of credit are in perfect orderit does not
question the necessary or value of the documentsnor is it interested in the question of why the
buyer wanted a particular document presented in a particular form. The bank is scrupulous,
however, in checking that the documents are correct; this is the doctrine of strict compliance.'
The letter of credit contains a list of the documents that the exporter must present. Each
document should be carefully and correctly named "Marine Bill of Lading" not simply "BL"
or Bill of Lading."
The number of originals and the number of copies required should be stipulated. For example, "3/3
Marine Bill of Lading" means that the exponer must produce three originals and three copies of the
marine bill of lading. Unless the letter of credit expressly states otherwise, the bank expects all
documents to be originals. (It is "sometimes difficult with modern documentation to decide what is
an Original and what is a copy. Any document which is authenticated and which states that it is an
original is usually accepted.)
The ICC suggests that documents are listed in a certain order:
Commercial invoice
Transport document
Insurance document
Other documents such as: certificate of origin, certificate of analysis, packing list, weight list,
phytosanitary cerrificate. etc.
Let us now look at each of these documents, in a little more detail to see what the banks are looking
for.

Commercial Invoice
A commercial invoice must be made out to the applicant for the letter of credit (normally the buyer),
unless otherwise stated in the letter of credit.
The description of the goods on the invoice must conform with the description in the letter of
credit. To avoid conflicts in description, it is good practice to keep the description in the letter of
credit as short as reasonably possible. The amount shown on the invoice should not be more than
the amount permitted by the letter of credit: if it is, the bank may refuse to accept the invoice.
Sometimes the buyer requires that an invoice must be certified or notarized; if so, the lener of
credit should state exactly what is meant, for example, what. kind of certification made by whom.
The following is an example of a commercial invoice using the SITPRO (United Kingdom
Simplification of International Trade Procedures Board) standard form.
Transport Document
When the exporter passes over the goods to the carrier, the carrier issues a transport document
appropriate for the particular means of transport involved. The main types are:
Sea transport: Marine bill of lading (or sea waybill's)
Air transport: Air waybill
Rail transport:
Railway consignment note
Road transport:
Road consignment note
Combined transport: Combined transport bill of lading
The letter of credit should state the type of document required. If alternative means of transport or
partial shipments are allowed perhaps by different modes of transport, the letter of credit should have
the words "or" (or "and/or") between the names of the transport documents.
e.g.: "Marine Bill of Lading and/or Road Consignment Note."
Some special problems associated with particular transport documents can be briefly highlighted
here.

Shipment by Sea: Some types of sea transport are not allowable


unless the parties agree on them and letter of credit is worded accordingly. In particular, transport on
the deck of a ship or in a pure sailing ship are not allowed. Thus, if the bank sees from a marine bill
of lading that transport will take place on deck, and if the letter of credit does not allow this, the bank
will reject the shipping document.
Often a marine bill of ladingwhich is negotiable (sellable) document -is not necessary: usually the
buyer does not plan to resell the goods during- shipment. In this case, the carrier often issues a sea
waybill, which is similar to the familiar road or rail consignment note.
Shipment by Air: The form of the air waybill (air consignment note) has been standardized by IATA.
(International Air Transport Association). The air waybill is issued in three originals and nine copies.
Only the second original goes to the consignee (the buyer).
Sometimes a letter of credit calls for "a full set of original air waybills"; this is obviously a mistake
(he exporter cannot provide the complete set; The bank, however, will follow the wording of the
letter of credit exactly and refuse an "incomplete set of waybills. Another incorrect requirement is
that the air waybill show the date of the flight: a correctly completed waybill cannot show this
information but again the bank must insist on strict compliance.
Shipment by Rail: As with the air waybill, letters of credit calling for a rail consignrnent note
occasionally make impossible demands. The "original consignment note" does not come into the
possession or the exporter, so a letter of credit demanding the original is certain to cause delay in
payment.
The Insurance Document

If shipment is made on CIF or CIP terms, the letter of credit will call for an insurance policy or
certificate. The exact risks to insured are also normally stated. (If shipment is under Incotcrms
other man CIF or CIP, the buyer may still ask the exporter to arrange some aspects of the insurance
for him. In such cases, the letter of credit calls for documents to prove that the exporter has taken
the agreed steps.)
Unless the letter of credit states otherwise, insurance coverase on a CIF or CIP shipment must be
for 110% of the CIF (or CIP) value of the goods; if it is not, banks often refuse the insurance
document.
Other Documents
Certificate of Origin: By-far the most common of the "Other documents" is the certificate of
origin. This is required for imports into the buyer's country under a preferential tariff or other
agreement. Procedures for obtaining certificates of origin vary from country to counntry.
A Chamber of Commerce or carrier can advise you.
Certificate of Inspection: Many countries, for example Indonesia, have found that the passage of
imported goods through their own customs is easier il" the soods are inspected and valued in the
country of the exporter. A number of international inspection companies, specialize in: such work."
The Societe Generate de Surveillance (SGS) is one example. If SGS inspection is required, the
parties should make a note of this effect in their conract and adjust in the delivery schedule to allow
time for inspeciion. Obviously the details on the inspection certificate must correspond exactly with
the details in the transport document and the commercial invoice. Discrepancies will almost certainly
delay in payment.
Special Requirements: Many countries require containers to be fumigated before shipment; others
have special requirements about packaging material: for certain kinds of products foodstuff in
particular a health inspection is necessary; some African countries place severe restrictions on the
import or export of wildlife or wildlife products. These are only examplesthe list is endless. In
each case the exporter and the buyer should issue it. The details must appear in the letter of credit:
vague requirements such as "appropriate wildlife certificates are likely to cause delay in paymentthe bank and the exporter may have different views on what is appropriate.
Summary
Prompt paymenr of the letter of credit depends on the exporter presenting correct documentation.
Remember- up to 90% of the applications for payment are rejected because of discrepancies.
Negotiating the Terms of a Letter of Credit
It is one of the buyer's main duties to provide the letter of credit. In fact, if an agreed letter of credit
is not issued on time, the exporter often has the right to cancel the contract because of a fundamental
breach by the buyer.
Unfortunately, many exporters pay little attention to the exact terms of the letter of credit until it is
too late. Usually exporters leave it to the buyer to apply to his house bank for a letter of credit: the
buyer provides the bank with outline information about the deal, and leaves the bank to draft the
letter of credit as it sees fit. This procedure meets the interests of the buyer and the bank, but it often
leaves the exporter with serious headaches. How can the exporter best protect his interests?
The first step is for exporter and buyer to agree exactly what documentation is required. Some
items are discretionary, for instance the nature of the transport document or the terms of insurance.
Other items are a matter of government regulation: the phytosanitary certificate or certificate of
origin, for example. The two parties may have to talk to their Chambers of Commerce, to their
banks or to the carrier to establish the complete list. The first step then is Agreement.
Once the list of documents has been agreed. Step 2 is incorporation of the list into the contract.
There are many ways of doing this, one of which is particularly effective. The ICC has published a
form that the buyer can use to apply for a letter of credit. In addition to the form, the ICC has
offered detailed notes on how to complete it. The exporter and the buyer can complete this
application form during their negotiations, and append a copy of the form to their contract. This
form can then be passed to the bank as Specification of the required letter of credit. Thus, the
credit, when issued, should be exactly as agreed by the parties with no nasty surprises for the
exporter. We will discuss the form in detail when we have mentioned the remaining two steps.
The verification step is an obvious precaution: as soon as the exporter receives advice that the
letter of credit has been opened, he should check that it complies with the agreernent he negotiated
with the buyer. The danger here is that when the bank drafts the letter of credit, it lists documents
or makes requirements that the exporter either does not understand or has not agreed to. Immediate
discussion with the advising/confirming bank is essential since amendments are always time
consuming. If the problem is spotted early enough, however, payment should not be delayed.
And finally Compliance. It cannot be said often enough that timely payment depends on exact
compliance by the exporter with the terms of the credit.
STEPS IN NEGOTIATING A LETTER OF CREDIT
AGREEMENT. The exporter and the buyer discuss and list all required documentation.

INCORPORATION. The list is corporated into the contract.


SPECIFICATION. The buyer applies for the letter of credit specifying the agreed
documentation.
VERIFICATION. The exporter checks the credit to see that required documentation isas agreed.
COMPLIANCE. The exporter rigorously checks documentation and submits it to the bank.
Let us then turn to the form used to apply for a letter of credit. In practice, most banks have a
form of their own, but it seldom differs widely from the ICC standard.
Segment 1: Applicant
The full name and address of the applicant (buyer), including normally the buyers account
number with the issuing bank.
Segment 2: Issuing bank
The name of the issuing bank. This can be left blank. If you obtain an application form from a
bank, the name is often preprinted.
Segment 3: Application Date/ Date of this application.
The date on which the application form is submitted to the bank. In negotiationg your contract,
you can leave this blank.
Segment 4: Date and Place of Expiry
All credits stipulate an expiry date: i.e., the last date for presentation of documents to the bank.
This should be carefully negotiated. The buyer will want an early date to save bank charges; the
exporter will want enough time after delivery to present the documents and to correct any
discrepancies that may be discovered by the bank. A stale (expired) letter of credit will not be
paid without an amendment.
This timing decision should obviously be coordinated with the other timing decisions on the
credit: Segment 14, latest date for shipment, and Segment 18, the period allowed after shipment
for presentation of documents to the bank.
The place of expiry is often At the counters of the confirming bank.
Segment 1: Beneficiary
The full name and address of the beneficiary- the exporter in most cases. (The buyer is normally
suspicious of anyone other than the exporter being named as beneficiary.) In addition to the
postal address, telephone, telex and fax numbers are sometimes included, especially if Segment 6
requests teletransmission.
Segment 6: Method of Issue
Issue by (air)mail
Issue by teletransmission (which shall be the operative credit
instrument) With brief advice by teletransmission.
This segment deals with the method of issuing the letter of credit. In effect there are two choices:
issue by mail and issue by teletransmission (normally telex). The choice depends on the time
available to the parties: issue by mail is likely to be much slower than issue by telex. If the
exporter wants the best of both worlds, he can cross two boxes: Issue by mail and Brief advice
by teletransmission. The brief advice is a notification by telex that the credit has been issued
and is on its way by mail. On this advice, the exporter might, perhaps, begin preparations for
delivery.
Segment 7: Transfer of the Credit
A transferable credit is one which allows the first beneficiary (the exporter) to request the
confirming bank to pay a third party. The effect is that the buyer will not necessarily know who
is the actual supplier of the goods- will it be ythe exporter of the as yet unknown third party. In
principle a letter of credit is not transferable, but it can be made so by crossing the appropriate
box.
Segment 8: Confirmation
This is a crucial issue for the exporter. Will the bank in his country merely handle the paperwork,
or will it make payment itself and recover the funds from the buyers bank? Exporters greatly
prefer confirmation.
Segment 9: Amount
The amount of the credit should be expressed both in figures and in words. The currency of the
credit should be stated using the ISO (International Standards Organization) currency code, e.g.,
USD for United States dollars, GBP for pounds sterling, or DEM for deutsche mark.

It is sometimes difficult to know exactly what the final invoice figure will be. Accordingly, many
credits use words such as "about" or aporoximately." In this case actual payment can be 10% more
or 10% less than the stated amount. (See UCP Article 39.) Another common phrase is "up to" or "not
exceeding." This is useful when partial shipment (and therefore partial payment) is not allowed, but
when the final invoice may be for considerably less than the stated amount of the credit.
It is sometimes the case that some part of the contract price is to be paid by letter of credit and the
rest by some other meansprepayment perhaps, or perhaps the buyer will retain a part of the price
until the warranty period is over. In this case, the application should state (in Segment 19) what
percentage of the invoice price is covered by the credit.
Segment 10: Partial Shipment
In principle, partiat shipments are allowed unless the not allowed box is crossed. You should
distinguish carefully between partial shipments and shipment in installments. Shipment in
installments means that an agreed schedule has been set up (e.g., three equai shipments in March.
August and October 2007.) This schedule should be noted in ''Additional Instructions" (Segment 19).
A partial shipment is simply an incomplete shipment with some part of the goods to follow later.
Unless the buyer has some clear reason for wishing all the goods to arrive together, partial shipment
should be "allowed."
Segment 11: Transshipment
Transshipment means moving the goods from one conveyance to another. Container transport
("combined transport) obviously presumes transshipment. It is only when goods travel by sea under
a sea. waybill or marine bill of lading that it makes sense to forbid transshipment- and even then
there would have to be special reasons for the prohibition: extreme fragility of the goods would be
one example. Normally transshipment is allowed.
Segment 12: Availability
Credit available wilh
by sight payment
by acceptance
by deferred payment
against the documents detailed herein
and beneficiary's draft at
on

by negotiation

"Credit available with..." this is sometimes followed by the name of the advising bank chosen by
the exporter. More often it is left blank. In this case, the issuing bank is free to decide which bank
will act for it in the exporter'scountry.
The various types of payment are discussed above. For the exporter, "by sight payment" is most
advantageous: as soon as the bank has "sight" of the documents, i.e.. as soon as the exporter presents
them, it pays.
Sometimes, though not often, the beneficiary (exporter) must make a draft on the bank to collect the
money. In this case the box "and beneficiarys draft is crossed, the word "at" is followed by "sight"
(or possibly some number of days); the word "on" is followed by "nominated bank."
Segment 13: Insurance Covered by the Buyer
insurance will be covered by us
This box is "for infonnation only"it simpiy clarifies that insurance is taken care of "by us," i.e., by
the buyer. The box is normally checked when the delivery terrn is FOB, CFR or some other term
where the exporter is not required to present an insurance document.
Segment 14: Transport Information
Loading on board/ dispatch, taking in charge at/ from
not later than
for transportation to:
This segment includes the "dispatch from...for transportation to..." information and the latest date of
shipment.
In stating where the goods will travel from and where they will travel to, the parties should agree
precise placesharbors, airports, and so on.
Generalized references such as "US East Coast Port" are sometimes used. After "no later than," the
parties should enter a final delivery date. If they do not , then the date of expiry of the credit is.
taken to be the final delivery date. Sometimes the formula "nor later than" does noc adequately
state the agreed delivery time. In that case, the words should be deleted and others substituted,
such as "during May 2007" or "not before 20th May 2007 and not after 28th June 2007."
This timing decision should be coordinated with the other timing decisions on the credit Segment
4; dare of expiry, and Segment 18, the period allowed after shipment for presentation of documents
to the bank.

Segment 15: Description of the Goods


Goods (brief description without excessive detail) .
The goods description should be kept as brief as possible. The more complicated the description, the
more chance there is of a discrepancy with some other documentthe inspection certificate or the
commercial invoice, for example.
.
Quantities are sometimes stated in specific terms: "30 x 8-gallon drums," for example. In this case
the bank checks the documents to ensure that the exact quantity has been shipped. If the terms are
less specific (50 tons of grade 3 sand," tor example), then the bank allows a tolerance or 5% either
way unless the credit expressly excludes all tolerances. Even more vague, the credit may state the
quantity as "about 50 tons or nearly 50 tons." In this case the bank allows a 10% tolerance before
refusing payment.
To date, use of the Standard International Trade Classification Code of the Harmonized System
Code which allocate code numbers to specific products is rare in letters of credit.
Segment 16: Incoterm(s)
FOB CFR CIF

Other terms: .

Three boxes here specify the most common terms or trade: FOB, CFR and CIF. In each case, the
name of a place must be added in parenrtheses. If any Incoterm is used, it should be given in full.
For details see Section 6 above.
Segment 17: Documents
The application form leaves the space where documents are to be listed without a heading of any
sort. (The reason tor this omission is not clear.)
Documents should be listed in the recommended order. If there is not enough space, additional pages
may be added.
Commercial Invoice
Transport Document
Insurance Document
Further documents
Segment 18: Presentation Period
After the transport document is issued (i.e.. after the goods are shipped, the exporter needs sometime
to collect the required documents, to prepare them and to present them to the bank. Most buyers fix a
maximum time between shipment and presentation. If this box is left empty, the UCP (Article 43)
automatically allows 21 days, and that may be taken a a normal figure.
This timing decision should be coordinated with other timing decisions: Segment 4, date of delivery,
and Segment 14, latest date for shipment.
Segment 19: Additional Instructions
Typical "additional instructions" include a statement of the percentage of
the invoice price covered by the credit if this is less than 100% (addinonal to Segment 9), or the
delivery schedule if delivery is in installments (additional to Segment 14).
Segment 20: Authorization to Debit
We authorize you to debit our account
This segment is the buyer's responsibility alone. Normally nothing is added here. If, however, the
buyer's account number is not mentioned under "applicant" in Segment 1, it may be stated after the
word "account."
Segment 21: Signature
Name, stamp and authorized signature(s) of the applicant
The buyer signs and stamps the form.
CASE STUDY:
GETTING PAID
In each situation below, decide the most appropriate method of payment.
(A) Confirmed L/C (B) No security open account
(C) Bank guarantee open account (D) Export insurance open account
1. Sale of a bale (roll) of cloth costing $200 to a nearby tailors shop with whom you have done
business for 20 years.

2. A new small customer in a Pacific island republic much given to political disturbances. The order
is for $10,000 worth of assorted textiles.
3. A contract for supply of cloth worth $5,000 per month to the government of Oceanea- a
prosperous country. Duration of the contract: two years, but renewable. Contract represents 25.5% of
turnover.
4. The same deal as (3) except that the contract represents only 0.5% of your turnover.
1. Open account, no security 2. Confirmed L/C
3. If possible a bank guarantee. Otherwise export credit insurance.
4. Export credit insurance is advisable. Selling on open account with no security at all is also
possible.
EXHIBIT 8.1. The export flow: decision chart (pp. 168-9)

FURTHER READING
INCOTERMS 2010
The new INCOTERMS 2010 became effective January 1, 2011. Incoterms--which is an abbreviation
for International Commercial terms--are a series of sales terms. They are published by the
International Chamber of Commerce (ICC) and are widely used in commercial transactions.
In addition to providing a set of rules for the interpretation of commonly used trade terms,
INCOTERMS 2010 accomplish the following: (a) significantly revises Group D listed in
INCOTERMS 2000; (b) reduce Incoterms from four groups to two groups, allowing trade experts to
choose the most suitable rule related to the mode of transport; and (c) reduce the absolute number of
Incoterms from 13 to 11.

Moreover, INCOTERMS 2010 offer additional guidance which assists users in selecting the most
appropriate Incoterm for each transaction. The revised terms also spell out rules regarding the use of
electronic procedures; detail information on security-related clearances for shipments; and offer
advice with respect to domestic trade.
What are Incoterms?
Incoterms or International Commercial terms are a series of sales terms. They are published by the
International Chamber of Commerce (ICC) and are widely used in international commercial
transactions. The purpose of Incoterms is to provide a set of international rules for the interpretation
of commonly used trade terms in international transactions. They closely correspond to the U.N.
Convention on Contracts for the International Sale of Goods. The first Incoterms were issued in
1936. The most recent Incoterms were updated in 2010 and became effective January 1, 2011.
Who needs to understand Incoterms?
Government trade officials as well as many private sector parties should understand Incoterms. Such
private sector parties include: exporters, importers, trade finance professionals, export compliance
specialists, customs brokers, freight forwarders, insurers, international credit professionals, and sales
and purchasing managers.
What are Incoterms used for?
Incoterms assist trade practitioners in interpreting the most commonly used international trade terms.
Using correct Incoterms in an international transaction reduces considerably uncertainties arising
from the different interpretation of such terms in different countries.
They apportion international trade transaction costs and responsibilities between buyers (importers)
and sellers (exporters) and reflect modern-day transportation practices.
Incoterms assist in significantly reducing misunderstandings among traders and thereby minimizing
trade disputes and litigation. However, their scope is limited to matters related to the international
rights and obligations of the parties involved in the contract of sale with respect to the delivery of the
goods sold. Thus, they apply to the contract of carriage, not the contract of sale.
Why were the INCOTERMS 2000 revised?
INCOTERMS 2010 are the updated version of INCOTERMS 2000. INCOTERMS 2010 have been
developed as a result of an extensive review of current shipping practices and trends in an effort to
keep up with the rapid expansion of world trade.
The key drivers for this update include: a need for improved cargo security, changes to the Uniform
Commercial Code in 2004 that resulted in a deletion of U.S. shipment and delivery terms, and new
trends in global transportation.
How do INCOTERMS 2010 differ from INCOTERMS 2000?
In addition to providing a set of rules for the interpretation of commonly used trade terms,
INCOTERMS 2010 significantly revise Group D listed in INCOTERMS 2000.
The five INCOTERMS 2000 listed in Group D included the following:
DAF Delivered At Frontier
DES Delivered Ex Ship
DEQ Delivered Ex Quay
DDU
Delivered Duty Unpaid
DDP
Delivered Duty Paid
INCOTERMS 2010 contain the following categories:
DAT
Delivered At Terminal
DAP
Delivered At Place
DDP
Delivered Duty Paid
Moreover, INCOTERMS 2010 reduce the number of Incoterm groupings from four to two,
allowing trade experts to choose the most suitable rule related to the mode of transport.
The 13 INCOTERMS 2000 contained four essential categories of Incoterms. They were:
Group E Departure
Group F Main carriage unpaid
Group C Main carriage paid
Group D Arrival.
The two main categories of INCOTERMS 2010 are now organized by modes of transport. Used in
international as well as in domestic contracts for the first time, the new groups aim to simplify the
drafting of contracts and help avoid misunderstandings by clearly stipulating certain obligations of
buyers and sellers.

Group 1. Incoterms that apply to any mode of transport are:


EXW
Ex Works
FCA
Free Carrier
CPT
Carriage Paid To
CIP
Carriage And Insurance Paid To
DAT
Delivered At Terminal
DAP
Delivered At Place
DDP
Delivered Duty Paid
Group 2. Incoterms that apply to sea and inland waterway transport only:
FAS
Free Alongside Ship
FOB
Free On Board
CFR
Cost And Freight
CIF
Cost, Insurance, and Freight
Further, the two new groupings listed above note a reduction of the number of Incoterms from 13 to
11.
Finally, INCOTERMS 2010 provide additional helpful guidance and clarify obligations. For
instance, the revised terms also spell out rules regarding the use of electronic procedures; detail
information on security-related clearances for shipments; and offer advice with respect to domestic
trade.
Can I still use the INCOTERMS 2000?
According to the International Chamber of Commerce, all contracts made under INCOTERMS
2000 remain valid even after 2011. In addition, although the ICC recommends using INCOTERMS
2010 after 2011, parties to a contract for the sale with respect of the delivery of goods can agree to
use any version of Incoterms after 2011. It is important, however, to clearly specify the chosen
version INCOTERMS 2010, INCOTERMS 2000, or any earlier version.
Where can I obtain a copy of the new INCOTERMS 2010?
You can purchase a copy of the new INCOTERMS 2010 from the ICC website.
Where can I learn more about the new Incoterms?
There are a number of private sector and government organizations that offer workshops, webinars,
and seminars related to the new Incoterms. For webinars and other events related to Incoterms and
many other topics of tradecraft education that are being offered by the U.S. Commercial Service and
its partners in support of the Presidents National Export Initiative, you may visit our Trade Events
Search Database.
INCOTERMS AND THE EXPORTER
International Commercial Terms, known as Incoterms, are internationally accepted terms
defining the responsibilities of exporters and importers in the arrangement of shipments and
the transfer of liability involved at various stages of the transaction. Incoterms do not cover
ownership or the transfer of title of goods. It is crucial to agree on an Incoterm at the start of
a negotiation/quotation of a sale, as it will affect the costs and responsibilities involved in
shipping, insurance and tariffs. The new Incoterms 2010 rules were revised by the
International Chamber of Commerce and will become effective January 1, 2011. Four terms
were eliminated (DAF, DEQ, DES, DDU) and two were added: Delivered at Place (DAP)
and Delivered at Terminal (DAT).
The modifications affect obligations, risk transfer, and cost sharing for the seller and buyer,
resulting in better clarification and application of the eleven (11) Incoterms, and consistent
with the way global trade is actually conducted since the last update in 2000.
In any sales transaction, it is important for the seller and buyer to agree on the terms of sale
and know precisely what is included in the sale price. Exporters should choose the Incoterm
that works best for their company, but also be prepared to quote on other terms.
See VEDP FastFacts- Responding to Inquiries
Inexperienced exporters may want to use the Incoterm Ex Works (EXW), because this
term carries the least burden for them. Under EXW, an exporters responsibility ends at
their facilitys loading dock, which includes making the goods available for pick up and
providing any product information needed for filing the Electronic Export Information (EEI).
The importers agent (i.e. their designated U.S. freight forwarder) will arrange and pay for
the pre-carriage, shipping, insurance and any additional costs from the exporters door. A
sale based on the Incoterm CIF, on the other hand, requires the exporter to arrange and

pay for the pre-carriage, shipping, and insurance to a named port. In this case, the sale
price (invoice) includes not only the (C)ost of goods, but also (I)nsurance and (F)reight
costs that the importing buyer pays the exporting seller.
When designating the Incoterm on a commercial invoice or a quotation to the buyer, the
term should be followed by the city or port of load/discharge, such as EXW Factory,
Richmond, VA or CIF Rotterdam. Using the actual address is better to avoid any
confusion or misinterpretation. Communication throughout the entire process is crucial. For
example, under Ex Works, the shipper should notify the importer when the goods are ready
and after they have been picked up by the importers selected carrier. The exporters freight
forwarder often provides the vessel and sail date, or air cargo service used, and any ocean
bill of lading or airway bill number to keep the parties informed of the arrangements and
status of the shipment (even though technically under Ex Works the exporters
responsibility ends at their loading dock).
The most burdensome Incoterm for the exporter is Delivered Duty Paid (DDP), because all
arrangements and costs are borne by the exporter, usually with the assistance of agents
(freight forwarders and customs house brokers). With DDP, the exporter bears all risks and
costs of transportation, including duties and tariffs, until the goods are received by the
importer, usually at the importers factory or warehouse. Since DDP represents the
maximum obligation to the seller, it is not recommended for companies that are new-toexport.

DDP Example: Four palletized drums of chemicals at US$ 40,000, DDP 123 Main St.,
Santiago, Chile.
In the DDP example, for $40,000 total, the exporter arranges and pays for all transit costs,
including delivery to a designated facility at 123 Main Street, Santiago, including any
insurance coverage and duties/tariff charges. While these costs are added to the products
price and are sometimes itemized on the commercial invoice, the exporter takes full
responsibility for the added logistics costs and potential headaches, such as delays at
customs, demurrage or detention, or changes in inland or ocean transportation costs.
Shipping DDP should only be used by the most experienced exporters. Many details must
be considered, such as trade barriers, duties, currency exchange, reputability of service
providers, and delivery to the final destination. For example, if your product is a large,
custom-made piece of machinery for a factory:
Are there local out-of-gauge, heavy lift service providers?
Does the road to the factory allow access by an oversized truck?
What are the dimensions and capability of the buyers receiving dock?
How will you repair any damage that may occur during transit?
INCOTERM DEFINITIONS/CHANGES
The 11 Incoterms consist of two groups and are listed below in order of increasing
risk/liability to the exporter. Under the revised terms, buyers and sellers are being urged to
contract precisely where delivery is made and what charges are covered. This should avoid
double-billing of terminal handling charges at the port of discharge. References to ships
rail were taken out to clarify that delivery means on-board the vessel. Insurance,
electronic documentation, and supply chain security are addressed in more detail, and
gender-neutral language is now used.
Rules for Sea and Inland Waterway Transport:
FAS - Free Alongside Ship: Risk passes to buyer, including payment of all transportation
and insurance costs, once delivered alongside the ship (realistically at named port terminal)
by the seller. The export clearance obligation rests with the seller.
FOB - Free On Board: Risk passes to buyer, including payment of all transportation and
insurance costs, once delivered on board the ship by the seller. A step further than FAS.
CFR - Cost and Freight: Seller delivers goods and risk passes to buyer when on board the
vessel. Seller arranges and pays cost and freight to the named destination port. A step
further than FOB.
CIF - Cost, Insurance and Freight: Risk passes to buyer when delivered on board the ship.
Seller arranges and pays cost, freight and insurance to destination port. Adds insurance
costs to CFR.
Rules for Any Mode or Modes of Transportation:
EXW - Ex Works: Seller delivers (without loading) the goods at disposal of buyer at sellers
premises. Long held as the most preferable term for those new-to-export because it
represents the minimum liability to the seller. On these routed transactions, the buyer has
limited obligation to provide export information to the seller.
FCA - Free Carrier: Seller delivers the goods to the carrier and may be responsible for
clearing the goods for export (filing the EEI). More realistic than EXW because it includes
loading at pick-up, which is commonly expected, and sellers are more concerned about
export violations.

CPT - Carriage Paid To: Seller delivers goods to the carrier at an agreed place, shifting risk
to the buyer, but seller must pay cost of carriage to the named place of destination.
CIP - Carriage and Insurance Paid To: Seller delivers goods to the carrier at an agreed
place, shifting risk to the buyer, but seller pays carriage and insurance to the named place
of destination.
DAT - Delivered at Terminal: Seller bears cost, risk and responsibility until goods are
unloaded (delivered) at named quay, warehouse, yard, or terminal at destination.
Demurrage or detention charges may apply to seller. Seller clears goods for export, not
import. DAT replaces DEQ, DES.
DAP - Delivered at Place: Seller bears cost, risk and responsibility for goods until made
available to buyer at named place of destination. Seller clears goods for export, not import.
DAP replaces DAF, DDU.
DDP - Delivered Duty Paid: Seller bears cost, risk and responsibility for cleared goods at
named place of destination at buyers disposal. Buyer is responsible for unloading. Seller is
responsible for import clearance, duties and taxes so buyer is not importer of record.
INCOTERMS DO NOT
Determine ownership or transfer title to the goods, nor evoke payment terms.
Apply to service contracts, nor define contractual rights or obligations (except for delivery)
or breach of contract remedies.
Protect parties from their own risk or loss, nor cover the goods before or after delivery.
Specify details of the transfer, transport, and delivery of the goods. Container loading is
NOT considered packaging, and must be addressed in the sales contract.
Remember, Incoterms are not law and there is NO default Incoterm!
3
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SALES AGENCY AND SERVICES AGREEMENT
BY AND BETWEEN
SIEMENS MEDICAL SOLUTIONS USA, INC.,
CTI MOLECULAR IMAGING, INC.,
AND
CTI PET SYSTEMS, INC.
May 1, 2004
SALES AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT (this "AGREEMENT") is entered into and effective as of the 1st day of
May, 2004 (the "EFFECTIVE DATE") by and between SIEMENS MEDICAL SOLUTIONS USA,
INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter
"SIEMENS"), CTI MOLECULAR IMAGING, INC., a corporation duly organized and existing
under the laws of the State of Delaware (hereinafter "CTI"), and CTI PET SYSTEMS, INC., a
corporation organized and existing under the laws of the State of Tennessee (hereinafter "CPS").
Hp ng ny (gi l Hp ng) c k kt v c hiu lc k t ngy 1/5/2004 (gi l "Ngy c
hiu lc") gia mt bn l SIEMENS MEDICAL SOLUTIONS USA, INC., Tng cng ty c ng
k hp php v hot ng theo lut php ca Tiu bang Delaware (gi l "SIEMENS"), tp on
CTI MOLECULAR IMAGING, INC., c ng k hp php v hot ng theo lut php ca Tiu
bang Delaware (gi l "CTI"), v bn kia l CTI PET SYSTEMS, INC., c ng k hp php v
hot ng theo lut php ca Tiu bang Tennessee (gi l "CPS").
PREAMBLE Phn m u
WHEREAS, CTI Group, Inc., CPS, Dr. Terry D. Douglass, Dr. Ronald Nutt, Michael C.
Crabtree and J. Kelly Milam and Siemens entered into a stock purchase, reorganization and
joint venture agreement (the "JOINT VENTURE AGREEMENT") dated as of December 9, 1987;
Xt v CTI Group, Inc., CPS, Ts. Terry D. Douglass, Ts. Ronald Nutt, Michael C. Crabtree v
J. Kelly Milam cng Siemens k kt cc hp ng mua c phn, ti t chc cc cng ty v lin
doanh (gi l "H Lin doanh") k t ngy 9 / 12 / 1987;

WHEREAS, Siemens entered into an Amended Distribution Agreement with CPS effective
March 1, 2002 pursuant to which Siemens has the right to distribute certain of the products
manufactured by CPS (the "DISTRIBUTION AGREEMENT");

WHEREAS, CTI entered into a Distribution Agreement with CPS effective March 1, 2002 pursuant
to which CTI has the right to distribute certain of the products manufactured by CPS (the "CTI
DISTRIBUTION AGREEMENT" and together with the Distribution Agreement, the
"DISTRIBUTION AGREEMENTS");
WHEREAS, CPS is engaged in the development, manufacture, assembly, selling and
licensing of hardware, software, systems and equipment, and parts and components thereof, used
in the position emission tomography ("PET") business for human imaging;
WHEREAS, CTI possesses the necessary expertise and marketing organization to
promote sales of, and to solicit and obtain purchase orders for, such products and to provide other
related services to Siemens in connection therewith;
WHEREAS, Siemens is willing to appoint CTI, and CTI is willing to accept its
appointment, as the non-exclusive sales representative of Siemens for the sale of those products
manufactured by CPS in the United States upon the terms and conditions set out in this Agreement;
and
WHEREAS, the service and maintenance contracts with customers for CPS Products sold
under this Agreement shall be assigned between CTI and Siemens in accordance with the principles
set out in this Agreement;
Xt v cc hp ng dch v v bo tr cho khch hng i vi cc sn phm ca CPS c bn theo
hp ng ny phi c giao cho CTI v Siemens thc hin tun theo nhng nguyn tc nu trong
hp ng ny;
Nay cn c vo nhng tha c c km theo y, cc bn ng k kt hp ng ny theo
nhng iu kin v iu khon sau y:
ARTICLE 1
APPOINTMENT
1.1 Appointment. During the term of this Agreement and upon the terms and conditions set
forth herein, Siemens appoints CTI as its non-exclusive sales representative to solicit purchase orders
("PURCHASE ORDERS") to be entered into by Siemens with customers for the sale of CPS
Products (as defined in Section 1.3) throughout the United States (the "TERRITORY"), and CTI
accepts such appointment and agrees to conduct such activities in accordance with the terms and
provisions of this Agreement.
Have you ever written diaries in English?
How many contracts have you collected?
How many terms have you got in your list of glossaries?
Do you have any evidence for them?
1.2 Authority. Hereunder: this/ these under; under this contract given that .
(a) CTI's authority hereunder shall be to solicit Purchase Orders within the Territory, provided that
all such Purchase Orders shall be subject to acceptance by Siemens as provided in Section 3.3 hereof.
(b) Except as set forth in Section 3.1 and Section 7.1 hereof, CTI and its employees, agents or
contractors shall have no authority, and each shall not represent that it has the authority to make,
execute or enter into any agreement or to incur any indebtedness on behalf of Siemens.
(c) Except as set forth herein, CTI and its employees, agents or contractors shall make
no payment, rebate, offer of rebate, or other remuneration, directly or indirectly, to any
customer or third party, including, without limitation, any buyers, brokers, or employees or agents
thereof from any compensation or other consideration paid to or provided to CTI by or on behalf of
Siemens.
1.3 CPS Products. Subject to the terms of this Agreement, CTI shall have the right to sell
throughout the Territory the products manufactured by or offered for sale by CPS from time to time
(the "CPS PRODUCTS"), including but not limited to any software embedded therein or otherwise

described therewith, and spare and replacement parts and accessories for those CPS Products.
The parties agree that at all times CTI shall have the right to sell, on behalf of Siemens, all products
that Siemens is permitted to distribute on behalf of CPS pursuant to the terms of the Distribution
Agreement. Subject to Section 5.1 of this Agreement, all CPS Products shall be marketed under the
Siemens brand.
1.4 Sales Force. As soon as reasonably practicable after the Effective Date, Siemens
and CTI jointly shall appoint a Sales Management Committee (the "SALES MANAGEMENT
COMMITTEE") which shall be composed of six members, with three representatives each from
Siemens and CTI. The presence of two Siemens representatives and two CTI representatives shall
constitute a quorum for meetings of the Sales Management Committee. Through the Sales
Management Committee, the parties shall determine the appropriate composition, reporting
structure and the assignment of regions into which their respective sales forces shall be combined.
ARTICLE 2
GENERAL OBLIGATIONS OF CTI, SIEMENS AND CPS
2.1 CTI Sales Activities. At all times during the term of this Agreement CTI, as Siemens's
non-exclusive sales representative, shall:
(a) diligently promote sales of the CPS Products in the Territory;
(b) maintain in the Territory an adequately trained sales force knowledgeable of the CPS
Products as is reasonably necessary to perform its obligations hereunder, and manage its sales
force personnel as "product sales engineers" (as that term is understood by Siemens on the
Effective Date) in support of Siemens's account executives;
(c) participate, as is appropriate and in compliance with applicable legal requirements,
in appropriate sales, promotion, marketing or merchandising programs in the Territory prepared or
undertaken by or on behalf of Siemens;
(d) participate in, and consult with Siemens and its designated agents, regarding trade
shows and exhibitions in the Territory where such participation will promote the CPS Products;
(e) as applicable, refer prospective customers to the designated Siemens representative to
obtain financing for the purchase of CPS Products, subject to the provisions of Section 2.6 below.
2.2 Documentation and Reports. CTI shall prepare or cause to be prepared, keep,
maintain and provide Siemens with the following documentation and reports in a form and format
reasonably acceptable to Siemens:
(a) periodic (though no less often than quarterly) reports of sales activities of CTI within the
Territory identifying, among other things, actual purchasers of the CPS Products and active
prospective purchasers, actual or pending orders, contact and other relevant lead information for
each customer and active prospect, and any other information or data as mutually agreed upon from
time to time by Siemens and CTI;
(b) non-confidential business records customarily maintained by CTI with respect to CTI's
solicitation of Purchase Orders;
(c) information, in such reasonable detail as requested by Siemens, regarding market
conditions and product performance;
(d) a forecast for the number and type of units that will be sold the following fiscal year, by
no later than May 15 of each year; and
(e) such other matters as reasonably requested by Siemens.
2.3 License to Product Technology. Subject to the terms and conditions of this Agreement, CPS
grants to CTI a non-exclusive license in the Territory to use the Product Technology (as defined
below) to the extent reasonably necessary for CTI to promote and solicit Purchase Orders for the
Products and to service and support the Products in order to allow CTI to fulfill its obligations under
this Agreement.
This license is royalty-free and non-transferable except as permitted by Section 14.3. "PRODUCT
TECHNOLOGY" shall mean all computer software code (in object code format and including all
associated tool sets) and other technology and know-how comprised within the Products as well
as any service manuals and user documentation that is generally provided by CPS to its
customers and similarly situated distributors. All rights in and to the Product Technology not
expressly granted in this license shall be retained by CPS.
2.4 Obligations of Siemens. At all times during the term of this Agreement, Siemens shall
support marketing of the CPS Products by:

(a) Providing product managers to support the combined CTI-Siemens sales force (created
pursuant to Section 1.4 of this Agreement) with regard to technical matters within their expertise;
(b) Providing product demonstrators to demonstrate CPS Products, including both software
and hardware aspects of them;
(c) Developing sales tools and sales aids, including, among other things, case studies, cost
analyses, and competitive analyses;
(d) Promoting the unique capabilities of CPS Products using LSO HI-REZ technologies
and other pertinent technologies that may be developed (and, if necessary, approved by the FDA)
for use in CPS Products during the term of this Agreement;
(e) Promoting the use of CPS Products in relevant medical disciplines including, but
not necessarily limited to, oncology, cardiology, and neurology (the "KEY DISCIPLINES"), and
further development of each Key Discipline as a market for CPS Products and other CTI and
Siemens products and services;
(f) Placing advertisements in applicable journals and publications, emphasizing those
journals and publications pertaining to the Key Disciplines;
(g) Attending and participating in appropriate trade shows pertaining to the PET
industry or any of the Key Disciplines;
(h) Ensuring equal representation of CTI and Siemens personnel and shared presentation
space at all trade shows attended, unless otherwise agreed by the parties;
(i) Together with CPS, developing medical advisory boards for each of the three Key
Disciplines;
(j) Together with CPS, developing luminary and reference-site accounts for PET and
PET/CT;
(k) Participating in research projects with luminaries, including commitments to make
research contributions to luminaries from time to time in connection with such research projects,
subject to applicable legal requirements and Siemens internal policies governing the funding of
research grants; and
(l) Supporting and promoting to Siemens customers and Siemens corporate accounts, in
accordance with Article 9 of this Agreement, the products and services manufactured, distributed,
and/or provided by CTI and its subsidiaries (including P.E.T.Net Pharmaceuticals, Inc., a
Tennessee corporation ("PETNET")), including radiopharmaceuticals (as defined in Section 9.1
below), cyclotrons, sources, and REVEAL(TM) Marketing and Network Solutions worldwide.
2.5 Obligations of CPS. During the term of this Agreement, CPS shall use commercially
reasonable efforts to support Siemens marketing of the CPS Products by:
(a) Providing product managers to support Siemens' product managers or, in lieu of
providing product managers, providing adequate access for Siemens product managers to CPS'
engineering and research personnel;
(b) Providing product demonstrators to demonstrate CPS Products, including both
software and hardware aspects of them, to Siemens product managers and training personnel;
(c) Providing sufficient technical information, operational details and technical analyses for
Siemens to develop competitive arguments, sales tools and promotional materials for sales of CPS
Products;
(d) Continuing to develop competitive products or features to further advance the
technology or address competitive pressures created by the technology or features developed by
competitors;
(e) Maintaining adequate product planning processes, soliciting comments or feedback
on development needs from Siemens and, if determined appropriate by CPS after consultation
with Siemens, responding to or implementing such comments or feedback;
(f) Maintaining good quality standards and order completeness, including review of
quality records with Siemens periodically;
(g) Providing adequate training, tools and methods to facilitate deployment and installation
of and applications training for the CPS Products by Siemens personnel;
(h) Providing support for research projects with luminary and reference site accounts
designated by CPS, including financial support in an amount and to the extent deemed necessary
or appropriate to further the interests of CPS; and

(i) Evaluating requests from Siemens from time to time to provide support to facilitate
development of e.soft(TM) applications and integration and connectivity of scanner data with other
e.soft(TM) and e.soft@LEONARDO(TM) workstations or other Siemens products or applications;
provided, that any such support will be provided by CPS to Siemens only upon their mutual
agreement (and in each party's respective exercise of its sole discretion) and subject to
availability of resources and other matters relating to the feasibility of providing such support.
2.6 Product Financing. Siemens shall have the right of first refusal to provide financing
arrangements to purchasers of the CPS Products from CTI pursuant to this Agreement;
provided, that the financing terms and productoffering shall be no less favorable to the CTI sales
team than Siemens provides to its own sales team. If Siemens is unwilling or unable to provide
financing on a timely basis for a prospective purchaser, CTI will be permitted to refer such customer
to alternative financing sources.
2.7 Initial Transfer Price Reductions. For all orders for CPS Products received by CPS after
the Effective Date, the parties agree that (i) the component prices for which CTI supplies LSO
and Siemens supplies CTs to CPS shall be reduced by the amounts set forth on Schedule 2.7
attached hereto, and (ii) such component price reductions shall be passed to Siemens in their
entirety by reducing the Transfer Prices (as that term is defined in the Distribution Agreement)
by the sum of such amounts, as also set forth on Schedule 2.7. The parties agree that Exhibit D
to the Distribution Agreement shall be substituted with a revised Exhibit D in substantially the
form of Schedule 2.7.1 reflecting the initial transfer price reductions.
2.8 Additional Transfer Price Reductions. Following the initial transfer price reductions
contemplated in Section 2.7 above, CPS agrees to further reduce the transfer prices for the
Siemens/CPS PET/CT products in its product line in the amount of $* per system as reflected on
Schedule 2.8 attached hereto (the "ADDITIONAL TRANSFER PRICE REDUCTIONS"), subject
to the receipt by CPS of an additional transfer price reduction of $* per unit from the Siemens CT
division (i.e. $* from CPS and $* from Siemens CT). The Additional Transfer Price Reductions
will become effective with the order of the * unit from Siemens to CPS after October 1, 2003
which shall include CPS Products ordered from CPS to fill Purchase Orders generated by CTI
after May 1, 2004 pursuant to this Agreement.
* Omitted information is the subject of a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934 and has been filed separately with the Securities and
Exchange Commission.
2.9 Scope. The initial transfer price reductions and the Additional Transfer Price Reductions
contemplated in Sections 2.7 and 2.8 above shall apply to Siemens global sales of CPS Products.
2.10 Periodic Transfer Price Review. Upon Siemens's written request given not more
frequently than *, CPS and Siemens shall review CPS's Transfer Prices (as that term is defined in
the Distribution Agreement). Following such review, Siemens shall have the right to provide its
recommendations as to appropriate adjustments to such Transfer Prices. All determinations
regarding the setting or the changing of Transfer Prices shall be made by CPS as provided in the
Joint Venture Agreement, and no provision of this Section 2.10 shall restrict CPS's discretion in
making such determinations.
ARTICLE 3
ORDERS FOR CPS PRODUCTS
3.1 Purchase Orders. CTI shall solicit Purchase Orders solely on the basis of the terms and
conditions of sale (the "TERMS OF SALE") by utilizing the established standard sales processes of
Siemens. In order to determine the price to customers, CTI's sales agents shall use the list prices as
published in the Siebel quote system utilizing the same prizing authorities and escalation
processes as the Siemens personnel. Siemens shall implement its pricing policies fairly between the
Siemens and CTI sales organization so that neither party is disadvantaged in pursuing opportunities
in the marketplace. Where appropriate, CTI shall inform each prospective customer that
consummation of the sale is subject to Siemens' acceptance of the Purchase Order.
3.2 Submission of Purchase Orders to Siemens. Within one (1) business days after CTI has
obtained a signed Purchase Order from a prospective customer, CTI shall submit the Purchase
Order to Siemens for review and approval. CTI shall include any additional information regarding
the prospective customer or the order that Siemens reasonably may request.
3.3 Acceptance of Purchase Orders. All Purchase Orders submitted by CTI are subject to
acceptance in writing by Siemens in accordance with its corporate policy. Siemens shall determine

whether or not it will accept a Purchase Order within two (2) business days of receiving the Purchase
Order and any additional information from CTI. Siemens promptly thereafter shall deliver notice of
its decision in writing to CTI. Siemens shall be obligated to accept all Purchase Orders submitted
by CTI that have been approved through the Siemens standard order acceptance process, which
applies for all business conducted by Siemens in the Territory. If the Purchase Order requires
financing, then the Purchase Order will be conditionally accepted based on financing approval.
* Omitted information is the subject of a request for confi ential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934 and has been filed separately with the Securities and
Exchange Commission.
3.4 Sales Revenue. Sales revenue under this Agreement shall accrue to Siemens in full, in
accordance with generally accepted accounting principles.
3.5 Installation and Training. Siemens shall be responsible for installation and initial
applications training through formal customer acceptance of the sold CPS Products. CTI agrees
to provide installation support and initial applications training during the first six (6) months of the
term of this Agreement, at a price to be mutually agreed by CTI and Siemens. Pricing shall be
comparable to current pricing presently offered by CTI and/or Siemens. Wherever possible during
the first six (6) months of the term of this Agreement, the party awarded the Service Contract for a
CPS Product under the provisions of Article 7 will perform installation and training; and, if such
party is CTI, then Siemens will pay to CTI $* per CPS Product, equal to the first-year warranty
labor credit extended to Siemens under the provisions of the Distribution Agreement.
3.6 Backlog. The completion of firm Purchase Orders which have been executed by the
customer prior to the Effective Date but for which delivery has not yet taken place (the
"BACKLOG ORDERS") shall be carried out by Siemens or hCTI, whichever originally entered
into the Purchase Order.
3.7 Sales Funnel. On or before June 1, 2004, representatives of CTI and Siemens shall review
all unexpired quotes that are in the course of being negotiated by CTI that were outstanding as of
the Effective Date (the "FUNNEL ORDERS"). CTI shall enter into all Funnel Orders, from time
to time after the Effective Date, in the ordinary course of business. Based on its review of the
Funnel Orders with CTI, Siemens shall select such of the Funnel Orders as meet Siemens' standards
for acceptance, whereupon CTI and Siemens shall work together to effect a transition of the
relationship from CTI to Siemens in a manner that meets the individual needs of the customer.
CTI shall carry out all Funnel Orders (a) not selected by Siemens in accordance with the
foregoing, or (b) selected by Siemens, but as to which a transition approach acceptable to the
customer is not achieved.
ARTICLE 4
EXPENSES
4.1 Expenses.
(a) Not later than one hundred fifty (150) days prior to the end of each CTI fiscal year, CTI
shall prepare and present to Siemens a proposed annual operating and capital budget (the
"BUDGET") for the expenses to be reimbursed by Siemens pursuant to Section 4.1(b) hereof
("REIMBURSABLE EXPENSES") during the following CTI fiscal year. Siemens shall have
thirty (30) days in which to review the Budget and communicate any material objections or
requested changes to the Budget in writing to CTI in reasonable detail. CTI and Siemens shall work
together to promptly respond to any objections and requested changes submitted by Siemens.
Siemens and CTI shall mutually agree upon a Budget by no later than June 20 of each year;
provided, that if Siemens and CTI are unable to approve a Budget by the beginning of CTI's fiscal
year, then until an agreement is reached the Budget for the prior year shall be deemed to be
adopted as the Budget for the current year, with each line item, as applicable, in the Budget increased
by the percentage increase in the Consumer Price Index - All Urban Consumers (CPI-U) U.S.
City Average All Items 1982-84=100 from August of the prior year to August of the current year.
* Omitted information is the subject of a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934 and has been filed separately with the Securities and
Exchange Commission
(b) Siemens shall reimburse CTI for all direct expenses incurred by CTI with respect to the
Account Managers employed by CTI who assist in the sales, marketing and account
management for the CPS Products and related administrative support personnel (the "ACCOUNT
MANAGERS"), including without limitation (i) payroll, wages, salaries and benefits; and (ii)

travel, lodging and related expenses; except employment taxes, which will be paid as provided in
Section 6.2.
(c) On the tenth (10th) day following the end of each month during the term of this
Agreement, CTI shall submit to Siemens an invoice identifying the amount of Reimbursable
Expenses incurred in the previous month. Within thirty (30) business days following the date of
such invoice, Siemens shall pay to CTI in cash via wire transfer to an account designated by CTI
the amount set forth on such invoice.
(d) The expenses to be incurred by Siemens pursuant to this Section 4.1 shall not exceed $*
for the period from the Effective Date to September 30, 2004.
(e) Contemporaneously with the execution of this Agreement, CTI has provided to Siemens,
and Siemens has approved, a budget for the fiscal year from October 1, 2004 to September 30, 2005
reflecting annual expenses of not more than $*.
4.2 Evaluation of CRPs.
(a) The Parties agree that the average customer realized prices for the CPS Product
configuration set forth on Schedule 4.2 hereof (the "CRPS") will be reviewed no later than October
31, 2004 for the five months ending September 30, 2004 (the "REVIEW PERIOD") in order to
determine whether, over the Review
Period, the CRPs on sales of CPS Products in the United States exceed the following target
CRPs for substantially similar product configurations:
2-slice PET/CT . . $*
6-slice PET/CT . . $*
16-slice PET/CT . . $*
The Parties agree that the analysis of sales during the Review Period will include only those
transactions that were entered into after the transfer price reductions became effective, regardless
of shipment date. In the event the average CRPs exceed the target CRPs set forth above for CPS
Products installed in the United States, Siemens and CTI shall each receive 50% of such excess with
such payment, if any, to be made within thirty (30) days of the turnover and acceptance by
customer. A similar review will be conducted each fiscal quarter during the term of this Agreement
commencing October 1, 2004. The parties agree that the target CRPs will be reduced dollar-fordollar with any transfer price reductions implemented after the initial transfer price reduction
referred to in Sections 2.7 and 2.8 hereof.
* Omitted information is the subject of a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934 and has been filed separately with the Securities and
Exchange Commission
(b) Transfer Price Relief to Luminaries. Siemens and CPS acknowledge that certain
sales to key accounts and other key market opportunities ("luminaries") may from time to
time necessitate a further reduction in CRPs for commercial reasons. The parties agree that CPS
shall be free to reduce its transfer prices within the limited scope of making sales to such
luminaries, such decision to be based upon reasonable business factors. Accordingly, the parties
agree that CRPs arising from such transactions shall be excluded from the calculation contemplated
in Section 4.2(a) above. The CRPs for all sales of PET and PET/CT products in multi-modality
deals where the CPS volume is less than *% of the total order volume also will be excluded from
the calculation contemplated in Section 4.2(a) above. The Parties shall designate one
representative from each of their finance organizations to evaluate and agree on those
transactions that should be excluded from the foregoing calculation. In the event the finance
teams fail to agree, the disputed transactions shall be escalated to the President of each Party for a
decision, prior to submission to arbitration in accordance with Section 12.1 of this Agreement. In
order to facilitate proactive decision making, once per fiscal quarter the combined Siemens and
CTI sales forces will develop a list of the luminary accounts to be targeted, as a 12-month rolling
forecast.
4.3 Inspection. CTI shall have the right, exercisable twice per fiscal year upon five (5)
business days notice to Siemens, to inspect at Siemens' headquarters for a period of no longer
than three (3) business days the customer account information, financial records, service contracts,
books, reports, and other documents prepared, maintained or retained by Siemens that support the
calculation of CRPs contemplated in Section 4.2 hereof and the additional payments, if any, to
be made, as well as the allocation of service contracts contemplated in Section 7.1 below. If
Siemens reasonably determines that the dates initially chosen by CTI to perform the inspection
would unreasonably interfere with Siemens's business, then Siemens and CTI shall select new

dates for the inspection by mutual agreement. CTI agrees that it shall hold in confidence and
treat as confidential all confidential information received from Siemens pursuant to this Section
4.3 and shall only use and disclose such information on a need-to-know basis in connection with
the business relations between CTI and Siemens, for financial and planning purposes, to
resolve disputes between the parties regarding the allocation of Service Contracts or the amount
owed to CTI pursuant to Section 4.2 of this Agreement.
ARTICLE 5
TRADEMARKS
5.1 Siemens Brand. The CPS Products sold by CTI pursuant to the terms of this Agreement
shall be marketed and sold under Siemens trademarks, service marks, logos, trade names, labels
and/or other materials; provided, however,
* Omitted information is the subject of a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934 and has been filed separately with the Securities and
Exchange Commission. that those CPS Products sold by CTI in fulfillment of Backlog Orders
pursuant to Section 3.6 of this Agreement or in fulfillment of Funnel Orders not entered into and
completed by Siemens pursuant to Section 3.7 of this Agreement shall be sold under CTI
trademarks, service marks, logos, trade names, labels and/or other materials. Nothing herein
contained shall give or be deemed to give CTI or its employees, agents or contractors any right,
title or interest in any trademark, service mark, copyright or other intellectual property right held or
used by Siemens. CTI shall not knowingly take any action, or knowingly fail to take any action
where such action or failure would, directly or indirectly, have an adverse effect upon the
trademarks, service marks, copyrights or other intellectual property rights of Siemens.
5.2 CTI Products. All CTI Products shall be marketed and sold under CTI trademarks, service
marks, logos, trade names, labels and/or other materials. Nothing herein contained shall give or
be deemed to give Siemens or its employees, agents or contractors any right, title or interest in
any trademark, service mark, copyright or other intellectual property right held or used by CTI.
Siemens shall not knowingly take any action, or knowingly fail to take any action where such
action or failure would, directly or indirectly, have an adverse effect upon the trademarks,
service marks, copyrights or other intellectual property rights of CTI.
5.3 CPS. The parties hereto agree that nothing contained in this Agreement is intended (i)
to limit or restrict CPS' right to label or use its trademarks, service marks, logos and trade names
in any manner necessary to maximize the growth of its business, or (ii) to amend or modify any
term or provision of the Joint Venture Agreement or the rights of the parties thereunder. With
respect to the CPS Products shipped with the Siemens logo or under the Siemens brand, CPS
agrees that it will not also place a CPS logo on the equipment, other than the CPS manufacturer
label on the lower right rear corner, without the prior approval of Siemens. For purposes of this
Agreement, the parties agree that CPS shall not be considered an "affiliate" of either CTI or
Siemens, but shall be deemed an independent business enterprise subject to the oversight and
control of its Board of Directors and the terms of the Joint Venture Agreement.
ARTICLE 6
TAXES, IMPORT, EXPORT
6.1 Sales and Related Taxes. In the event any governmental entity imposes any tax on the
sale of CPS Products, Siemens shall either pay the amount of such tax directly, or cause the
customers to pay the amount of such taxes directly, to such governmental entity. CTI shall have no
obligation to pay any taxes on the sale of the CPS Products and Siemens agrees to indemnify and
reimburse CTI for any such taxes imposed on CTI by any governmental entity, except that
Siemens shall not be obligated to pay sales or related taxes on sales of any CPS Products for which
Siemens does not get sales credit under the terms of this Agreement.
6.2 Employment Taxes. The parties acknowledge and agree that the Account Managers
will be employed by CTI and will under no circumstances be considered employees of Siemens.
CTI shall be responsible for all withholding, payroll and similar taxes related to its employment of
the Account Managers none of the Account Managers shall be entitled to any benefits afforded to
the employees of Siemens. CTI agrees that: (i) Siemens will not withhold on behalf of the Account
Managers any sums for income tax, unemployment insurance, social security, or any other
withholding pursuant to any law or requirement of angovernmental body; and (ii) all of such taxes,
payments and withholdings, if any, are the sole responsibility of CTI. CTI agrees to indemnify and

reimburse Siemens for any income tax, unemployment withholding or other employment taxes with
respect to the Account Managers that are imposed on Siemens by any governmental entity.
ARTICLE 7
SERVICE AND WARRANTY
7.1 Service Contracts.
(a) For purposes of this Article 7, the term "SERVICE CONTRACT" means a service
contract covering a CPS Product for which formal customer acceptance is received (i) at the time
of sale of the CPS Product, regardless of whether the CPS Product is sold as a new unit or as a used
unit, or (ii) at any time after such sale until the date which is eleven (11) months after formal
customer acceptance of installation of the CPS Product.
(b) As soon as reasonably practicable after the Effective Date, the parties shall form a
committee (the "SERVICE MANAGEMENT COMMITTEE") which shall be composed of six
representatives as follows: three representatives each from Siemens and CTI with two
representatives from each party from the service organization and one from the finance group.
The presence of two Siemens representatives and two CTI representatives shall constitute a
quorum for
meetings of the Service Management Committee. The Service Management Committee
shall meet on a monthly basis, and may meet by telephone conference. At each
meeting, Siemens shall submit to the Service Management Committee a list of all
Service Contracts received by Siemens since the previous meeting. The list of Service Contracts
shall include a summary of all information the Service Management Committee deems
necessary for the selection of such contracts by the Parties. The selection of such contracts by CTI
and Siemens shall take into consideration certain parameters, including, but not limited to,
predominant geographic coverage in the customer's region, pre-existing business
relationships, and contract value. At the initial meeting of the Service Management Committee,
Siemens shall have the right to select the first Service Contract it desires to maintain, then CTI
shall have the right to select one Service Contract, and thereafter the parties shall alternate
selections until all Service Contracts have been divided between them as closely as possible to the
revenue split contemplated in Section 7.2 below. The selection sequence will continue to alternate at
subsequent Service Management Committee meetings, such that the party that did not have the last
selection at the prior meeting shall have the right to select first at the next meeting. Within thirty
(30) days of the end of each fiscal quarter, the chief financial officer of Siemens or the chief
financial officer of its Nuclear Medicine Group shall certify that all Service Contracts required to
be submitted to the Service Management Committee under this Agreement have been submitted
as required hereunder and that the summaries of such service contracts as provided by Siemens are
true and correct in all material respects.
7.2 Service Contract Transfers. As a result of the selections made by the representatives of
the Service Management Committee under Section 7.1 hereof, Siemens and CTI shall each enter
into or otherwise effect the transfer or assignment of such initial Service Contracts to ensure that
the aggregate revenues to be derived respectively by Siemens and CTI thereunder shall be
substantially equal. Siemens shall ensure that the agreements executed by the customer authorize
the transfer or assignment of such Service Contracts to CTI as contemplated in Section 7.1 above.
7.3 Service Contract Disputes. In the event the Service Management Committee is unable to
resolve any dispute or controversy, the matter shall be promptly submitted to the President of each
organization for resolution prior to submission of the dispute to arbitration in accordance with
Section 12.1 of this Agreement. The parties agree to work in good faith to resolve any such dispute
expeditiously in a manner consistent with the spirit of this Article 7.
7.4 First Year Warranty. First year warranty service shall be provided by the party that receives
the Service Contract, with such party also receiving the first-year parts credit from CPS. If CTI
provides first-year warranty labor, Siemens shall pay CTI the applicable lump-sum labor
reimbursement amount set by Schedule 7.4 attached hereto. For all CPS Products, whether sold as
new units or used units, not covered by a Service Contract at the time of formal customer
acceptance of installation, the responsibility for providing first-year warranty labor on such CPS
Products shall be allocated equally between CTI and Siemens by the Service Management
Committee at the last monthly meeting before formal customer acceptance of installation. Any
Service Contract later executed with respect to any such CPS Product shall be allocated in
accordance with Section 7.1 above.

7.5 Existing Service Contracts; Installed Base.


(a) Except as provided in Article 8 of this Agreement, all contracts in force on the
Effective Date between either CTI or Siemens and any third party for extended warranty service
on any CPS Product shall be retained after the Effective Date by the party which originally entered
into them.
(b) Notwithstanding the other provisions of this Article 7, but subject to the provisions of
Article 8, Siemens and CTI shall have the right independently to pursue any and all service
contracts for CPS Products that, if entered into, would not meet the definition of "Service Contract"
set forth in Section 7.1(a) above; and CTI nor Siemens shall be obligated to submit any such service
contract to the Service Management Committee.
ARTICLE 8
INTERNATIONAL EXPANSION
8.1 Assignment of Service Contracts.
(a) CTI shall assign to Siemens all scanner service contracts for the service of any CPS
Products to which CTI or any of its affiliates is a party in any international market other than Korea
or Japan. A list of the applicable service contracts to be assigned is attached hereto as Schedule
8.1. In connection with such assignment, Siemens agrees to assume all remaining first year
warranty labor obligations applicable to such CPS Products, as well as installation and first-year
warranty labor obligations as to those CPS Products covered by Backlog Orders to be installed at
any international location after the Effective Date. CTI agrees to credit Siemens for the unused
prorated portion of the first-year parts warranty for those CPS Products contemplated in the
immediately preceding sentence, up to the amount set by CPS. The parties agree that in no event
shall such credit exceed the aggregate unused prorated portion of the first-year parts warranty
applicable to such assigned service contracts.
(b) In consideration for the assignment of service contracts pursuant to this Section 8.1,
Siemens shall pay CTI $2,200,000, in immediately available funds, to the account designated by
CTI. CTI reserves the right to direct that some or all of these funds be paid directly to CTI's wholly
owned European subsidiaries.
(c) CTI shall be responsible for all severance and other costs associated with the cessation
of its international sales and service business with respect to the sale and service of the CPS
Products. Siemens shall have the right to interview, solicit and hire those CTI employees currently
engaged in CTI's international sales and service operations for the CPS Products.
8.2 Limitation. In consideration of the assignment set forth in Section 8.1 above, CTI hereby
agrees that, during the term of this Agreement, it shall not enter or re-enter the United States market
or any international market with respect to the sale or service of CPS Products, either directly or
indirectly, alone or in cooperation with any third party other than CPS, except as may be otherwise
agreed in writing by the parties hereto or as follows:
(a) In Korea, CTI shall continue its focus on sales based on the fee/scan business model
and the service of such equipment.
(b) From and after the Effective Date, the parties acknowledge and agree that CTI shall
retain the existing Distribution Agreement for CTI PET Products dated January 22, 2003 (the
"CMI AGREEMENT") between CTI and Kabushiki Kaisha CMI ("CMI") in Japan, which has an
initial term of three (3) years; provided, that (i) upon the termination or expiration of the CMI
Agreement, CTI shall not replace CMI with another distributor in Japan or extend the CMI
Agreement with respect to the sale or service of CPS Products, and (ii) during the term of the CMI
Agreement, CTI will not enter into any new agreements regarding the distribution of CPS
Products in Japan.
8.3 Restrictive Covenant. In consideration of the payment of the
consideration provided for in Section 8.1(b) of this Agreement, during the term
of this Agreement neither CTI nor any entity in which CTI owns 50% or more of
the voting securities, other than CPS (collectively, the "CTI RESTRICTED PARTIES"), shall
engage in the business of selling, servicing, maintaining, or repairing PET or PET/CT scanners
in the United States market or any international market other than Korea and Japan.
8.4 Termination of Restrictions. The limitations and restrictive covenants set forth in
Sections 8.2 and 8.3 above shall terminate and become of no further force and effect immediately
upon CTI's receipt of any notice of non-renewal of this Agreement given by Siemens pursuant to

Section 10.1 below in order to allow CTI to prepare to re-enter the markets at or after the effective
date of termination.
ARTICLE 9
SALE OF CTI PRODUCTS
9.1 Siemens as Representative. CTI hereby appoints Siemens, and Siemens hereby accepts
appointment, as CTI's non-exclusive representative to offer for sale to Siemens' customers products
manufactured and/or distributed by CTI and
its subsidiaries (collectively, the "CTI PRODUCTS"), including but not limited to:
(a) positron-emitting molecular probes used in PET procedures, whether for diagnosis
of disease or for research purposes ("RADIOPHARMACEUTICALS"), distributed by
PETNET;
(b) cyclotrons;
(c) REVEAL(TM) Marketing and Network Solutions; and
(d) sources; provided, with respect to Section 9.1(d) above, that regulatory requirements for
CPS sources are met and that offers are made by Siemens in a good faith basis.
9.2 Exclusivity.
(a) Subject to the expiration or termination of any existing agreements to which
Siemens is a party regarding the provision to Siemens customers of cyclotrons or
radiopharmaceuticals, Siemens hereby agrees that during the term of this Agreement it shall offer
exclusively CTI cyclotrons, PETNET radiopharmaceuticals, and CPS sources for sale to
Siemens customers interested in purchasing cyclotrons, radiopharmaceuticals, or sources. It is a
condition to Siemens' obligations under this Section 9.2 that the cyclotrons, radiopharmaceuticals,
or sources be competitively priced, and that (with respect to radiopharmaceuticals), PETNET be
able to timely deliver the radiopharmaceuticals to the customer site. Siemens agrees to review
and pursue the early termination of any such conflicting agreement or relationship if Siemens can
do so without cost to itself and such termination will not adversely affect Siemens's existing business
operations.
(b) Siemens and CTI agree that the provisions of this Article 9 do not impose any restriction
on (i) CTI's right to distribute the CTI Products itself or through others, (ii) Siemens's rights to
distribute its products itself or through others, or (iii) CPS's right to distribute any CPS Products
itself or through others.
9.3 Procedures. CTI and Siemens shall cooperate to develop procedures for the sale of CTI
Products pursuant to this Article 9; provided, that all sales of CTI Products shall be made in
accordance with CTI's standard terms and conditions of sale and pursuant to orders accepted by CTI.
9.4 Packaging of CTI Products with Siemens Products. CTI Products offered by Siemens
under this Article 9 may be included as an option to the customer as part of a package with the CPS
Products and Siemens' own products. In no event shall Siemens be obligated to package CTI
Products with any other Siemens products, nor shall any customer be forced to purchase any such
package. Any such packaged offering shall comply with all Federal, state and local laws.
9.5 Commission. The commission that the Siemens sales representatives will receive for the
sale of the CTI Products shall be consistent with the commission paid by CTI to its PET
tomography sales representatives for the same
products.
9.6 Mirada License. As additional consideration for CTI's execution of this Agreement,
Siemens shall execute and enter into that certain Fusion7D(R) Software License Agreement dated as
of the Effective Date (the "MIRADA LICENSE") between Siemens and Mirada Solutions Limited,
a wholly owned subsidiary of CTI incorporated under the laws of England and Wales.
9.7 Further Cooperation. The parties will work together to identify other potential areas in
which they may collaborate in furtherance of their respective businesses. Siemens also
acknowledges its desire to enter into a separate agreement with Concorde Microsystems, Inc.
("CONCORDE") for the distribution of its microPET(TM) product line, on terms to be mutually
agreed upon between Siemens and Concorde.
ARTICLE 10
TERMINATION
10.1 Term. The initial term of this Agreement shall be two (2) years from the Effective Date
and shall automatically be extended for additional one (1) year periods unless either party

provides not less than 180 days prior written notice of its election not to renew for such additional
term or this Agreement is earlier terminated pursuant to Sections 10.2, 10.3, 10.4, or 10.5 hereof.
10.2 Termination for Cause. At any time during this Agreement, this Agreement may be
terminated for cause:
(a) By any party, upon thirty (30) days' written notice to the other parties, upon the
occurrence of any one or more of the following events:
(i) a material breach by any other party of this Agreement if such other party shall have
failed to cure such breach within ninety (90) days' of receipt of written notice thereof from the
terminating party describing with specificity the factual basis constituting the material breach;
(ii) an adjudication of bankruptcy of any party under any bankruptcy or insolvency
law; or
(iii) the commission by any party of a receiver for business or property, or the making
of any general assignment for the benefit of Creditors
(b) By CTI, in the event that total unit sales of CPS Products represent less than *% of
total unit sales of new PET and PET/CT scanners in the United States for two consecutive fiscal
quarters as reported by the National Electronics Manufacturers Association (in either dollar
volume or number of orders), if such reduction is not directly attributable to a decline in the
quality of the CPS Products, non-competitive pricing or transfer pricing issues not attributable to
the Transfer Prices paid for CTs to Siemens by CPS, adverse action by the U.S. Food and Drug
Administration (the "FDA") related to CPS or the CPS Products, work stoppage or labor unrest at
CPS that results in missed shipments, or similar events adversely affecting CPS's business
operations in a manner that erodes total market share.
(c) By CTI, if Siemens terminates the Mirada License for any reason.
(d) By CTI, if Siemens is in breach or default of any of its payment obligations set
forth in this Agreement and such breach or default continues for thirty (30) days or more after
receipt of written notice thereof, upon written notice to Siemens, with such termination to be
effective on the date of receipt by Siemens of such termination notice.
10.3 Termination Upon a Force Majeure Event. If a Force Majeure Event (as defined in
Section 14.2) continues for a period of six (6) months or longer, then the entirety of this Agreement
may be terminated by any party whose own performance is not delayed or prevented by the
Force Majeure Event (the "UNAFFECTED PARTY") immediately thereafter by providing
notice to the other parties.
* Omitted information is the subject of a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934 and has been filed separately with the Securities and
Exchange Commission.
10.4 Termination by Mutual Agreement . This Agreement may be terminated at any time during
the term hereof the mutual written agreement of the parties hereto.
10.5 Termination Upon Exercise of Option. Either party shall have the right to terminate this
Agreement at such time as Siemens attains an 80% or greater interest in CPS pursuant to the
closing of the additional purchase and sale rights set forth in Section 14 of the Joint Venture
Agreement (the "OPTION").
10.6 Obligations Upon Termination.
(a) Except as provided, CTI agrees that upon the termination of this Agreement for any
reason whatsoever CTI shall:
(i) cease all marketing and promotion of CPS Products and the solicitation of Purchase
Orders on behalf of Siemens; and
(ii) on or before the effective date of termination, assist Siemens in preventing any
disruption of service or supply to customers of CPS Products located within the Territory, by
providing Siemens with a complete and accurate list and description of all unfulfilled Purchase
Orders from customers for the CPS Products submitted to CTI on or before the effective date of
the termination.
(b) Upon termination of this Agreement, Siemens shall reimburse CTI for all expenses for
which Siemens is obligated to reimburse CTI and which were incurred on or before the effective
date of termination.
10.7 Distribution of CPS Products.
(a) Upon the termination or non-renewal of this Agreement by Siemens for any reason,
CTI shall have the right to distribute CPS Products on substantially the terms set forth in the CTI
Distribution Agreement, as such

agreement may be amended from time to time by the parties.


(b) Upon the termination or non-renewal of this Agreement by CTI for any reason other
than a payment default by Siemens in accordance with to Section 10.2(d) above, CTI shall not
have the right to be a distributor of the CPS Products; provided, however, that Siemens and CTI may
enter into discussions regarding an appropriate OEM relationship to further the commercial interests
of the parties.
ARTICLE 11
LIMITS ON DAMAGES AND INSURANCE
11.1 Limitation of Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR
LOSS OF ANTICIPATED PROFITS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR
THE SALE OR USE OF THE CPS PRODUCTS.
11.2 Insurance. CTI and Siemens each agrees to maintain during the term hereof liability
insurance for personal injury and property damage, including product liability and contractual
coverage, as set forth herein. Coverage for personal injury shall be not less than One Million
Dollars ($1,000,000) aggregate annual liability. Coverage for property damage shall be not less than
Two Million Dollars ($2,000,000) per occurrence. CTI and Siemens agree that all liability insurance
obtained by CTI and Siemens shall include CTI and Siemens as named insureds reasonably
acceptable to CTI and Siemens. CTI and Siemens further agree, as a continuing obligation after
the term hereof, to maintain such insurance with no less than the coverage specified above in
full force and effect for the full life of the CPS Products sold hereunder. CTI and Siemens shall
supply each other with a Certificate of Insurance upon written request by Siemens or CTI.
ARTICLE 12
DISPUTE RESOLUTION
12.1 Arbitration. Except for (i) claims resulting from an alleged breach of a party's
confidentiality obligations hereunder or infringement of a party's technology or software, or (ii)
situations in which a party may suffer irreparable harm, any controversy or claim between the parties
arising out of or relating to this Agreement which cannot be settled by mutual agreement of the
parties in lieu of the institution of legal proceedings by either party shall be submitted to binding
arbitration on the terms set forth in the Joint Venture Agreement.
12.2 Release of Siemens by CTI. For and in consideration of the promises made by
Siemens set forth herein, the adequacy and sufficiency of which hereby is acknowledged, CTI
hereby does release, acquit, remise and forever discharge Siemens, all of its past and present
servants, agents, employees, shareholders, officers, directors, partners, associates, principals,
attorneys, successors, predecessors, insurers, and assigns, and any parent, subsidiary or affiliated
entities from any and all claims, causes of action, liabilities, obligations, responsibilities,
agreements, damages, actions, costs, and expenses of any nature whatsoever, including attorneys'
fees, arising out of or relating to violations or alleged violations of Section 12.2 the Joint Venture
Agreement related to the sale of PET image display or image analysis workstations, spare parts or
sources, from the beginning of time to the Effective Date. No portion of this Section 12.2 shall
apply to matters arising pursuant to this Agreement after the Effective Date.
12.3 Release of CTI by Siemens. For and in consideration of the promises made by CTI
set forth herein, the adequacy and sufficiency of which hereby is acknowledged, Siemens hereby
does release, acquit, remise and forever discharge CTI, all of its past and present servants,
agents, employees, shareholders, officers, directors, partners, associates, principals, attorneys,
successors, predecessors, insurers, and assigns, and any parent, subsidiary or affiliated entities
from any and all claims, causes of action, liabilities, obligations, responsibilities, agreements,
damages, actions, costs, and expenses of any nature whatsoever, including attorneys' fees, arising
out of or relating to violations or alleged violations of Section 11.4 of the Joint Venture
Agreement related to the sale of PET image display or image analysis workstations, spare
parts or sources, from the beginning of time to the Effective Date. No portion of this Section
12.3 shall apply to matters arising pursuant to this Agreement after the Effective Date.
12.4 Release by CPS. For and in consideration of the promises made by CTI and Siemens set
forth herein, the adequacy and sufficiency of which hereby is acknowledged, CPS hereby does
release, acquit, remise and forever discharge CTI and Siemens, all of their respective past and

present servants, agents, employees, shareholders, officers, directors, partners, associates,


principals, attorneys, successors, predecessors, insurers, and assigns, and any of their respective
parent, subsidiary or affiliated entities from any and all claims, causes of action, liabilities,
obligations, responsibilities, agreements, damages, actions, costs, and expenses of any nature
whatsoever, including attorneys' fees, arising out of or relating to violations or alleged violations of
Sections 11.4 or 12.2 of the Joint Venture Agreement related to the sale of PET image display or
image analysis workstations, spare parts or sources, from the beginning of time to the Effective
Date. No portion of this Section 12.4 shall apply to matters arising pursuant to this Agreement
after the Effective Date.
12.5 Denial of Admissions. The parties hereby agree that the releases set forth in Sections
12.2, 12.3, and 12.4 of this Agreement shall not be deemed to be an admission by any party of any
violation of any provision of the Joint Venture Agreement.
12.6 Sale of Workstations. The Parties hereby agree to amend the Joint Venture Agreement to
provide that future sales of PET image display and image analysis workstations (as opposed to
those workstations that provide PET reconstruction or image correction capability, which shall
continue to be excluded as part of the CPS Business) by either CTI or Siemens pursuant to the
terms of this Agreement shall not constitute a breach of the covenant not to compete contained in
the Joint Venture Agreement.
ARTICLE 13
ADDITIONAL COVENANTS
13.1 Further Assurances. CTI, CPS, and Siemens shall cooperate reasonably with each
other in connection with any steps required to be taken as part of their respective obligations under
this Agreement, and shall i) furnish upon request to each other such further information; ii) execute
and deliver to each other such other agreements, certificates, documents, and instruments; and iii) do
such other acts and things, all as any other party to this Agreement reasonably may request for
the purpose of carrying out the intent of this Agreement and the transactions contemplated hereby.
13.2 Assignment of Contracts. In the event that the transactions contemplated by this
Agreement require the sale, assignment, assumption, transfer, conveyance, or delivery by any
party hereto (the "ASSIGNOR") to another party hereto (the "ASSIGNEE") of any contract to
which the Assignor is a party, and if either (x) the provisions of such contract (the
"RESTRICTED CONTRACT") prohibit such assignment, or (y) the provisions of the Restricted
Contract require the consent of any other party to such sale, assignment, assumption, transfer,
conveyance, or delivery and such other party withholds, unreasonably delays, or unreasonably
conditions such consent, then:
(a) Notwithstanding any other provision hereof, neither this Agreement nor any other
document related to the consummation of the transactions contemplated hereby shall constitute a
sale, assignment, assumption, transfer, conveyance, or delivery or an attempted sale, assignment,
assumption, transfer, conveyance ,or delivery of the Restricted Contract; and
(b) The Assignor and the Assignee shall cooperate with each other in any reasonable and
lawful arrangements designed to provide to the Assignee the benefits of use of the Restricted
Contract for the term thereof (or any right or benefit arising thereunder, including the enforcement
for the benefit of the Assignee of any and all rights of the Assignor against a third party
thereunder); and
(c) The Assignor and the Assignee shall use their respective best efforts, and shall
cooperate with each other, to obtain the consent to the assignment of the Restricted Contract as
quickly as practicable.
Once consent for the sale, assignment, assumption, transfer, conveyance and delivery of a
Restricted Contract is obtained, the Assignor promptly shall assign, transfer, convey, and deliver
the Restricted Contract to the Assignee, and the Assignee shall assume the obligations under the
Restricted Contract assigned to the Assignee from and after the date of assignment to the Assignee.
ARTICLE 14
MISCELLANEOUS
14.1 Relationship. Nothing in this Agreement shall be construed to render any party the
employer or employee of any other party, the agent or principal of any other party, or a joint
venturer or member of any other party. No party shall have the right to bind any other party, to

exercise control of any other party, or to conduct any other party's business, except as expressly set
forth in this Agreement.
14.2 Force Majeure Provision. No party hereto shall be liable for any delay arising from
unanticipated catastrophic circumstances beyond its reasonable control including, but not
limited to, acts of God, war, riot or civil commotion, fire, flood, terrorism, drought or act of
government ("FORCE MAJEURE EVENTS"); provided, that the party seeking to be excused
shall make every reasonable effort to minimize the delay resulting therefrom. Each party shall keep
the other parties fully informed of any such circumstances. During the period that the performance
by one of the parties of its obligations under this Agreement is been suspended by reason of a Force
Majeure Event, all parties to this Agreement shall cooperate and use their commercially reasonable
best efforts to continue the business contemplated by this Agreement; provided, that any Unaffected
Party may (but shall not be required to) suspend performance of all or part of its obligations
hereunder to the extent that such suspension is commercially reasonable. The parties agree to
resume their performance under this Agreement as soon as possible upon the passing of the Force
Majeure Event.
14.3 Assignment. No party shall have the right to assign or otherwise transfer its rights and
obligations under this Agreement except with the prior written consent of the other parties;
provided, however, Siemens and CTI shall each be entitled to assign any or all of its rights and
obligations hereunder to any of its controlled subsidiaries, provided that both Siemens and CTI,
as applicable, shall remain fully liable for the performance of all its obligations hereunder; and
further provided that a successor in interest by merger, by operation of law, assignment, purchase
or otherwise of the entire business of either party shall acquire all rights and obligations of such
party hereunder. Any prohibited assignment shall be null and void.
14.4 Notices. All notices or other communication which are required or permitted hereunder
shall be in writing and sufficient if delivered by hand, by facsimile or telecopier transmission (and
a transmission confirmation is received by the sender), or by a recognized international or
overnight courier, to the persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date so delivered.
Siemens:
Siemens Nuclear Medicine Group
3501 North Barrington Road
Hoffman Estates, Illinois 60195
Facsimile: (847) 304-7080
Attention: President, Siemens Nuclear Medicine
With copies to:
Siemens Medical Solutions USA, Inc.
51 Valley Stream Parkway
Malvern, PA 19355
Facsimile:
Attention: President & CEO
and
Associate General Counsel
Siemens Legal Department J-16
51 Valley Stream Parkway
Malvern, PA 19355
CTI:
CTI Molecular Imaging, Inc.
810 Innovation Drive
Knoxville, TN 37932
Fax No.: 865/218-3016
Attention: President
With a copy to:
CTI Molecular Imaging, Inc.
810 Innovation Drive
Knoxville, TN 37932
Fax No.: 865/218-2760
Attention: General Counsel
CPS:
CPS Innovations
810 Innovation Drive
Knoxville, TN 37932
Fax No.: 865/218-2878
Attention: President
With a copy to:
Kilpatrick Stockton LLP

Suite 900
607 14th Street
Washington, DC 20005-2018
Fax No.: 202 585 0002
Attention: David A. Stockton
14.5 Entire Agreement. This Agreement, including the schedules attached hereto and
incorporated as an integral part of this agreement, constitutes the entire Agreement of the parties
with respect to the subject matter hereof, and supersedes any and all previous Agreements by and
between CPS, Siemens and CTI with respect to the subject matter hereof, if any, as well as any
and all proposals, oral or written, and all negotiations, conversations or discussions heretofore had
between the parties related to this agreement.
14.6 Amendment. This Agreement shall not be deemed or construed to be modified, amended,
rescinded, canceled or waived, in whole or in part, except by written amendment signed by the
parties hereto.
14.7 Publicity. This Agreement is confidential and no party shall issue press releases or engage
in other types of publicity of any nature dealing with the commercial and legal details of this
Agreement without the other parties' prior written approval, which approval shall not be
unreasonably withheld. However, approval of such disclosure shall be deemed to be given to the
extent such disclosure is required to comply with governmental rules, regulations or other
governmental requirements. In such event, the publishing party shall promptly furnish a copy of
such disclosure to the other parties. Notwithstanding the foregoing, CPS, Siemens and CTI shall be
permitted to file this Agreement and to disclose the terms of this Agreement in their respective filings
with the U.S. Securities and Exchange Commission or any similar state agency.
14.8 Severability. In the event that any of the terms of this Agreement are in conflict with any
rule of law or statutory provision or are otherwise unenforceable under the laws or regulations of
any government or subdivision thereof, such terms shall be deemed stricken from this
Agreement, but such invalidity or unenforceability shall not invalidate any of the other terms of
this Agreement and this Agreement shall continue in force, unless the invalidity or unenforceability
of any such provisions hereof does substantial violence to, or where the invalid or unenforceable
provisions comprise an integral part of, or are otherwise inseparable from, the remainder of this
Agreement.
14.9 Counterparts. This Agreement shall be executed in three or more counterparts, and each
such counterpart shall be deemed an original hereof.
14.10 Waiver. No failure or delay by any party to take any action or assert or exercise any
right or remedy hereunder shall operate or be deemed to be a waiver of such right or remedy in
the event of the continuation or repetition of the circumstances giving rise to such right; nor shall
any single or partial exercise of such right or remedy preclude any other or further exercise
thereof or of any other right or remedy. No provision of this Agreement may be waived except in a
writing signed by the party granting such waiver. Quyn t b thc hin. Khng c iu khon no
trong hp ng ny cho php t b nu khng c bn kia chp thun bng vn bn.
14.11 Authorization and Execution. By executing this Agreement each party represents and
warrants to the other parties (i) that the entry into and execution and performance of this Agreement
has been fully and duly authorized by all required corporate action, and (ii) that the person
signing this Agreement on behalf of a party has been fully authorized by all required corporate
action to execute this Agreement on behalf of the party for which such person is signing.
14.12 Confidentiality. Each party hereto agrees not to disclose to others the technical and
business information of the other parties hereto ("CONFIDENTIAL INFORMATION"), and
agrees to use the other parties' Confidential Information only for the implementation of this
Agreement and to hold the other parties' Confidential Information confidential using at a minimum
the same care it would exercise to protect its own Confidential Information but in no event less
than a reasonable degree of care. The receiving party further agrees to disclose the Confidential
Information of the disclosing party only to the receiving party's employees and agents who have a
need to know and only to those employees and agents who have agreed in writing to confidentiality
obligations substantially similar to those in this Section 14.12. The receiving party shall not permit
any of its personnel to remove any proprietary or other legend or restrictive notice contained or
included in any Confidential Information provided by the disclosing party, and the receiving
party shall not permit any of its personnel to reproduce or copy any such Confidential Information

except as expressly authorized under this Agreement. Provided, however, that such
confidentiality obligation shall not apply to any information which (a) is now or hereafter becomes
a part of the public domain, other than by act or omission of the receiving party, (b) was
independently developed by the receiving party or its affiliates; (c) information that was in such
party's possession prior to disclosure by the other party, (d) is hereafter furnished to the receiving
party by a third party, as a matter of right and without restriction on use or disclosure, who
lawfully possesses such information and did not acquire it directly or indirectly from the other
party, (e) is disclosed in any U.S. or foreign patent, or published patent application, whether
owned by the other party or any third party, or (f) is required to be disclosed to a government
agency or pursuant to a judicial proceeding, but only to the extent so required and provided that the
receiving party gives the disclosing party advance notice of such disclosure and reasonably
cooperates with the disclosing party (at the disclosing party's expense) to contest such disclosure.
The duration of this confidentiality obligation shall be for the term of this Agreement and for two
(2) years thereafter with respect to any Confidential Information that does not constitute a "trade
secret" under applicable law, and for Confidential Information that does constitute a trade
secret under applicable law, these confidentiality obligations shall last in perpetuity. Nothing in this
Section is intended by the parties to abrogate any rights or obligations of the parties under
common law or statutory law with respect to the use and disclosure of confidential information or
trade secrets.
14.13 Survival. The provisions in Section 14.12 shall survive the expiration or termination
of this Agreement indefinitely.
14.14 Governing Law. This Agreement shall be governed by, construed under, and
interpreted in accordance with the laws of the State of Delaware, U.S.A, applicable to contracts
made and performed entirely within that state.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
CTI MOLECULAR IMAGING, INC.
By: /s/ Ronald Nutt
----------------------------------Ronald Nutt, Ph.D.
President
SIEMENS MEDICAL SOLUTIONS USA, INC.
By: /s/ Thomas N. McCausland
----------------------------------Thomas N. McCausland
President
CTI PET SYSTEMS, INC.
By: /s/ R. Gregory Brophy
----------------------------------R. Gregory Brophy
President

Chapter 3 (P. 115)


NEGOTIATING INSPECTION AND DEFECTS LIABILITY
1. Exporting and the Problem of Quality
THE PROBLEM
Export markets are often far away. When things
go wrong with products, repair and replacement
can be ruinously expensive. What special steps
can the exporter take to minimize the risk of the
goods being rejected or of heavy defects liability

Th

claims?
THE PRINCIPLE
The first steps an exporter should take are to
ensure that all exported goods meet or
exceed the quality specified, that marking
and packaging are correct, and that delivery
is on time. Secondly, the agreement between
the parties should contain specific quality
specifications; detailed specification reduces
the chance of a dispute because it provides a
clear and objective standard that the goods
must meet.
IN MORE DEPTH
No manufacturer produces perfect products every
time. Even so, quality is a key issue, and customer
satisfaction is essential to successful business.
Many companies have quality assurance programs
to ensure that customers get what they pay for.
Until things are going well in the local market, it
makes little sense to export, because quality
assurance and customer satisfaction are much
rougher issues when the customer is in another
country, and when distance makes
communication, transport, inspection, payment,
and verification of claims expensive and time
consuming. Before looking in detail at inspection,
defects liability and the other issues, let's trace the
course of an exported product from manufacture
through to the end of the defects liability period
and see where the exporter is at risk.
Scenario: Verbena Electric is selling lightweight headphones with a built-in AM/FM radio. The
equipment runs on a single AAA battery. The customer is Euroeast Impex, a purchasing house in an
East European country with a huge market for modern, high quality equipment- provided the price is
right. The two sides have agreed an FOB (Port Verbena) price of $2.78 per unit, excluding battery.
Quality is an issue from the start of negotiations. Euroeast wants a product it can sell in tens of
thousands. But, despite the low price, this is not a throw-away product- the end user wants
headphones that will last at least six months. How does Euroeast get the quality it wants.
CONCEPT REVIEW: Close Knit
Verbena Knils is selling 5,000 sweaters to an importer in Nonamia, a country 4,000 miles away. The
Monamian buyer agrees to pay by letter of credit, but not by confirmed letter of credit. Delivery is to
be made DDP (Port Nemo). As to specifications, the buyers general conditions of purchase state:
"The quality of all deliveries shall be in accordance with the customs of the trade as practiced in the
Republic of Nonamia." And further, Clearly defective goods may'be rejected on arrival-and returned
to exporter at the exporter's risk and cost." The buyer wants to buy from Verbena Knits on these
loose and somewhat informal terms.
Where do you see danger for the exporter? If there is "Some Danger" or "Great
Danger, what is the danger you foresee ?
1. In the terms of the letter of credit? ..........................................................
NO DANCER
SOME DANGER GREAT DANGER
2. In the DDP delivery?..........................................................................

NO DANCER

SOME DANGER GREAT DANGER

3. In the lack of detailed quality specification?................................................


NO DANCER
SOME DANGER GREAT DANGER
4. In the "rejection on arrival" provision? ......................................
...
. NO DANCER
SOME DANGER
GREAT DANGER
.5. In the unusually geographical distance between exporter and buyer?......
NO DANCER
SOME DANGER GREAT DANGER
1. Some danger. An unconfirmed letter of credit is liable to severe delay in payment; the buyer's
bank (and therefore to some extent the buyer) take control of payment.
2. Some danger. The exporter bears the risk of the goods not only during their
voyage but also through customs and during transportation in the buyer's
country. This can cause problems.
3. Great danger. The right of the buyer to return "clearly defective" goods needs
close definition: full specificadon is the only way.
4. Some danger. The buyer has the right to reject defective goods undermost
applicable laws. The problem, as with question 3, is to define "defective."
5. Some danger. If anything goes wrong, the cost of putting things right increases with distance.
:
What You Should Know
1. Delivery of poor quality products to export markets is particularly dangerous because the cost
of curing defects is high.
2. To guard against high costs, the exporter should be particularly careful about quality
assurance.
3. In negotiating quality clauses, the exporter should pay special attention to detailed, realistic
specification of the goods.
4. Inspection provisions both before and after delivery must be negotiated with care.
5. The final quality hurdle is the defects liability period during which the exporter is liable to
cure defects that come to light in the goods.
(Page 121) 3.2 INSPECTION, ACCEPTANCE AND REJECTION
THE PROBLEM
When goods are delivered, the buyer inspects them. What are the buyers rights of rejection? Under
what circumstances can the buyer cancel the contract?
PRINCIPLE
The buyer has the right to inspect the goods and to reject them if they do not conform with the
contract. Under certain circumstances, the buyer may cancel the contract, though normally the
exporter takes or (has the right to take) corrective action.
IN MORE DEPTH
An exporter agrees to deliver goods of a certain quantity and quality. Any deviation is, essentially, a
breach of contract. Everyone knows, however, that delivered goods are seldom perfect. Somehow
the buyer must be protected against inferior goods, and the exporter must be protected against
cancellation of the contract for trivial or insufficient reasons. The defects liability provision (or
warranty) provides this double protection; the exporter says, in effect: I promise to deliver perfect
goods, but, if I break this promise, I still have a contract because I will fix the problem.

Translate into Vietnamese


CONTRACT FOR DISTRIBUTORSHIP AGENCY: DISTRIBUTORSHIP AGREEMENT
THIS AGREEMENT dated the last day of January 2010 . by and between AGIP PETROLI SPA
Singapore branch having a place of business at 302 Orchard Road 14-02 to 14-04 Tong Building,
Singapore 0923 ("AGIP")
And " xxxxxxxxxxxxxxxxxxx whose registered office is
xxxxxxxxxxx ("DISTRIBUTOR") '
,
Witnesseth:
AGIP and DISTRIBUTOR hereby covenant and agree as follows:
1. Definitions
As used in this Agreement the following terms shall have the meaning set forth hereafter:
a) "Products" shall mean AGIP Lubricants for Automotive and Industrial application and Special
Products as listed in the First Schedule for the distribution by Distributor in Consumer Packages (as
hereinafter defined) carrying the registered AGIP trademarks and/or getting up; it is agreed by the
parties hereto that AGIP or AGIP Affiliates (as hereinafter defined) may from time to time without
assigning any reasons thereto make improvements to or changes in the Products during the currency
of this Agreement; such improvement or changes even if resulting in a change in the characteristics
of the Products shall not affect the status of the Products as the Products and AGIP shall notify
DISTRIBUTOR of such improvement or changes
b) "Territory" shall mean the Socialist Republic of Vietnam
c) '"Consumer Packages" shall mean such original standard packages from time to time adopted by
AGIP
d) "Affiliate" shall mean any entity which is controlled by or in control of or under common control
with another specified entity
"Control" shall mean' a 25% or larger ownership of issued and outstanding voting securities or
common officers or directors or a contractual relationship allowing one entity to assume or
substantially influence the management or operations of another.
2. Appointment

a) Subject to the terms and conditions in this Agreement AGIP hereby grants to the Distributor the
sole right during the continuance in force of this Agreement to purchase for distribution and resale in
the Territory those of its Products exclusively for Automotive and Industrial Application (excluding
international marine application) specified in the First Schedule
b) This appointment shall take effect on ../../19 .. and shall subsist for a period of .. years from that
date unless otherwise terminated in accordance with the provisions of this Agreement and shall
continue thereafter until terminated by either party giving to
the other at any time six (6) months' notice in writing
c) Provided always that the Distributor is not in breach of any of its obligations and terms
whatsoever hereunder AGIP will not appoint any other distributor for the Products in the Territory
during the term of this Agreement; however AGIP may during the period of six (6) months prior to
the termination hereof appoint the Distributor's successor (if any) and allow AGIP and such
successor to make itself known as AGIP's future distributor appointed to do business after the
termination of this Agreement
3. Distributor's undertakings
a) The Distributor shall during the continuance of this Agreement purchase all its requirement of the
Products from AGIP and shall diligently and faithfully serve AGIP as its distributor in the Territory
and shall improve and promote the sale of the Products for Automotive and Industrial application
(excluding international marine application) to customers through the Territory and to ensure the
best possible display of the Products in
all marketing and sales outlets
b) The Distributor shall ensure in all events that the minimum order for the Products for delivery to
the Distributor shall be that set out in clause 6 (0 hereinafter set out in the Second Schedule hereto
c) The Distributor shall ensure that to conform with all legislation rules, regulations and statutory
requirements relating to the importation storage distribution and sale of the Products in the Territory
from time to time.
d) The Distributor shall not alter or treat in any way whatsoever the content and Consumer Packages
of the Products and will supply Products only in Consumer Packages form and get up in which they
are supplied to the Distributor by AGIP; the Distributor shall procure similar undertaking from all its
marketing and sales outlets accordingly and shall be responsible for and stand liable for the
compliance thereof
e) The Distributor shall maintain sales records in .respect of in its outlets and supply each month a
sales and stocks return and such other further records and reports all in the English Language as may
be specified by AGIP from time to time
f) The Distributor shall ensure that its salesmen visit regularly the business premises of present and
potential marketing and sales outlets/customers for the Products in the Territory and in addition to
visit attempt to obtain orders for the Products from any persons to whom they may be directed by
GIP
g) The Distributor shall be responsible for ensuring that the Products reach the consumer in the best
possible condition and shall take all positive precautions to avoid contamination or alteration of the
Products and the Consumer packages and shall educate and procure similar undertaking from all its
salesmen and marketing and sales outlets accordingly and shall be responsible for and stand liable
for the compliance thereof
h) The Distributor shall promptly resolve satisfactorily any complaints relating to the promotion sale
or provision of technical information and all other matters whatsoever in respect of the Products
arising within the Territory; the Distributor shall promptly notify AGIP of any complaints or unusual
comments whether favorable or unfavourable or by way of requests for information) it may receive
pertaining to the Products or of any defective Products; it is understood that AGIP shall not be in
anyway responsible for or liable to any complaints whatsoever and the Distributor hereby agrees to
fully indemnify AGIP accordingly. The Distributor shall keep AGIP regularly and continuously
informed of the progress and development of the market in the Territory for the Products and for all
goods similar thereto or competitive therewith and of all laws 'and regulations affecting the

import distribution labelling packaging advertising and sale of the Products and of such goods in the
Territory and of all matters whatsoever affecting or relevant to AGlP's business in the Territory.
j The Distributor shall not distribute similar product in the Territory or enter into any business
transaction in competition with AGIP
k The Distributor will keep full proper and up-to-date records in the English Language showing
clearly all enquiries, transactions and proceedings relating to the distributorship and shall at all times
permit AGIP or its representatives full access thereto
l) The Distributor hereby acknowledges that the Agreement is personal and shall not assign or
purport to assign the benefit of this Agreement without the prior consent in writing of AGIP, of which
consent shall not be unreasonably withheld without prejudice to the foregoing; it is understood that
an amalgation or reconstruction or change in control and change in ownership of up 25% equity and
above are deemed an assignment for which AGIP prior written consent must be procured
m) The Distributor shall in selling the Products be bound by AGIP's conditions of sale as from time
in force and any modification thereto made by AGIP either generally or in respect of any
particular purchase and in selling shall contract on like terms to those conditions as from time to time
in force together with any general or particular modifications as respects any particular sale and shall
not make any promises representations warranties or guarantees with reference to the Products
except such as are consistent with those conditions or as one expressly authorised by AGIP in writing
n) The Distributor shall not directly or through any agent sell any of the Products outside the
Territory or knowingly or having reason to believe that they would be so resold sell the Products to
any person or body corporate or incorporate within the Territory with a view to their resale outside
the Territory
o) The Distributor shall not directly or through any agent sell any of the Products for marine
application or knowingly or having reason to believe that they would be resold, sell the Products to
any person or bod}' corporate or incorporate
p) The Distributor acknowledges that it is not competent to and will not incur any liability on behalf
of AGIP or in any way pledge or purport to pledge AGIP's credit or accept any order or make any
contract binding upon AGIP
q) The Distributor shall present a draft annual marketing advertising and promotion plan to AGIP for
comment and approval prior to its implementation. It is understood that approval by AGIP does not
amount to an acceptance of liability whatsoever or howsoever thereunder and the Distributor
undertakes to fully indemnify AGIP at all times accordingly
r) The Distributor undertakes that its marketing advertising and promotional activities in respect of
the Products shall at all times comply with the applicable law and the industry standards
s) Distributor shall conduct its business in a manner that will reflect favorably on AGIP and AGIP
Affiliates, the Products and the good name and reputation of the foregoing and shall foster consumer
confidence in the Products. Distributor shall not engage in any deceptive or. misleading promotion or
advertising or indulge or partake in or condone any unethical trade practices
t) The Distributor shall fully indemnify and keep AGIP fully indemnified and harmless at all times
and from time to time and against any and all loss damage claim penalties whatsoever and
howsoever or liability or expense (and if solicitor's fees on a solicitor and client's basis to be taxed)
suffered or incurred by AGIP resulting from a breach of any of the terms herein by the Distributor or
otherwise whatsoever and howsoever in relation to or arising out of this Agreement.
4. Principal's undertakings
a) AGIP shall use its best endeavour to supply the Distributor with the Products ordered by the
Distributor
b) AGIP warrants to Distributor that the Products will comply with the given characteristics as
amended from time to time as contemplated herein provided always any claim for breach of the
foregoing warranty must be submitted in writing by Distributor to AGIP within 5 (five) days after the
date in which such claim is made, failing which such claims shall not be considered or allowed; it is
further provided that AGIP's liability in respect of any breach of the foregoing warranty shall be

limited in all events to the Distributor's purchase price of the Products involved plus the cost of
transportation of such Products approved in writing by AGIP prior to the time that such cost is
incurred
c) Subject to AGIP prior written approval of the marketing advertising and promotional plan and the
budget thereof and subject always to the strict compliance thereof AGIP agrees to
reimburse the Distributor half the aforesaid budget spent or actual spending whichever is the lesser.
The approval by AGIP does not amount to an acceptance of liability whatsoever or however
thereunder and the Distributor- undertake to fully indemnify AGlP at all times accordingly
d) No warranty or warranties expressed or implied including but not limited to any implied warranty
of merchantability or fitness for any purpose! whatsoever are given by AGIP in respect of the
Products excepting only that warranty given to Distributor pursuant above which is subject to the
terms conditions and limitations therein set forth
n) AGIP warrants that information furnished by AGIP to Distributor for advertising or other
promotional purposes in respect of the products will be as far as practicable accurate at the time of
publication
5. Agip's reservations
AGIP reserves to itself notwithstanding anything to the contrary herein contained the following
rights:
a) To decline or to accept any order form the Distributor and by so declining shall not incur any
liability whatsoever to the Distributor if the Distributor is in breach of any one of the terms
whatsoever of this Agreement
b) Without prejudice to the generality of this Agreement and without assigning any reason there to
and without prior notice vary the First Schedule hereto defining the Products either by withdrawing
therefrom a class or classes of Products named therein or by the addition thereto after notice to the
Distributor of a further class or further classes of products of AGIP and as set to in Clause 1(a) above
c) If the Distributor is not at any time producing adequate sales coverage throughout the whole of the
Territory and the region thereof and without prejudice to any of its right under this Agreement AGIP
may either exclude from this Agreement such part or parts of the Territory and/or exclude from this
Agreement such one or more of the Products herein defined or to take both these courses of action
save that neither such course of action shall be taken under this clause without prior notice to the
Distributor
d) To take such step itself as may seem necessary or expedient (including and without prejudice to
the generality of the reserved right to appoint a representative in the Territory) to promote the Sale of
the Products in the Territory and to notify the Distributor of any persons, firms or bodies corporate
carrying on business in the Territory who appear to it to be in a position to enhance the sale of the
Products
e) To enter upon manufacture or market research or distribution of any products whatsoever without
consulting the Distributor or remunerating the Distributor in any way for any of such products may
be sold in the Territory
f) AGIP may sell and supply directly without prior consent or approval of the Distributor the
Products to AGIP Affiliate and such person or companies in which EN1 or companies belonging to
ENI own a share of not less than 30% and to take part in in government's tenders from time to time
for the supply and sale of the Products without remunerating the Distributor in any way
6. Prices, delivery and conditions of sale
a) Prices quoted to the Distributor for any of the Products are set out against the Products in the First
Schedule hereto and are subject to change by AGIP at any time prior to Distributor's firm order
b) AGIP shall have no liability whatsoever for any delay in delivery or performance caused by war,
industrial disputes, fire, force majeure or any other circumstances whatsoever beyond its control
c) Without prejudice to any other rights under this Agreement AGIP shall be entitled to withhold
further supplies without liability whatsoever while payment of any sums due from the Distributor
remains outstanding

d) Distributor shall submit its estimated requirements for the Products during successive four
months periods to AGIP at least two months prior to the commencement of each such period
e) For shipments of the Products to Distributor under this Agreement Distributor shall submit its firm
orders with irrevocable confirmed Letters of Credit established and received and further acceptance
by AGIP as follows
- not later than the 10th (tenth) day of the month preceding the month in which order is to be shipped
for Products to be supplied ex-Singapore plant
- not less than 60 (sixty) days prior to the desired delivery dale for Products to be supplied ex-Italy
The terms of the irrevocable confirmed Letters of Credit shall be prescribed and approved by AGIP
from time to time
f) The first Contract Year of this Agreement shall commence' on the effective date hereof and
subsequent Contract Years shall commence on anniversaries of said effective date; during successive
Contract Years Distributor shall purchase from AGIP no less than the quantity of the Products set out
in the Second Schedule
Minimum quantities for subsequent renewal terms shall be agreed upon between the Parties hereto
no less than 6 (six) months prior to the commencement of the renewal term in question or if not so
agreed shall be the minimum quantity for the immediately preceding Contract Year or the actual
quantity sold during such year whichever is the higher to be increased by 10% every subsequent
renewal year up to 19 ..
g) Distributor orders for the products may specify delivery at one time but no requested delivery
shall be for less than 1 (One) Container of Products
h) AGIP reserves for itself and the AGIP Affiliates the right to discontinue the manufacture or sale of
any Products or to make changes in its composition at any time without any liability to Distributor
apart from that of notifying Distributor
i) Delivery of the Products shall be made within 60 days from the date of the receipt and acceptance
by AGIP of the irrevocable confirmed Letter of Credit for Products to be supplied ex-Italy and within
30 days for Products to be supplied ex-Singapore
j) If for any reasons whatsoever the Distributor shall fail to neglect to take delivery of the Products
within 1 day of schedule date (inclusive) the AGIF shall be entitled to treat the order as cancelled and
invoice the Distributor for all costs and expenses incurred or dispose of the Products within 14 days
thereafter and invoice the Distributor for all costs and expenses incurred by AGIP and any
diminution in the sale price
7. Passing of Risk/Title
a) Unless otherwise agreed the risk to the Products shall pass to the Distributor as soon as or when
the Products or part thereof are deemed delivered or ready for delivery to the Distributor and/or the
Products or part thereof are deemed to be in the Distributor's
possession
b) Notwithstanding the aforesaid and without prejudice thereto the Title to the Products only pass to
the Distributor upon full payment of the price of the Products to AGIP
c) Until full payment and prior to the Distributor's sale of the Products the Distributor shall keep
and/or store the Products in such manner consistent with AGIP's ownership and manifested to all
third parties
8. Payment terms
a) The Distributor agrees to pay for all Products of AGIP ordered by way of irrevocable confirmed
Letters of Credit through a bank payable at sight to AGIP in United States Dollars payable in
Singapore or elsewhere as AGIP may determine from time to time
b) All amounts required to be paid by the Distributor shall be paid without deduction or abatement
whatsoever
9. Stocks

The Distributor shall at all times during the continuance of this Agreement carry stocks of no less
than one month's supply of the Products and ensure that all orders received by the Distributor's
marketing and sales outlets are supplied without due delay; the Distributor shall take all reasonable
steps to ensure that the stocks are properly stored at all times and that a continuous stock rotation
policy is maintained for all stocks in all warehouses to ensure the quality of the Products is preserved
10. Trademarks and patents
a) It is agreed that all rights in the trade marks appearing upon or used in relation to the Products and
of the goodwill attaching thereto are and shall remain the exclusive property of AGIP or its
associated companies; the Distributor shall only use the said trade marks in conjunction with the
Products and in accordance with the provisions of this Agreement; the said trademarks shall not be
used in any manner liable to invalidate the registration or lessen the value thereof; the right to use the
said trade marks in connection with the Products is only granted to the extent that.
AGIP is able to do so without endangering the validity of the registration or lessening the value. The
Distributor shall immediately inform AGIP of any and every improper or wrongful use or any actual
or potential infringement in the Territory of AGIP's patents trademarks, designs, models, or similar
industrial or commercial monopoly rights which come to the Distributor's notice and shall provide
full co-operation to AGIP at all times
b) The Distributor shall not do or omit to do anything by which the goodwill and reputation
associated with the trade marks might or diminished or jeopardised and shall include in, all printed
matter on which any of the trade marks of AGIP (or one of its associated companies as the case may
be) the form thereof to be determined by AGIP
c) Distributor is authorised to use AGIP's registered names logos and trademarks related to the
Products during the existence of and in the course of operating under this Agreement; but nothing
contained herein shall be construed as granting or shall grant to Distributor any rights, title or interest
in the above said names and trademarks or other industrial property right owned or being used by
AGIP or any AGIP Affiliate. Distributor shall take no steps to register any AGIP or AGIP Affiliate
trademark, trade name brand or logo or any other word(s) or symbol(s) deemed deceptively similar
thereto by AGIP. Distributor shall have no right to use any such word(s) or symbol(s) as or as part of
its corporate or trade name
d) Upon expiration of this Agreement Distributor shall forwith cease all use of AGIP's or any AGIP
Affiliate's industrial property rights and shall not thereafter use any such right or any trademark name
brand or logo deemed deceptively similar thereto by AGIP except in connection with the sale of such
quantities of the Products as Distributor may have in stock at the time of expiration or termination
11. Confidentiality
a) The Distributor shall not at any time during or after the term divulge or allow to divulge to any
persons any confidential information relating to this distributorship or to AGIP
b) Any technical commercial and confidential information given in order to assist the Distributor to
carry out its obligations in this Agreement is only to be used for the said purposes only
c) The Distributor shall ensure that its employees and dealers and marketing and sales outlets are
aware of and observe the provisions of this clause both during the subsistence of this Agreement and
thereafter
d) All written material embodying information designated by AGIP as confidential and all copies
thereof are to be returned to AGIP on the termination of this Agreement
e) The Distributor acknowledges that all information concerning the Products identified by AGIP or
any AGIP Affiliate as trade secret which Distributor has obtained or shall obtain in consequence of
this Agreement whether from AGIP and AGIP Affiliate or otherwise are solely for the purposes of
tills Agreement; distributor undertakes to use the same degree of care as in preserving the secrecy of
its own secret business information and shall procure similar undertaking from its own employees
and dealers and marketing and sales outlets accordingly and Distributor shall be responsible for and
stand liable for the compliance thereof. The obligations of this Section shall not apply however to
information which:

i) prior to the transmittal thereof to'Distributor was of general public knowledge; or


ii) becomes subsequent to the time of transmittal to Distributor a matter of general public knowledge
otherwise than as a consequence of a breach by Distributor of its obligation under this Section; or
iii) is made public by AGIP; or
iv) was in the possession of Distributor in documentary form prior to the time of Disclosure thereof
to Distributor by AGIP and was not acquired directly or indirectly fro AGIP and is held by
Distributor free of any obligation of confidence to AGIP or any third party; or
v) is received in good faith from a third party to disclose it who to the best of Distributor's
knowledge did not obtain the same from AGIP and who imposes no obligation of secrecy on
Distributor with respect to such information
12. Independence of the parties
It is agreed by the parties hereto that the Distributor is operating and will continue to operate for its
own account and nothing in this Agreement is intended or shall be constructed to authorise the
Distributor without the prior written approval of AGIP to create or assume any liability or
indebtedness of any kind in the name of or on behalf of AGIP or to give any warranty of make any
representation in the name of or on behalf of AGIP and this Agreement shall not be construed as
constituting the Distributor as agents of AGIP for any purpose whatsoever or to constitute a
partnership between the parties hereto
13. Force majeure
a) In the event that AGIP shall be unable to continue the commercial production of the Products by
reason of causes beyond its control including by way of illustration (but specifically not limited to
fire, flood, explosion, action of elements, acts of God, accidents, epidemics, strikes, lockouts or other
labour troubles or 'shortages, inability to obtain or shortage of material, equipment or transportation,
insurrections riots, or civil commotion, war, enemy action, acts, demands or requirements of any
government or by other causes which it could not reasonably be expected to avoid then it shall not be
responsible for any loss whatsoever to the Distributor howsoever arising. Thereafter AGIP shall use
its best endeavours to resume the commercial production of tlie Products
b) In case of the extension of the circumstances of force mnjeure throughout a prolonged period of
time whereby the performance of the respective obligation could not be carried out this Agreement
shall be terminated at the request" of either party and'' this Agreement shall be treated as frustrated
whereupon:
i) without demand all money due to AGIP shall be paid immediately without deduction; and
ii) the Distributor shall cease to distribute the Products of AGIP immediately
14. Termination
This Agreement shall terminate
a) on expiry date; or
b) if:
i) any encumbrance shall take possession of any of the property of either party; or
ii) either party shall become insolvent; or
iii) the Distributor shall become bankrupt or to go into liquidation either voluntary or compulsory
unless as part of a bona fide scheme of reconstruction or amalgamation approved by AGIP or to be
dissolved compound with its creditors or have a receiver appointed in respect of the whole or any
part of its assets; or
iv) a receiver is appointed in respect of one whole or any of the assets or undertaking or other
process shall be issued against any property of the Distributor; or
v) the Distributor shall cease or threaten to cease to carry on the whole or any substantial part of its
business other than in the course of reconstruction or amalgamation approved by AGIP hereto; or

vi) If the Distributor commits or allows to be committed a breach, of any of its obligations herein
stated and does not remedy such breach within fourteen (14) days after written notice has been given
to it by AGIP; or
vii) If the Distributor commits or is charged with the commission of a criminal or unlawful act or by
commission has committed or charged with a criminal or unlawful act; or
viii) If the Distributor engages in any conduct prejudicial to AGIP or AGIP's Affiliates generally or
the marketing of the Product generally.
Then in any such event AGIP may be written a notice forthwith terminate this Agreement but without
prejudice to any other rights of the parties hereto.
15. Effects of termination
If this Agreement terminates for any reason whatsoever and without prejudice to any other rights:
a) Without demand all money due to AGIP shall be paid immediately without deduction
b) The Distributor shall cease to distribute the Products of AGIP immediately
c) AGIP shall have the discretion and option to regard any unexecuted orders placed by the
Distributor and accepted by AGIP before such termination as cancelled excepted those in respect of
which the Distributor shall have furnished documentary evidence to the satisfaction of AGIP within
thirty (30) days from the notice of the Products ordered to third parties prior to the termination of this
Agreement
d) The Distributor shall if requested by AGIP forthwith return to AGIP or elsewhere as AGIP may
direct at the expense of AGIP all goods or Products belonging to AGIP in its possession or under its
control and all advertising and promotional matters relating to the Products in its control. In case of
default AGIP shall be entitled without notice to enter at any time upon the premises where the said
goods or Products may be for the time being and to remove the same
c) All Products remaining unsold which in the mutual opinion of AGIP and Distributor are not in
good condition shall be forthwith disposed of by the Distributor as directed by AGIP
f) The Distributor shall return to AGIP all samples and publicity promotional and advertising
material and technical material and copy thereof used in the distributorship
g) The Distributor shall return to AGIP all originals and copies of all documents and information in
any form containing or covering in any way part of the Intellectual Property and technical
specifications and literature
h) In the event of termination of this Agreement AGIP shall have the option to repurchase from
Distributor any or all of the Products purchased from AGIP and owned by Distributor on the date
Distributor receives written notice of AGIP's intention to exercise the repurchase shall be the invoice
price thereof actually paid by Distributor plus verified transport cost paid by Distributor; in the event
of the exercise of this repurchase option by AGIP Distributor shall promptly deliver the Products to
AGIP in conformity with all laws and requirements which may be necessary or proper to transfer
good title to such Products to AGIP free and
clear of any charge lien or encumbrance; AGIP shall pay Distributor for such product promptly after
Distributor has complied with all of its obligations hereunder
i) Distributor recognizes and agrees that it is fully compensated for its activities in developing the
market for. the Products in promoting the name and reputation of the Products and in building
goodwill in respect of the Products by way of revenues derived from re-sales of the Products during
the currency of this Agreement; consequently in no event shall termination of tins Agreement for any
reasons whatsoever and howsoever. Give rise to any right of
action by Distributor to recover additional compensation of loss or damage from AGIP
16. Non-Competition
During the term of this Agreement the Distributor shall not distribute manufacture develop or occupy
itself in any other way directly or indirectly with goods of a nature competitive with the Products inor outside the Territory without prior written consent from AGIP

17. Appointment of sub-distributors


a) The Distributor shall have the right to appoint Sub-Distributors and outlets to store and distribute
the sales of the Products within the Territory on behalf of Distributor
b) The Distributor shall also ensure that all Sub-Distributors and outlets shall at all times observe and
comply with the terms and conditions as stated in this Agreement which are applicable to themselves
as distributors and the Distributor shall be responsible and stand liable for the compliance thereof
18. Non-Waiver
It is understood and agreed that the failure of delay on the party of AGIP to require performance or
compliance of the Distributor of any provisions of this Agreement shall not affect AGIP's right to
require performance or compliance has been waived in writing
19. Assignment
This Agreement shall be binding on the successors and assigns of each of the..parties hereto;
provided however that this Agreement shall not be assigned, transferred or sold in whole or in part by
Distributor unless the terms and conditions of such assignment
transfer or sale are approved in writing by AGIP
20. Savings of terms
a) Notwithstanding termination herein the terms conditions warranties undertakings and indemnities
contained or referred to herein shall continue to subsist and bind the parties and each individual
thereof insofar as same or any part thereof remain unfulfilled or to be performed or outstanding or
for the purpose of giving effect to each and every one of them
b) The several undertakings of the parties shall survive and shall be treated as in full force and effect
notwithstanding any change in shareholding and directorship or the constitution of AGIP
c) If anyone or more of the provisions contained herein or any documents or records executed in
connection herewith shall be invalid illegal or unenforceable in any respect under any applicable law,
the validity legality and enforceability of the remaining provisions or part thereof contained herein
shall not in any way be affected or impaired
21. Arbitration
All disputes arising in connection with the present agreement shall be finally settled- under the
provisions of the Singapore Arbitration Act and any modifications thereof from time to time.
Arbitration proceedings shall take place in Singapore; Singapore law shall be applicable
22. Entire Agreement
a) This Agreement embodies the entire understanding of the parties and overrides and supercedes any
prior promises representations understandings or implications
b) Any amendment hereto must be in writing and signed by the duly authorised representatives of
AGIP and Distributor. No amendment to this Agreement shall be effected by the acknowledgement
or acceptance by AGIP of purchase orders, invoices, shipping instruction forms or, others similar
documents which contain terms or condition at variance with or in addition to those set forth herein
unless such acknowledgement or acceptance specifically states that it is intended to amend this
Agreement
23. Interpretation
a) Any reference to any of the parties herein include their assignees and/or successors-in-title and/or
personal representatives
b) Words importing the singular tense include the plural tense' and vice-versa
c) Words importing the masculine gender include the feminine gender and neuter gender and viceversa
d) Person(s) includes a Corporation and vice-versa

e) The Clause headings in this Agreement are for ease of reference only and will not affect the
interpretation hereof
24. Notices
Any notices required to be served hereunder shall be sufficiently given if forwarded by registered
post recorded delivery cable telex or telegraph to the address set out at the head of this Agreement or
such other address as may have been notified in writing to the other party for such purposes
25. Execution
This Agreement may be executed in any number of counterparts, any single counterpart or a set of
counterparts executed in either case by all the parties hereto shall constitute full and original
agreement for all purposes
IN WRITNESS WHEREOF the parties hereto have caused this Agreement to be executed in
counterpart original by their duly authorised representatives on the day and year first set forth above
SIGNED by
On behalf of
AGIP FETROLI SPA

SIGNED by
On behalf of
DISTRIBUTOR

(Page 126) 3.3 WARRANTY AND GUARANTEE


THE PROBLEM
Are a warranty and a guarantee the same thing? Why do some contracts replace a warranty with
a defects liability provision?
THE PRINCIPLE
A guarantee is a promise about somebody elses performance; a warranty is a promise about your
own. When businessmen speak of the sellers guarantee or warranty they mean the
exporters liability for defects; to avoid confusion, many drafters today use the term Defects
Liability Provision.
IN MORE DEPTH
A warranty is a promise you make about your own performance. The word is used in many
contexts. A warranty of title, for example, is a promise to a buyer that the exporter really owns
the contract goods. A product warranty is a promise by the exporter to cure defects in his
products.

There are two parties to a warranty: buyer and seller. A guarantee, on the other hand, involves
three parties, as the diagram shows. The guarantor makes a promise to one party at the request of
another. There is a major confusion of terminology. Blacks Law Dictionary comments:
Internationally, the distinction between warranty and guarantee is often blurred. First,
businessmen loosely use the words as though they mean the same thing. Another common belief
is that a warranty covers materials and workmanship, while guarantee covers specifications. This
is not true. Does it matter? In fact, yes. Confusion between warranty and guarantee can be
dangerous. When?
Lets say a contract is written in English, but German law applies. German law makes a clear
distinction between a sellers warranty and a sellers guarantee the sellers obligations are
more extensive under a guarantee. So loose English will get the exporter into trouble if
German law, or any closely related law applies to the contract.
As a general rule, incorrect use of guarantee causes trouble; use the word only if you mean a
third party guarantee.
p.127-148

When businessmen speak of the sellers guarantee or warranty they mean the exporters
liability for defects; to avoid confusion, many drafters today use the term Defects Liability
Provision.
A defects liability provision (or warranty) covers defects that are present at the moment of
delivery. Normally quality control prevents products with obvious defects from leaving the
factory; in the next step, products with obvious or patent defects are identified during open
package inspection and rejected. The defects that give rise to the most serious problems between
exporter and buyer are hidden or latent defects.
Defects may be (a) in workmanship, (b) in materials, or (c) in design. However, fair wear and
tear and misuse by the buyer are not covered by the provision.
The defects liability period is the period during which the exporter is liable for- and must make
good- defects that are apparent on delivery or that come to light later. The buyer, of course, must
prove that the defect was present in the goods at the date of delivery- often a difficult task. It is
important for both sides in a contract negotiation to understand that a defect is a fault provably
present in the goods on delivery- nothing more. In principle, under most laws, the exporter is
liable only for problems that arise from defects.
CONCEPT REVIEW: GET WEAVING
Verbena Textile is replacing twenty of its looms. The looms are thirty years old, and spare parts
are hard to find. The factory engineer chooses the best of the old looms and cannibalizes the
others to make twelve looms in good working order. Verbena Textile negotiates to sell these
looms to Esperanza Cotton Mills. Esperanza Cotton wants twelve-month warranty with the
looms; Verbena Textile is prepared to sell them on as is.
1. What arguments are the two sides likely to put forward in negotiating the warranty (defects
liability)?

.
2. Which side do you think is in the right?

.
1. Second-hand machinery is usually sold internationally "as is. From the buyer's point of view
this has an obvious disadvantageif the machine goes wrong, repair may be expensive or
impossible. However, it makes little sense for the seller to offer a warranty. Firstly he is not in
the business of selling or repairing machines. Secondly, assuming he is prepared to offer a
warranty, the cost would be prohibitivein some cases the total cost might be more than the
cost of a brand-new machine using the latest technology.
2. Both sides have a point. The most common solution is for the buyer to check the machines
carefully for full functionality before buying them- and then to accept the sale without
warranty.
Translate into Vietnamese
ABC'S CONTRACT
GENERAL TERMS AND CONDITIONS
1) Shipment or delivery
The obligations of Seller to ship or deliver the goods specified on the face of this Contract ("Goods")
by the time or within the period specified on the face of this Contract shall be subject to the
availability of the vessel or the vessel's space
If, under the terms of this Contract, Buyer is to secure or arrange for the vessel or vessel's space,
Buyer shall secure or arrange for the necessary vessel or vessel's space on berth terms basis and give
Seller shipping instructions within a reasonable time prior to shipment, including but not limited to
the name and detailed schedule of the vessel. If Buyer fails to give such instructions within a
reasonable time prior to shipment, Seller may, at its sole discretion and at Buyer's risk and account,
arrange for the vessel or the vessel's space and make shipment of the Goods, without prejudice and in
addition to any other rights and remedies Seller may have under this Contract or at law or in equity
or otherwise.

In case of shipment or delivery installments, any delay or failure in shipment of one installment shall
not be deemed a breach of this Contract giving rise to a right of Buyer to cancel this Contract or
refuse to accept performance with respect to other installments.
2) Payment
If payment for the Goods shall be made by a letter of credit, Buyer shall establish in favor of Seller an irrevocable letter of credit through a prime bank of good international repute immediately after
the conclusion of this Contract in a form and upon terms satisfactory to Seller.
If Buyer fails to make any due payment, to establish a letter of credit or otherwise to perform its
obligations hereunder, Seller may demand that Buyer provide, within a reasonable time, adequate
assurance satisfactory to Seller of the due performance of this Contract and may with old shipment or
delivery of any all of the undelivered Goods until such assurance is given.
Buyer shall pay the price specified on the face of this Contract without set-off counterclaim,
recoupment or other similar rights which Buyer may have against Seller, which rights shall be
exercised in separate proceedings between Buyer and Seller.
Any new, additional or increased freight rates, surcharges (bunker, currency, congestion or other
surcharges), taxes, customs duties, export or import surcharges or other governmental charges, or
insurance premiums, which may be incurred by Seller with respect to the Goods after the
conclusion of this Contract shall be for the account of Buyer and shall be reimbursed to Seller by
Buyer on demand.
If Buyer fails to pay for the Goods in accordance with this Contract, Buyer shall pay to Seller as
liquidated damages and not as a penalty overdue interest at the rate of the lower of eighteen percent
(18%) per annum or the maximum interest rate permitted by the laws of Buyer's country, calculated
from the date for such payment until the actual date of payment calculated on the 360 day-a-year
basis for the actual number of days elapsed.
3) Force Majeure
If the performance by Seller of its obligations hereunder is directly or indirectly affected or prevented
by force majeure, including but not limited to Acts of God, flood, typhoon, earthquake, tidal wave,
landslide, fire, plague, epidemic, quarantine restriction, perils of the sea, war declared or not or threat
of the same civil commotion, blockade, arrest or restraint of government, rulers or other labor
dispute, explosion, accident or breakdown in whole or in part of machinery, plant, transportation or
loading facility, governmental request, guidance, order or regulation, unavailability of transportation
or loading facility, bankruptcy or insolvency of the manufacturer or supplier of the Goods, or any
other causes or circumstances whatsoever beyond the reasonable control of Seller or manufacturer or
supplier of the Goods, then Seller shall not be liable for loss or damage, or failure of or delay in
performing its obligations under this Contract and may, at its option, extend the time of shipment or
delivery of the Goods or terminate unconditionally and without liability the unfulfilled portion of this
Contract to the extent so affected or prevented
4) Default
In case of (i) Buyer's failure to perform any provision of this Contract; (ii) Buyer's inability to pay its
debts generally as they become due; (iii) Buyer's bankruptcy or insolvency or (iv) appointment of a
trustee, receiver or liquidator of Buyer of any material part of Buyer's assets or properties ("Events of
Default"), Seller may, at its sole discretion, (i) terminate this Contract or any part thereof; (ii) declare
all obligations of Buyer immediately due and payable; (iii) resell the Goods; (iv) hold the Goods for
Buyer's account and risk; (v) pospone the shipment of Goods; or (vi) stop the Goods in transit, and
Buyer shall reimburse Seller for all losses damages arising directly or indirectly from such Events of
Default.
The rights and remedies of Seller hereunder are cumulative and in addition to Seller's rights, powers
and remedies existing at law or in equity or otherwise.
5) Intellectual property rights

Nothing herein contained shall be construed as transferring any patent, trademark, utility model,
design, copyright, mask word or any other intellectual property rights in the Goods, as such rights
being expressly reserved to the true and lawful owners thereof.
Seller shall be neither responsible nor liable for any infringement or unauthorized use with regard to
any patent, trademark, utility model, design, copyright, mask work or any other intellectual property
rights.
6) Warranty, claim
Unless expressly stipulated on the face of this contract, seller makes no warranty or condition,
expressly or impliedly, 'as to the fitness or suitability of the goods for any particular purpose or use
or the merchantability thereof.
If any warranty exists. Seller's liability shall be limited to replacement or repair of the defective
Goods.
Any claim by Buyer of whatever nature arising under or in relation to this Contract shall be made by
registered airmail within thirty (30) days after the arrival of the Goods at the port of destination, or
solely in respect to a claim alleging the existence of a latent defect in the Goods, within six (6)
months after the arrival of the Goods at the port of destination, and any such claim shall contain full
particulars with evidence certified by an authorized surveyor.
7) Limitation
Seller shall not be responsible, whether in contract or warranty, tort or on any other basis, to Buyer
for any special, incidental, consequential, indirect or exemplary damages, and in no event shall
Seller's total liability on any or all claims from Buyer exceed the price of the Goods.
8) General
(1) All disputes, controversies or differences arising out of or in relation to this Contract or the
breach thereof which cannot be settled by mutual accord without undue delay shall be settled by
arbitration in Tokyo, Japan, in accordance with the rules of procedure of the Japan Commercial
Arbitration Association; the award of arbitration shall be final and binding upon both parties, and
judgment on sucli award may be entered in any court or tribunal having jurisdiction thereof; this
Contract shall be, in all respects, governed by and construed in accordance with the laws of Japan;
the trade terms herein used, such as FOB, CFR and CIF, shall be interpreted in accordance with
"INCOTERMS 2000".
(2) The failure of Seller at any time to require full performance by Buyer of the terms hereof -shall
not affect the right of Seller to enforce the same; the waiver by Seller of any breach of any provision
of this Contract shall not be construed as a waiver of any succeeding breach of such provision or
waiver of the provision itself.
(3) This Contract constitutes the entire agreement between the parties hereto and supersedes all prior
or contemporaneous communications, agreements or undertakings with regard to the subject matter
hereof; this Contract may not be modified or terminated except by a written agreement of Seller and
Buyer.
(4) Buyer shall not transfer or assign this Contract or any part thereof without Seller's prior written
consent.

(page 149) CHAPTER 4: THE LEGAL FRAMEWORK


1. The Big Picture
THE PROBLEM
Many exporters are gifted salesmen, and their contracts reflect this emphasis on sales.
Unfortunately, there are a number of legal loose ends that must be tied down if a good
sales technique is to mature into a profitable way of doing business.
THE PRINCIPLE

Like the other phases of an export negotiation, the legal framework can be negotiated in
clear steps- in this case six.
IN MORE DEPTH
A contract is not merely a list of ideas agreed by the exporter and the buyer during
negotiation: it is an enforceable, legal instrument. The two sides ignore the legal
dimensions of the contract at their peril.
STEP 1. THE APPLICABLE LAW: choice of law
STEP 2. CONTRACT OR NO CONTRACT? Meeting of minds, capacity, legality,
consideration.
STEP 3. ENTIRE AGREEMENT. Whereas recital, contract documents, definitions.
STEP 4. THE PARTIES. Identity, naming, notices, assignment.
STEP 5. STATUS OF THE CONTRACT. Termination, cancellation, recission, language.
STEP 6. SETTLEMENT OF DISPUTES. Amicable settlement, arbitration, litigation.
The first question about the legal framework of the contract is always: what law have the
two sides chosen to fill the gaps in their agreement (Step 1). Then the question arises is the
document the parties are signing really a contract, or is just a piece of paper (Step 2)? If it is
a contract, is it the entire agreement? And if it is the entire agreement, how do the two sides
ensure that it includes everything they want it to include (Step 3)?
Once the full legal nature of the contract is established, it is time to turn to the parties
signing it. Are the parties all they seem to be? And will they remain the same during the
lifetime of the contract (Step 4)?
Good relations usually prevail during the negotiation of a contract. Later, however, things
can go wrong. A good contract allows for this by foreseeing circumstances under which the
parties might wish to end their agreement (Step 5). If a dispute arises, some means of
settling things should be agreed beforehand: that way at least some goodwill might be
preserved and the cost of the dispute minimized (Step 6).
CHOOSING AN APPLICABLE LAW
What considerations should an exporter bear in mind when negotiating an applicable law?
Although national laws differ greatly in detail, most laws belong to one of two families:
Anglo-American or Continental. The Anglo-American family is based on case-law (the law
develops over centuries through court decisions); the Continental family is based on a legal
code (the law is expressed in a code). The two systems work in different ways and produce
different kinds of contract.
Anglo-American contract law is case law: judges decide cases on their merits (the rights
and wrongs of the cases; decisions create precedents. A precedent is binding: future judges
(subject to complex rules( are obliged to follow it. After a while, so many precedents exist
that even the best judges become confused. The case-law principle has a remarkable
result: nobody knows the law in a given case until the judge reaches a decision. The AngloAmerican lawyer can suggest the outcome of a case- but certainly is impossible. Under
Continental systems, outcomes are more predictable: judges simply apply the code- they
are not required to use their sense of justice to seek the fairest solution to the case.
Scenario: Nonamia was until recently, a socialist country with-no developed commercial
lawin fact, the necessary law is still not published. Abet Johnson runs a factory in
Nonamia that makes quality jogging shoes. He receives several inquiries from European
countries. One customer, Frankimport. is interested enough to suggest some broad
contract terms: price, delivery dale, length of defects liability period. Johnson now asks a
lawyer in Nonamia to draft a contract.
Early in the discussion, the lawyer asks Johnson: "What law applies to the contract?"
Johnson has no idea. The lawyer explains the principle: a contract covers many issues;
anything left undecided is regulated by the applicable law. The lawyer lists three
possibilities:
- The exponer's law (the law of Nonamia):
- The buyer's law (the law of Germany);
- A third-party law (e.g.. the law of Sweden or of England).
Each option is radically different:
.!

Option 1: Nonamia has no contract lawthere is no water round the fish. If there is a
dispute, the Nonamian judge must make a decision, " but this decision is unpredictable: To
gain some degree of certainty, the parties must write a contract detailed enough to cover
most eventualities. This is difficult and expensive; even when it is completed, the Nonamian
judge may not enforce it as the parties intended.
Option 2: German contract law is codified. The code (the BGB) has been clarified by a
hundred years of interpretation in the courts. The contract can be short and to the pointon
the other hand using the law, of the buyer's country gives the buyer a perhaps unfair
advantage in the event of a dispute.
Option. 3: Choosing a third-party lawEnglish law perhaps or Swedish lawgives neither
side an advantage. But the law must be chosen carefully. Swedish law is a member of the
Continental family. The contract can be short and to the pointSwedish law (we can
suppose) will fill gaps in the contract fairly and reasonably. English law, on the other hand,
is a member of the Anglo-American family.
The advantage of English law is that its principles have been refined over many centuries to
deal with international trade: it is internationally familiar and extremely flexible; if the parties
draft the contract carefully, they can achieve almost any result they wish. On the other
hand, a contract under English law is usually lengthy and
derailed: English law is case law, so the parties normally decide many issues ahead of time
rather than leaving the judge to make decisions on the basis of precedents.
The choice of an applicable law is not easybut it is wiser to choose a law than to leave
the issue open. A summary of the factors involved:

GOAL
PREDICTABILITY
AND
CONSISTENCY
OF COURT
DECISIONS

ANGLO-AMERICAN
SYSTEMS
Justice in the individual case

CONTINENTAL SYSTEMS
Consistency and uniformity of
enforcement
Decisions in all but the most
difficult cases are precictable
with some accuracy. Decisions
are generally consistent from
court to court.

Unless matters are carefully


regulated in the contract, the
decision of the judge is not
fully predictable. Different
judqes may give widely
different judgments.
LENGTH AND
To be clear, contracts must
Because the law regulates
DETAIL OF
regulate many issues, so they most problems, contracts can
CONTRACT
tend .to be long and detailed. be short and lacking in detail.
INTERNATIONAL English and Amencan law
Continental laws do not have
ACCEPTANCE
have been refined over the
the prestige of Angto-Arnencan
centuries to cope with issues laws in international practice.
of intemational trade. The
They tend to focus on national
principles are widely
rather than internalionat issues
understood and respected.
Sometimes the parties cannot agree an applicable law, so they leave the matter open- the
contract contains no provision at all on applicable law. What then? If the contract does not
specify an applicable law, then a special branch of law known as international private law
comes inyo play and decides the law of the contract. In the case of an export contract,
especially an E-, F-, or C- term contract, the law chosen is nearly always the law of the
exporter. In our Nonamian jogging-shoe scenario above, that means the choice of
Nonamian law- and, a great deal of uncertainty.
The contract clause that specifies the applicable law should be carefully worded. It should
state not only that the chosen law that supplements the provisions of the contract, but also
that it regulates some difficult issues- Do the partes actually have a contract? What rules of
interpretation shall apply? And so on.
CONCEPT REVIEW 1
Swords and Shares
Plough Shares is a Verbenan company making non-mechanical farm equipment. On 3 rd
July 2004 it receives a letter from Wide Horizon Farm Tools in Esperanza. The letter asks
Plough Shares to quote its latest price on two of its catalog items; 1005X3 Mattocks and
2068Z2 Shovels. Order size is 500 of each item. The two companies have never done
business together.
Plough Shares quotes $4,000 for the mattocks and $2,500 for the shovels. On the quotation is
clearly stamped: "Our General Conditions of Sale apply to all deliveries.".
An order arrives exactly in line with the offer except that it is stamped: "Our General
Conditions of Purchase apply to this Order." Plough Shares confirms the order, stamping it,
as before: "Our General Conduions of Sale apply to all deliveries." The goods are delivered
FOB on 4th September; they are inspected and accepted by the buyer on 4th October. The

invoice sent by Plough Shares is also stamped with the familiar stamp. Wide Horizon pays
for the goods.
Then there is a serious warranty claim: the handles of both the mattocks and the shovels
break easily. On 14th March Wide Horizon notifies Plough Shares of the problem. Plough
Shares says "Too bad the defects liability period has expired." Wide Horizon replies:
"Not at ailthe period runs for another two weeks." The disagreement arises, as you
have probably guessed, because the Seller's general conditions allow a six-month
warranty from the date of delivery, and the Buyer's Conditions a six-month warranty from
the date of acceptance.
1. Is the original letter from Wide Horizon an "offer to buy"?
YES
NO
2. Is the quotation from Plough Shares an offer to sell?
YES
NO
3. Is the order placed by Wide Horizon an offer to buy or is it an acceptance?
OFFER TO BUY ACCEPTANCE
4. Is there a clear and full acceptance of an offer at any stage of the negotiation ?
YES
NO
5. Do the two sides have a contract?
YES
NO LEGAL POSITION NOT CERTAIN
6. If yes. who is right on the warranty case?
PLOUGH SHARES WIDE HORIZON LEGAL POSITION NOT CERTAIN
1. No. It is a request for quotation. 2. Yes
3. Offer 10 buy. There is a major discrepancy between the terms of the oner and
the "acceptance. 4. No
5. The legal position is unccertain.
6. Again uncertain. If there is a contract, the terms are unclear.
CONCEPT REVIEW 2 Out Of The Window
Verbena Farm Power is taking delivery; of 300 gasoline powered mini-generators (5 kW) for
farm use. The supplier is a German company, Supergrid. After signing the concract,
Verbena Farm realizes that Supergrid's price is too high: the same equipment is available in
the United States at half the price. So Verbena Farm is delighted when a new Government
Order prohibits all machines louder than 90 decibels. Verbena Farm argues that since the
German machine produces 95 decibels, it is illegal and the contract is null and void.
Supergrid offers to thicken the sound insulation on the machine; Verbena Farm refuses this
offer. Imagine now three versions of the contract. Version 1 contains this clause:
Severability
In the event that any provision of the Agreement is held to be illegal or otherwise
unenforceable, such provision shall be deemed to have been deleted from this
Agreement, while the remaining provisions shall be and shall continue in full force
and effect.
Version 2 contains this wording
Partial Invalidity
If any provision or provisions of this contract are invalid, or become invalid, this
has no effect on the validity of the remaining provisions.
If any provision of this contract is invalid, or becomes invalid, tne parties have the
duty to replace the invalid provision with a new valid provision that fulfills the
original intent of the invalid provision
Version 3 says nothing ai all on this subject.
Which version of the contract is most favorable to Verbena Farm's argument? Which
version is least favorable?
Least favorable: VERSION 1
VERSION 2 VERSION 3
Most favorable: VERSION 1
VERSION 2 VERSION 3
Least favorable for Verbena Farm is Version 2: this wording clearly obliges the parties
to redraft the disputed clause.
The most favorable version is possibly version 3but everything then depends on the
applicable law. Is a partly illegal contract wholly illegal under the law that applies to this
contract? If German law applies, for example, the answer in case of doubt is "Yes."
CONCEPT REVIEW 3 Taken into Consideration
General Supplies, a Verbenan company, trades in food, clothing, household goods, and so
on. It has an export contract with Frankimport, a German company, to sell 400 cartons of

pineapple rings in 500 gram cans. Two weeks before delivery is due, Frankimport sends the
following fax to General Supplies:
Will you please change our order to 131 cartons of pineapple juice, 110 cartons of
pineapple chunks, and 200 cartons of pineapple rings. According to the price list
you sent us, the total invoice price is now exactly the same as the original price.
Please confirm the new arrangement immediately.
General Supplies confirms the new order with the following fax:
We hereby confirm your change of order. We shall now send 131 cartons of
pineapple juice, 110 cartons of pineapple chunks, and 200 cartons of pineapple
rings. There is no change in the price.
The goods are delivered FOB (Port Verbena) and paid for under a letter of credit. When the
goods arrive in Bremen, however, Frankimport finds 400 cartons of pineapple rings. It
informs General Supplies immediately that it is rejecting half the consignment, as deviating
from the agreement as modified. General Supplies replies that the original contract was
never modified according to the law of Verbena, and that Frankimport must accept the
whole consignment.
1. What is the source of this dispute? .
2. The law of Verbena (which is a member of the common-law family) applies to the
contract. Who is right about the validity of the modification?
GENERAL SUPPLIES
FRANKIMPORT
3. Section 2-209.1 of the Uniform Commercial Code states:
An agreement modifying a contract..needs no consideration to be binding.
If there were a similar regulation in Verbena, how would it affect this dispute?
..
1. The dispute arises because ah agreenk'ni to modify a contract requires, under some
laws, consideration: both sides must have new risks and duties under the new
agreement. In this case. only General Supplies has a new duly and only
Frankimport has a new right.
2. General Supplies
3. Consideration would not be required, and Frankimport would be justified in relying
on the modification and rejecting the goods.
Translate into Vietnamese
JOINT VENTURE CONTRACT.
Based on:
'
- The Law on Foreign Investment in Vietnam approved by the National
"Assembly of the Socialist Republic of Vietnam" on December 29th, 1987
- The Decree 29/HDBT on February 6th, 1991 of the Council of Ministers
regulating in detail tliQ implementation of the Law on Foreign Investment in
Vietnam
Today, 1st December, 19 ... the Parties have agreed to sign this contract to
establish a Joint Venture Company ("JVC") on the terms and conditions as
follows:
Article 1: NAMES OF THE PARTIES TO THE JOINT VENTURE'
VIETNAMESE PARTNER (PARTY A):
DEPARTMENT OF HOME TRADE HANOI
Head office at 10 Le Lai Street, Hanoi
Socialist Republic of Vietnam
Tel: 252578 Fax: (84) 2 -54592
Represented by: MR. DUONG DINH - Director
FOREIGN PARTNER (PARTY B):
IMEX PAN - PACIFIC INC
A Company registered and incorporated in the Republic of the
Philippines with head office: Ground floor, Corinthian Plaza, Pasea
de Roxas, Legaspi Village, Makati, Manila, Philippines
Tel: 8104391-94, Tlx: 65714 PHLMPXPN, Fax: 632-810-10-10'
Represented by: Mr. JOHNATHAN H. NGUYEN - President
Article 2: NAME, HEAD OFFICE, OBJECTIVE OF JVC .
The JOINT VENTURE COMPANY shall be named as:
- International Name: Hanoi General Commercial Centre

- Head Office: Hang Bai Street corner Trang Tien Street


Hanoi, Socialist Republic of Vietnam
The JOINT VENTURE COMPANY shall be a limited company
granted the status of a juridical person subject to Vietnam laws, stipulated
m the Joint Venture Contract and Charter of the Joint Venture . ^
- Main objectives of the Joint Venture Company
Building and operating 4 Star Hotel, and Business Centre of
international standards to be located at Hang Bai Street on the
corner of Trang Tien Street, Hanoi, Socialist Republic of Vietnam:
- The Joint Venture Commercial Centre after completion will
have the following facilities:
1) 4 Star Hotel
2) Business Centre with office space for rental in accordance with International
Standards
3) Restaurants, Bars, Discos, Function Rooms, food and beverage facilities and
other Hotel related facilities for tourist services
Article'3: INVESTED AND LEGAL CAPITAL CAPITAL CONTRIBUTION
INCREASE AND TRANSFER
- Project cost: USDxx,000,000.00 (xx million US Dollars)
- Legal capital: USDxx,000,000.00 and contributed by the two Parties as follows:
USD xx,000,000.00 by party A (30%)
USD xx,000,000.00 by party B (70%)
-Loan: USD xx,QOQ,000.00 to be borrowed from any financial institution
and arranged by Party B for the Joint Venture; terms and conditions of the
loan will be mutually agreed on by both parties
The juridical responsibilities of each party for the third party is within its
contributed capital. All legal capital will be contributed in a lump sum or
installments at appropriate periods agreed on by both parties and the State
Committee for Co-operation and Investment.
If either of the two parties does not follow the Schedule of Capital Contribution,
that party shall have to inform the other party within 90 days before and shall
be responsible for-any losses caused by the such failure
CAPITAL CONTRIBUTION
The capital contributed by Party "A" shall be USD xx,000,000.00 comprising of:
- Land rental for xx years
- Fees for the retirement and relocation of present employees
- Fees for clearing the construction area
The capital contributed by party B shall be USD xx,500,000.00 comprising of
architectural design, materials, equipment, working capital and other expenses
CAPITAL INCREASE
On the basis of the needs of development during the operation, the Joint
Venture Capital can increase its legal capital in the following forms:
- Reinvesting the profit share of each party.
- Contributing new capital
The increase of the legal shall be agreed by both parties and be approved by
the State Committee for Co-operation and Investment
CAPITAL TRANSFER
During operation, either party can transfer its capital contribution to the other
party or the third party approved by the State Committee for Co-operation and
Investment
Article 4: DURATION OF THE CONTRACT
The stipulated duration of this contract is xx years from the official date of
establishment of the Joint Venture and can be extended by the agreement of the
Parties hereto together with and subject to the approval of the State Committee
for Co-operation and Investment
Article 5: RESPONSIBILITIES OF EACH PARTY .
PARTY A'S RESPONSIBILITIES
1.. To contribute its capital (as stipulated in Article 3 of this contract)

2. To complete the application formalities to obtain the investment license and


other necessary permits for the establishment of the Joint Venture Company
3. To obtain all necessary permits for Party B's personnel to stay and work in
Vietnam
4. To take part in controlling in the Joint Venture
5. To do all necessary tasks to facilitate the operation of the Joint Venture
PARTY B'S RESPONSIBILITIES
1. To contribute its capital (as stipulated in Article 3 of this contract)
2. To take part in controlling the Joint Venture
3. To provide its know-how and management experience to the Joint Venture :
4. To advise on and supply the technical data for 'machinery necessary
equipment and materials for the Joint venture so that party A can study their
use and supply for an import quota when necessary.
5. To study markets and imported commodities such as machinery, equipment,
materials, accessories, etc., through its Head Office and/or Branches
6. To provide Party A with lists and prices of commodities which are not available
in Vietnam
7. To ensure capital for building, the foundation of the Hotel and Business Centre
8. To ensure the availabilities of the working capital to make the business
profitable
9. To market the Hotel and Business Centre and use its best endeavours to
attract and bring in foreign tourists to patronise the Hotel Business Centre
MUTUAL OBLIGATIONS
1. On the basis of labour contracts, the Joint Venture Company shall employ,
appoint, terminate and supervise the Board of Directors in their employing,
appointing, terminating, and supervising other personnel of the Joint Venture
2. Salaries and subsidies of all personnel of the Joint Venture shall be paid by the
Joint Venture Company
3. Salaries and subsidies for foreign personnel shall be paid in foreign currency
4. To further the best interests of the Joint Venture, both parties can request the
Board of Management to change or replace personnel; any change or
replacement shall not be implemented without proper reasons
5. Citizens of Vietnam have priority to be recruited to work for the Joint Venture;
the Joint Venture can employ foreign experts for work requiring highly technical
skills which cannot be done by the Vietnamese citizens
6. Any interest and obligation of Vietnamese personnel working for the Joint
Venture shall be ensured by their labour contracts in accordance with Vietnam
labour Regulations for enterprises with Foreign Capital
7. Salaries and other subsidies for Vietnamese personnel shall be paid in
Vietnamese Dong currency
8. During operation of the Joint Venture the Board of Directors shall organize
regular training programs for Vietnamese personnel of the Joint Venture
9. The Board of Directors, during, the operation of the Joint Venture shall
arrange the schedule of training and visits for Vietnamese managers working for
the Joint Venture
10. Both parties shall inform each other of all their major policies which affect
the Joint Venture
Article 6: CONTROL AND MANAGEMENT
The Head of the. Company shall be its Board of Management consisting of 9
(nine) members appointed as follows:
- Party "A" shall appoint 3 (three) members
- Party "B" shall appoint 6 (six) members
The powers, duties, activities, and- terms of this: Board of Management shall
be stipulated in the Charter of the Joint Venture
BOARD OF DIRECTORS
The Board of Directors of the Joint Venture Company shall be appointed by the
Board of Management on the basis of the agreement between the two parties .

- The first Board of Directors for the initial period lasting 5 years of the Joint
Venture shall be appointed as follows:
- General Director and Vice General
Director of Finance:
By Party B
- Managing Director and Chief Accountant:
By Party A Article 7: FISCAL YEAR
The fiscal year of the Joint Venture shall commence on January 1 st and terminate
on December 31st of the same year
The first fiscal year shall commence from the official date of establishment to
the December 31st of the same year
Article 8: PRINCIPLES OF ACCOUNTING
The Joint Venture Company shall implement' its accounting system on the basis
of Vietnamese Accounting principles and standards and be checked by
Vietnamese Financial Organization (as stated in Article 18 of Law on Foreign
Investment in Vietnam as aforesaid)
Article 9: YEARLY ACCOUNTING REVIEW '
Every year, the Joint Venture shall be responsible for its accounting review in
conformity with regulations of the Vietnam Government; documents of the
yearly accounting review 'must be submitted to the relevant authorized
organization after approval by the Board of Management
Article 10: INSURANCE
Both parties agree to choose a Vietnamese insurance company to insure the
assets of the Joint Venture
Article 11: PROFIT-PROFIT SHARING- ESTABLISHMENT FUNDS
The Joint Venture and its foreign partner shall be liable to fulfill their financial
obligations to the Vietnam Government as stipulated in the Investment License
issued by the State Committee for Cooperation and Investment
After fulfilling all its financial obligations to the Vietnamese Government, the
Joint Venture shall use 5% of its profit to set up a reserve fund; Other funds shall
be established in conformity with Vietnamese Laws
The reserve fund shall be limited to not more than 25% of the legal capital in
accordance with Article 30 of the Law on Foreign Investment; the Board of
Directors shall decide the profit share of both parties as follows:
Profit sharing for the initial xx years of the Joint - Venture
- Party A: 30%
- Party B: 70%
The profit sharing of both parties shall be as follows:
After xx years
after xx years after xx years
Party A:
35%
40%
50%
Party B:
65%
60%
50%
Party B can remit the following abroad:
- Profit from the business
. .
,
- Receipts from supplying services and technology transfers
. - Money from loans and interest of the said loans
- Money and other assets officially belonging to Party B
Foreign personnel working for the Joint Venture can remit their legal income
after returning their income tax in conformity with regulations on foreign
exchange control of Vietnam; During operation of the Joint Venture losses of
the Joint Venture in any fiscal year shall be compensated by profits in following
years but this shall no longer, be valid after five years as stipulated in Article 27
of the law on Foreign, Investment
Article 12: EXPENSE FOR ESTABLISHMENT OF THE JOINT VENTURE
All expense concerned with the establishment of each partner shall be included
in the investment cost of the Joint Venture Company
Article 13: OFFICIAL OPERATING DATE :
The Joint Venture shall be officially established when the State Committee for
Cooperation and Investment approves and issues the Investment license
Article 14: DISSOLUTION - BANKRUPCY - FORCE MAJEURE

The Joint Venture can be dissolved before the termination of the contract in the
following cases:
- Both parties agree and suggest the dissolution to be passed by the Board of
Management
- The Joint Venture is juridically appraised as a bankrupt company
- One of the two parties does not want to continue as a Party in the Joint Venture
and wants to transfer its contributed capital without agreement of the other
party but the State Committee for Co-operation and Investment permits the
dissolution
Formalities of bankruptcy declaration shall be carried out in conformity with
appropriate international regulations agreed to by the two parties
In case of observance of Vietnamese- laws and regulations on bankruptcy
declaration, both parties agree to refer this to Vietnam Economic Arbitration or
other juridical organization in accordance with the Law on Foreign Investment
In case of Force Majeure such as earthquake, storm, flood, fire, war, or any other
unforeseen disaster which has occurred beyond the control of any party, that
party shall be discharged of its related commitments in this contract provided:
- The Force Majeure is the proximate cause which obstructs or delays the
execution of the contract
- That each party has tried all possible measures to overcome such occurrences
- That each party shall immediately, after such occurrence, inform the other
party of the same and within 20 days, send the other party a written notice
indicating the measures undertaken and the cause which prevents the
execution of the Contract duly confirmed by the relevant authorities at the place
where the disaster occurs
Article 15: LIQUIDATION
In case of liquidation as stated in Article 14 of this contract, the Board of
Management shall appoint a committee to execute the liquidation
During liquidation, the assets of the company shall first be used to pay for
worker's salaries, unpaid taxes, due debts, and liquidation expenses, the other.
assets . shall be shared by the two parties according to their rate of capital
contribution (both for profits and losses)
The Name of activities of the Liquidation Commission shall be stated in details in
the Charter of the Joint Venture Company
In case of bankruptcy as stated in Article 14 of this contract, the liquidation shall
be executed in conformity with Article 19 of Law on Foreign Investment
Article 16: DISPUTE
Upon the approval of. the State Committee for Cooperation and Investment, the
Joint Venture Contract shall become a juridical document which shall bn
respected by both parties
Any one-sided contractual termination is not valid.
Any dispute between the two parties arising from the execution of this Joint
Venture Contract shall first be resolved through mutual consultations and
amicable settlement proceedings; if, however, the two parties fail to reach an
agreement, 'the dispute shall be referred to the Singapore Economic Arbitration
All matters that are not provided for in this Contract but are necessary for the
carrying out of the objectives of the Joint Venture ,
Company will be carried out by each party in accordance with the Charter of the
Joint-Venture Company or-the applicable-Investment
Law and Implementing Decree
This contract is made in 10 copies in English and Vietnamese and comes into
effects on the date of issuance of the Investment License, Signed
on ...... ...... ...... ......19 ......
FOR THE VIETNAMESE PARTY:
FOR FOREIGN PARTY
DEPARTMENT OF HOME TRADE HANOI
IMEXPAN-PACIFIC INCORPORATED
DUONG DINH
DIRECTOR

JOHNATHAN H. NGUYEN
PRESIDENT

(page 158) CONTRACT OR NO CONTRACT


THE PROBLEM
If a dispute arises about a contract, the lawyers for each side study the text to see if the
contract is a binding and enforceable agreement or if there are loopholes: can one side say
the "contract" is not worth the paper it is written on? Each applicable law looks at this
problem differently. What reasons are common in international cases for deciding that the
parties have "no contract"?
THE PRINCIPLE
Under most legal systems, a contract is enforceable only if (a) the parties achieve a
"meeting of minds" through a process of offer and acceptance, if (b) both sides are capable
of entering a contract, and if (c) the purpose of the contract is legal. Theo hu ht cc h
thng php l, hp ng c tnh cht rng buc ch khi no (a) cc bn t c s thng
nht ch thng qua quy trnh ngh v chp nhn, (b) c hai bn c nng lc k kt hp
ng, v (c) mc ch ca hp ng hp php. An odd twist of Anglo-American law is that
the contract must give both sides rights and dutiesone-sided contracts are "no contract."
Lut php Anh- M vn rt phc tp cho rng hp ng phi quy nh trch nhim v
quyn li cho cc bn hp ng ch c mt pha a ra b xem l khng phi hp ng.
IN MORE DEPTH
ADVERBIAL CLAUSES OF CONCESSION
1)
Though/ Although he is sick, Though/ Although their lines of reasoning are different,
he goes to work.
Continental laws and Anglo-American laws are both
geared to
No matter how sick he is, he goes
No matter how different their lines of reasoning are,
to work.
Continental laws and Anglo-American laws are both
geared to
However sick he is, he goes to
However different their lines of reasoning are,
work.
Continental laws and Anglo-American laws are both
geared to
However sick, he goes to work.
However different their lines of reasoning, Continental
Sick as he is, he goes to work.
laws and Anglo-American laws are both geared to
Different as their lines of reasoning are, Continental
Despite/ In spite of/
laws and Anglo-American laws are both geared to
Notwithstanding sickness, he goes Despite different lines of reasoning, Continental laws
to work.
and Anglo-American laws are both geared to
Though/ Although sick, he goes to Their lines of reasoning being different, Continental
work.
laws and Anglo-American laws are both geared to
(II) Though he goes everywhere, he always remembers his home.
No matter where he goes, he always remembers his home.
Wherever he goes, he always remembers his home.
Despite any place he goes to, he always remembers his home.
(III)Though he says anything, he is a bad manager.
However different their lines of reasoning, Continental laws and Anglo-American laws are
both geared to the needs of the international business community: different procedures,
different drafting styles, different agreementsbut a common purpose and, in many cases,
a common result. D t duy c khc nhau, nhng lut php ca chu u Lc a v AnhM u nhm ti p ng nhu cu ca cng ng doanh nghip quc t: quy trnh xt x,
cch d tho, cch tha thun tuy khc nhau nhng mc ch vn nh nhau v trong nhiu
trng hp, kt qu cng nh nhau.
This is particularly true in deciding the issue of contract or no contract. The Anglo-American
argues that a contract is an enforceable agreement, and that an "invalid contract" is
therefore a contradiction in terms; the Continental lawyer has no trouble with the idea of an
invalid contract. For the exporter, it makes no difference if the lawyer tells him he has "no
contract" or an "invalid contract"either way he is in trouble. What are the most likely
causes of such an uncomfortable situation?

The Meeting of Minds


A contract comes about when there is a meeting of minds, when one side says "I make
you this offer" and the other side says "I accept." But sometimes there is a written
agreement and no "meeting of minds." How can that happen?
Duress
If I hold a pistol to your head and force you to sign a contract, this is duressundue
pressure. A contract never came into existence because there was no meeting of minds.
Similarly, if one party has an excessively strong position (a monopoly on the supply of a
vital raw material, for example), and if this party uses this position to dictate grossly unfair
terms, the agreement is likely to be ruled "unconscionable." An unconscionable
agreement is no contract.
Mistake and Fraud
A mistake about the goods or a deliberate fraud can mean that there was no meeting of
minds. For example, I could have a contract with you to buy the cargo of the Empress of
Verbena for $900. Unfortunately there are two ships of this name: I was selling the cargo of
one, and you believed you were buying the cargo of the other. Or if I try to cheat you by
saying that the cargo consists of new leather jackets when the jackets are unused but thirty
years oldin each case there was no meeting of minds and no contract.
Failure to Follow the Rules of Offer and Acceptance
A contract comes into force when an offer is made by one side and accepted by the other.
Complex rules govern this process and they are often broken. What are these rules?
Offer and Acceptance
A contract comes into existence when one party (the offerer) makes an offer, and another
party (the offeree) accepts it.
An offer is not always, in international practice, the first move in forming a contract. Often
the buyer first makes an inquiry or, more formally, issues a Request for Tender. In line with
this inquiry, the exporter makes a tender or an offer, usually the offer is open for a stated
period of time. If the buyer rejects the offer, it is clearly dead; as soon as the buyer says
"No," the exnorter is no longer bound by the offer.
Normally, of course, buyers do not say No- they make a counteroffer: You want 900. Ill
offer you 600. In other words, Yes, if What is on the negotiating table now? The
counteroffer is a rejection; in effect it kills the original offer. On the table now is not an offer
to sell for 900 but an offer to buy for 600. The exporter must now make a choice: accept,
reject, or make another counteroffer, for example: Lets say 800. The cycle of offer and
counteroffer continues until one side says I accept or until negotiations are broken off.
When a dispute arises- especially if there is no written contract- lawyers scrutinize the
process of offer and acceptance, trying to discover the exact point, if any, at which a
contract came into existence. Since most negotiations deal with many issues at the same
time- price, payment, delivery, warranty- deciding if the parties really have a contract and, if
so, on what terms, can become an expensive nightmare. This is one main reason to put
every agreement into writing and sign it.

THE ENTIRE AGREEMENT CLAUSE

For the Anglo-American exporter, signing a contract amounts to saying everything we


discussed so far is now dead- this contract is the final form of our entire agreement. This
principle derives from an ancient rule of English law known as the Parol Evidence Rule.
For the Continental exporter this is not so: a letter that predates the contract, a memo, the
minutes of a meeting- all might have some bearing on the contract,
CONCEPT REVIEW: BUTTONED UP
Verbena Paintshop makes spray-painting equipment. It sells a unit costing $55.000 to
Esperanza Respray, a small company that resprays busses and tracks. Delivery (FOB)
takes place on 3rd August 2004. The machine is inspected in Esperanza on 18 th September
2004. On 10th January, Esperanza Respray notifies the exporter that the compressor in the
spraying unit has failed, and that the machine cannot be used. Verbena Paintshop sends a
replacement compressor by air; it arrives on 5th February, 2005. On 16th September 2005,
Esperanra Respray notifies the exporter that the compressor failed for a second tirne on
20th August and asks for a further replacement. Verbena Paintshop refuses.
Study the Defects Liability provision below. What arguments are the two two sides likely to
put forward in making their cases?
Defects Liability Period
The Defects Liability Period shall be a period of six months.
If any defect occurs during the Defects Liability Period, the Buyer shall forthwith inform the
Seller in writing the details of the defect.
The Seller shall be responsible for making good with all possible speed any defect as
notified which arises from defective materials, workmanship or design.
The provision of this clause shall apply to any goods repaired, replaced or otherwise
made good by the Seller, but not so as to extend the Defects Liability Period for more
than twelve months from the commencement date of original defects liability period.
1. .Arguments likely to be used by Espsranza Respray:

.
2. Arguments likely to be used by Verbena Paintshop:

.
3. Points requiring better regulation in this defects liability provision:

.
1. Espcranza Respray will argue that the compressor is obviously a poorly made
item since it failed twicethere is probably a defect in design. Further it will say
that the exporter's liability for defects extends to all replaced items. The second
failure occurredand was notifiedwithin the maximum agreed defects liability
period, i.e., twelve months from the commencement of the period.
2. Verbena Paintshop has two arguments: firstly there was a delay of four weeks
between the second failure and the required notification: this is not notification
"forthwith:" the failure to offer timely notification cancels the seller's duty to cure the
defect; Secondly, the defects liability period began with delivery (3 rd August 2004);
the failure of the compressor thus occurred when it was no longer under warranty.
3. The clause would be clearer if it stated when the defects liability period began.
Under most applicable laws the period begins with delivery. More exact specification
of the notification period is not common or necessary.
CONCEPT REVIEW: WHO CHOOSES?
The defects liability provision below is taken from a set of general conditions in common
use by Chinese companies. Read the answer the questions
The Seller warrants that goods are made of the best materials, with first class
workmanship, and comply in all respects with the specifications given in Annex
B. The Seller warrants that the goods when correctly mounted and properly
operated and maintained, shall give appropriate performance for a period of
twelve months.
If a defect in materials, workmanship or design, or any discrepancy with
specifications comes to light during the warranty period, the Seller shall at his
own cost satisfy the claim, subject to the agreement of the Buyer in one of the
following ways:
a. Agree to the rejection of the goods and refund to the Buyer the value of the goods thus
rejected;

b. Reduce the price of the goods according to the degree of inferiority, extent of damage, or
amount of loss suffered by the buyer;
c. Replace the defective goods with new goods which conform to the quality and
performance given in Annex B;
d. Repair the defective goods to bring them in conformity with the quality and performance
specifications given in Annex B;
e. Allow the Buyer or a third party appointed by the Buyer to repair the defective goods and
to bring them in conformity with the quality and performance specifications given in Annex B
at Sellers risk and cost.
1. Are these general conditions Conditions of Sale or Conditions of Purchase?
SALEPURCHASE
2. If there is a defect, who chooses the method of cure?
BUYER
EXPORTER
3. Is this a warranty of freedom from defects on delivery or a warranty of durability?
FREEDOM FROM DEFECTS DURABILITY
1. Conditions of Purchase. (See answer to question 2)
2. The exporter proposes a method, but the buyer must agree to it. Thus the
buyer is in control,
3. Durability. Another sign that we are dealing with conditions of purchase.
CONCEPT REVIEW: WHO PAYS?
Verbena Medical makes hospital beds and other hospital furniture. It exports 40 beds to
South Central Hospital in Espcranza City. The defects liability provision in the contract
includes this wording:
The Seller shall indemnify and hold harmless the Buyer against any loss or damage
whether direct or indirect suffered by the Buyer as the result of defective or faulty
goods delivered by the Seller.
Assume that the coniract is subject to the law of Espcranza which is modelled on U.S. law.
During the defects liability period, one of the beds collapses with unfortunate results:
1. The bed itself is unusable and must be replaced;
2. The patient who was in the bed is injured, with extra medical costs of $5,000;
3. The injured patient, a rich politician, threatens the hospital with a lawsuit for his
"pain and suffering"the. hospital pays the patient $9,000 to avoid the lawsuit;
4. Hospital equipment around the bed is damagedthe equipment cost $4,000;
5. The ward where the bed was situated is a private wardit cannot be used for 3
days with a loss to the hospital of $3.000:
6. Two orderlies at the hospital start a fight over who broke the bedone of them is
hospitalized at a cost of $5,000;
7. During the fight, equipment is smashed at a cost of $8,000.
Which costs must Verbena Medical most probably pay?
1.
3.
5.
7.
:
2.
4.
6.
1. Yes
2. Yes

3 Possibly
4 Yes

5. Yes
6. No

7. No

SUMMARY: What You Should Know


1. The purpose of the defects liability provision is to allow the exporter to cure defects in
delivered goods: the provision'must therefore explain the corrective action he must take.
2. The normal options are to repair, to replace, to allow reduction in the price of the
goods, allow return of the goods, or to allow the buyer to repair the defect at the
exporter's expense.
3. The exporter likes to have full discretion over what corrective action he takes; buyers,
however, resist this.
4. The exporter usually, though not always, pays for curing defects.
5. The consequences of a defect can be costly; the panics often negotiate at length to
decide who pays for consequential loss or damage.
CONCEPT REVIEW: BUTTONED UP
Verbena Paintshop makes spray-painting equipment. It sells a unit costing $55.000 to
Esperanza Respray, a small company that resprays busses and tracks. Delivery (FOB)
takes place on 3rd August 2004. The machine is inspected in Esperanza on 18 th September
2004. On 10th January, Esperanza Respray notifies the exporter that the compressor in the

spraying unit has failed, and that the machine cannot be used. Verbena Paintshop sends a
replacement compressor by air; it arrives on 5th February, 2005. On 16th September 2005,
Esperanra Respray notifies the exporter that the compressor failed for a second tirne on
20th August and asks for a further replacement. Verbena Paintshop refuses.
Study the Defects Liability provision below. What arguments are the two two sides likely to
put forward in making their cases?
Defects Liability Period
The Defects Liability Period shall be a period of six months.
If any defect occurs during the Defects Liability Period, the Buyer shall forthwith inform the
Seller in writing the details of the defect.
The Seller shall be responsible for making good with all possible speed any defect as
notified which arises from defective materials, workmanship or design.
The provision of this clause shall apply to any goods repaired, replaced or otherwise
made good by the Seller, but not so as to extend the Defects Liability Period for more
than twelve months from the commencement date of original defects liability period.
1. .Arguments likely to be used by Espsranza Respray:

.
2. Arguments likely to be used by Verbena Paintshop:

.
3. Points requiring better regulation in this defects liability provision:

.
1. Espcranza Respray will argue that the compressor is obviously a poorly made
item since it failed twicethere is probably a defect in design. Further it will say
that the exporter's liability for defects extends to all replaced items. The second
failure occurredand was notifiedwithin the maximum agreed defects liability
period, i.e., twelve months from the commencement of the period.
2. Verbena Paintshop has two arguments: firstly there was a delay of four weeks
between the second failure and the required notification: this is not notification
"forthwith:" the failure to offer timely notification cancels the seller's duty to cure the
defect; Secondly, the defects liability period began with delivery (3 rd August 2004);
the failure of the compressor thus occurred when it was no longer under warranty.
3. The clause would be clearer if it stated when the defects liability period began.
Under most applicable laws the period begins with delivery. More exact specification
of the notification period is not common or necessary.
CONCEPT REVIEW: WHO CHOOSES?
The defects liability provision below is taken from a set of general conditions in common
use by Chinese companies. Read the answer the questions
The Seller warrants that goods are made of the best materials, with first class
workmanship, and comply in all respects with the specifications given in Annex
B. The Seller warrants that the goods when correctly mounted and properly
operated and maintained, shall give appropriate performance for a period of
twelve months.
If a defect in materials, workmanship or design, or any discrepancy with
specifications comes to light during the warranty period, the Seller shall at his
own cost satisfy the claim, subject to the agreement of the Buyer in one of the
following ways:
a. Agree to the rejection of the goods and refund to the Buyer the value of the goods thus
rejected;
b. Reduce the price of the goods according to the degree of inferiority, extent of damage, or
amount of loss suffered by the buyer;
c. Replace the defective goods with new goods which conform to the quality and
performance given in Annex B;
d. Repair the defective goods to bring them in conformity with the quality and performance
specifications given in Annex B;
e. Allow the Buyer or a third party appointed by the Buyer to repair the defective goods and
to bring them in conformity with the quality and performance specifications given in Annex B
at Sellers risk and cost.
1. Are these general conditions Conditions of Sale or Conditions of Purchase?
SALEPURCHASE
2. If there is a defect, who chooses the method of cure?

BUYER
EXPORTER
3. Is this a warranty of freedom from defects on delivery or a warranty of durability?
FREEDOM FROM DEFECTS DURABILITY
1. Conditions of Purchase. (See answer to question 2)
2. The exporter proposes a method, but the buyer must agree to it. Thus the
buyer is in control,
3. Durability. Another sign that we are dealing with conditions of purchase.
CONCEPT REVIEW: WHO PAYS?
Verbena Medical makes hospital beds and other hospital furniture. It exports 40 beds to
South Central Hospital in Espcranza City. The defects liability provision in the contract
includes this wording:
The Seller shall indemnify and hold harmless the Buyer against any loss or damage
whether direct or indirect suffered by the Buyer as the result of defective or faulty
goods delivered by the Seller.
Assume that the coniract is subject to the law of Espcranza which is modelled on U.S. law.
During the defects liability period, one of the beds collapses with unfortunate results:
1. The bed itself is unusable and must be replaced;
2. The patient who was in the bed is injured, with extra medical costs of $5,000;
3. The injured patient, a rich politician, threatens the hospital with a lawsuit for his
"pain and suffering"the. hospital pays the patient $9,000 to avoid the lawsuit;
4. Hospital equipment around the bed is damagedthe equipment cost $4,000;
5. The ward where the bed was situated is a private wardit cannot be used for 3
days with a loss to the hospital of $3.000:
6. Two orderlies at the hospital start a fight over who broke the bedone of them is
hospitalized at a cost of $5,000;
7. During the fight, equipment is smashed at a cost of $8,000.
Which costs must Verbena Medical most probably pay?
1.
3.
5.
7.
:
2.
4.
6.
1. Yes
3 Possibly
5. Yes
7. No
2. Yes
4 Yes
6. No
(Page 42) TRANSPORT
THE PROBLEM
For the exporter, transportation has two aspects: the physical safety of goods which
means appropriate packaging and correct marking and correct documentation. Unless the
shipping documents are in perfect order, prompt payment under a letter of credit is difficult
or impossible. What are the dangers?
THE PRINCIPLE
The parties should state in their contract what packaging should bear. The exporter must
follow the agreement scrupulously or payment may be delayed. The exporter should ensure
that the shipping documents correspond exactly with the conditions of the letter of credit
and that the bill of ladding is clean, otherwise, again, payment can be seriously delayed.

(Page 169) THE CONTRACT AS THE ENTIRE AGREEMENT


THE PROBLEM
An ancient rule of Anglo-American law states that the final written version of the contract
replaces all previous agreements between the parties. What implications does this rule
have for the exporter?
THE PRINCIPLE
Most international contracts whatever legal system they adopt include an entire
agreement provision. This clause has important results: the background of the contract
must be established within the contract itself, important letters and memoranda must be
listed as contract documents, and definitions play an important part in contract drafting.
Hu ht cc hp ng quc t - cho d l h thng php l no c vn dng u phi bao
gm iu khon hp ng hon chnh. iu khon ny c tc ng ht sc quan trng: bi cnh
ca hp ng phi c nu r trong hp ng, cc th t, memo phi c lit k l chng t ca
hp ng, v nh ngha cng rt quan trng khi son tho.
IN MORE DEPTH

When an exporter and a buyer sign a contract, are they simply adding the final link to a
chain of agreements? Or are they putting into words a final and definitive version of
everything agreed so far? The Continental and Anglo-American systems differ widely in
their answer to these questions.
THE WHEREAS RECITAL: THE BACKGROUND OF THE CONTRACT
In most exporter deals, the contract is the entire agreement. Unfortunately, however, the
text of a contract seldom answers important background questions: Why did the parties
sign the contract in the first place? What made the deal attractive? How long had the
parties known each other? What future business did they hope for? And so on. If a
dispute arises, the judge must ask such questions in order to understand the contract
fully; often the parties give different answers. How can the court establish the truth? If the
contract is the entire agreement, then earlier letters and documents cannot be used as
evidence. To overcome this uncertainty, lawyers write the answers to background
questions into the contract. Through the whereas-recital. Contracts often begin:

Witnesseth that

THIS PROCUREMENT CONTRACT


between
The Styropak Company of Nonamia
and
Verbena Packaging Ltd. Of Verbena

WHEREAS the parties have for many years successfully traded together
AND WHEREAS Styropak has recently developed biodegradable styrofoam
packaging
The parties hereby agree ..
The word whereas means because or considering that; in other words whereas-clauses
are not provisions, promises or conditionsthey are explanations. A typical whereas-recital
contains many types of background information. An example from a technology acquisition
contract:
- WHEREAS the parties have successfully cooperated in a number of projects in the
Republic of Verbena during the last. ten years; (Background of Collaboration)
- WHEREAS the Supplier has wide experience in the supply of electronic products
for use in tropical conditions; (Expertise of the parties)
- WHEREAS the parties concluded on 28 May 2007 a Memorandum of
Understanding and intend to develop products for Verbena; (Previous Agreements)
- WHEREAS the Supplier has developed and patented an electronic relay under the
registered trade-name "Hair Trigger"; (Reference to a Patent)
- WHEREAS both parties are interested in introducing this new technology into the
East Asian region; (Mutual Interest)
- WHEREAS the purchaser wishes to incorporate the latest relay-manufacturing
technology in its own products; (Goals of the Parties)
- AND WHEREAS the government of the Republic of Verbena actively supports the
introduction of pioneer technology (Economic Support Available)
It is hereby agreed that
Contracts for the sale of goods seldom contain so much information, but the purpose of any
recital is the same: if a dispute arises, the recital allow the court to discover the real
meaning of the contract through an understanding of the expectations of the parties when
they signed it.
Sometimes the exporter is tempted to treat the recital as a chance to promote his skills
and the excellence of his products. This is a mistake. If the contract gets into trouble, the
buyer will have a "big stick" with which to beat the exporter "You told me you were the

best and I acted on that belief." If big claims are in the recital in black-and-wnite the
exporter is trapped.
In a contract written under a Continental Law, a recital (or "preamble") is usefulit
prevents misunderstandingbut it is not essential. Continental lawyers often avoid the
complicated grammar of the whereas-clause; they prefer simple sentences under the
heading Preamble. The legal result is, of course, exactly the same.
DEFINITIONS
Another result of the entire agreement provision is the need for a definitions section.
Many terms are discussed during negotiations- faxes and letters andlikely to be
exchanged asking What exactly do you mean by?
It is common practice to group all definitions in a section of their own near the beginning
of the contract. Every word that the two sides discuss during their negotiations is likely to
require a definition.
CONCEPT REVIEW 3: MAKING CLAIMS
Verbena Leather makes leather carrying cases for cameras, lap-lop computers and other
hi-tech personal equipment. It has successfully exported one consignment of its products to
Japan, but it has otherwise sold mostly in the local market. A buyer in the United States is
interested in making a large purchase. During the negotiations, the American buyer
mentions the whereas-recital and offers the wording he wants to include in the contract.
Read it and then answer the questions.
Whereas Verbena Leather has a highly trained workforce and the most modern
leather-making machinery;
And whereas Verbena Leather has wide experience is supplying products to all parts
of the world;
. .
And whereas Verbena Leather is fully familiar with regulations regarding import
of leather goods into the United States;
The parties nereby agree...
1 Why does the American buyer want this wording in the recital?
..
2. Why might such high claims be dangerous for Verbena Leather?
..
3. Does this whereas-recital have any advantages for Verbena Leather?
YES NO
1. The wording will help the buyer if the products run into technical or regulatory
problems in the United States. The exporter cannot plead ignorance or inexperience.
2. An experienced exporter will always run into trouble in new market. If a dispute
arises, the judge might well take this fact into account in deciding the case- but not if
this wording is in the recital.
3. No.
CONCEPT REVIEW 2: Top Priority
The clause below is taken from a set of tender documents for the supply (and installation)
of a lighting system. It has three obvious weaknesses. What are they?
'"Contract Documents" means collectively the completed Tender Documents with
possible supplements, the Contract Agreement, Tender Drawings, the Notice of
Award, the Performance Bond, the Guarantee for Advance Payment, the Form of
Retention Guarantee, the Copy of Policy for Third Party Insurance, the Letter of
Power of Attorney and the Joint Venture Agreement (if any) with annexures and
appendices included therein and any additions, supplemental agreements, change
orders and extra work orders (if any).
1. .
..
2. .
..
3. .
..
1. The list has no order of precedence: if there is a conf.ict among the documents,
nobody will know which prevails.
2. The list is carelessly put togetherit includes anything that might be important; it
should be cut back to essentials.
3. By using the words "if any," the list includes documents which may not even exist.
CONCEPT REVIEW 3: Hide and Seek

Let us stay with the leather goods contract from Concept Review 1, Making Claims. During
negotiations the two sides spend a great deal of lime discussing the type of leather to be
used. One product, as it is agreed, is to be made of "antelope hide" and the specifications
in the contract include that phrase. But what is an antelope? There is a long exchange of
faxes on this subject; finally the two sides agree a list of breeds that are "antelopes as far
as the contract is concerned. The list is important, and it is signed by both sides. After this
the contract is signed.
Relying on this signed list, Verbena Leather uses gazelle skin (which is included in the list)
for some products. The American buyer objects and tries to reject the delivered goods. The
dispute goes before a judge in California.
What are the irnportant considerations in deciding who is right?
1. .
..
2. .
..
3. .
..
The essential question is this: is the list of breeds part of the contract or not? To
decide this, we must first ask if the list of breeds is mentioned in the contract as a
contract document. If it is, then it is pan of the contract and enforceable. If it is not
mentioned as a contract document, then we must ask if the contract contains an
entire agreement provision or, failing that, if the applicable law assumes that the
contract is the entire agreement. Iffor whatever reasonthe contract is the entire
agreement, then the list of breeds, which was agreed before the contract was
signed, has no validity.
SUMMARY: What you Should Know
1. The Anglo-American contract is, traditionally, the entire agreement. To avoid
confusion, most international contracts contain an "entire agreement" clause (re)stating
this position.
2. The entire agreement clause means that all documents that predate the concract
become invalid when the contract is signed.
3. One result is that the background to the contractoften needed by a court to
interpret the contractis provided in the form of a whereas-recital.
4. Any important documents (tellers, memo rand-urns, and so on) that predate the contract
are listed in the contract as "contract documents." Such documents must be given an order
of seniority in case of contradictions.
5. Definitions of terms agreed during negotiations are included in a definitions sections
in the concract.
TERMINATION
Termination occurs when either party pursuing power created by agreement or law puts
an end to the contract otherwise than for its breach. Thus runs Americas UCC. If the two
sides agree in the contract that one of the parties may, under certain circumstances, end
the contract, then this is an act to terminate. In practice, there are two kinds of
termination: termination for convenience and termination for default.
Termination for convenience occurs when one party (usually the buyer) simply decides to
drop the contract. No rule is required. This is unusual in a standard export contract, but is
common in time-frame contracts. (A time-frame contract is one which allows the buyer to
order items at his discretion over a long period of time- two years perhaps.)
Termination for default occurs when the contract sees certain defaults which allow one
side (usually the buyer to terminate, Contracts within an Anglo-American framework tend
to stipulate that on termination (for whatever reason), the party terminated has the right
to be paid for all supplies or services correctly delivered. Contracts within the Continental
framework tend to omit this provision, relying on the applicable law to resolve the issue.
To avoid any uncertainty, termination clauses should include such wording as:
In the event of termination for whatever reason, the Seller shall be entitled to
receive full payment for all goods and services delivered by the Seller at the date
of termination.
An example, then, from an American time-frame contract:
Termination for Default
The Buyer may by written notice of. default to the Seller, terminate the whole or
any part o this contract in any one of the following circumstances:

(i) If the Seller fails to make delivery of the Goods within the time specified
herein;
(ii) If the Seller fails to perform any of the other provisions of this contract, or so fails
to make progress as to endanger performance of this contract in accordance with its
terms, and in either of these two circumstances does not cure such failure within a
period of 10 days.
CANCELLATION
When one party breaches a contract, the other has the right to demand cancellation of the
contract.'" Cancellation' occurs when either party puts an end to the contract for
breach.Note the difference between termination and cancellation. The contract is
terminated under a provision of the contract: a contract is cancelled when one side has
breached and the other simply refuses to proceed.
Docs every breach allow cancellation by the other party? Clearly not. The law dues
everything it can to enforce contracts- cancellation on trivial grounds makes no legal
sense. Accordingly, most laws see a breach as either fundamental or noi fundamental. A
fundamental breach goes ''to the heart of the contract" and allows the other side " to say
"Enough. The contract is over." How can you decide what is and what is not
"fundamental breach"? Some cases are easy to decide, but there is a large gray area
under every well-established law, the courts are frequently .askcd to make decisions on
hard cases.
When a contract is cancelled, a payment problem arises: should the party in breach
receive compensation for duties performed so far? Courts worldwide find it difficult to
establish a principle on this, and judgment is usually on a case-by-case basis. Naturally
the party in breach has a weak case: even so, there is some chance of recovering what
has genuinely been earned.
RESCISSION
Termination and cancellation are both one-sided procedures. When the two parties agree to
end a contract, the generally used term is rescission. Lei's say, for example, that a supplier
of electric cable has difficulty supplying the quality his customer requires, and the customer
has meanwhile found a cheaper supplier elsewhere. Both sides now have an interest in
dissolving the contract. In legal theory, they enter a new contract to annul the old contract.
(The mutual surrender of rights is seen as providing the necessary consideration.)
Unfortunately the term rescission is used in other contexts than a mutual agreement to end
a contract; international contract drafting would benefit if it were not.
Impossibility and Frustration
Occasionally a contract is discharged because it is impossible or totally pointless to
continue with it. The classic cases are a contract to rent a music hall which burns downno
music hall, no contractand a contract to rent scats along the route of a procession which
is cancelledonce again, no procession, no contract. Most legal
systems recognize that sometimes a contract has lost its point and give one of the parties
the right to end it. But the courts are reluctant to allow thiscontracts are signed to be kept,
not to be broken. The exporter is wise to assume that performance will be required.
THE LANGUAGE OF THE CONTRACT
Whenever versions of a single document exist in two languages, there are
Conflicts: no translation is ever perfect. Ideally, the parties should agree on a contract
language, making it clear that translations do not have the same authority as the original
version in the contract language.
What happens, though, if the parties cannot agree? There are two roads: (a) the parties say
nothing at allin a dispute, the judge decides which version to trust; (b) the parties make
two (or more) versions equally authoritative; again, the judge decides which version to
favor.
CONCEPT REVIEW 1
TONGUE TWISTER
Read this status-of-the-contract and assume the contract says nothing else about
language.
Copies of the Contract, one in English and one in Swahiti, have been signed by bothe
parties. Each party retains one copy in each language.
1. What are the dangers of a clause like this?
2. Why do you think the two sides accepted it?

1. Translations always produce conflicts; the danger here is that nobody knows
which version prevails.
2. The reason that two sides accept a loose clause like this is usually laziness and a
hope that problems will not arise. Not the best contract practice.
CONCEPT REVIEW 2
Fundamentals
It is seldom easy to decide if a failure to perform by the other side constitutes a
"fundamental breach." Remembering that difficult cases often finish up in the courts because the
lawyers for the two sides cannot agree, look at each of these situations and make your "best guess."
.
1. Delivery is two weeks late. The exporter is required under the contract to pay liquidated damages
of 0.5% of the contract price per week up to a maximum of 5%.
FUNDAMENTAL NOT FUNDAMENTAL NO BREACH
2. Same situation, except that delivery is sixty weeks late.
FUNDAMENTAL NOT FUNDAMENTAL NO BREACH
3. A machine that is of the greatest importance in the buyer's operations breaks down one week after
delivery. There is a six month defects liability provision in the
contract.
FUNDAMENTAL NOT FUNDAMENTAL NO BREACH
4. The buyer agrees to open a letter of credit, but. three months after the agreed date, the letter of
credit has still not been opened.
FUNDAMENTAL NOT FUNDAMENTAL NO BREACH
5. The buyer agrees to open a confirmed letter of credit with the First World Bank of Sheboygan.
When the confirmed letter of credit arrives, it is issued by the Moon
Bank of Verbena.
FUNDAMENTAL NOT FUNDAMENTAL NO BREACH
1. No breach. The contract allows late delivery.
2. Almost certainly fundamental breach. Sixty weeks delay is fifty weeks longer
than the contract foresaw in the liquidated damaged provision. Such a delay
would, in most cases, go "to the heart of the contract."
3. No breach. The contract foresees cure of defects.
4. Fundamental breach
5. Probably not fundamental breachthe issuing bank has asked for, and
received.confirmation by a bank in the exporter's country. The exporter' s interests are
fully covered.
Settlement of Disputes
THE PROBLEM
Many disputes are unnecessarily bitter because the parties did not specify a clear and
detailed procedure for settling their problems. What procedures are available? What works
best in the international context?
THE PRINCIPLE
Most negotiators prefer to take disputes to arbitration before a specialist court rather than
litigation before a local judge. To avoid lengthy and expensive proceedings, a well drafted
contract specifies an acceptable arbitration procedure.
IN MORE DEPTH'
Signing a contract is like a wedding in that few of the people involved foresee the
arguments, the disputeseven the quarrelsthat generally the ahead. Unlike marriage
partners, however, the panics to a contract regulate in advance, either expressly or
implicitly, a mechanism for settling their disputes. If the contract says nothing explicit, then
the applicable law provides the answer litigation before a judge.
Litigation
Of the three options available for settling disputes, litigation before the courts is
internationally the least attractive: it is public, it is expensive, it is time-consuming, and the
results are very legalistic rather than businesslike. For the exporter and the buyer,
litigation in a civil court creates special problems: if it sometimes appears difficult to get
justice in one's own country-in a foreign country it may seem impossible. Yet one side
must inevitably appear in a foreign court. Since most people are reluctant to accept this
serious disadvantage, what are the other choices?
Many contracts foresee a two-step process for dispute resolution:
* Amicable Settlement;

* Arbitration.
The first stepamicable settlementis not essential, but it is worth considering in any
export negotiation.
Amicable Settlement and Conciliation
The very word "dispute" suggests an angry confrontation between two sides each of
which believes it is in the rightan unhealthy business situation. An amicable settlement
clause calls for the friendly settlement of disagreements before they turn into disputes. A
typical wording:
Resolution of Disputes
The Buyer and the Seller shall make every effort to resolve amicably by direct, informal
negotiation any disagreement or dispute arising between them under or in connection with
the Contract.
ARBITRATION
If the two sides cannot reach agreement between themselves, the resolution of their dispute
requires a forum. This is a court of law unless the parties specify otherwise. In practice,
most contracts do specify otherwise, calling arbitration.
Arbitration has a long history. It began with courts set up by medieval trade guilds to settle
disputes among guild members. Such members-only courts kept things private and cheap;
further the judges were senior practitioners of the craft who understood the business
perfectly.
The other advantages of arbitration are:
* Its tendency to be quicker than litigation (at least there is no lengthy appeals procedure);
* The foreseeability of the costs.
On the other hand, costs are extremely high, and many costs- executive time invested in
preparing the case, for example- can never be recovered. Even so, most contracts contain
a clause specifying arbitration; compared with litigation it is generally seen as the lesser of
two evils.
In drafting an arbitration clause, four practical questions must be resolved:
- How many arbitrators sit in the court?
-Where does the court sit?
-What is the language of the court?
-Who pays court costs?
Does the court of arbitration have the power to enforce its judgement and make others
comply? In a direct sense, no. In practice, however, an arbitral award can normally be
enforced through the civil courts. Civil courts take necessary steps to order to pay for fine or
compensation because most trading countries have accepted the major international
convention on the enforcement of awards- the so-called New York Convention. Others have
bilateral arrangements or have signed other accords. But a word of caution is in order here:
having a right to enforcement and achieving enforcement are two different things. If the
buyer comes from a. country which has a. poor reputation for enforcing awards-or if the
country is not a signatory to the Conventionthen the exporter should be especially careful
to ensure that payment is secure preferably with an al-sight, confirmed letter of credit.
Money in hand is always preferable to a right to be paid money in a far-off country.
In Conclusion
Overall, the main concern of the two sides should be dispute avoidance, rather than dispute
management. Formal dispute resolution is expensive and damaging to business
relationshipseven if you win.
CONCEPT REVIEW
Beyond Dispute
Blue King Beer is a brewery in Verbena that exports about 40% of it production. Blue King
is negotiating with a hotel chain in Esperanza to supply a range of "fancy" beers suited to
the taste of tourists. The minimum contract price over a period of three years is agreed as
$400,000about 5% of Blue King's turnover. During negotiations the subject of a
settlement of disputes clause comes up. How would you advise the two sides when they
ask you the following questions? In each case give your reasons in the space provided.
1. Is it reasonable to omit a settlement of disputes clause completely?
YES
NO ..................................................................................
2. If no, should we specify arbitration? Or litigation?
ARBITRATION LiTiGATiON .................................................
3. Should we add an amicable settlement provision?

YES
NO .................................................................................
4. If yes, should this provision contain a detailed procedure for amicable settlement?
YES
NO ..............................................................................
5. If a contract specifies arbitration, where is. the best place tor the tribunal to meet?
UNSPECIFIED
BUYER'S COUNTRY NEUTRAL COUNTRY
EXPORTER'S COUNTRY. COUNTRY OF THE DEFENDANT
6. Should we state that both sides accept any arbitral award as "final and binding"?
YES NO .
1. No. A sizable contract should contain a clause on settlement of disputes.
2. Arbitrationit is likely to be quicker, cheaper and more businesslike; it will not put one
side at a real (or imagined) disadvantage before the national courts of the other.
3. Yes. A serious (and successful) attempt at amicable settlement can save huge sums
of money.
4. Yes. A procedure ;in support of amicable settlement has been found to save
considerable legal costs and management lime.
5. Possibly the country of the defendant. This creates extra costs for the side
wishing to begin the dispute and thus makes amicable settlement more likely.
6. Yes. It is always worth stating this even though such clauses are not always
enforceable.
CHAPTER 5: THE EXPORT CONTRACT
1. Making the Contract Safe
THE PROBLEM
Once all the commercial and legal decisions have been made and put into contract form,
the exporter may still be at risk. How can the last contractual risks be eliminated?
THE PRINCIPLE
The contract must be systematically examined for weaknesses before it is signed. The four
step process that examines the contract ceilings, special risks that come from the particular
circumstances of the contract, risks that come from outside the contract and risks that might
be hidden in the applicable law.
IN MORE DEPTH
Lets think of the contract as an old-fashioned castle. How can the exporter make the castle
safe? Obviously by looking for weaknesses and by finding ways to strengthen the castle at
those points. We will have a tidy four-step approach to making our contracts safe.
STEP 1. CEILING: Are any liabilitites unlimited?
STEP 2. ROADBLOCK: What special risks should be limited?
STEP 3. IRON CURTAIN: How can the exporter limit the effect of the applicable law?
STEP 4. SIGNPOSTS: How can the exporter limit the effect of third party actions?
STEP 1: THE CEILING
The exporter will certainly notice several places where he has agreed to make payments: if
he is late, for example; if a machine fails to reach promised specifications; if he is late in
curing a defect; or whatever. Each of these liabilities must be capped in some way: a ceiling
figure must be set. A full examination of the contract discovers where the exporter has
unlimited time or money liabilities: a ceiling clause makes the situation safe.
STEP 2: THE ROADBLOCK
The most familiar roadblocks in export contracts are set up to cover force majeurre and the
exporters liability for consequential loss or damage incurred by the buyer.
Each individual contract encounters different risks arising perhaps from:

The nature of the product;

The means of transport;

The market situation;

The economic or political situation in the exporters or the buyers country.

STEP 3: THE IRON CURTAIN


The total agreement between the two sides is their written contract plus the relevant
provisions of the applicable law. It has also become clear that the applicable law- especially
if it is the law of other side- can contain unwelcome surprises: rights of the buyer against
the exporter, duties of the exporter that involve unexpected cost. The situation can be
clarified to some extent by the inclusion of an iron curtain clause. The iron curtain clause,
perhaps, is like a ring-wall, joining all the defensive outposts and roadblocks around
Contract Castle. No approach is allowed unless it is through an accepted and understood
doorway.
STEP 4: CHANGING THE ROADSIGNS
There are two likely sources of third party interference in the exporters contract affairs: the
tax office is one, and the other are outsiders who sustain some loss or injury from goods
supplied under the contract.
In his own country, the exporter must pay any taxes levied by his government- that is
obvious. However, the exporter may find- especially under DDP contracts where part of the
work is done and part of the profit is earned in the buyers country- that the buyers
government also wishes to collect taxes from him. Naturally he cannot refuse to pay- but he
can at least change the roadsign. He can redirect the tax office to the buyers address by
using the standard clause on taxation.
The exporter tries to limit (or exclude) liability wherever possible. The table below shows the
areas where the exporter is most at risk and actions he will try to take to reduce his liability
to a foreseeable figure.
DELIVERY

DEFECTS
LIABILITY

TOTAL
LIABILITY

OTHER

TERMINATION

Define what
counts as
delay and
what does not

Define what
counts as a
defect and
what does not

If possible,
pass the buck
with an
indemnificatio
n clause

Search for
other danger
areas

Limit
termination for
default to
closely defined
situations

Define
excusable
delay,
especially
force majeure

Limit duties to
repairing or
replacing
goods with
latent defects

Try to limit
your total
liability to your
insurance
coverage

Define the
danger and
write a clause
that limits or
excludes
liability

Ensure that
you will be paid
for work
performed up
to the date of
termination

Try to get a
grace period

Exclude
liability for
consequential
loss or
damage

Try to exclude
payment of
damages if
termination is
allowed

Try to exclude other remedies if


carriages are paid
SET A CEILING
ADD AN IRON CURTAIN
All rights and duties not expressly included are excluded.
(page 203) USING A MODEL CONTRACT
THE PROBLEM

Asking a lawyer to draft a complete contract for each export deal does always make
economic sense: the time and money invested are out of proportion to the value of the
contract. In such cases, the exporter is tempted to proceed without any kind of contract. Is
this dangerous? Why or why not?
THE PRINCIPLE
A model contract is a half-way house between the dangerous practice of trading without a
contract and the expensive practice of asking a lawyer to tailor a contract for each deal. No
model contract can regulate every problem, but most important issues can be addressed
and reasonable alternatives suggested.
International trade between companies on different continents with different cultures and
different concepts of law cannot risk such informal proceedings. For an agreement to be
clear, workable and enforceable, it must normally be reduced to a written, signed contract.
IN MORE DEPTH
Unfortunately, asking a lawyer to draft a contract for each new agreement is costly and
time-consuming; many companies simply dont bother. This is where a model contract is
helpful. Unfortunately, however, using a model contract is not as easy as it sounds. Many
model contracts are too general; with over 150 nations in the world, each with its own law
no model contract can cover them all. Other models are too specialized: a model contract
designed for use in England offers offers little guidance to an Ethiopian exporter trying to
sell a machine to Vietnam. In every case, a model contract requires adaption before it
meets the needs of the two sides.
Translate the following Convention into Vietnamese. The translation given on the
right serves as example for you to continue.
ICC MODEL CONTRACT FOR THE SALE OF GOODS
Hp ng Mu Xut nhp khu Hng ha ca Phng TM Quc t
1. THE CONTRACT IN ENGLISH
CONTRACT FOR THE SALE OF GOODS
BETWEEN
...................................... hereinafter called "the SELLER"
AND
...................................... hereinafter called "the BUYER"
PREAMBLE
(NOTE: The Preamble is optional)
'
The agreement between the parties to this Contract is based on the following understandings:
(NOTE: The following clauses are examples only. Delete as
appropriate)
1. The BUYER is acting partly on its own behalf and partly as a purchasing agent for other companies
2. The BUYER is acting as purchasing agent for .....................'
3. Both parties understand that Goods made to the BUYER'S special specifications may have no value or very
limited value on the open market
4. The SELLER understands that the BUYER in specifying the Goods has relied to a large extent on the
expertise of the SELLER
5. The SELLER understands that the BUYER is under contract to resell the Goods and that if the Goods are
defective or non-conforming in quality or quantity, the BUYER may be liable for damages in an amount
exceeding .....................(Currency and amount)
6. The SELLER understands that the BUYER intends to install the Goods as a component part in equipment to
be resold, and that if the Goods are defective or non-conforming in quality or quantity, the BUYER may be liable
for substantial damages
7. ..(List of additional background understandings between the parties)

1. Applicable Law
This Contract and all questions relating to its formation, validity, interpretation or performance shall be governed
by the law of.............(Name of country)
(NOTE: The subclause below is optional)
This Contract shall not include, incorporate or be subject to the provisions of the "United Nations Convention on
Contracts for the International Sale of Goods"
2. Definitions
In this Contract the words below have the meanings ascribed to them unless the context otherwise clearly
dictates:
2.1. Unless expressly modified by the parties, "FOB", "CIF" and other trade terms have the meanings and
obligations ascribed to them in Incoterms 2000, Publication 460 of the International Chamber of Commerce,
Paris
2.2. "Contract" means this Contract, its preamble and appendices, as well as all documents expressly listed as
Contract documents or otherwise expressly mentioned in this Contract
2.3. "Goods" means the Goods specified in Clause 4 below
2.4. "Price" means the Price as specified in Clause 9 below payable to the SELLER for the Goods
2.5. "Delivery" means Delivery as specified in Incoterms 1990 under the Incoterm or Incorterms agreed in this
Contract
2.6. "Day" means a calendar Day. For the purposes of this Contract, Saturdays, Sundays and all holidays are
considered as Days
2.7. "Direct" costs and losses are costs and losses arising in immediate connection with any failure to deliver,
any delay in Delivery or any defect in Goods delivered under this Contract.
Such costs and losses must have an immediate, foreseeable and probably causal connection with the delay or
defect. All other costs and losses are deemed by this Contract to be "indirect"; In particular, loss of profit, loss of
use, and loss of contract are considered indirect losses
2.8. "Government" means national Government, local Government, local authorities, and their agencies.
In particular customs and/or excise departments are considered
as Government agencies
2.9. "Termination" means the discharge of the Contract by one of the parties under any right expressly granted
by this Contract; The discharge of the Contract by any other right arising from the applicable law or any oilier
source is deemed to be "cancellation" of the Contract
2.10. ........................(list of additional definitions agreed between the parties)
3. Entire Agreement and Contract Documents
This Contract constitutes the entire agreement and understanding between the parties. There are no
understandings, agreements, conditions, reservations, or representation, oral or written, that are not embodied
in this Contract or that have not been supersede by this Contract
(NOTE: The subclause and list below are optional)
In addition to the text of Contract itself, the documents listed below shall form part of the Contract; All listed
documents and the clauses of this Contract shall be read, if possible, so as to be consistent; In the event of
conflict, the order of precedence for the provisions and documents which constitute this agreement shall be as
follows:
(NOTE: The list below contains examples only. Delete as appropriate)
a. Any alterations made on the face of the printed Contract
b. The Contract itself
c. Specifications
d. Manufacturing drawings
e. The BUYER'S Special/ General Conditions of Purchase
f. The SELLER'S SpeciaVGeneral Conditions of Sale
g. .....................................................................( Further contract documents).

4. Scope of Supply
The Goods to be delivered under this Contract are specified .......(Use "below" or_the name of the annex where
the goods are specified)
5. Delivery
5.1. Date, Place and Terms of Delivery
Delivery of the Goods shall be made ...............(agreed Incoterms); the schedule date of Delivery shall
be ...............( Agreed date of delivery); Risk and title to the Goods shall pass from the SELLER to the BUYER
on Delivery
The place of Delivery under this Contract is ..............................(Agreed place of delivery. Note: In FOB, FCR,
CIF and CIP.(etc.) contract, this is part of shipment).
5.2. Naming and Arrival of Vessel
(NOTE: This clause is intended primarily for use in FOB and FAS contracts).
The BUYER shall advise the SELLER of the name of the vessel not later than ...........(Number of days). Days
before the agreed Delivery date
If the vessel named by the BUYER fails to arrive on or before ...................( Date of arrival of ship). then the
SELLER may at his discretion deliver the Goods to a bonded warehouse in the port of ................( Port of
shipment). and shall be deemed to have fulfilled his Delivery obligations under this
Contract; In this event, the SELLER must notify the BUYER of the full circumstances of the Delivery to the
warehouse. With Delivery to the warehouse, all costs, including but not limited to cost of storage and insurance
are to the BUYER'S account
5.3. Shipping Marks and Packaging
(NOTE: The following two subclauses are examples; reword as appropriate).
On the surface of each package delivered under this Contract shall be marked: the package number, the
measurements of the package, gross weight, net weight, the lifting positions the letter of credit number, the
words RIGHT SIDE UP, HANDLE WITH CARE,':
KEEP DRY, and the mark .....................................( Shipping mark)
Goods are to be packed in ...................( Description of required packing) and are to be well protected against
dampness, shock, rust or rough handling. The SELLER shall be liable for any damage to or loss of the Goods
attributable to improper or defective packaging
(NOTE: The following subclause is relevant only to deliveries in Germany).
5.4. Disposal of Packaging
Responsibility for the disposal of any packaging shall be the BUYER'S

6. Notification of Delivery
(NOTE: This clause applies largely to contracts under which delivery takes place in the country of the seller).
lmmediately on Delivery, the SELLER shall notify the BUYER of delivery by .................. (Means of notification,
e.g., FAX). This notification shall include ..(List of documents and information required)
7. Inspection before shipment
7.1. Inspection by the Buyer
The BUYER may, at the BUYER'S option, inspect the Goods prior to shipment. At least .............. (Number of
days). Days before the actual Delivery date, the SELLER shall give notice to the BUYER, or to any agent
nominated by the BUYER, that the Goods are available for inspection. The SELLER shall permit access to the
Goods for purposes of inspection at a reasonable time agreed by the parties
(NOTE: Customs requirements for importation of goods into Indonesia and the Philippines require inspection by
SGS prior to shipment from the Seller's country. The following clause is
recommended for sales to these countries).

7.2. Inspection by Inspection service


The parties understand that importation into ............(Name of country) requires inspection of Goods by SGS
before shipment from the SELLER'S country; The SELLER agrees to cooperate fully with the SGR' in providing
access to and necessary information about the Goods for the purpose of such inspection
8. Early Delivery, Partial Shipment, Delay in Delivery
8.1. Early Delivery
(NOTE: The three sub-clauses below, are alternatives. Delete as necessary).
Early Delivery is not permitted under this Contract
Delivery up to .........(Number of days). Days early is permitted; however, payment shall not become due until
the date agreed for payment in this Contract.
Delivery up to .......... (Number of days) Days early 'is permitted; in this case payment shall fall due as though
the actual Delivery date were the Delivery date agreed in the Contract.
8.2. Partial Shipment
(NOTE: The two sub-clauses below are alternatives. Delete as necessary).
Partial shipment is not permitted under this Contract
Partial shipment, is permitted under this Contract, subject to the agreement of both parties; however, any costs
arising from partial shipment shall be to the account of the .........(BUYER or SELLER).
8.3. Delay in Delivery
In the event of late Delivery for reasons other than force majeure as defined in Clause 17 below, the SELLER
shall pay as liquidated damages and not as a penalty the sum of .........(Figure). of the value of the
undelivered part per Day of late Delivery up to a maximum of
......... (Figure). of the Contract Price; Payment of liquidated damages shall be due without the BUYER having
to furnish proof of any loss, damage or injure
(NOTE: The two sub-clauses below are alternatives. Delete as necessary).
Payment of liquidated damages shall constitute full and complete satisfaction of any claim of the BUYER
against the SELLER arising from the or in connection with late Delivery of any Goods; In particular the SELLER
shall not be liable for any indirect loss or damage, as defined in Clause 2.7 above, arising from or In connection
with late Delivery of any Goods.
Payment of liquidated damages by the SELLER shall not preclude the BUYER from seeking compensatory
damages from the SELLER for any loss, injury or damage arising from or in
connection with late Delivery of any Goods; In particular the BUYER shall be entitled to compensation from the
SELLER for any indirect or consequential loss or damage, including but not limited to loss of profit, loss of use
or loss of contract, arising from or in connection, with late Delivery of any Goods; However, payments made as
liquidated damages shall be offset against any compensatory damages recovered from the SELLER for the late
Delivery of any Goods.
8.4. Termination for Delay
In the event that the SELLER becomes liable to pay the maximum sum payable as liquidated damages under
Clause 8.3 above, then the BUYER shall, upon due notice, have the rignt to terminate the Contract '
9. Price
The Price for the Goods to be delivered under this Contract is ........ Currency symbol and figure.
(...................Currency and figure in words.)
10. Terms of Payment
Payment shall be made by means of an irrevocable, confirmed letter of credit; The BUYER shall open the letter
of credit on or before .........( Date of opening of letter of credit). on the terms agreed by the parties and annexed
to this Contract a? Appendix .......... .........(Appendix number).
This Contract shall not come into force under Clause 16 below until the SELLER has received advice that the
letter of credit has been opened in his favour and has ascertained that the terms are in accordance with those

agreed between the parties; Any discrepancy between the terms agreed by the parties and the letter of credit as
issued shall be notified by the SELLER to the BUYER immediately
11. Inspection of the Goods
11.1. Duty to Inspection and Notify Discrepancies
The BUYER shall inspect the Goods on their arrival at the place of destination. If the Goods fail to conform with
the Contract in either quality or quantity, then the BUYER shall notify the
SELLER of any discrepancy without delay
11.2. Failure to Notify Discrepancies
If the BUYER does not notify the SELLER of any such
discrepancy within ......... (Number of days). Days of the arrival of the Goods, then the Goods shall be deemed
to have been in conformity with the Contract on arrival.
11.3. Buyer's Rights in the Event of Discrepancy in Quantity
If a material discrepancy in quantity exists and is duly notified to the SELLER, the BUYER at his discretion and
subject to Clause
8.2 above may either:
a. Accept the delivered portion of the Goods and require the SELLER to deliver the remaining portion forthwith;
or
b. Accept the delivered portion of the Goods and terminate the remaining portion of the Contract upon due
notice given to the SELLER.
If any material discrepancy in quantity exists such that ...(Description of fundamental discrepancy) and
if such discrepancy is duly notified to the SELLER, the BUYER may at his discretion:
a. Adopt either of the remedies prescribed above in this clause;
or
b. Reject the delivered portion of the Goods and recover from the
SELLER all payments made to the SELLER as well as all costs, expenses and customs duties incurred by the
BUYER in association with the shipment, movement through customs, insurance or storage of the Goods
(NOTE: Clause 11.4 below may not be necessary if SGS inspection takes place before shipment).
11.4. Buyer's Rights in the Event of Discrepancy in Quality
Discrepancies in quality shall be considered as defects and shall give rise to claims under the defects liability
provision of this Contract in Clause 12 below
However, a fundamental discrepancy in quality shall give the BUYER the right to refuse Delivery of the Goods in
whole or in part and to recover from the SELLER all payments made for the unaccepted portion of the Goods as
well as all costs, expenses and customs duties incurred by the BUYER in association with the shipment,
movement through customs, insurance or storage of the unaccepted portion of the Goods
12. Defects Liability
12.1. Seller's Liability for Defects
The SELLER warrants that the Goods supplied under this Contract shall at the date of their Delivery:
a. Be free from defects in material
b. Be free from defects in workmanship
c. Be free from defects inherent in design, including but not limited to selection of materials, and be fit for the
purpose for which such Goods are normally used
If any defect provably present in any of the Goods on the date of Delivery comes to light during the defects
liability period, then the BUYER shall forthwith notify the SELLER; The SELLER, without undue delay, shall at
his own risk and cost and at his discretion repair or replace such item or otherwise make good the defect
The SELLER'S liability for defects is subject to the BUYER having adhered to all procedures and instructions
applicable to the .......... Condition of use (e.g., "storage, installation, use or operation") l of the item, and
expressly excludes damage to the Goods caused by fair wear and tear or by misuse occurring after Delivery
12.2. Defects Liability Period

The SELLER shall be liable for defects which come to light during a period of .......... days from ........... 2 ; After
the end of this period, the BUYER shall have no right to raise claims of any kind against the SELLER for any
defect in any Goods of the SELLER'S supply
The defects liability period shall be prolonged by the length of any period during which the Goods cannot be
used by the BUYER because of a defect. However, if new Goods are delivered to replace defective Goods, the
defects liability period shall not begin again on
the replacement Goods
12.3. Limitation of Defects Liability
(NOTE: The two clauses below are alternatives. Delete as necessary)
The duty to repair and replace or otherwise to make good defects is the only duty of the SELLER in the event of
the Delivery of defective Goods; In particular the BUYER shall not be entitled to compensation from the
SELLER for an}' indirect loss or damages as defined in Clause 2.7 above, arising from or in connection with
Delivery of defective Goods
The SELLER'shall indemnify and hold harmless the BUYER against any loss or damage however arising
whether direct or indirect which shall be suffered by the BUYER as the result of defective or faulty Goods
delivered by the SELLER.
13. Liability to Third Parties
(NOTE: The two clauses below are alternatives. Delete as necessary)
The ..........3 shall compensate and hold harmless the .......... ''from any award of damages, reasonable costs,
expenses or legal fees, in the event of any action or lawsuit by a third party resulting from any injury, loss or
damage to the third party caused by a defect in
the Goods delivered under this Contract
In the event of such Lawsuit, the ........' shall immediately notify the .......... : and shall fully cooperate with
the ..........' in taking any necessary legal action.
In the event of any action or lawsuit by a third party resulting from any injury, loss or damage to the third party
caused by a defect in the Goods delivered under this Contract, the party against whom the action or lawsuit is
brought shall bear all costs, expenses, awards of damages or legal fees arising therefrom
14. Taxation
All income taxes, value added taxes, customs duties, excise charges, stamp duties or other fees levied by any
Government, Government agency or similar authority shall be borne exclusively by the party against whom they
are levied.
15. Assignment of Rights and Delegation of Duties
The rights under this Contract may not be assigned nor the duties delegated by either party without the prior
written consent of the other party.
16. Coming Into Force
This Contract shall come into force after signature by both parties and after:
a. The issuance of a letter of credit in accordance with the terms of Clause 10 above;
b. ................................................................. 2
If the Contract has not come into force within .......... 3 Days of its signature by both parties, all its provisions shall
become null and void.
17. Force majeure
(NOTE: The word duty is marked' by an asterisk in this clause; for contracts under Philippines law, the word
duty should be replaced by the word obligation).
If either party is prevented from or delayed in, performing any duty under this Contract by an event beyond his
reasonable control, then this event shall be deemed force majeure, and this party shall not be considered in
default and no remedy., be it under this Contract or otherwise, shall be available to the other party.
(NOTE: The subclause below contains examples only. It should be modified as necessary).
Force majeure events include, but are not limited to: war (whether war is declared or not), 'riots, insurrections,
acts of sabotage, or similar occurrences, strikes, or other labour unrest;

newly introduced Laws or Government regulations; delay due to Government action or inaction, or inaction on
the part of any inspection agency; Fire, explosion, or other unavoidable accident; flood, storm, earthquake, or
other abnormal natural event.
(NOTE: The subclause below on non-force-majeure events is Optional)
Force majeure events do not include .......... .......... .......... ..........
If either party is prevented from or delayed in, performing any duty under this Contract, then this party shall
immediately notify the other party of the event, of the duty affected, and of the expected duration of the event.
If any force majeure event prevents or delays performance of any duty under this Contract for more than .......... 2
Days, then either parties may on due notification to the other party terminate this Contract.
18. Termination
Notice of Termination as defined in Clause 2.9 of this Contract shall be in writing and shall take effect .......... 3
Days from the receipt of such notice by the party notified.
In the event of Termination, the duties of the parties shall be as incurred up to the date of Termination; In
particular, the SELLER shall receive the full Price of any Goods delivered and accepted by the BUYER; The
provisions of this Agreement dealing with defects liability, arbitration, and such other provisions as are
necessary in order to resolve any post-Termination disputes shall survive Termination.
19. Partial Invalidity
If any provision or provisions of this Contract are invalid or become invalid, then this shall have no effect on the
remaining provisions. Further, the parties agree to replace any invalid provision with a new, valid provision
having, as far as possible, the same intent as the provision replaced.
20. Modification and Waiver
Modification of the terms and conditions of this Contract shall be binding on both parties even without
consideration if the modification is in writing, is signed, and is expressly stated to be a modification of this
contract.
Any waiver of any right under this Contract is binding on the party making the waiver even without consideration
provided the waiver is in writing, is signed and is expressly stated to be a waiver of the said right;
21. Language
The language of the Contract, of all Contract Documents, and of all correspondence and other communication
between the parties shall be English.
22. Notices
Notices served by one party to the other under this Contract shall be made, in the first instance by facsimile
transmission (hereinafter called "FAX"). A further copy of each notice shall be sent by registered mail and
signed.
The effective date of the notice shall be the date of FAX transmission. In the event of a dispute about the receipt
of a FAX, however, the effective date of the notice shall be the date of receipt of the registered letter or a date
seven days after the registered
mailing, whichever is earlier.
Notices shall be sent to the following addresses and FAX numbers:
SELLER: .......... .......... .......... .......... .......... .......... ..........
Address:.......... .......... .......... .......... ...'.....,. .......... ..........
FAX Number: .......... .......... .......... .......... .......... .......... ..........
BUYER: .......... .......... .......... .......... .......... .......... ..........
Address:.......... .................... .......... ..........'.......... ..........
FAX Number: .......... ...'....... .......... .......... .......... ..---- Any change in an address or FAX number shall be the subject of a required notice under this Contract.
23. Settlement of Disputes
All disputes arising in connection with this Contract shall be finally settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by .......... Number (of arbitrators)' arbitrators
appointed in accordance with the said rules.
The place of arbitration shall be .......... Name of the place (city) of arbitration. The language of arbitration shall
be English.
(NOTE: The three sub-clauses below are alternatives. Delete as necessary).
In the event of arbitration, each party shall bear its own costs.

In the event of arbitration, the court shall assess the amount of the costs to be borne by each party
In the event of arbitration, the party against whom the award is made shall bear the entire costs of both parties
to the action.
The parties agree that any award made in accordance with the provisions 5f this clause is final and binding on
both parties.
Execution
The parties, intending to be legally bound, have signed this Contract on the dates and at the places stated
below:
For and on the behalf of:
For and on the behalf of:
SELLER
BUYER
Title:

Title:

Date:
Date:
Place:
Place:
(NOTE: The witnessing of signatures is not required by all national laws).
Witness of SELLER'S Signature Witness of BUYER'S Signature
3. MODEL CONTRACT FOR THE SALE OF GOODS AND THE CIVIL CODE OF VIETNAM '
The are three main types of contract, under CCVN (see appendix 2 for the, English and Vietnamese versions).
Sales/Procurement Contract (421-442)
Contract to Manufacture (550-561)
Contract for Services (521-529)
The model Contract is a pure Sales Contract - an exchange of "assets" for "money".
In -the following parts some principal clauses from the model Sales contract are compared with the stipulations
regarding civil contracts by the civil code of the Socialist Republic of Vietnam with a view to offering the reader
an insight into the subject - matter.
3.1. Structure of the Model contract
What you should know before reading the contract
Preamble
Clause 1 : Applicable Law
Clause 2 : Definitions
Clause 3 : Entire Agreement and Contract Documents
What the Buyer will get
Clause 4 : Scope of supply
How the good will be supplied
Clause 5 : Delivery
Clause 6: Notification of Delivery
Clause 7: Inspection before Shipment
Clause 8: Early Delivery, Partial Shipment, and Delay in
Delivery
What the Buyer will give
Clause 9; Price ;
How the Buyer will pay
Clause 10: Terms of Payment
What if the goods are not as ordered ?
Clause 11: Inspection of tlic Goods
Clause 12: Defects Liability

Liabilities outside the contract


Clause 13: Liability to Third Parties
Clause 14: Taxation
The legal status of the contract
Clause 15: Assignment of Rights and Delegation of Duties
Clause 16: Coming Into Force
Clause 17: Force Majeure
Clause 18: Termination
Clause 19: Partial Invalidity
Clause 20: Modification
Clause 21: Language
Clause 22: Notices
Clause 23: Settlement of Disputes
Execution
Details not include in the main body of the contract
Appendices
Clause 7: Inspection before Shipment
Clause 8: Early Delivery, Partial Shipment, and Delay in Delivery
What the Buyer will give
. Clause 9: Price
How the Buyer will pay
Clause 10: Terms of Payment
What if the goods are not as ordered ?
Clause 11: Inspection of the Goods
Clause 12: Defects Liability
.

Liabilities outside the contract


Clause 13: Liability to Third Parties
Clause 14: Taxation
The legal status of the contract
Clause 15: Assignment of Rights and Delegation of Duties
Clause 16: Coming Into Force
... ^
Clause 17: Force Majeure
'
Clause 18: Termination
Clause 19: Partial Invalidity
Clause 20: Modification
Clause 21: Language
Clause 22: Notices
Clause 23: Settlement of Disputes
Execution
Details not include in the main body of the contract
Appendices
3.2. Interpretation of the Contract under CCVN

Article 135. Interpretation of Civil Transactions


1. The interpretation of a civil transaction must be based upon the actual desire of the parties at the time of
establishing such transaction an on the objectives of such transaction.
2. Where a civil transaction may be interpreted as having different meanings, the civil transaction must be
interpreted in accordance with a meaning consistent with the objective of the transaction, and shall be in
accordance with the customs of the place where the transaction was established; if the party which is
economically stronger includes in the civil
transaction points 'which are disadvantageous to the weaker party, the interpretation of the civil transaction
must be such that favors the weaker party.
Article 408. Interpretation of contracts
1. If a contract contains unclear provisions, the interpretation of such provisions shall not only rely upon the
wording of the contract but also shall be based upon the common intentions of the parties.
2. If a clause of the contract susceptible of many meanings, shall be chosen the meaning, which would
allow the implementation of the clause to most benefit the parties.
3. If a contract contains a wording with many different meanings the contract shall be interpreted according to
the, meaning which best conforms to the characteristics of the
contract.
4. If a contract contains clauses or words which are difficult to understand, those shall be explained according
to the customs at the appointed place for the execution of the contract.
5. When a contact lack some provisions not belonging to the essential substance, the contract shall be
supplemented according to the customs in regard of such types of contracts
at the appointed place for the execution of the contract.
6. The clauses of contract shall be interpreted in relations to each other so that each is given the meaning
derived from the contract as a whole.
Remark:
Where rules of interpretation allow the court a great deal of freedom, the parties should be as precise
as possible.
3.3. Applicable Law of the Contract under CCVN.
Article 834: Civil contracts
1. Forms of civil contracts shall be governed by the law of the country where contracts are concluded. The
contracts that are concluded in a foreign country with violations of law governing forms of contracts shall be
valid in Vietnam if the form of those contracts does not violate the law of the Socialist Republic of Vietnam.
2. The rights and obligations of parties in a civil contract shall be determined by the law of the country where
performance of the contract takes place.
The contracts that are concluded and performed wholly in Vietnam shall be governed by the law of the
Socialist Republic of Vietnam.
If the place of performance of a contract is not indicated then the place of performance shall be determined
by the law of Socialist republic of Vietnam.
3. The civil contract having has immovable property in Vietnam as its subject-matter shall be governed by the
law of the Socialist Republic of Vietnam.
Remark:
Article 834 is in need of clarification by the courts.
3.4. Applicable Law of the Contract under the Model Contract.
1. Applicable law

This contract, and all questions relating to its formation, validity, interpretation or performance shall be governed
by the law or....................
(Note: The subclause below is optional).
This contract" shall not include, incorporate or be subject to the provisions of the "United Nations Convention on
Contracts for the International Sale of Goods.
'
Remark
The Model Contract assumes freedom of contract in choosing an applicable law. It also allows-for
exclusion of the Vienna Sales Convention.
3.5. Scope of Contract: Technical Specifications
Notes for preparing the Technical Specification
A set of precise and clear specifications is-a prerequisite for bidders to respond realistically and competitively to
the requirements of the Purchaser without qualifying their bids. In the
context of International Competitive Bidding (ICB), the specifications must be drafted to permit the widest
possible competition and, at the same time, present a clear statement of the required standards of
workmanship, materials, and performance of the goods and services to be procured. Only if this is done will be
objectives of economy, efficiency, and fairness in procurement be realised, responsiveness of bids be ensured,
and the subsequent task of bid evaluation facilitated. The specifications should require that all goods and
materials to be incorporated in the goods be new, unused, and of the most recent or current models, and that
they incorporate all recent improvements in design and materials unless
provides for otherwise in the contract ...
Care must be taken in drafting specifications to ensure that they are not restrictive. In the specification of
standards for equipment, materials, and workmanship, recognised international standards should be used as
much as possible. Where other particular
standards are used, whether national standards of the Borrower's country or other standards, the specifications
should state that equipment materials, and workmanship that meet other authoritative standards, and which
ensure at least a substantially equal quality than the standards mentioned, will also be acceptable. '
Source: World Bank Standard . Bidding' Document: Procurement of Goods, p. 65.
Remark: Technical specifications must be prepared to allow absolute
certainty as to the scope of contract,
3.6. Legal Families and the Applicable Law
The total agreement between the parties is their written contract (the fish) plus the applicable private law (the
water)
In principle, the parties to a contract are free to decide the private law that will supplement their contract; i.e.,
the parties are free to choose the water their fish swims in.
Each country has its own national law. These laws belong to one of three families.
- The Civil Law Family: legal systems based on codified laws. The aim is consistency and predictability. The
judge applies the written law. Examples: France, Germany, Spain.
- The Common Law Family: legal systems aimed at achieving the most just result in the individual case. There
is no written law - only precedents to guide decisionmaking. Examples: England, United State, Malaysia.
- The Religious Law Family: legal systems based on Moslem principles. For contracts, there laws tend to adopt
international common law or civil law principles.
Examples: Saudi Arabia, Pakistan.
3.7. The Vienna Sales Convention ..

- The United Nations .Conventions, on Contracts for the International Sale of Goods (The Vienna Sales
Convention) is the law of any country that adopts it. Where the Convention
conflicts with existing national law, the Convention prevails.
The Convention applies to international sales only.
- The parties to a contract can "opt out" of the Convention with a clause such as:
This contract, and all questions concerning its validity, interpretation and performance shall be governed by the
law of the Republic of Verbena. This contract shall not include, incorporate or be subject to the provision of the
"United Nations Convention on
Contracts for the International Sales of Goods".
Many questions about the meaning of the Convention must be answered in the courts. So far the answers
have been slow in coming.
- Even so, the importer might wish to accept the Convention if the law applicable to the contract is weak or
underdeveloped, or if it favours the seller too strongly.
3.8. Requirement to provide a User's Guide.
Article 435: Obligations to provide information and User's Guide.
The seller is bound to provide the purchaser with necessary information on the assets sold, and guidelines for
using those assets. If the seller fails to perform this obligation, the purchaser shall have the right to request the
seller to perform the obligation; If the seller still does not perform it, the purchaser shall have the right to annul
the contract and claim for compensation of damages.
* Remark:
The buyer's right to annulment for failure to produce a user's guide would not normally be acceptable
in a seller.
169
3.9. Transfer of Risk, Transfer of Title.
'Article 432: Moment of Transfer of the Ownership
1) The ownership over purchased items shall pass to the purchaser from the moment when the purchaser
receives the object, except for cases where parties agree or law
stipulates otherwise.
Article 43: Moment of Passage of Risk.
1. The seller party shall bear risks regard of the sold assets until the moment when assets are delivered to
the purchaser, and the latter shall bear risks from the moment of receiving assets if parties have not agreed
otherwise.
Remark:
The concepts of "deliver^'" and "receipt" will require some definition by the courts. Under an Incoferm
contract, both terms could mean delivery.
3.10. Transfer of Risk and Title under the Model Contract.
5. Delivery
5.1. Date, Place and Terms of Delivery
Delivery of the Goods shall be made ............... The scheduled date of Delivery shall be ................ Risk and title
to the Goods
shall pass from the SELLER to the BUYER on Delivery.
Remark: Transfer of risk and title .together is often the simplest arrangement.
3.11. Place of Delivery under CCVN and under the Model Contract.

Article 426: Place of Delivery of Assets


Parties shall agree upon the place of delivery of assets; If there are no agreement on this then the provision of
Article -289 [residence or headquarters of Buyer] of this Code shall be applied.
The place of Delivery under this Contract is .............................;5
5. Agreed place of delivery. Note: In FOB, FCR, CIF and CIP
(etc) contracts, this is the port/place of shipment,
'Remark:
Place of Delivery should be stated. In C-term contracts it is the port of shipment, not the port of arrival.
3.12. Time of Delivery under CCVN and under the Model Contract.
Article 425: Time of performance of a Sale Contract
1. The time for performance of a sale contract shall be agreed upon by parties. The seller must deliver the
assets to the purchaser at the time as agreed. The seller can deliver the
assets before the Fixed time only if the purchaser agrees.
In cases where parties do not fix the time for delivery of assets, the purchaser shall have the right to request the
seller to deliver assets and the seller shall have the rights to ask the purchaser to receive assets at any time,
provided that parties shall inform to each other within a reasonable period of time, and provided further that
parties do not have other agreements.
2. If parties have not agreed upon a. term of payment, the purchaser shall have to pay upon receipt of the
assets.
5. Delivery
5.1. Date, Place and Terms of Delivery
Delivery of the Goods sliall l(e made ......
The scheduled date of Delivery shall be
Remark: '
.. .
It is essential to clarify the time of delivery. Late delivery has important financial consequences. The
warranty period usually begins to run from delivery.
3.13. Force Majeure under CCVN and under the Model Contract.
' Article 308: Civil liability due to breach of civil obligations.
1. The obligor, who fails to fulfil improperly the obligation, shall bear civil liability to the obligor.
2. The obligor, who cannot fulfils the obligation due to force majeure events, shall not bear civil liability, unless
otherwise provided for by agreements or stipulated by the law.
17. Force Majeure
If either party is prevented from, or delayed in performing any duty* under this Contract by an event beyond his
reasonable control, then this event shall be deemed force majeure, and this party shall not considered in default
and no remedy, be it under this Contract or otherwise, shall be available to the other party.
[NOTE: The subclause below contains examples only. It should be Modified as necessary].
Force majeure event include, but are not limited to: war (whether war is declared or not), riots, insurrections,
acts of sabotage, or similar occurrence's; strikes, or other labor unrest:
newly introduced laws or Government regulations; delay due to Government action or inaction, or inaction on
the part of any inspection agency, fire, explosion, or other unavoidable accident; flood, storm, earthquake, or
other abnormal natural event.
[NOTE: The subslause below on non - force 'Majeure events is optional]
Force Majeure events do not include

If either party is prevented from, or delayed in, performing any duty* under this Contract, then this party shall
immediately notify the other party of the event, of the duty* affected, and of the expected duration of the event.
If any force Majeure event prevents or delays performance of any duty* under this Contract for more than ... 2
days, then either party may on due notification to the . other party
terminate this Contract.
Remark:

Forced Majeure need details negotiation.


3.14. Penalties and Liquidated Damages under CCVN
Article 377: Punitive damages.
1. Punitive damages is measure that shall be applied by the agreement or the parties or by law to secure the
fulfillment of an obligation by which the defaulting party must pay an
amount of money to the injured party.
2. An agreement or punitive damages, must be filed in an act which may be .separated from included into the
main contract.
Article 378; Rate of punitive damages.
The rate of punitive damages may be a certain sum of money or may be terminated by percentage of the value
of the breached part of the obligation, but must not exceed 5%.
Article '379: Relationship between punitive damages and compensatory damages.
'
1. The parties may agree upon that the defaulting party shall have to pay only punitive damages but not
compensatory damages, or both, either punitive damages and
compensatory damages; " if the rate of compensatory damages was not agreed upon in advance, the
entire damages must be compensated.
2. If the parties have agreed upon the choice between punitive damages or compensatory damages, the right to
choose shall be granted to the injured party.
3. In case where punitive da infixes rather compensatory damages have been agreed upon by the parties or
stipulated by law, the defaulting party must pay only punitive damages.
Remark:
The 5% rate for punitive damages is stringent is, but it is unclear.
The possible of paying both compensatory and punitive damages is
highly unattractive to the seller: few contracts will allow it.
3.15. Liquidated damages under the Model Contract
8.3. Delay in Delivery
* In the event of late Delivery for reason other than force majeures defined in Clause 17 below, the SELLER
shall pay as liquidated damages and not as a penalty the sum of
<FIGURE>and of the value of the undelivered part per Day of late Delivery up to a maximum of <FIGURE> and
of the Price payable Clause 9 below. Payment of liquidated damages shall be due without the BUYER'having'to
furnish proof of any loss, damage or injury.
[NOTE: r/ic too subclauses below are alia-natives.} "
Payment of liquidated damages shall constitute full and complete satisfaction of any claim of the. BUYER
against the SELLER arising from or in connection with late Delivery of any Goods. In particular the SELLER
shall not be liable for any indirect or consequential loss or damage, as defined in Clause 2.7 above, arising
from or in connection with late Delivery of any Goods.

Payment of liquidated damages by the SELLER shall not preclude the BUYER from seeking compensatory
damages from the SELLER for any loss, injury or damage arising from or in
connection with late Delivery of any Goods. In particular the BUYER shall be entitled to compensation from the
SELLER for any indirect or consequential loss or damage, including but not limited to loss of profit; loss of use
or loss of contract, arising from or in connection with late Delivery of any Goods. However, payments made as
liquidated damages shall be offset against any compensatory damages recovered from the SELLER for the late
Delivery of and Goods.
8.4. Termination for Delay
In the event that the SELLER becomes liable to pay the maximum sum payable as liquidated damages under
Clause 8.3 above, then the delay shall be deemed breach of contract and the
BUYER may, upon due notice, terminate the Contract and/or seek any other remedy available to him.
Remark:
In practice, few sellers will accept Alternative 2; it goes against the principle of liquidated damages.
3.16. Defective Delivery under CCVN
Article 428: Liability for delivery of assets in improper quantify
1. In cases where the seller delivers things in quantity exceeding that outnumbered the quantity which has been
agreed upon, the purchaser shall have the right to refuse the excess, or to receive it and pay for it at agreed
price.
2. In cases the seller party delivers things in quantity less than the quantity which has been agreed upon,
the purchaser shall have either of following rights.
a. To terminate the contract and request compensation for damages.
b. To receive the quantity which was delivered and request compensation for damages.

c. To receive what has been delivered and extend a period of time for the seller to deliver the rest.
Article 429: Liability due to Delivery of Incompleted Things.
1. In cases where things which have been delivered are not completed and thus causing the usefulness to be
failed, the purchaser shall have either of following rights:
a. To cancel the contract and request compensation for damages:
b. To receive what has been delivered and ask the seller party to deliver component or parts which have
not been delivered and to request compensations for damages and to
suspend the payment until the things becomes complete.
Article 430: Liability for delivery of things of the Wrong category.
In case where the things-have... been .delivered, in improper [assortment], the purchaser shall have
either of the following rights
1. To terminate the contract and request compensation for damages.
2. To receive what has been delivered any pay for it at the price as agreed upon by parties. '
3. To request the seller to deliver tbinp in proper assortment.
Remark:
,
The buyer's right to terminate is very hard on the seller. These clauses are (probably) disposive,
however. Some wording on fundamental breach is necessary in the contract.
3.17. Defective Delivery under the Model Contract.
11.3. Buyer's rig fits in the event of Discrepancy in quantity' .

If a material discrepancy in quantity exists and is duly noticed to the SELLER, the BUYER hi. his discretion and
subject to clause 8.2 above may either.
a. Accept the delivered portion of the Goods and required the SELLER to deliver the remaining portions
forthwith; or
b. Accept the delivered portion of the Goods and terminal of the remaining portion of the Contract upon the due
notice given to the SELLER.
If any material discrepancy in quantity exists such that <STATEMENT OF FUNDAMENTAL DISCREPANCY>
and if such discrepancy is duly notified to the SELLER, the BUYER
may at his discretion.
a. Adopt either of the remedies prescribed in tins clause above;
or
b. Reject the dclivored portion of the Goods and recover from the SELLER all payments made to the SELLER
as well as all costs, expenses and customs duties incurred by the BUYER in association with the shipment,
movement through customs, insurance or storage of the Goods.
11.4. Buyer's rights in the event Discrepancy in quality
Discrepancies in quality shall be considered as defects and shall give rise to claims under the Defects Liability
provision of this Contract in Clause 12 below.
However, a fundamental discrepancy in quality shall give the BUYER the right to refuse Delivery of the Goods
in whole or in part and to recover from the SELLER all payments made for the and customs duties incurred
by the BUYER in association with the shipment, movement through customs. Insurance coverage of the
unaccepted portion the Goods/Further a refusal to accept delivery in whole shall be considered termination
under Clause 18 of this Contract and refusal to accept delivery in part shall be considered termination of that
part of the Contract affected by such refusal.
Remark:
The wording on. fundamental breach is a necessary protection for the seller. It is essential for the buyer
to be fair to the seller or he will simply refuse to do business.
3.18. Defect liability under CCVN
Article 437: Guarantee of the Quality of Goods.
1. The. seller shall guarantee the fitness and characteristics of things sold; If the purchase discovers in the
purchased things the defects which devaluated it decreases its fitness of he/she must immediately notify the
seller thereof and shall have the right to request the seller to repair, or to replace the things with the defects, or
to reduce price and to compensate for damages, if parties have not agree otherwise.
2. The sale party shall guarantee that things sold are in accordance with description on covers Or appropriate
with the sample that has been chosen by the purchaser.
3. The sale party shall not be liable for defects in the following cases:
(a) Defect that the purchase party have already known and must have known when buying.
(b) Things at auction; things second hand trade;
(c) The purchase party at fault of causing defect to things.
Article 438: Warranty obligation
The sale party shall have warranty obligation to things sold for a period of time to be called warranty period, if
the warranty is agreed upon by parties or stipulated by Law. The
warranty period shall be calculated from the time the purchase party has to receive things.
Article 439. Right to request for [remedy of Defect under] warranty
During the warranty period, if the purchase party discovers any defects on things, it shall have the right to
request the sale party to repair things free of charge or to reduce the price
or to exchange the things with defects for the others or to return things and receive back the money.

Remark:
The correct word is "warranty"
The warranty period appears to run forever unless otherwise regulated by the contract.
The buyer has the right to choose the remedy which is grossly unfair to the seller.
3.19. Defect Liability under the Model Contract.
12. Defects liability
12.1. Seller's Liability for defects
The SELLER warrants that the Goods, supplied under this Contract shall at the date of their Delivery.
a. Be free defects in material.
b. Be free from defects in workmanship;
c. Be free from defect inherent in design, including but not limited to selection of materials and be fit for the
purpose for which such Goods are normally used.
If any defect provably present it any of the Goods, on the date of Delivery comes to light during the defects
liability period, then the BUYER shall forthwith notify the SELLER. The SELLER, without undue delay, shall at
his own risk and cost and at his discretion repair or replace such item or otherwise make goods the defect.
The SELLER'S liability for defects is subject to the BUYER having adhered to all procedures and instruction
applicable to the .... of the item, and expressly excludes damages to the Goods caused by fair wear and tear or
by misuse occurring after Delivery.
1.2.2. Defects Liability period
The SELLER shall be liable for defect which come to light during a period of ........... days from ..... After the end
of this period, the BUYER shall have no right to raise claims of any kind against the SELLER for any defect in
any Goods of the SELLER'S supply.
The defect liability period shall be prolonged by the length of any period during which the Goods cannot be
used by the Buyer because of a defect. However, it new Goods are delivered to replace defective Goods, the
defects liability period shall not begin again on
the replacement Goods.
1.2.3. Limitation of Defects Liability.
[NOTE: The two clauses below are alternatives. Delete as necessary]
The duty to repair and replace or otherwise to make good defects is the only duty of the SELLER in the event of
the Delivery, of defective Goods. In particular the BUYER shall not entitled to compensation from the SELLER
for any indirect loss or damage as defined in Clause 2.7 above, arising from or in connection with Delivery of
defective Goods.
The SELLER shall indemnify and hold harmless the BUYER against any loss or damage however arising
whether direct or indirect which shall be suffered by the BUYER as the result of defective or faulty Goods
delivery by the SELLER.
3.20. Payment under CCVN and the Model Contract
Article 295: Fulfilling the obligation of paying money.
1. The obligation to pay money shall be fulfilled in full, according to the time limit, at the appointed place and in
the agreed upon procedures.
2. The money that must be paid shall be the Vietnamese Dong, except in cases where the law stipulates
otherwise.
Article 424: Price and Modes of Payment
3. Modes of payments shall be agreed upon by parties or stipulated by law.
Remark:
The requirement to pay all monies in Dong needs interpretation

UNITED NATIONS CONVENTION ON


CONTRACTS FOR THE INTERNATIONAL
SALE OF GOODS
The States Parties to this Convention,
bearing strong mind the broad objective in the
resolution adopted by the sixth special sesssion
of the General Assembly of the United Nations on
the establishment of a New International
Economic Order;
Considering that the development of
international trade on the basis of equality and
mutual benefit is an important element in
promoting friendly relations among States;
Being of the opinion that the adoption of
uniform rules which govern contracts for the
international sale of goods and take into account
the different social, economic and legal systems
would contribute to the removal of legal barriers
in international trade and promote the
development of international trade.
Have agreed as follows

Article 1
1. This Convertion applies to contracts of sale of
goods between parties whose places of business
are strong different States:
(a) When the States are Contracting States; or
(b) When the rules of private international law
lead to the application of the law of a Contracting
State
2. The fact that the parties have their places of
business in different States is to be disregarded
whenever this fact does not appear either from
the contract or from any dealings between, or
from information disclosed by, the parties at any
time before or at the conclusion of the contract.
3. 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.
Article 2. This Convention does not apply to
sales
(a) Of goods bought for personal, family or
household use, unless the seller, at any time
before or at the conclusion of the contract,
neither knew nor ought to have known that the
goods were bought for any such use;
(b) By auction;
(c) On execution or otherwise by authority of law;
(d) Of stocks, shares, investments securities,
negotiable instruments or money;
(e) Of ships, vessels, hovercraft or aircraft;
(f) Of electricity.

CNG C LHQ V HP NG MUA


BN HNG HA QT
Cc nc thnh vin ca Cng c
ny,
Coi trng nhng mc tiu tng qut ca
cc ngh quyt v thit lp mt trt t
kinh t quc t mi c i Hi ng
LHQ chp nhn trong kha hp bt
thng ln th 6,
Xt rng s pht trin thng mi quc
t trn c s bnh ng, i bn cng
c li l mt yu t quan trng thc y
quan h hu ngh gia cc quc gia;
Cho rng vic chp nhn cc qui tc
thng nht chi phi cc mi quan h
trong mua bn hng ha quc t v c
tnh n cc h thng x hi kinh t v
php l trong thng mi quc t v h
tr cho vic pht trin thng mi quc
t,
tha thun nhng im sau
iu 1
1. Cng c ny p dng cho nhng
hp ng mua bn hng ha gia cc
bn c tr s thng mi ti cc quc
gia khc nhau
a. Khi cc quc gia ny l thnh vin
ca Cng c, hoc
b. Khi lut c p dng l lut ca
nc thnh vin Cng c ny theo cc
quy tc t php quc t.
2. Vic cc bn c tr s thng mi ti
cc quc gia khc nhau khng tnh n
khi vn ny khng xut pht t hp
ng, t cc mi quan h hnh thnh
hoc vo thi im k hp ng ga
cc bn hoc t vic trao i thng tin
gia cc bn.
3. Quc tch ca cc bn, quy ch dn
s hoc thng mi ca h, tnh cht
dn s hay thng mi ca cc bn hay
ca hp ng, khng c xt ti khi
xc nh phm vi p dng ca Cng
c ny.
iu 2. Cng c ny khng p dng
i vi giao dch mua bn
a) cc hng ho dng cho c nhn, gia
nh hoc ni tr, tr khi ngi bn, vo
bt c lc no trong thi gian trc
hoc vo thi im k kt hp ng,
khng bit hoc khng cn phi bit
rng hng ha c mua s
dng nh th;

b) Bn u gi;
c) thi hnh lut hoc vn kin y
thc theo lut;
d) C phiu, c phn, chng khon u
t, cc chng t c th chuyn nhng
hoc tin t;
e) Tu thy, my bay v tu chy trn
m khng kh;
f) in nng
Article 3
1. Contracts for the supply of goods to be
manufactured or produced are to be considered
sales unless the party who orders the goods
undertakes to supply a substantial part of the
materials necessary for such manufacture or
production.
2. This Convention does not apply to contracts in
which the preponderant part of the obligations of
the part who furnishes the goods consists in the
supply of labour or other services.
Article 4. This convention governs only the
formation of the contract of sale and the rights
and obligations of the seller and the buyer arising
from such a contract. In particular, except as
otherwise expressly provided in this Convention,
it is not concerned with:
(a) The validity of the contract or of any of its
provisions of any usage;
(b) The effect which the contract may have on the
property in the goods sold.
Article 5 This Convention does not apply to the
liability of the seller for death or personal injury
caused by the goods to any person.
Article 6
The parties may exclude the
application of this Convention or, subject to
Article 12, derrogate from or vary the effect of any
of its provisions.
PART III. SALE OF GOODS
PHN 3: MUA BN HNG HA
Chapter I. GENERAL PROVISION
Chng 1: Nhng quy inh chung
Article 25 A breach of contract committed by
iu 25. S vi phm hp ng do mt
one, of the parties is fundamental if it results in
bn gy ra l vi phm c bn nu vi
such detriment to the other party as substantially phm lm cho bn kia b thit hi m
to deprive him of what he is entitled to expect
ngi b thit hi trong mt chng mc
under the contract, unless the party in breach did ng k b mt nhng g m h c
not foresee and a reasonable person of the same php c theo hp ng, tr phi bn vi
circumstances would not have foreseen such a
phm khng tin liu c hu qu
result.
v mt ngi c l tr minh mn cng se
Article 26 A declaration of avoidance of the
khng tin liu c nu vo hon
contract is effective only if made by notice to the
cnh tng t.
other party.
iu 26. Mt li tuyn b v vic hy
Article 27 Unless otherwise expressly provided in this
hp ng ch c hiu lc nu c
Part of the Convention if any notice, request or otherthng bo cho bn kia bit.
communication is given or made by a party in accordance
iu 27. Tr phi Phn II ca Cng c
with this Part and by means appropriate in the
ny c quy nh khc, nu thng bo
circumstances, a delay or error in the transmission of
yu
thecu hay thng tin khc c
communication or its failure to arrive does not deprive
thc hin bi mt bn ca hp ng
that party of the right to rely on the communication theo Phn III ny v bng mt phng
Article 28 If, in accordance with the provisions of tin thch hp vi hon cnh, th s
this Convention, one party is entitled to require
chm tr hoc lm ln trong vic
performance of any obligation by the other party, chuyn giao thng tin hoc thng tin
a court is not bound to enter a judgement for
khng n ngi nhn, cng se lm
specific performance unless the court would do
bn mt quyn vin dn cc thng
so under its own law in respect of similar
tin ca mnh.
contracts of sale not governed by this
iu 28. Nu mt bn c quyn yu cu

Convention.
Article 29
1. A contract may be modified or terminated by
the mere agreement of the parties.
2. A contract in writing which contains a provision
requiring any modification or termination by
agreement to be in writing may not be otherwise
modified or terminated by agreement. However, a
party may be precluded by his conduct from
asserting such a provision to the extent that the
other party has relied on that contract.

PART II. FORMATION OF THE CONTRACT


Article 14.
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
intension of the offer or 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 others, unless the
contrary is clearly indicated by the person making
the proposal.
Article 15.
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.
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.
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.
Article 17 An offer, even if it is irrevocable, is
terminated when a rejection reaches the offeror.
Article 18
1. A statement made by or other conduct of the
offeree indicating assent to an offer is an
acceptance. Silence or inactivity does not in itself
amount to acceptance.
2. An acceptance of an offer becomes effective at
the moment the indication of assent reaches the
offeror. An acceptance is not effective if the
indication of assent does not reach the offeror

bn kia thc hin thi hnh mt ngha v


no th chiu theo cc quy nh ca
Cng c ny Toa n khng b bt buc
phi ra phn quyt buc bn kia thc s
thc hin hp ng, tr khi toa n ra
phn quyt trn c s lut nc
mnh i vi cc hp ng mua bn
tng t khng c iu chnh bi
Cng c ny.
iu 29.
1. Mt hp ng c th c iu
chnh hay chm dt bng tha thun
n thun gia cc bn.
2. Mt hp ng bng vn bn cha
ng mt iu khon quy nh rng mi
s sa i hoc chm dt hp ng
phi c cc bn lm bng vn bn th
khng th b sa i hoc chm dt
theo tha thun gia cc bn hoc di
mt hnh thc khc. Tuy nhin hnh
ng ca mt bn c th khng cho
php h vin dn iu khon y trong
chng mc m bn kia cn c vo hnh
ng .
iu 15
1. Mt th cho hng c hiu lc khi n
ti c ngi c cho hng.
2. Cho hng d l loi cho hng
khng hy ngang vn c th b hy b
nu thng bo v vic hy cho hng
n vi ngi c cho trc hoc
cng mt lc vi cho hng
iu 16
1. Cho ti khi hp ng c giao kt,
ngi cho hng vn c th rt li cho
hng, nu thng bo v v vic rt li
ti ni ngi c cho hng trc
khi ngi ny gi thng bo chp nhn
cho hng
2. Tuy nhin cho hng khng th b hy
b.
a) Nu n ch ro, bng cch n nh mt
thi hn chp nhn hay bng cch
khc rng n khng th hy ngang.
b) Nu ngi nhn coi cho hng khng
th hy ngang l hp l v hnh
ng theo chiu hng .
iu 17. Cho hng, d l loi khng
hy ngang se mt hiu lc khi ngi
cho hng nhn c thng bo v
vic t chi cho hng.
iu 18
1.
iu 19
1.
iu 20
1.
iu 21
1.
iu 22
1.
iu 23
1.
iu 24
1.

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 offerer. An
oral offer must be accepted immediately unless
the circumstances indicate otherwise.
3. However, if, by virtue of the offer or as a result
of practices which the parties have established
between themselves or of usage, the offeree may
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,
thee acceptance is effective at the moment the
act is performed, provided that the act is
performed within the period of the time laid down
in the preceding paragraph.
Article 19
1. A reply to an offer which purports to be an
acceptance but contains additions, limitations, or
other modifications is a rejection of the other and
constitutes a counter-offer.
2. However, a reply to an offer which purports to
be an acceptance but contains additional or
different terms which do not materially alter the
terms of the offer constitutes an acceptance,
unless the offerer, without undue delay, objects
orally to the discrepancy or dispatches a notice to
that effect. If he does not so object, the terms of
the contract are the terms of the offer with the
modifications contained in the acceptance
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.
Article 20
1. A period of the time for acceptance fixed by the
offeror in a telegram or a letter begins to run from
the moment the telegram is handed in for
dispatch, or from the date shown on the letter or,
if no such date is shown, from the date shown on
the envelope. A period of time for acceptancefixed by the offeror by telephone, telex or other
means of instantaneous communication, begins
to run from the moment that
the other reaches the offeree.
2. Official holidays or non-business days
occurring during the period for acceptance are
included in calculating the period. However, if a
notice of acceptance cannot be delivered at the
address of the offeror on the last day of the
period because that day falls on an official
holiday or a non-business day at the place of
business of the offeror, the period is extended
until the first business day which follows.
Article 21
1. A late acceptance is nevertheless effective as
an acceptance if without delay the offeror orally
so informs the offeree or dispatches a notice to
that effect.
2. If a letter or other writing containing a late
acceptance shows that it has been sent in such
circumstance that if its transmission had been
normal it would have reached the offeror in due
time, the late acceptance is effective as an

acceptance unless, without delay, the offerer


orally informs the offeree that he considers his
offer as having lapsed or dispatches a notice to
that effect.
Article 22 An acceptance may be withdrawn if
the withdrawal reaches the offeror before or at
the same time as the acceptance would have
become effective.
Article 23 A contract is concluded at the moment
when an acceptance of an offer becomes
effective in accordance with the provisions of this
Convension.
Article 24 For the purposes of this Part of the
Convension, an offer, declaration of acceptance
or any other indication of intension "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, to his
habitual residence.
Chapter II. OBLIGATIONS OF THE SELLER
Article 30. The seller must deliver the goods,
hand over any documents relating to them and
transfer the property in goods, as required by the
contract and this Convention.
Section I. Delivery of the goods and
handing over of documents
Article 31. If the seller is not bound to deliver the
goods at any other particular place, his obligation
to deliver consists:
(a) If the contract of sale involves carriage of the
goods in handing the goods over to the first
carrier for transmission to the buyer;
(b) If, in cases not within the preceding
subparagraph, the contract relates to specific
goods, or unidentified goods to be drawn from a
specific stock or to be manufactured or produced,
and at that time of the conclusion of the contract
the parties knew that the goods were at, or were
to be manufactured or produced at, a particular
place - in placing the goods at the buyer's
disposal at that place.
(c) In other cases in placing the goods at the
buyer's disposal at the place where the seller had
his place of business at the time of the
conclusion of the contract.
Article 32. If the seller, in accordance with the
contract or this Convention, hands the goods
over to a carrier and if the goods are not clearly
identified to the contract by markings on the
goods, by shipping documents or otherwise, the
seller must give the buyer notice of the
consignment specifying the goods.
1. If the seller is bound to arrange for carriage of
the goods, he must make such contracts as are
necessary for carriage to the place fixed by
means of transportation appropriate in the usual
terms for such transportation.
2. If the seller is not bound to effect insurance in
respect to the carriage of the goods, he must, at
the buyer's request, provide him with all available
information necessary to enable him to effect
such insurance.
Article 33. The seller must deliver the goods:
(a) If the date is fixed by or determinable from the
contract, on that date;
(b) If a period of time is fixed by or determinable

form the contract, at any time within that period


unless circumstances Indicate that the buyer is to
choose a date; or
(c) In any other case, within a reasonable time
after the conclusion of the contract.
Article 34
If the seller is/bound to hand over documents
relating to the goods, he must hand them over at
the time and place and in the form required by
the contract. If the seller has handed over
documents before that time, he may, up to that
time, cure any lack of conformity in the
documents, if the exercise of this right does not
cause the buyer unreasonable inconvenience or
unreasonable expense. However, the buyer
retains any right to claim damages as provided
for in this Convention.

UNITED NATIONS CONVENTION ON CONTRACTS FOR THE


INTERNATIONAL SALE OF GOODS
The States Parties to this Convention,
bearing strong mind the broad objective in the resolution adopted by the
sixth special session of the General Assembly of the United Nations on the
establishment of a New International Economic Order
considering that the development of international trade on the basis of
equality and mutual benefit is an important element In promoting friendly
relations among States;
being of the opinion that the adoption of uniform rules which govern
contracts for the international sale of goods and take into account the different
social, economic and legal systems would contribute to the removal of legal
barriers in international trade and promote the development of international
trade.
have agreed as follows
CNG C LHQ V HP NG MUA BN HNG HA QT
Cc nc thnh vin ca Cng c ny,
Coi trng nhng mc tiu tng qut ca cc ngh quyt v thit lp mt nn
trt t kinh t quc t mi c i Hi ng LHQ chp nhn trong kha hp
bt thng ln th 6,
Xt thy s pht trin thng mi quc t trn c s bnh ng, i bn cng
c li l mt yu t quan trng thc y quan h hu ngh gia cc quc gia,
Cho rng vic chp nhn cc qui tc thng nht chi phi cc mi quan h trong
mua bn hng ha quc t v c tnh n cc h thng x hi kinh t v php l
trong thng mi quc t v h tr cho vic pht trin thng mi quc t,
tha thun nhng im sau
.
PART 1. SPHERE OF APPLICATION AND GENARAL PROVISIONS
Chapter I. SPHERE OF APPLICATION
Article 1
1. This Convertion applies to contracts of sale of goods between parties whose
places of business are strong different States:
(a) When the States are Contracting States; or
(b)
When the rules of private international law lead to the application of the law of a
Contracting State
2. The fact that the parties have their places of business in different States is to
be disregarded whenever this fact does not appear either from the contract or
from any dealings between, or from information disclosed by, the parties at any
time before or at the conclusion of the contract.
3. 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.
iu 1
4. Cng c ny p dng cho nhng hp ng mua bn hng ha gia cc bn
c tr s thng mi ti cc quc gia khc nhau
a. Khi cc quc gia ny l thnh vin ca Cng c, hoc

b. Khi lut c p dng l lut ca nc thnh vin Cng c ny theo cc quy


tc t php quc t.
5. Vic cc bn c tr s thng mi ti cc quc gia khc nhau khng tnh n
khi vn ny khng xut pht t hp ng, t cc mi quan h hnh thnh
hoc vo thi im k hp ng ba cc bn hoc t vic trao i thng tin
gia cc bn.
Quc tch ca cc bn, quy ch dn s hoc thng mi ca h, tnh cht dn s
hay thng mi ca cc bn hay ca hp ng, khng c xt ti khi xc nh
phm vi p dng ca Cng c ny.
Article 2. This Convention does not apply to sales
(a) Of goods bought for personal, family or household use, unless the seller, at
any time before or at the conclusion of the contract, neither knew nor ought to
have known that the goods were bought for any such use;
(b) By auction;
(c) On execution or otherwise by authority of law;
(d) Of clocks, shares, investments securities, negotiable instruments or money;
(e) Of ships, vessels, hovercraft or aircraft;
(f) Of electricity.
iu 2. Cng c ny khng p dng i vi giao dch mua bn
a) cc hng ho dng cho c nhn, gia nh hoc ni tr, tr khi ngi bn, vo
bt c lc no trong thi gian trc hoc vo thi im k kt hp ng, khng
bit hoc khng cn phi bit rng hng ha c mua s dng nh th;
b) Bn u gi;
c) thi hnh lut hoc vn kin y thc theo lut;
d) C phiu, c phn, chng khon u t, cc chng t lu thng hoc tin t;
e) Tu thy, my bay v tu chy trn m khng kh;
f) in nng
Article 3
1. Contracts for the supply of goods to be manufactured or produced are to be
considered sales unless the party who orders the goods undertakes to supply a
substantial part of the materials necessary for such manufacture or production.
2. This Convention does not apply to contracts in which the preponderant part of
the obligations of the part who furnishes the goods consists in the supply of
labour or other services.
iu 3.
1. Cc hp ng cung cp hng ha c ch bin hay sn xut c coi l hp
ng mua bn tr khi bn t hng cam kt cung cp phn ln cc nguyn liu
cn thit cho vic ch bin hay sn xut hng ha .
2. Cng c ny khng p dng cho cc hp ng trong c ngha v ca bn
cung cp hng ch yu l phi thc hin mt cng vic hoc thc hin cc dch
v khc.
Article 4. This convention governs only the formation of the contract of sale
and the rights and obligations of the seller and the buyer arising from such a
contract. In particular, except as otherwise expressly provided in this
Convention, it is not concerned with:
(a) The validity of the contract or of any of its provisions of any usage;
(b) The effect which the contract may have on the property in the goods sold.
iu 4. Cng c ny chi iu chinh vic k kt hp ng mua bn v cc
quyn v ngha v ca ngi bn v ngi mua pht sinh t hp ng . Tr
khi c quy nh khc c nu trong Cng c. Cng c khng lin quan n
a. Hiu lc ca hp ng hoc ca bt c iu khon no ca hp ng hoc
bt ky tp qun no.
b. Anh hng m hp ng c th c i vi quyn s hu cc hng ha
bn.
Article 5 This Convention does not apply to the liability of the seller for death or
personal injury caused by the goods to any person.
iu 5. Cng c ny khng lin quan n trch nhim ca ngi bn trong
trng hp hng ca ngi bn gy thit hi v thn th hoc lm cht mt
ngi no .
Article 6
The parties may exclude the application of this Convention or,
subject to Article 12, derrogate from or vary the effect of any of its provisions.

iu 6. Cc bn c th khng p dng Cng c ny hoc, theo ng iu 12,


khng th lm tri vi bt c iu khon no ca Cng c hay sa i hiu lc
ca iu khon .
Chapter II. GENERAL PROVISIONS
Article 7
1. In the interpretation of this Convention, regard is to be had to its international
character and to the need to promote uniformity in its application and the
observance of good faith in international trade.
2. Questions concerning matters governed by this Convention which are not
expressly settled in it are to be settled in conformity with the general
principles on which it is based or , in the absence of such principles, in
conformity with the law applicable by virtue of the rules of private
international law.
iu 7.
1. Khi gii thch cc Cng c ny, cn lu n tnh cht quc t ca n, n
s cn thit phi tng cng s nht qun trong vic p dng Cng c v tun
th trong thng mi quc t.
2. Cc vn lin quan n i tng iu chinh ca Cng c ny m khng
quy nh c th trong Cng c se c gii quyt theo cc nguyn tc chung
m t Cng c c hnh thnh hoc nu khng c nguyn tc ny th chiu
theo lut c p dng theo quy phm ca t php quc t.
Article 8
1. For the purposes of this Convention statements made by and other conduct
of a party are to be interpreted according to his intent where the other party
knew or could not have been unaware what that intent was.
2. If the preceding paragraph is not applicable, statements made by and other
conduct of a party are to be interpreted according to the understanding that a
reasonable person of the same find as the other party would have had in the
same circumstances.
3. In determining the intent of a party or the understanding a reasonable person
would have had, due consideration is to be given to all relevant circumstances
of the case including the negotiations, any practices which the parties have
established between themselves, usages and any subsequent conduct of the
parties.
iu 8.
1. Vi mc ch ca Cng c ny, tuyn b v cch s dng khc ca mt bn
c gii thch theo ng nh ca bn , khi bn kia bit hay khng th
bit nh y.
2. Nu quy nh ni trn khng c p dng th tuyn b v cch x s khc
ca mt bn c gii thch theo ngha m mt ngi c l tr, nu ngi
c t vo v tr ca pha bn kia, trong nhng hon cnh tng t cung se
hiu nh th.
3. Khi xc nh mt bn hoc mt ngi c l tr c nh hoc cc hiu nh
th no, cn phi tnh n mi tnh tit lin quan, k c cc cuc m phn, mi
thc t m cc bn c trong mi quan h tng h ca h cc tp qun v
mi hnh vi sau ca cc bn.
Article 9
1. The parties are bound by any usage to which they have agreed and by any
practices which they have established between themselves
2. The parties are considered, unless otherwise agreed, to have impliedly made
applicable to their contract or its formation a usage of which the parties knew or
ought to have known and which in international trade is widely known to, and
regularly observed by, parties to contracts of the type involved in the particular
trade concerned.
iu 9.
1. Cc bn b rng buc bi tp qun m h thoa thun v bi thc tin
c thit lp trong mi quan h tng h .
2. Tr phi c thoa thun khc, c th cho rng cc bn k kt hp ng c ng
p dng nhng tp qun m h bit hoc cn phi bit v l nhng tp
qun c tnh cht ph bin trong thng mi quc t v c cc bn p dng
thng xuyn i vi hp ng cng chng loi trong lnh vc bun bn hu
quan iu chinh hp ng ca mnh hoc iu chinh vic k kt hp ng .
Article 10. For the purposes of this Convention:

(a) If a party has more than one place of business, the place of business is that
which has the closest relationship to the contract and its performance,
having regard to the circumstances known to or contemplated by the parties
at any time before or at the conclusion of the contract;
(b) If a party does not have a place of business, reference is to be made to his
habitual residence.
iu 10. Vi mc ch ca Cng c ny,
1. Nu mt bn c nhiu hn mt tr s thng mi th tr s thng mi ca
h se l tr s no c mi lin h cht che nht vi hp ng v vi vic thc
hin hp ng , c tnh ti nhng tnh hung m cc bn u bit hoc u
d on c bt ky lc no trc hoc vo thi im thi im hp ng.
b. Nu mt bn khng c tr s thng mi th se ly ni c tr thng xuyn
ca h.
Article 11. A contract of sale need not be concluded in or evidenced by writing
and is not subject to any other requirements as to form. It may be proved by
any means, including witnesses.
iu 11. Hp ng mua bn khng cn phi c k hoc xc nhn bng vn
bn hay phi tun theo mt yu cu no khc v hnh thc ca hp ng. Hp
ng c th c ch71ng minh bng mi cch, k c bng li khai ca nhn
chng.
Article 12. Any provision of Article 11, Article 29 or Part II of this Convension
that allows a contract of sale or its modification or termination by agreement or
any offer, acceptance or other indication of intension to be made in any form
other than in writing does not apply where any party has his place of business in
a Contracting State which has made a declaration under Article 96 of this
Convention. The parties may not derogate from or vary the effect of this Article.
iu 12. Bt ky quy nh no ca iu 11, iu 29 hoc Phn th hai ca Cng
c ny cho php hp ng mua bn thay i hoc nh chi hp ng theo s
thoa thun ca hp ng cc bn hoc n cho hng v chp nhn n cho
hng hay bt ky s th hin y1` ch ca bn c lp khng phi di hnh thc
vn bn m di bt ky hnh thc no khc se khng c p dng cho d chi
mt trong s cc bn c tr s thng mi t nc thnh vin ca Cng c
m nc tuyn b bo lu theo iu 96 ca Cng c ny. Cc bn khng
c quyn lm tri vi iu ny hoc sa i hiu lc ca n.
Article 13. For the purposes of this Convention, "writing" includes telegram and
telex.
iu 13. Theo tinh thn ca Cng c ny, in bo v telex cung c coi l
hnh thc vn bn.
PART II. FORMATION OF THE CONTRACT
Article 14.
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 offer or 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 others, unless the contrary is clearly
indicated by the person making the proposal.
PHN II. KY KT HP NG
iu 14
1. Mt ngh k kt hp ng gi cho mt hay nhiu ngi xc nh c coi l
mt li cho hng nu c xc nh chnh xc v nu n chi ro nh ca
ngi cho hng mun t rng buc mnh trong trng hp c s chp nhn
cho hng. Mt ngh c iu kin c coi l chnh xc khi n nu ro hng
ha v n nh s lng v gi c mt cch trc tip hoc gin tip hoc quy
nh th thc xc nh nhng yu t ny.
2. Mt li ngh cho mt hay nhiu ngi xc nh chi c coi l mt li mi
giao dch mua bn, tr phi ngi ni ro nh ca mnh trong li ngh.
Article 15.
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.

iu 15
1. Mt th cho hng c hiu lc khi n ti tay ngi c cho hng.
2. Th cho hng d l loi cho hng khng hy ngang vn c th b hy bo
nu thng bo v vic hy cho hng n vi ngi c cho trc hoc cng
mt lc vi cho hng
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.
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.
iu 16
1. Cho ti khi hp ng c giao kt, ngi cho hng vn c th rt li cho
hng, nu thng bo v v vic rt li ti ni ngi c cho hng trc khi
ngi ny gi thng bo chp nhn cho hng
2. Tuy nhin cho hng khng th b hy bo.
a) Nu n chi ro, bng cch n nh mt thi hn chp nhn, hay bng cch
no khc rng n khng th hy ngang.
b) Nu ngi nhn coi cho hng khng th hy ngang l hp l v tin tng
hnh ng theo th cho .
Article 17 An offer, even if it is irrevocable, is terminated when a rejection
reaches the offeror.
iu 17. Cho hng, d l loi khng hy ngang se mt hiu lc khi ngi cho
hng nhn c thng bo v vic t chi cho hng.
Article 18
1. A statement made by or other conduct of the offeree indicating assent to an
offer is an acceptance. Silence or inactivity does not in itself amount to
acceptance.
2. An acceptance of an offer becomes effective at the moment the indication of
assent reaches the offeror. An acceptance is not effective if the indication of
assent does not reach 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.
3. However, if, by virtue of the offer or as a result of practices which the parties
have established between themselves or of usage, the offeree may 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, thee acceptance is
effective at the moment the act is performed, provided that the act is performed
within the period of the time laid down in the preceding paragraph.
iu 18.
1.Mt li tuyn b hay mt hnh vi khc ca ngi c cho hng biu hin s
ng vi cho hng to thnh chp nhn cho hng. S im lng hoc khng
c hnh ng no khng c hiu l mc nhin c gi tr nh mt s chp
nhn.
2.Chp nhn cho hng c hiu lc t khi ngi cho hng nhn c chp
nhn. Chp thun cho hng khng c hiu lc nu nh th chp nhn y khng
c gi ti ngi cho hng ng thi hn quy nh trong th cho hng, hoc
nu thi hn khng c quy nh th trong mt thi gian hp l, xt theo cc
tnh tit ca giao dch k c tc ca cc phng tin lin lc m ngi cho
hng s dng. Mt cho hng bng ming phi c chp nhn ngay, tr khi
cc tnh th bt buc phi ngc li
3.Tuy nhin nu do hiu lc ca cho hng hoc do thc tin c gia hai bn
trong mi quan h tng h hoc tp qun th ngi c cho hng c th
chng to s chp thun ca mnh bng mt hnh ng no nh hnh ng
lin quan n vic gi hng hay tr tin d khng thng bo cho ngi cho
hng th chp nhn cho hng c hiu lc k t khi nhng vic lm c thc
hin vi iu kin l chng phi c thc hin vi iu kin l chng phi c
thc hin trong thi hn quy nh ni phn trn.
Article 19

1. A reply to an offer which purports to be an acceptance but contains additions,


limitations, or other modifications is a rejection of the other and constitutes a
counter-offer.
2. However, a reply to an offer which purports to be an acceptance but contains
additional or different terms which do not materially alter the terms of the offer
constitutes an acceptance, unless the offerer, without undue delay, objects
orally to the discrepancy or dispatches a notice to that effect. If he does not so
object, the terms of the contract are the terms of the offer with the
modifications contained in the acceptance
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.
iu 19.
1.
Mt phc p c khuynh hng chp nhn cho hng nhng c cha ng
nhng im b sung, gim bt hay sa i khc th c coi l t chi cho
hng v to nn s mc c v mua bn.
2.
Tuy nhin s phc p theo hng chp nhn cho hng, nhng c cha
ng cc iu khon b sung hay nhng iu khon khc m khng lm bin
i mt cch c bn ni dung ca cho hng th c coi l chp nhn cho
hng, tr phi ngi cho hng khng biu hin bng ming ngay phn i
nhng im khc bit hoc gi ngay thng bo v s phn i ca mnh cho
ngi c cho hng. Nu ngi cho hng khng lm nh vy, th ni dung
ca hp ng se l ni dung ca cho hng gm nhng sa i nu trong chp
nhn cho hng.
3.
Cc yu t b sung hay sa i lin quan n cc iu kin gi c, thanh
ton; n phm cht v s lng hng ha, a im v thi gian giao hng, n
phm vi trch nhim ca cc bn hay gii quyt cc tranh chp c coi l
nhng iu kin lm bin i mt cch c bn ni dung ca cho hng.
Article 20
1. A period of the time for acceptance fixed by the offeror in a telegram or a
letter begins to run from the moment the telegram is handed in for dispatch, or
from the date shown on the letter or, if no such date is shown, from the date
shown on the envelope. A period of time for acceptance-fixed by the offeror by
telephone, telex or other means of instantaneous communication, begins to run
from the moment that
the other reaches the offeree.
2. Official holidays or non-business days occurring during the period for
acceptance are included in calculating the period. However, if a notice of
acceptance cannot be delivered at the address of the offeror on the last day of
the period because that day falls on an official holiday or a non-business day at
the place of business of the offeror, the period is extended until the first
business day which follows.
iu 20.
1. Thi hn chp nhn cho hng do ngi cho hng quy nh trong in tn
hay th, bt u t lc bc in c giao gi i hoc vo ngy ghi trn th
hoc nu ngy khng c th tnh t ngy bu in trn b th. Thi hn
chp nhn cho hng do ngi cho hng quy nh bng in thoi, bng telex,
hoc bng phng tin thng tin lin lc khc, bt u tnh t thi im cho
hng n tay ngi c cho hng.
2. Cc ngy l chnh thc hay ngy nghi nm trong thi hn quy nh chp nhn
cho hng th khng c tr, khi tnh thi hn . Tuy nhin, nu thng bo
chp nhn cho hng khng th giao ti a chi ca ngi cho hng vo ngy
cui cng ca thi hn quy nh m ngy cui cng l ngy l hay ngy nghi
ti tr s thng mi ca ngi cho hng, th thi hn chp nhn cho hng se
c ko di ti ngy lm vic u tin tip theo.
Article 21
1. A late acceptance is nevertheless effective as an acceptance if without delay
the offeror orally so informs the offeree or dispatches a notice to that effect.
2. If a letter or other writing containing a late acceptance shows that it has been
sent in such circumstance that if its transmission had been normal it would have
reached the offeror in due time, the late acceptance is effective as an
acceptance unless, without delay, the offerer orally informs the offeree that he
considers his offer as having lapsed or dispatches a notice to that effect.
iu 21.

1. Mt chp nhn cho hng chm tr vn c hiu lc l mt chp nhn nu


ngi cho hng thng bo ngay bng ming cho ngi nhn cho hng hoc
gi cho ngi ny mt thng bo v vic .
2. Nu th t hay vn bn khc l s chp nhn chm tr, c ngi nhn
cho hng gi i trong nhng iu kin m, nu s chuyn giao bnh thng n
n tay ngi cho hng kp thi, tr phi ngi cho hng thng bo ngay
bng ming khng chm tr, hoc gi vn bn thng bo ngay cho ngi c
cho hng bit rng ngi cho hng coi cho hng ca mnh ht hiu lc.
Article 22. An acceptance may be withdrawn if the withdrawal reaches the
offeror before or at the same time as the acceptance would have become
effective.
iu 22. Chp nhn cho hng c th b hy bo nu thng bo v vic hy bo
ti ni ngi cho hng trc hoc cng thi im hiu lc ca chp nhn.
Article 23 A contract is concluded at the moment when an acceptance of an
offer becomes effective in accordance with the provisions of this Convension.
iu 23. hp ng c coi l c k k t lc chp nhn cho hng c
hiu lc theo ng cc quy nh ca Cng c ny.
Article 24. For the purposes of this Part of the Convension, an offer, declaration
of acceptance or any other indication of intension "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, to his habitual residence.
iu 24. Theo tinh thn ca Phn III Cng c ny, mt cho hng, mt thng
bo chp nhn cho hng hoc bt c mt th hin nh no cung c coi l
ti ni ngi c cho hng khi c thng tin bng li ni vi ngi ny,
hoc c giao bng bt c phng tin no cho chnh ngi c cho hng ti
tr s thng mi ca h, ti a chi bu chnh hoc nu h khng c tr s
thng mi hay a chi bu chnh, th gi ti ni thng tr ca h.
PART III. SALE OF GOODS
Chapter I. GENERAL PROVISION
PHN 3: MUA BN HNG HA
Chng 1: Nhng quy inh chung
Article 25 A breach of contract committed by one, of the parties is fundamental
if it results in such detriment to the other party as substantially to deprive him
of what he is entitled to expect under the contract, unless the party in breach
did not foresee and a reasonable person of the same circumstances would not
have foreseen such a result.
iu 25. S vi phm hp ng do mt bn gy ra l vi phm c bn nu vi
phm lm cho bn kia b thit hi m ngi b thit hi trong mt chng mc
ng k b mt nhng g m h c php c theo hp ng, tr phi bn kia vi
phm khng tin liu c hu qu v mt ngi c l tr minh mn cung se
khng tin liu c nu vo hon cnh tng t.
Article 26 A declaration of avoidance of the contract is effective only if made
by notice to the other party.
iu 26. Mt li tuyn b v vic hy hp ng chi c hiu lc nu c thng
bo cho bn kia bit.

Article 27 Unless otherwise expressly provided in this Part of the Convention if any
notice, request or other communication is given or made by a party in accordance with
this Part and by means appropriate in the circumstances, a delay or error in the
transmission of the communication or its failure to arrive does not deprive that party of
the right to rely on the communication
iu 27. Tr phi Phn II ca Cng c ny c qui nh khc, nu thng bo yu cu
hay thng tin khc c thc hin bi mt bn ca hp ng theo Phn III ny v
bng mt phng tin thch hp vi hon cnh, th s chm tr hoc lm ln trong vic
chuyn giao thng tin hoc thng tin khng n ngi nhn, cung se khng lm bn
mt quyn vin dn cc thng tin ca mnh.
Article 28 If, in accordance with the provisions of this Convention, one party is
entitled to require performance of any obligation by the other party, a court is
not bound to enter a judgement for specific performance unless the court would

do so under its own law in respect of similar contracts of sale not governed by
this Convention.
iu 28. Nu mt bn c quyn yu cu bn kia thc hin ngha v no th
chiu theo cc quy nh ca Cng c ny, toa n khng b bt buc phi ra
phn quyt buc bn kia thc hin hp ng, tr khi toa n ra phn quyt
trn c s lut nc mnh i vi cc hp ng mua bn tng t khng c
qun trit bi Cng c ny.
Article 29
1. A contract may be modified or terminated by the mere agreement of the
parties.
2. A contract in writing which contains a provision requiring any modification or
termination by agreement to be in writing may not be otherwise modified or
terminated by agreement. However, a party may be precluded by his conduct
from asserting such a provision to the extent that the other party has relied on
that contract.
iu 29.
1. Mt hp ng c th c iu chinh hay chm dt bng thoa thun n
thun
2. Mt hp ng bng vn bn cha ng mt iu khon qui nh rng mi s
sa i hoc chm dt hp ng phi c cc bn lm bng vn bn th khng
th b sa i hay chm dt theo thoa thun gia cc bn di mt hnh thc
khc. Tuy nhin hnh ng ca mt bn c th khng cho php h vin dn iu
khon y trong chng mc m bn kia cn c vo hnh ng .
Chapter II. OBLIGATIONS OF THE SELLER
Chng II. Ngia vu cua ngi ban
Article 30. The seller must deliver the goods, hand over any documents
relating to them and transfer the property in goods, as required by the contract
and this Convention.
iu 30. Ngi bn c ngha v giao hng, giao chng t lin quan n hng
ha v chuyn giao quyn s hu v hng ha ng theo quy nh ca hp
ng v ca Cng c ny.
Section I. Delivery of the goods and handing over of documents
Muc I. Giao hang va chuyn giao chng t
Article 31. If the seller is not bound to deliver the goods at any other particular
place, his obligation to deliver consists:
(a) If the contract of sale involves carriage of the goods in handing the goods
over to the first carrier for transmission to the buyer;
(b) If, in cases not within the preceding subparagraph, the contract relates to
specific goods, or unidentified goods to be drawn from a specific stock or to be
manufactured or produced, and at that time of the conclusion of the contract
the parties knew that the goods were at, or were to be manufactured or
produced at, a particular place - in placing the goods at the buyer's disposal at
that place.
(c) In other cases in placing the goods at the buyer's disposal at the place where
the seller had his place of business at the time of the conclusion of the contract.
iu 31. Nu ngi bn khng b buc phi giao hng ti mt ni nht nh no
, th ngha v giao hng ca ngi y gm
a) Nu hp ng mua bn quy nh c vic vn chuyn hng ha , th ngi bn
phi giao hng cho ngi vn chuyn u tin chuyn giao cho ngi mua.
b) Nu trong nhng trng hp khng nm trong trng hp cp ti im ni
trn, m i tng ca hp ng mua bn l hng c nh hoc hng ng loi
phi c tch ra t mt khi lng d tr xc nh hoc phi c ch to hay
sn xut ra v vo lc k kt hp ng, cc bn bit rng hng ha c
hay phi c ch to hoc c sn xut ti mt ni no , th ngi bn
phi c ngha v t hng di quyn nh ot ca ngi mua ti ni .
c) Trong trng hp khc, ngi bn c ngha v t hng di quyn nh ot
ca ngi mua ti ni m ngi bn c tr s thng mi vo thi im k kt
hp ng.
Article 32. If the seller, in accordance with the contract or this Convention,
hands the goods over to a carrier and if the goods are not clearly identified to
the contract by markings on the goods, by shipping documents or otherwise,
the seller must give the buyer notice of the consignment specifying the goods.

1. If the seller is bound to arrange for carriage of the goods, he must make such
contracts as are necessary for carriage to the place fixed by means of
transportation appropriate in the usual terms for such transportation.
2. If the seller is not bound to effect insurance in respect to the carriage of the
goods, he must, at the buyer's request, provide him with all available
information necessary to enable him to effect such insurance.
iu 32.
1. Nu ngi bn, chiu theo hp ng hay Cng c ny, giao hng cho mt
ngi chuyn ch, v nu hng khng c tch bit mt cch ro rng cho mc
ch ca hp ng bng cch ghi k m hiu trn hng ha, bng cc chng t
chuyn ch hay bng cch no khc, th ngi bn phi thng bo cho ngi
mua bit v vic h gi hng kem theo chi dn v hng ha.
2. Nu ngi bn c ngha v thu xp vic chuyn ch hng ha, th h phi k
kt cc hp ng cn thit vic chuyn ch c thc hin ti ch, bng cc
phng tin chuyn ch thch hp vi hon cnh c th v theo cc iu kin
thng thng i vi phng thc chuyn ch .
3. Nu ngi bn khng c ngha v bo him hng ha trong qu trnh chuyn
ch, th h phi cung cp cho ngi mua, nu ngi mua yu cu, mi thng tin
cn thit c th gip ngi mua k kt hp ng bo him.
Article 33. The seller must deliver the goods:
(a) If the date is fixed by or determinable from the contract, on that date;
(b) If a period of time is fixed by or determinable from the contract, at any time
within that period unless circumstances indicate that the buyer is to choose a
date; or
(c) In any other case, within a reasonable time after the conclusion of the
contract.
iu 33. Nu ngi bn phi giao hng
a) ng vo ngy giao hng m hp ng quy nh, hay c th xc nh
ngy bng cch tham chiu hp ng,
b) Vo bt ky thi im no trong khong thi gian c hp ng n nh hay
c th xc nh c bng cch tham chiu hp ng nu nh khng th cn c
vo cc tnh tit bit ngy giao hng m ngi mua n nh.
c) Trong mi trng hp khc, trong mt thi hn hp l sau khi hp ng c
k kt.
Article 34
If the seller is/bound to hand over documents relating to the goods, he must
hand them over at the time and place and in the form required by the contract.
If the seller has handed over documents before that time, he may, up to that
time, cure any lack of conformity in the documents, if the exercise of this right
does not
cause the buyer unreasonable inconvenience or unreasonable expense.
However, the buyer retains any right to claim damages as provided for in this
Convention.
iu 34. Nu ngi bn c ngha v giao cc chng t c lin quan n hng
ha th h phi thc hin ngha v ny ng thi hn, ng a im v ng
hnh thc nh quy nh ca hp ng. Trong trng hp ngi bn giao chng t
trc thi hn, th ngi bn c th, trc khi ht thi hn quy nh loi bo
nhng im khng ph hp trong chng t vi iu kin l vic lm ny khng
gy cho ngi mua mt tr ngi hay ph tn v l no. Tuy nhin ngi mua vn
c quyn oi ngi bn bi thng thit hi chiu theo cng c ny.
Section II. Conformity of the goods and third party claims
Article 35
1. The seller must deliver goods which are of the quantity, quality and
description required by the contract and which are contained or packaged in
the manner required by the contract.
2. Except where the parties have argeed otherwise, the goods do not conform
with the contract unless they
(a) Are fit for the purposes for which goods of th& same description would
ordinarily be used;
(b) Are fit for any particular purpose expressly or impliedly made known to the
seller at the time of the conclusion of the contract, except where the
circumstances show that the buyer did not rely, or that it was unreasonable
for him to rely, on the seller's skill and judgement;

(c) Possess the qualities of goods which the seller has held out to the buyer as a
sample or model;
(d) Are contained or packaged in the manner usual for such goods or, where
there is no such manner, in a manner adequate to preserve and protect the
goods.
3. The seller is not liable under subparagraphs (a) to (d) of the preceding
paragraph for any lack of conformity of the goods if at the time of the
conclusion of the contract the buyer knew or could not have been unaware
of such lack of conformity.
MUC II. Tinh phu hp cua hang hoa va quyn cua ngi th 3.
iu 35.
1. Ngi bn phi giao hng ng s lng, phm cht v m t quy nh trong
hp ng, v ng bao b hay ng gi nh trong hp ng yu cu.cc bn
thoa thun khc, hng
2. Ngoi tr trng hp cc bn c thoa thun khc, hng ha b coi l
khng ph hp vi hp ng nu
a) Chng khng thch hp cho cc mc ch s dng m hng ha cng loi
vn thng p dng;
b) Hng khng thch hp cho cc mc ch c th no m ngi bn trc
tip hoc gin tip bit c vo lc k kt hp ng, tr trng hp cc
hon cnh c th cho thy rng ngi mua khng da vo ky nng v
quyt nh ca ngi bn, hoc vic da vo nh vy l khng hp l;
c) Hng ha khng th hin cc phm cht ca hng mu hoc kiu dng m
ngi bn cung cp cho ngi mua;
d) Hng khng c ng bao b theo cch thng thng cho nhng hng cng
loi hoc, nu khng th hin cch thng thng, th bng cch thch hp
gi gn v bo v hng ha .
3. Ngi bn khng chu trch nhim v vic giao hng khng ng hp ng
nh nu trong cc im t (a) n (d) ca iu khon trn nu ngi mua
bit hoc khng th khng bit v vic hng khng ph hp vo lc k
kt hp ng.
Article 36
1. The seller is liable accordance with the contract and this Convension for any
lack of conformity which exists at the time when the risk passes to the
buyer; even though the lack of conformity becomes apparent only after that
time.
2. The seller is also liable for any lack of conformity which occurs after the time
indicated in the preceding paragraph and which is due to a breach of any of
his obligations, including a breach of any guarantee that for a period of time
the goods will remain fit for their ordinary purpose or for some particular
purpose or will retain specified qualities or characteristics.
iu 36.
1. Ngi bn chu trch nhim, theo ng hp ng v Cng c ny, v mi
s khng ph hp ca hng ha vo lc chuyn giao ri ro cho ngi mua,
ngay c khi s khng ph hp ca hng ha chi c pht hin sau .
2. Ngi bn cung chu trch nhim v mi s khng ph hp ca hng ha
xy ra sau thi im ni im trn v l hu qu ca s vi phm bt
ky ngha v no ca ngi bn, k c vic khng th m bo trong mt
thi hn no , hng ha vn thch hp cho mc ch s dng thng
thng hay mc ch c th hoc vn duy tr c nhng tnh cht hay
c im quy nh.
Article 37. If the seller has delivered goods before the date for delivery, he
may, up to that date, deliver any missing part or make up any deficiency in the
quantity of the goods delivered, or deliver goods in replacement of any nonconforming goods delivered or remedy any lake of conformity in the goods
delivered, provided that the exercise of this right does not cause the buyer
unreasonable inconvenience or
unreasonable expense. However, the buyer retains any right to claim damages
as provided for in this Convention.
iu 37. Trong trng hp giao hng trc thi hn, ngi bn c quyn, cho
ti thi hn , giao mt phn hay mt s lng thiu hoc giao hng mi thay
cho hng giao thng ph hp vi hp ng, hoc khc phc mi s khng
ph hp ca hng ha giao vi iu kin vic lm ca ngi bn khng
gy cho ngi mua mt tr ngi hay ph tn v l no. Tuy nhin ngi mua c
quyn oi bi thng thit hi chiu theo Cng c ny.

Article 38
1. The buyer must examine the goods, or cause them to be examined, within as
short a period as is practicable in the circumstances.
2. if the contract involves carriage of the goods, examination may be deferred
untill after the goods have arrived at their destination.
3. if the goods are redirected in transit or redispatched by the buyer without a
reasonable opportunity for examination by him and at the time of the
conclusion of the contract the seller knew or ought to have known of the
possibility of such redirection or redispatch, examination may be deferred
until after the goods have arrived at the new destination.
iu 38.
1. Ngi mua phi kim tra hng hoc bo m c s kim tra hng
trong mt thi gian ngn m thc t c th lm c ty tnh hung c
th.
2. Nu hp ng c quy nh v chuyn ch hng ha, th vic kim tra
hng c th c chm li n lc hng ti ni phi n.
3. Nu a im n ca hng b thay i trong thi gian hng ang trn
ng vn chuyn hoc hng c ngi mua gi i tip v khi
ngi mua kgo6ng c c hi hp l kim tra hng ha, con ngi
bn bit hay ng le phi bit khi k kt hp ng v kh nng i
l trnh hay gi tip , th vic kim tra c th c di li cho n khi
hng ti ni n mi.
Article 39
1. The buyer loses the right to rely on a lack of conformity of the goods if he
does not give notice to the seller specifying the nature of the lack of conformity
within a reasonable time after he has discovered it or ought to have discovered
it.
2. In any event, the buyer loses the right to rely on a lack of conformity of the
goods if he does not give the seller notice thereof at the latest within a period of
two years from the date on which the goods were actually handed over to the
buyer, unless this time-limit is inconsistent with a contractual period of
guarantee.
iu 39.
1. Ngi mua b mt quyn khiu ni v hng ha khng ph hp vi hp
ng nu ngi mua khng thng bo cho ngi bn nhng tin tc v s
bt ph hp trong mt thi hn hp l k t lc ngi mua pht
hin hay ng le phi pht hin ra khim khuyt .
2. Trong mi trng hp, ngi mua b mt quyn khiu ni hng khng ph
hp vi hp ng nu ngi mua khng thng bo cho ngi bn bit iu
chm nht trong thi hn 2 nm k t ngy hng ha thc s giao
cho ngi mua tr phi thi hn ny tri ngc vi thi hn bo hnh quy
nh trong hp ng.
Article 40. The seller is not entitled to rely on the provisions of Articles 38 and
39 if the lack of conformist relates to facts of which he knew or could not
have been unaware and which he did not disclose to the buyer.
iu 40. Ngi bn khng c quyn vin dn cc quy nh ca iu 38 v 39
nu s khim khuyt ca hng ha lin quan n cc yu t m ngi bn
bit hoc khng th khng bit v h khng thng bo cho ngi mua,
Article 41. The seller must deliver goods which are free from any right or claim
of a third party, unless the buyer agreed to take the goods subject to that right
or claim. However, if such right or claim is based on industrial property or other
intellectual property the seller's obligation is governed by Article 42.
iu 41. Ngi bn phi giao loi hng m chng khng b rng buc bi bt c
quyn hay khiu ni no ca ngi th 3 tr trng hp ngi mua ng nhn
loi hng b rng buc vo quyn v khiu ni . Tuy nhin, nu quyn v
khiu ni c hnh thnh trn c s s hu cng nghip hay s hu tr tu
th ngha v ca ngi bn se c iu chinh theo iu 42.
Article 42
1. the seller must deliver goods which are free from any right or claim of a third
party based on industrial property or other intellectual property, of which at
the time of the conclusion of the contract the seller knew or could not have
been unaware, provided that the right or claim is based on industrial property
or other intellectual property or other intellectual property:

(a) under the law of the State where the goods will be resold or otherwise used,
it was contemplated by the parties at the time of the conclusion of the
contract that the goods would be resold or otherwise used in that State; or
(b) in any other case, under the law of the State where the buyer has his place
of business.
2. The obligation of the seller under the preceding paragraph does not extend to
the cases, where
(a) at the time of the conclusion of the contract the buyer knew or could not
have been unaware of the right or claim ;or
(b) The right or claim results from the seller's compliance with technical
drawings, designs, formulae or other such specifications furnished by the buyer.
iu 42.
1. Ngi bn phi giao nhng hng ha m chng khng b rng buc bi bt
c quyn hay khiu ni no ca ngi th ba trn c s s hu cng
nghip hay s hu tr tu khc m ngi bn bit hoc khng th khng
bit vo thi im k kt hp ng, vi iu kin nu cc quyn v yu
sch ni trn c hnh thnh trn c s s hu cng nghip hay s hu tr
tu khc.
a) theo php lut ca quc gia ni hng ha se c bn hay s dng
bng cch khc, nu cc bn d on vo lc k kt hp ng rng
hng ha se c bn li hay s dng bng cch khc ti quc gia
; hoc
b) trong mi trng hp khc, theo lut php ca quc gia ni c tr s
thng mi ca ngi mua.
2. Trong cc trng hp sau y, ngi bn khng b rng buc bi nhng
ngha v nu trn
a) Vo lc k kt hp ng, ngi mua bit hoc khng th khng
bit v s hin hu ca hay khiu ni ni trn; hoc
b) quyn hay khiu ni bt ngun t vic ngi bn tun theo bn
ve ky thut thit k cng thc hay nhng s liu chi tit do ngi
mua cung cp.
Article 43
1. The buyer loses the right to rely on the provision of Article 41 or article 42 if
he does not give notice to the seller specifying the nature of the right or
claim of the third party within a reasonable time after he has become aware
of the right or claim.
2. The seller is not entitled to rely on the provision of the preceding paragraph if
he knew of the right or claim of the third party and the nature of it.
iu 43.
1. Ngi mua mt quyn khiu ni da vo cc quy nh ca iu 41 v 42,
nu ngi mua khng thng bo cho ngi bn tnh cht ca quyn hay
khiu ni ca ngi t 3, trong mt thi gian hp l k t khi ngi mua
bit hay ng le phi bit v quyn hay khiu ni .
2. Ngi bn khng c quyn vin dn nhng quy nh ti im (1) nu trn
nu ngi bn bit v quyn hay khiu ni ca ngi th 3 v tnh cht
ca quyn hay khiu ni .
Article 44. Notwithstanding the provisions of paragraph (1) of Article 39 and
paragraph (1) of Article 43, the .
buyer may reduce the price in accordance with Article 50 or claim damages,
except for loss of profit, if he
has a reasonable excuse for his failure to give the required notice.
iu 44. Bt k nhng quy nh ca im (1) iu 39 v im (1) iu 43, ngi
mua c th gim gi theo iu 50 hay oi bi thng thit hi, ngoi tr khon
li b bo l, nu ngi mua c l do hp l gii thch nguyn nhn khng
thng bo tin tc cn thit cho ngi bn.
Section III. Remedies for breach of contract by the seller
Muc III. Cac bin phap bao h phap ly trong nhng trng
hp ngi ban vi pham hp ng.
Article 45. If the seller fails to perform any of his obligations under the
contract or this Convention, the buyer may
(a) exercise the rights provided in Articles 46 to 52;
(b) claim damages as provided in Articles 74 to 77.
1. The buyer is not deprived of any right he may have to claim damages by
exercising his right to other remedies.

2. No period of grace may be granted to the seller by a court or arbitral tribunal


when the buyer resorts to a remedy for breach of contract.
iu 45.
1. Nu ngi bn khng thc hin mt ngha v pht sinh theo hp ng mua
bn hay Cng c ny, th ngi mua c cn c
a) thc hin nhng quyn hn ca mnh theo quy nh ti cc iu t 46 n
52;
b) oi bi thng thit hi nh quy nh ti cc iu t 74 n 77.
2. Ngi mua khng mt quyn oi bi thng thit hi khi h s dng
quyn p dng mt bin php bo h php l trong trng hp ngi bn vi
phm hp ng.
Article 46. The buyer may require performance by the seller of this
obligations unless the buyer has resorted to a remedy which is inconsistent
with this requirement.
1. If the goods do not conform with the contract, the buyer may require delivery
of substitute goods only if the lack of conformity constitutes a fundamental
breach of contract and a request for substitute goods is made either in
conjunction with notice given under Article 39 or within a reasonable time
thereafter.
2. If the goods do not conform with the contract, the buyer may require the
seller to remedy the lack of conformity by repair, unless this is unreasonable
having regard to all the circumstances. A request for repair must be made either
in conjunction with notice given under Article 39 or within a reasonable time
thereafter.
iu 46.
1. Ngi mua c th yu cu ngi bn thc hin ngha v, tr phi ngi mua
s dng mt bin php bo h php l khng ph hp vi yu cu .
2. Nu hng ha khng ph hp vi hp ng, ngi mua chi c th oi ngi
bn phi giao hng thay th khi s khng ph hp to nn mt s vi
phm c bn hp ng v yu cu thay th hng phi c t ra cng mt
lc vi vic thng bo nhng d kin theo iu 39 hoc trong mt thi hn
hp l sau .
3. Nu hng ha khng ph hp vi hp ng, ngi mua c quyn yu cu
ngi bn loi tr s khim khuyt y, tr phi iu ny khng hp l xt
theo tt c cc tnh tit. Yu cu lot tr s khim khuyt ca hng ha so
vi hp ng phi c tin hnh, hoc cng mt lc vi thng bo nhng
d kin theo iu 39 hoc trong mt thi hn hp l sau .
Article 47
1. The buyer may fix an additional period of the time of reasonable length for
performance by the seller or his obligations.
.
2. Unless the buyer has received notice from the seller that he will not perform
within the period so fixed, the buyer may not, during that period .resort to any
remedy for breach of contract. However, the buyer is not deprived thereby of
any right he may have to claim damages for delay in performance.
iu 47.
1. Ngi mua c th n nh thm mt thi hn hp l ngi bn thc hin
ngha v.
2. Tr phi ngi mua c ngi bn thng bo rng ngi bn se khng
thc hin ngha v ca mnh trong thi hn b sung , ngi mua khng c
s dng n bt ky bin php bo h php l no trong trng hp ngi bn vi
phm hp ng trc khi thi hn b sung kt thc. Tuy nhin, ngay c trong
trng hp ny ngi mua cung khng mt quyn oi bi thng thit hi do
ngi bn chm tr trong vic thc hin ngha v.
Article 48
1. Subject to Article 49, the seller may, even after the date for delivery, remedy
at his own expense any failure to perform his obligations, if he can do so
without unreasonable delay and without causing the buyer unreasonable
inconvenience or uncertainty of reimbursement by the seller of expenses
advanced by the buyer. However, the buyer retains any right to claim damages
as provided for in this Convention.
2. If the seller requests the buyer to make known whether he will accept
performance and the buyer does not comply with the request within a
reasonable time, the seller may perform within the time indicated in his

request. The buyer may not, during that period of time, resort to any remedy
which is inconsistent with performance by the seller.
3. A notice by the seller that he will perform within a specified period of time is
assumed to include a request, under the preceding paragraph 2, that the buyer
make known his decision.
4. A request or notice by the seller under paragraph (2) or (3) of this article is
not effective unless received by the buyer.
iu 48.
1. Theo ng quy nh ca iu 49, ngi bn c th, ngay c sau khi ht thi
hn giao hng, loi tr mi thiu st trong vic thc hin ngha v ca mnh,
vi iu kin l vic lm khng ko di s chm tr v l v khng gy ra
cho ngi mua nhng tr ngi hay tnh hnh bt nh v l trong vic hon
tr cc ph tn m ngi bn phi thc hin cho ngi mua. Tuy nhin ngi
mua vn gi nguyn quyn oi bi thng thit hi chiu theo Cng c ny.
2. Nu ngi bn yu cu ngi mua cho bit l ngi mua c chp nhn vic
loi tr thiu st ni trn ca ngi bn hay khng v nu ngi mua khng
p ng yu cu ny trong mt thi hn hp l th ngi bn c th thc
hin vic loi tr thiu st trong thi hn m ngi bn ghi trong yu
cu. ngi mua khng th, trong thi hn s dng bt c bin php bo
h php l no khng thch hp cho vic thc hin ngha v ca ngi bn.
3. Nu ngi bn thng bo rng ngi bn se thc hin vic loi tr thiu st
trong mt thi hn n nh th thng bo ni trn bao gm c yu cu ngi
mua cho bit h chp nhn vic loi tr thiu st hay khng, chiu theo quy
nh ca khon 2 ni trn.
4. Yu cu hay thng bo ca ngi bn theo khon 2 hay 3 ca iu khon
ny se khng c hiu lc nu ngi mua khng nhn c n.
Article 49
1. The buyer may declare the contract avoided
(a) If the failure by the seller to perform any of his obligations under the
contract or this Convention amounts to a fundamental breach of contract; or
(b) In case of non-delivery, if the seller does not deliver the goods within the
additional period of time fixed by the buyer in accordance with paragraph (1) of
article 47 or declares that he will not deliver within the period so fixed.
2. However, in cases where the seller has delivered the goods. The buyer loses
the right to declare the contract avoided unless he does so:
(a) In respect to late delivery, within a reasonable time after he has become
aware that delivery has been made;
(b) In respect of any breach other than late delivery, within a reasonable time:
(c) after he knew or ought to have known of breach;
(d) after the expiration of any additional period of time fixed by the buyer in
accordance with paragraph (1) of Article 47. or after the seller has declared that
he will not perform his obligations within such an additional period; or
(e) after the expiration of any additional period of time indicated by the seller in
accordance with paragraph (2) of Article 48, or after the buyer declared that he
will not accept performance.
iu 49.
1. Ngi mua c th tuyn b hy hp ng
a) nu vic ngi bn khng thc hin bt c ngha v no pht sinh t hp
ng hay t Cng c ny cu thnh mt vi phm c bn n hp ng; hoc
b) trong trng hp khng giao hng, nu ngi bn khng giao hng trong thi
gian c ngi mua gia hn thm cho h theo khon 1 iu 47 hoc nu
ngi bn tuyn b se khng giao hng trong thi hn b sung .
2. Tuy nhin trong trng hp ngi bn giao hng, ngi mua se mt quyn
hy hp ng tr khi ngi mua tuyn b hy hp ng;
a) khi hng giao chm, trong mt thi hn hp l k t lc ngi mua bit
rng vic giao hng c thc hin
b) i vi mi trng hp vi phm khng phi giao hng chm tr, trong mt
thi hn hp l
i) k t lc ngi mua bit hay ng le phi bit v s vi phm ;
ii) sau khi ht thi hn b sung cho ngi bn theo khon 1 iu 47 hoc sau
khi ngi bn tuyn b rng h se khng thc hin ngha v ca mnh trong
thi hn c gia hn ; hoc
11) sau khi ht thi hn b sung m ngi bn chi ro theo khon 2 iu
48 hoc sau khi ngi mua tuyn b rng h khng chp nhn thc hin
ngha v.

Article 50. If the goods do not conform with the contract and whether or not
the price has already been paid, the buyer may reduce the price in the same
proportion as the value that the goods actually delivered had at that time of the
delivery bears to the value that conforming goods would have had at the time.
However, if the seller remedies any failure to perform his obligations in
accordance with Article 37 or Article 48 or if the buyer refuses to accept
performance by the seller in accordance with those Articles, the buyer may not
reduce the price.
iu 50. Trong trng hp hng ha khng ph hp vi hp ng bt k tin
hng c tr hay cha, ngi mua c th gim gi hng theo ty l cn c
vo s sai bit gia gi tr thc ca hng ha vo lc giao hng v gi tr ca
hng ha nu hng ph hp vi hp ng vo lc giao hng. Tuy nhin, nu
ngi bn loi tr mi thiu st trong vic thc hin mi ngha v theo iu 37
hoc iu 48 hoc nu ngi mua t chi chp nhn vic thc hin ca ngi
bn theo cc iu khon ny th ngi mua khng c gim gi hng.
Article 51. If the seller delivers only a part of the goods or if only a part of the
goods delivered is in conformity with the contract, Article 46 to 50 apply in
respect of the part which is missing or which does not conform.
1. The buyer may declare the contract avoided in its entirety only if the failure
to make delivery completely or in conformity with the contract amounts to a
fundamental breach of the contract.
iu 51.
1. Nu ngi bn chi giao mt phn hng ha hoc nu chi mt phn hng ha
giao ph hp vi hp ng th cc iu 46 n 50 se c p dng i
vi phn hng ha thiu hoc phn hng ha khng ph hp vi hp ng.
2. Ngi mua chi c tuyn b hy bo ton b hp ng nu vic khng thc
hin hp ng hoc mt phn hng giao khng ph hp vi hp ng cu
thnh mt s vi phm c bn hp ng.
Article 52
1. If the seller delivers the goods before the date fixed, the buyer may take
delivery or refuse to take delivery.
2. If the seller delivers a quantity of goods greater than that provided for in the
contract, the buyer may take delivery or refuse to take delivery of the excess
quantity. II the buyer takes delivery of all or part of the excess quantity, he
must pay (or it at the contract rate.
iu 52.
1. Nu ngi bn giao hng trc thi hn quy nh th ngi mua c quyn
chp nhn hoc t chi vic giao hng .
2. Nu ngi bn giao mt s lng nhiu hn s lng quy nh trong hp
ng, ngi mua c th chp nhn hay t chi s lng vt tri ni trn.
Nu ngi mua chp nhn ton b hay mt phn s lng vt tri ni trn
th ngi mua phi tr tin hng vt tri theo gi hp ng quy nh.
Chapter III. OBLIGATIONS OF THE BUYER
Article 53. The buyer must pay the price for the goods and lake delivery of
them as required by the contract and this Convention.
Chng III. Nghia vu cua ngi mua
iu 53. Ngi mua c ngha v thanh ton tin hng v nhn hng theo quy
nh ca hp ng v ca Cng c ny.
.
Section I. Payment of the Price
Article 54. The buyer's obligation to pay the price includes taking such steps
and complying with such formalities as may be required under the contract or
ant laws and regulation to enable payment to be made.
Muc I. Thanh toan tin hang
iu 54. Ngha v thanh ton tin hng ca ngi mua bao gm vic p dng
cc bin php v hon chinh cc th tc theo yu cu ca hp ng hoc lut l
c th thc hin vic tr tin hng.
Article 55. Where a contract has been validly concluded but does not expressly
or implicitly fix or make provision for determining tlie price, the parlies are
considered, in the absence of any indication to the contrary, to have impliedly
make reference to the price generally charged at the lime of the conclusion the

contract tor such' goods sold under comparable circumstances in the trade
concerned.
iu 55. Khi hp ng c k kt mt cch hp php, nhng khng quy
nh gi c mt cch trc tip hoc gin tip, hoc khng quy nh cch xc
nh gi tr cc bn, tr phi c s quy nh ngc li c coi l c ng da
vo gi c n nh cho loi ha nh vy khi hng ha ny c em bn
trong nhng iu kin tng t ca ngnh bun bn hu quan.
Article 56. If the price is fixed according to the weight of the goods, in case of
doubt it is to be determined by the net weight.
iu 56. Nu gi c c n nh theo trng lng ca hng ha th trong
trng hp c nghi ng, gi se c xc nh theo trng lng tnh.
Article 57. If the buyer is not bound to pay the price at any other particular
place, he must pay It to the seller:
1. At the seller's place of business, or
2. If the payment is to be made against the handing over of the goods or of
documents, at the place where the handing over takes place.
3. The seller must bear any increase in the expenses incidental to payment
which is caused by a change in his place of business subsequent to the
conclusion of the contract.
iu 57.
1. Nu ngi mua khng c ngha v thanh ton tin hng ti mt a im no
th h phi tr tin cho ngi bn
a) ti tr s thng mi ca ngi bn; hay
b) ti ni giao hng hoc giao chng t nu vic tr tin c thc hin khi giao
hng hoc giao chng t.
2. Ngi bn phi chu s gia tng ph tn thc hin vic thanh ton do s
thay i a im tr s thng mi ca mnh sau khi hp ng c k kt.
Article 58
1. If the buyer Is not bound to pay the price at any other specific time, he must
pay it when the seller places either the goods or document controlling their
disposition at the buyer's disposal in accordance with the contract and this
Convention. The seller may make such payment a condition for handing over
the goods or documents.
2. If the contract Involves carriage of the goods, the seller may dispatch the
goods on terms whereby the goods, or documents controlling their
disposition, will not be handed over to the buyer except against payment of
the price.
3. The buyer Is not bound to pay the price until he has had an opportunity to
examine the goods, unless the procedures for delivery or payment agreed
upon by the parties are inconsistent with his having such an opportunity.
iu 58.
1. Nu ngi mua khng c ngha v tr tin vo mt thi hn nht nh, th
ngi mua phi tr khi, theo hp ng v Cng c ny, ngi bn t hoc
hng ha hoc cc chng t nhn hng di quyn nh ot ca ngi mua.
Ngi bn c th a ra iu kin phi thanh ton nh vy i li vic giao
hng hoc chng t.
2. Nu hp ng quy nh vic chuyn ch hng ha, ngi bn c th gi hng
vi iu kin l hng hay chng t nhn hng chi c giao cho ngi mua khi
ngi mua thanh ton tin hng.
Article 59. The buyer must pay the price on the dale fixed by or determinable
from the contract and this Convention without the need for any request or
compliance with any formality on the part of the seller.
iu 57. Ngi mua phi tr tin vo ngy quy nh hoc c th c xc nh
theo hp ng v Cng c ny m khng cn yu cu hay thc hin mt th
tc no khc v pha ngi bn.
Section II. Taking delivery
Muc II. Nhn hang
Article 60. The buyer's obligation to take delivery consists:
(a) In doing all the acts which could reasonably be expected of him In order to
enable the seller to make delivery; and
(b) In taking over the goods.

iu 60. Ngha v nhn hng ca ngi mua gm


a) thc hin mi hnh vi tip theo mt cch hp l cho php ngi bn thc
hin vic giao hng; v
b) tip nhn hng ha.
.
Section III. Remedies for breach of contract by the buyer
Article 61
1. If the buyer falls to perform any of his obligations under the contract or this
Convention, the seller may:
(a) exercise the right provided In Article 62 to 65.
(b) claim damages as provided In Article 74 to 77.
2 The seller Is not deprived of any right he may have to claim damages by
exercising his right to other remedies.
3 No period of grace may be granted to the buyer by a court or arbitral tribunal
when the seller resorts to a remedy tor breach of contract.
Muc III. Cac bin phap bao h phap ly trong trng hp ngi mua vi
pham hp ng
iu 61.
1. Nu ngi mua khng thc hin mt ngha v no theo hp ng mua bn
hay Cng c ny, th ngi bn c th
a) thc hin cc quyn quy nh ti iu 62 v 65
b) oi bi thng thit hi nh quy nh ti cc iu t 74 n 77
2. Ngi bn khng mt quyn oi bi thng thit hi khi h s dng quyn
c p dng cc bin php bo h php l khc.
3. Khng mt thi hn tng thm no c th c toa n hay trng ti ban cho
ngi mua khi ngi bn p dng mt bin php bo h php l trong trng
hp ngi mua vi phm hp ng.
Article 62. The seller may require the buyer to pay the price, take delivery or
perform his other obligations, unless the seller has resorted to a remedy which
Is inconsistent with this requirement.
iu 62. Ngi bn c th yu cu ngi mua tr tin, nhn hng hay thc
hin cc ngha v khc tr phi ngi bn s dng mt bin php bo h php l
khc khng thch hp vi cc yu cu .
Article 63
1. The seller may fix .an additional period of time of reasonable length for
performance by the buyer of his obligations.
2. unless the seller has received notice from the buyer that he will not perform
within the period so fixed, the seller may not. during that period, resort to any
remedy for breach of contract. However, the seller is not deprived thereby of
any right he may have to claim damages for delay in performance.
iu 63.
1. Ngi bn c th n nh cho ngi mua mt thi hn b sung hp l thc
hin ngha v ca mnh.
2. Tr phi nhn c thng bo ca ngi mua ch bit se khng thc hin
ngha v trong thi gian y, ngi bn trong thi hn khng th p dng bt
c mt bin php bo h php l no trong trng hp ngi mua vi phm hp
ng. Tuy nhin, ngi bn khng v th m mt quyn oi bi thng thit hi
v ngi mua chm thc hin ngha v.
Article 64
1. The seller may declare the contract avoided
(a) if the failure by the buyer to perform any of his obligations under me
contract or this Convention amounts to a fundamental breach of contract; or
(b) if the buyer does not, within the additional period of time fixed by the seller
in accordance with paragraph (1) of Article 63, perform his obligation to pay the
price or take delivery of the goods, or if he declares that he will not do so within
the period so-fixed.
2. However, In cases where the buyer has paid the price, the seller, loses the
right to declare the contract avoided unless he does so
(a) In respect of late performance by the buyer, before the seller has become
rendered: or
(b). In respect of any breach other than late performance by the buyer, within a
reasonable time
(c) after the seller knew or ought to have known of the breach; or

(d) after the expiration of any additional period of time fixed by the seller In
accordance with paragraph (1) of Article 63, or after the buyer has declared
that he will not perform his obligations within such an additional period.
iu 64.
1. Ngi bn c th tuyn b hy hp ng
a) nu vic khng thc hin ngha v ca ngi mua theo hp ng hay Cng
c cu thnh mt s vi phm c bn hp ng; hoc
b) nu ngi mua khng thc hin ngha v tr tin hoc khng nhn hng
trong thi hn b sung theo khon 1 iu 63 hoc nu ngi mua tuyn b se
khng lm vic trong thi hn y.
2. Tuy nhin trong nhng trng hp ngi mua tr tin, ngi bn mt mt
quyn tuyn b hy hp ng tr khi ngi bn lm nh vy,
a) trong trng hp ngi mua chm thc hin ngha v hoc khi ngi bn
bit rng ngha v c thc hin; hoc
b) trong trng hp ngi mua vi phm bt c ngha v khc ngoi vic chm
tr trong mt thi hn hp l,
i) k t lc ngi bn bit hay ng le phi bit s vi phm , hoc
ii) sau khi kt thc thi hn b sung theo khon 1 iu 63 hay sau khi ngi
mua tuyn b rng h se khng thc hin ngha v ca mnh trong thi hn
b sung .
Article 65
1. If under the contract the buyer is to specify the form, measurement or other
features of the goods and he fails to make such specification either on the
date agreed upon or within a reasonable time after receipt of a request from
the seller, the seller may, without prejudice to any other rights he may have,
make the specification himself in accordance with the requirements of the
buyer that may be known to him.
2. if the seller makes the specification himself, he must inform the buyer of the
details thereof and must fix a reasonable time within which the buyer may
make a different specification. If .after receipt of such a communication, the
buyer falls to do so within the time so fixed, the specification made by the
seller is binding.
iu 65.
1. Nu theo hp ng, ngi mua phi xc nh hnh dng, kch thc hay
nhng c im khc ca hng ha v nu ngi mua khng lm iu vo
thi gian thoa thun hay trong mt thi hn hp l k t khi nhn c yu cu
ca ngi bn, th ngi bn c th t mnh xc nh hng ha theo ng nhu
cu ca ngi mua m ngi bn c th bit m khng lm phng hi n cc
quyn li khc.
2. Nu ngi bn t mnh xc nh hng ha, h phi bo chi tit cho ngi mua
ni dung vic xc nh v n nh mt thi hn hp l ngi mua c th
a ra cc chi tit khc ca hng ha. Nu sau khi nhn c thng bo m
ngi mua khng xc nh chi tit hng ha trong thi hn ni trn th s xc
nh hng ha do ngi bn thc hin c tnh cht bt buc.
Chapter IV. PASSING OF THE RISK
Chng IV. Chuyn rui ro
Article 66. Loss of or damage to the goods after the risk has passed to the
buyer does not discharge him from his obligation to pay the price, unless the
loss or damage is due to an act or omission of the seller.
iu 66. Tht thot hay h hong hng ha xy ra sau khi ri ro chuyn sang
ngi mua khng min tr cho ngi mua ngha v tr tin, tr phi tht thot
hay h hong hng l do hnh ng hay s thiu trch nhim ca ngi bn
gy ra.
Article 67
1. If the contract of sale Involves carriage of the goods and the seller Is not
bound to hand them over at a particular place, the risk passes to the buyer
when the goods are handed over to the first carrier for transmission to the buyer
in accordance with the contract of sale. If the seller is bound to hand the goods
over to a carrier at a particular place, the risk does not pass to the buyer until to
the carrier at that place. The fact that the seller is authorized to retain
documents controlling the disposition of the goods does not affect the passage
of the risk.
2. Nevertheless, the risk does not pass to the buyer until the goods are clearly
identified to the contract, whether by markings on the goods, by shipping
documents, by notice given to the buyer or otherwise.

iu 67.
1. Nu hp ng mua bn quy nh vic vn chuyn hng ha v ngi bn
khng b buc phi giao hng ti ni quy nh, ri ro c chuyn sang ngi
mua k t lc hng c giao cho ngi chuyn ch th nht chuyn cho
ngi mua theo hp ng mua bn. Nu ngi bn buc phi giao hng cho
mt ngi chuyn ch ti mt ni quy nh, ri ro khng c chuyn cho
ngi mua cho n khi hng ha c giao cho ngi chuyn ch ti ni .
Vic ngi bn c php gi li cc chng t nhn hng khng nh hng
n vic chuyn giao ri ro.
2. Tuy nhin ri ro khng c chuyn sang cho ngi mua nu hng ha khng
c phn nh ro rng theo hp ng bng cch ghi k m hiu trn hng
ha, bng cc chng t vn ti, bng mt thng bo gi cho ngi mua hoc
bng nhng cch thc khc.
Article 68. The risk in respect of goods sold in transit passes to the buyer from
the conclusion of the contract. However, if the circumstances so indicate, the
risk is assumed by the buyer from the time the goods were handed over to the
carrier who issued the documents embodying the contract of carriage.
Nevertheless, if at the time of the conclusion of the contract of sale, the seller
knew or ought to have known that the goods had been lost or damaged and did
not disclose this to the buyer, the loss or damage is at the risk of the seller.
iu 68. Ri ro v hng ha bn trn ng vn chuyn c chuyn sang
cho ngi mua, k t khi k kt hp ng. Nhng trong cc trng hp cn thit
nh nu, ngi mua phi nhn ri ro v mnh k t khi hng c giao cho
ngi chuyn ch l ngi k pht cc chng t xc nhn vic thc hin hp
ng chuyn ch. Tuy nhin, nu vo lc k kt hp ng mua bn, ngi bn
bit hoc ng le phi bit v s kin hng ha b mt hay h hong v
khng thng bo cho ngi mua v iu th vic tht thot hay h hong hng
ha do ngi bn phi gnh chu.
There are some mistakes in the Vietnamese translation. How do you
corect the translated version according to the English original?
Article 69
1. In cases not within Article 67 and 68, the risk passes to the buyer when he
takes over the goods or, if he does not do so in due time, from the time when
the goods are placed at his disposal and he commits a breach of contract by
failing to take delivery.
2. However, if the buyer is bound to take over the goods at a place other than a
place of business of the seller, the risk passes when delivery is due and the
buyer is aware of the fact that the goods are placed at his disposal at that place.
3. If the contract relates to goods not then identified, the goods are considered
not to be placed at the disposal of the buyer until they are clearly identified to
the contract.
iu 69.
1) Trong cc trng hp khng c nu ti iu 67 v 68, ri ro c
chuyn sang ngi mua khi ngi ny nhn hng hoc nu ngi mua
khng lm vic ny ng thi hn quy nh k t lc hng c t di
quyn nh ot ca ngi mua v ngi mua vi phm hp ng v
khng chu nhn hng.
2) Tuy nhin, nu ngi mua b buc phi nhn hng ti mt ni khng phi
l tr s thng mi ca ngi bn, ri ro c chuyn khi vic giao hng
phi c thc hin v ngi mua bit rng hng c t di quyn
nh ot ca h ti ni .
3) Nu hp ng mua bn lin quan n hng ha cha c nh dng,
hng chi c coi l t di quyn nh ot ca ngi mua chng
no chng c tch bit ro rng cho mc ch ca hp ng.
Article 70. If the seller has committed a fundamental breach of contract, Article
67, 68 and 69 do not impair the remedies available to the buyer on account of
the breach.
iu 70. Nu ngi bn vi phm c bn i vi hp ng, cc quy nh ca
iu 67, 68, 69 khng nh hng n quyn ca ngi mua s dng cc bin
php bo h php l trong trng hp xy ra vi phm .
Chapter V. PROVISIONS COMMON TO THE OBLIGATIONS OF THE SELLER
AND OF THE BUYER

mua.

Section I. Anticipatory breach and instalment contracts


Cac iu khoan chung i vi nghia vu cua ngi ban va ngi

Muc 1. Vi pham trc va cac hp ng giao hang tng phn


Article 71
1. A party may suspend the performance of his obligations if, after the
conclusion of the contract, it becomes apparent that the other party will not
perform a substantial part of his obligations as a result of:
(a) a serious deficiency in his ability to perform or in his creditworthiness; or
(b) his conduct in preparing to perform or in performing the contract.
2. if the seller has already dispatched the goods before the grounds described
in the preceding paragraph become evident, he may prevent the handing over
of the goods to the buyer even though the buyer holds a document which
entitled him to obtain them. The present paragraph relates only to the right in
the goods as between the buyer and the seller.
3. A party suspending performance, whether before or after dispatch of the
goods, must immediately give notice of the suspension to the other party and
must continue with performance if the other party provides adequate assurance
of his performance.
iu 71.
1. Mt bn c th ngng thc hin ngha v ca mnh nu c du hiu cho thy
sau khi hp ng c k kt, bn kia se khng thc hin mt phn ch yu
ngha v ca h do
a) S khim khuyt nghim trng v kh nng thc hin hoc v uy tn; hoc
b) Cung cch lm vic ca bn kia trong vic chun b thc hin hay trong khi
thc hin hp ng,
2. Nu ngi bn gi hng i trc khi nhn ra nhng l do nu trong mc
trn, h c th ngn cn khng hng ha c giao cho ngi mua ngay c
nu ngi mua nm gi chng t cho php h nhn hng. Mc ny chi lin quan
n quyn ca ngi mua v ngi bn i vi hng ha.
3. Mt bn ngng thc hin hp ng d trc hay sau khi gi hng, phi gi
ngay mt thng bo v vic cho bn kia v phi tip tc thc hin hp ng
nu bn kia bo m y vic th hin ngha v ca h.
Article 72
1. If prior to the date for performance of the contract it is clear that one of the
parties will commit a fundamental breach of contract, the other party may
declare the contract avoided.
2. If time allows, the party intending to declare the contract avoided must give
reasonable notice to the other party murder to permit him to provide adequate
assurance of his performance.
3. The requirements of the preceding paragraph do not apply if the other party
has declared that he will not perform his obligations.
iu 72.
1. Nu trc ngy quy nh thc hin hp ng m thc t cho thy ro rng mt
bn se gy ra vi phm c bn hp ng, bn kia c th tuyn b hy hp ng.
2. Nu thi gian cho php, bn no c nh tuyn b hp ng b hy th phi
gi mt thng bo hp l cho bn kia cho php h bo m y vic thc
hin ngha v ca mnh.
3. Cc quy nh ca khon trn khng p dng nu bn kia tuyn b rng h
se khng thc hin ngha v ca mnh.
Article 73
1. In the case of a contract for delivery of good by instalments, if the failure of
one party to perform any of his obligations in respect of any instalment,
constitutes a fundamental breach of contract with respect to that instalment,
the other part may declare the contract avoided with respect to that
instalment.
2. If one party's failure to perform any of his obligations In respect of any
instalment gives the other party good grounds to conclude that a
fundamental breach of contract will occur with respect to future instalments,
he may declare the contract avoided for the future, provided that he does so
within a reasonable time.
3. A buyer who declares the contract avoided in respect of any delivery may at
the same time declare it avoided In respect of deliveries already made or of
future deliveries if by reason of their interdependence, those deliveries could

not be used for the purpose contemplated by the parties at the time of the
conclusion of the contract.
iu 73.
1. Nu hp ng quy nh giao hng tng phn v nu vic mt bn khng thc
hin ngha v lin quan n mt l hng to nn mt s vi phm c bn hp
ng v l hng th bn kia c th tuyn b hy hp ng v l hng lin
quan.
2. Nu mt bn khng thc hin bt c mt ngha v c lin quan n l hng
no, cho php bn kia c l do xc ng kt lun rng s vi phm c bn hp
ng se xy ra i vi cc l hng c giao trong tng lai, bn c th tuyn
b hy hp ng i vi cc l hng giao trong tng lai vi iu kin phi lm
vic trong mt thi hn hp l.
3. Ngi mua khi tuyn b hy hp ng i vi bt ky l hng no, c th cng
mt lc tuyn b hp ng b hy i vi cc l hng se c giao trong tng
lai nu do tnh lin kt cc l hng ny khng th s dng c cho nhng mc
ch m cc bn d tnh vo lc k kt hp ng.
Section II. Damages
Article 74. Damages for breach of contract by one party consist of a sum equal
to the loss, including loss of profit suffered by the other party as a consequence
of the breach. Such damages may not exceed the loss which the party in breach
foresaw or ought to have foreseen at the time of the conclusion of the contract
in the light of the facts and matters of which he then knew or ought to have
known as a possible consequence of the breach of contract.
Muc 2.
iu 74.
Article 75. It the contract is avoided and if in a reasonable manner and within a
reasonable time after avoidance the buyer has bought goods in replacement or
the seller has resold the goods, the party claiming damages may recover the
difference between the contract price and the price in the substitute transaction
as well as any further damages recoverable under article 74.
iu 75.
Article 76
1. If the contract is avoided and there is a current price for the goods, the party
claiming damages may if he has not made a purchase or resale under Article
75, recover the difference between the price fixed by the contract and the
current price at the time of avoidance as well as any further damages
recoverable under Article 74. If, however the party claiming damages has
avoided the contract after
taking over the goods, the current price at the time of such taking over shall be
applied instead of the current price at the time of avoidance.
2. For the purposes of the preceding paragraph, the current price is the price
prevailing at the place where delivery of the goods should have been made or if
there is no current price at that place, the price at such other place as severs as
a reasonable substitute making due allowance for differences in the costs of
transporting the goods.
iu 76.
1. Khi hp ng b hy v hng c mt mc gi hin hnh, bn oi bi thng
thit hi c th, nu h khng mua hng thay th hay bn li theo iu 75,
nhn phn chnh lch gi nh ca hp ng v gi hin hnh vo lc hy hp
ng cng mi khon tin bi thng thit hi khc c th c nhn theo iu
74. Mc d vy, nu bn oi bi thng thit hi tuyn b hy hp ng sau
khi tip nhn th gi hin hnh vo lc tip nhn hng c p dng thay cho
gi hin hnh vo lc hy hp ng.
2. Vi mc ch ca khon ni trn, gi hin hnh l gi p dng ti ni m vic
giao hng ng le phi c thc hin hoc nu khng c gi hin hnh ti ni
, l gi p dng ti mt ni khc m ngi ta c th dng thay th mt
cch hp l c tnh n s chnh lch trong chi ph chuyn ch hng ha.
Article 77. A party who relies on a breach of contract must take such measures
as are reasonable in the circumstances to mitigate the loss including loss of
profit resulting from the breach. If he fails to take such measures the party in
breach may claim a reduction in the damages in the amount by which the loss
should
have been mitigated.

iu 77. Mt bn vin dn vi phm hp ng ca bn kia, phi p dng nhng


bin php hp l cn c vo cc tnh hung c th hn ch tn tht, k c
khon li b bo l do s vi phm hp ng gy ra. Nu h khng lm iu , bn
vi phm hp ng c th yu cu gim bt mt khon tin bi thng thit hi
bng vi mc tn tht m le ra c th hn ch c.
Section III. Interest
Article 78. If a party fails to pay the price or any other sum that is in arrears,
the other party is entitled to interest on it without prejudice to any claim for
damages recoverable under article 74.
Muc 3. Tin li
iu 78. Nu mt bn chm thanh ton tin hng hay mi khon tin thiu
khc, bn kia c quyn oi tin li tnh trn s tin chm tr m khng nh
hng n quyn oi bi thng thit hi ca h theo iu 74.
Section IV. Exemptions
Article 79. A party is not liable for a failure to perform any of his obligations if
he proved that the failure was due to an impediment beyond his control and
that he could not reasonably be expected to have taken the impediment into
account at the time of the conclusion of the Contract or to have avoided or
overcome it or its consequences
1. If the party's failure is due to the failure by a third person whom he has
engaged to perform, the whole or a part of the Contract, that party is exempt
from liability only if
(a) he is exempt under the preceding paragraph; and
(b) the person whom he has so engaged would be so exempt if the provision of
that paragraph were applied to him.
2. The exemption provided by this Article has effect for the period during which
the impediment exists.
3. The party who fails to perform must give notice to the other party of the
impediment and its effect on his ability to perform. If the notice is not
received by the other party within a reasonable time after the party who
fails to perform knew or ought to have known of the impediment, he is liable
for damages resulting from such non receipt.
4. Nothing in this article prevents either party from exercising any right other
than to claim damages under this Convention.
Muc 4. Min trach
iu 79.
1. Mt bn khng chu trch nhim v vic khng thc hin mt ngha v ca h
nu chng minh c rng vic khng thc hin la do mt tr ngi nm ngoi
kim sot ca h v khng th oi hoi mt cch hp l rng h phi tnh ti tr
ngi vo lc k kt hp ng hoc phi trnh hay khc phc cc hu qu .
2. Nu mt bn khng thc hin ngha v ca mnh do ngi th 3 cam kt thc
hin ton b hay mt phn hp ng cung khng thc hin iu , th bn y
chi c min trch trong trng hp
a) c min trch theo quy nh ca khon ni trn, v
b) nu ngi th 3 cung se c min trch nu cc quy nh ca khon trn
c p dng cho h.
3. Min trch theo iu ny chi c hiu lc trong thi gian tn ti tr ngi .
4. Bn no khng thc hin ngha v ca mnh th phi bo cho bn kia bit v
tr ngi v nh hng ca n i vi kh nng thc hin ngha v. Nu thng
bo c bn kia nhn trong thi hn hp l k t khi bn khng thc hin ngha
v bit hay ng le phi bit tr ngi trong vic gi thng bo , th bn ny
phi chu trch nhim v nhng thit hi t vic bn kia khng nhn c thng
bo.
5. Nhng quy nh ca iu khon ny khng cn tr mi bn s dng quyn
khc ngoi quyn oc bi thng thit hi theo Cng c ny.
Article 80. A party may not rely on a failure of the other party to perform to the
extent that such failure was caused by the first party's act or omission.
iu 80. Cc bn khng c vin dn vic khng thc hin ngha v ca bn
kia trong chng mc m s vi phm ngha v l do nhng hnh vi hay s
sut ca chnh bn vin dn.
Section V. Effect of Avoidance
Muc V. Hu qua cua vic huy hp ng

Article 81
1. Avoidance of the contract releases both parties from their obligations under it,
subject to any damages which may be due. Avoidance does not affect any
provisions of the contract for the settlement of disputes or any other provisions of
the contract governing the rights and obligations of the parties consequent upon
the avoidance of the contract.
2. A party who has performed the contract either wholly or in part may claim
restitution form the other party of whatever the first party has supplied or paid
under the contract if both parties are bound to make restitution they must do so
concurrently.
iu 81.
1. Vic hy hp ng gii phng hai bn khoi ngha v ca h, tr nhng khon
bi thng thit hi c th c. Vic hy hp ng khng c nh hng n quy
nh ca hp ng v gii quyt tranh chp hay quyn li v ngha v ca hai bn
trong trng hp hp ng b hy.
2. Bn no thc hin ton b hay mt phn hp ng c th oi bn kia hon
li nhng g m h cung cp hay thanh ton khi thc hin hp ng. Nu c hai
bn u b buc phi thc hin vic hon li, h phi cng mt lc thc hin vic
.
Article 82
1. The buyer loses the right to declare the contract avoided or to require the
seller to deliver substitute goods if it is impossible for him to make restitution of
the goods substantially in the condition in which he received them.
2. The preceding paragraph does not apply
(a) if the impossibillity of making restitution of the goods or of making
restitution of the goods substantially in the condition In which the buyer
received them is not due to his act or omission.
(b) if the goods or part of the goods have perished or deteriorated as a result of
the examination provided for in article 38; or
(c) if the goods or part of the goods have been sold in the normal course of
business or have been consumed or transformed by the buyer in the course of,
normal use before he discovered or ought to have discovered the lack of
conformity.
iu 82.
1. Ngi mua mt quyn tuyn b hy bo hp ng hay oi ngi bn phi giao
hng thay th nu h khng th hon li hng ha trong tnh trng thc cht
ng nh khi h nhn hng .
2. iu khon trn khng p dng.
a) Nu vic khng th hon li hng ha hoc khng th hon li trong tnh
trng v thc cht ng nh khi ngi nhn, khng phi do mt hnh ng hay
mt s s sut ca h.
b) Nu hng ha hay mt phn hng ha khng th s dng c hoc h hong
theo kt qu ca vic kim tra quy nh ti iu 38; hoc
c) Nu trc khi nhn thy hay ng le phi nhn thy hng ha khng ph hp
vi hp ng, ngi mua bn ton b hay mt phn hng ha trong qu trnh
kinh doanh thng thng, hay tiu dng hoc bin i ton b hay mt phn
hng ha theo hnh thc s dng thng thng.
Article 83. A buyer who has lost the right to declare the contract avoided or to
require the seller to deliver substitute goods in accordance with article 82
retains all other remedies under the contract and this Convention.
iu 83. Ngi mua, khi mt quyn tuyn b hy bo hp ng hay oi
ngi bn phi giao hng thay th theo iu 82, vn c php duy tr quyn
s dng bin php bo h php l khc theo hp ng v Cng c ny.
Article 84
1. If the seller is bound to refund the price he must also pay interest on it from
the date on which the price was paid
2. The buyer must account to the seller for, ail benefits which he has derived
from the goods or part of them
(a) If he must make restitution of the goods or part of them; or
(b) .If it is impossible for him to make restitution of all or part of the goods or to
make restitution of all or part of the goods substantially in the condition in which
he received them but he has nevertheless declared the contract avoided or
required the seller to deliver substitute goods.
iu 84.

1. Nu ngi bn b buc phi hon li gi tin h cung phi tr tin li trn tng
s tin k t ngy ngi mua thanh ton.
2. Ngi mua phi tr cho ngi bn s tin tng ng vi mi li nhun m
h c hng t hng ha hay mt phn hng ha.
a) khi h phi hon li ton b hay mt phn hng ha, hay
b) Khi h khng th hon li ton b hay mt phn hng ha hay khng th
hon li hng thc cht ng nh tnh trng h nhn, mc d h tuyn b
hp ng b hy hay oi ngi bn giao hng thay th.
Section VI. Preservation of the Goods
Article 85. If the buyer is in delay in taking delivery of the goods or where
payment of the price and delivery of the goods are to be made concurrently if
he (ails to pay the price and the seller is either in possession of the goods or
otherwise able to control their disposition the seller must take such steps as are
reasonable in
the circumstances to preserve them. He is entitled to retain them until he has
been reimbursed his reasonable expenses by the buyer.
Muc 6. Bao quan hang hoa
iu 85. Khi ngi mua chm tr nhn hng hay khng tr tin hoc khi vic
tr tin v v giao hng phi c tin hnh cng lc v hng ha con nm
di quyn nh ot hay kim sot ca ngi bn, ngi bn phi thc hin
nhng bin php hp l trong tng tnh hung bo qun hng ha. Ngi
bn c quyn gi li hng ha cho ti khi ngi mua hon tr cho h cc chi ph
hp l.
Article 86
1. If the buyer has received the goods and intends to exercise any right under
the contract or this Convention to reject them, he must take such steps to
preserve them as are reasonable in the circumstances. He is entitled to retain
them until he has been reimbursed his reasonable expenses by the seller.
2. If goods dispatched to the buyer have been placed at his disposal at their
destination and he exercises the right to reject them, he must take possession
of them on behalf of the seller provided that this can be done without payment
of the price and without unreasonable inconvenience or unreasonable expense.
This provision does not apply if the seller or a person authorized to. take charge
of the goods on his behalf is present at the destination. If the buyer takes
possession of the goods under this paragraph his rights and obligations are
governed by the preceding paragraph.
iu 86.
1. Nu ngi mua nhn hng v c nh s dng quyn t chi nhn hng
theo hp ng hay Cng c ny, th h phi thc hin cc bin php hp l
trong nhng tnh hung bo qun hng ha. Ngi mua c quyn gi li
hng ha cho ti khi ngi bn hon tr cho mnh cc chi ph hp l.
2. Nu hng ha gi cho ngi mua c t di quyn nh ot ca ngi
ny ti ni n v nu ngi mua s dng quyn t chi hng th h phi thay
mt ngi bn tip nhn hng ha vi iu kin ngi mua c th lm vic ny
m khng phi tr tin hng v khng gp tr ngi hay cc chi ph bt hp l.
Quy nh ny khng p dng nu ngi bn hay ngi c y quyn nhn hng
ha cho ngi c mt ti ni n. Nu ngi mua tip nhn hng theo quy nh
ca khon ny, nhng quyn li v ngha v ca ngi mua c iu chinh
bng quy nh ti khon trn.
Article 87. A party who Is bound to take steps to preserve the goods may
deposit them in a warehouse of a third person at the expense of the other party
provided that the expense incurred is not unreasonable.
iu 87. Bn no b buc phi c nhng bin php bo qun hng ha, c
th giao hng vo kho ca ngi th ba, chi ph do bn kia chu vi iu kin cc
chi ph ny phi hp l.
Article 88
1. A party who is bound to preserve the goods in accordance with article 85 or
86 may sell them by any appropriate means If there has been an unreasonable
delay by the other party in taking possession of the goods or in taking them
back or in paying the price or the cost of preservation, provided that reasonable
notice of intention to sell has been given to the other party.
2. If the goods are subject to rapid deterioration or their preservation would
Involve unreasonable expense, a party who is bound to preserve the goods in

accordance with article 85 or 86 must take reasonable measures to sell


them. To the extent possible he must give notice to the other party of his
intention to sell.
3. A party selling the goods has the right to retain out of the proceeds ot sale an
amount equal to the reasonable expenses of preserving the goods and of
selling them. He must account to the other party for the balance.
iu 88.
1. Bn no phi bo qun hng ha theo iu 85 hay 86 c th bn hng i
bng cch thc thch hp nu bn kia chm tr mt cch phi l trong vic tip
nhn hay ly li hng hoc trong vic tr tin hng hay cc chi ph bo qun,
nhng phi thng bo hp l cho bn kia nh pht mi hng ha.
2. Nu hng ha thuc loi mau hong hay vic bo qun se gy ra cc chi ph
phi l th bn no c ngha v bo qun hng ha theo iu 85 hay 86 phi tin
hnh cc bin php hp l bn i. Theo kh nng ca mnh h phi thng bo
cho bn kia bit nh pht mi .
3. Bn bn hng c quyn gi li t tin bn hng mt s tin ngang vi cc
chi ph hp l ca vic Bo qun v pht mi hng ha. Phn con li c tr
cho bn kia.
PART IV. FINAL PROVISIONS
Article 89. The Secretary-Genaral of the United Nations is hereby designated as
the depositary for this Convention.
Phn 4. NHNG QUY INH CUI CUNG
iu 89. Tng Th k LHQ c chi nh l ngi gi lu chiu bn Cng c
ny.
Article 90. This Convention does not prevail over any international agreement
which has already been or may be entered into and which contains provisions
concerning the matters governed by this Convention, provided that the parties
have their places of business in States parties to such agreement.
iu 90. Cng c ny khng nh hng n bt ky mt thoa thun quc t
no c hay se c k kt bao gm nhng quy nh lin quan n cc vn
l i tng iu chinh ca Cng c ny, vi iu kin cc bn ca hp ng
phi c tr s thng mi ti cc quc gia thnh vin ca thoa thun quc t .
Article 91
1. This Convention is open for signature at the concluding meeting of the United
Nations Conference on Contracts lor the International Sale of Goods and will
remain open for signature by all States at the Headquarters of the United
Nations New York until 30 September 1981.
2. This Convention is subject to ratification acceptance or approval by the
signatory States.
3. This Convention is open for accession by all States which are not signatory
States as from the date it is open for signature.
4. Instruments of ratification, acceptance, approval and accession are to be
deposited with the Secretary-General of the United Nations.
iu 91.
1. Cng c ny c ngo cho cc bn k kt ti phin hp b mc ca Hi
ngh LHQ v Hp ng Mua bn Hng ha Quc t, v se ngo cho cc quc
gia k kt ti tr s LHQ ti New York, cho ti ngy 31-11-1981.
2. Cng c ny phi c s ph chun, chp thun hay chun y ca cc quc
gia k kt.
3. Cng c ny c ngo tt c cc quc gia khng k tn tham gia, k t
ngy Cng c ngo cho cc bn k kt.
4. Vic ph chun, chp nhn, chun y v tip cn phi c ng k vi Tng
Th k LHQ.
Article 92
1. A Contracting State may declare at the time of signature, ratification,
acceptance, approval or accession
that it will not be bound by Part II of this Convention or that it will not be bound
by Part III of this Convention.
2. A contracting State which makes a declaration in accordance with the
preceding paragraph in respect of Part II or Part III of this Convention is not to be
considered a Contracting State within paragraph (1) of Article 1 of this

Convention in respect of matters governed by the Part to which the declaration


applies.
iu 92.
1. Mt quc gia thnh vin c th vo lc k kt, ph chun, chp nhn, chun y
hay gia nhp, tuyn b se khng b rng buc bi Phn II hay Phn III ca Cng
c ny.
2. Mt quc gia thnh vin, theo u khon trn a ra mt tuyn b v Phn II
hay Phn III ca Cng c ny se khng c coi l mt quc gia thnh vin theo
ngha ca Khon 1 iu 1 Cng c ny v cc vn quy nh ca Cng c c
lin quan n tuyn b .
Article 93
1. If a Contracting State has two or more territorial units in which, according to
its constitution, different systems of law are applicable in relation to the matter
dealt with in this Convention, it may, at the lime of signature, ratification,
acceptance, approval or accession, declare that this Convention is to extend to
all its territorial units or only to one or more of them, and may amend its
declaration by submitting another declaration another declaration at any time.
.
,
2. These declarations are to be notified to the depositary and to state expressly
the territorial units to which the Convention extends.
3. It, by virtue of a declaration under this Article, this Convention extends to one
or more but not all of the territorial units of a Contracting State, and it the place
of business of a party is located in that State, this place of business for the
purposes of this Convention, is considered not to be in a Convention, extends.
4. It a Contracting State makes no declaration under paragraph (1) of this
article, the Convention is to extend to all territorial units of that State.
iu 93.
1.
2.
3.
Article 94
1. Two or more Contracting States which have the same or closely related legal
rules on matters governed by this Convention may at any time declare that
he Convention is not to apply to contracts of sale or to their formation where
the parties have their places of business in those Slates. Such declarations
may be made jointly or by reciprocal unilateral declarations.
2. A contracting State which has the same or closely related legal rules on
matters governed by this Convention as one or more non-Contracting States
may at any time declare that the Convention is not to apply to contract of
sale. or to their formation where the parties have their places of business in
those States.
3. If a State which is the object of a declaration under the preceding paragraph
subsequently becomes a Contracting State, the declaration made will, as
from the date on which the Convention enters into force in respect of the new
Contracting State, have the effect of a declaration makes under paragraph
(1), provided that the new Contracting State joins in such declaration or
makes a reciprocal unilateral declaration.
iu 94.
1.
2.
3.
Article 95. Any state may declare at the time of the deposit of its instrument
of ratification, acceptance, approval or accession that it will not be bound by
subparagraph (1) (b) of article 1 of this Convention.
iu 95.
1.
2.
3.
Article 96. A Contracting State whose legislation requires contracts of sale to
be concluded in or evidenced by writing may at any time make a declaration in
accordance with article 12 that any provision of article 11, article 29, or Part II of

this Convention, that allows a contract of sale or its modification or termination


by
agreement or any offer, acceptance, or other indication of intention to be made
in any form other than in writing, does not apply where-any party has his place
of business in that State.
iu 96.
Article 97
1. Declarations made under this Convention at the time of singnature are
subject to confirmation upon ratification, acceptance or approval.
2. Declarations and confirmations of declarations are to be in wiling and be
formally notified to the depositary.
3. A declaration takes effect simultaneously with the entry into force this
Convention in respect of the State concerned. However, a declaration of
which the depositary receives formal notification after such entry into force
takes effect on the first day of the month following the expiration of six
month after the date of its receipt by the depositary. Reciprocal unilateral
declarations under article 94 take effect on the first day of the month
following the expiration of six months after the receipt of the latest
declaration by the depositary.
4. Any State which makes a declaration under this .Convention may withdraw it
at any time by a formal notification in writing addressed to the deposition.
Such withdrawal is to take effect on the first day of the month following the
expiration of six months after the date of receipt of the notification by the
depositary.
5. A withdrawal of a declaration made under article 94 renders inoperative, as
from the date on which on which the withdrawal takes effect, any reciprocal
declaration made by another State under that article.
iu 97.
1.
2.
3.
Article 98. No reservations are permitted except those expressly
authorized in this Convention.
iu 98.
Article 99.
1. This Convention enters into force, subject to the provisions of paragraph (6)
of this Article, on the first day of the month following the expiration of twelve
month's after the date of deposit of the tenth instrument of ratification,
acceptance, approval or accession, including an instrument which contains a
declaration made under article 92.
2. When a State ratifies, accepts, approves or accedes to this Convention after
the deposit of the tenth instrument of ratification, acceptance, approval or
accession, this Convention, with the exception of the Part excluded, enters
into force in respect of that State, subject to the provisions of paragraph (6)
of this article, on the first day of the month following the expiration of twelve
months after the date of the deposit of its instrument of ratification,
acceptance, approval or accession.
3. A State which ratifies, accepts, approves or accedes to this Convention and is
party to either or both the Convention relating to a Uniform Law on the
Formation of Contracts for the International Sale of Goods done at The Hague
on 1st July 1964 (The 1964 Hague Formation Convention) and the Convention
relating to a Uniform Law on the International Sale of Goods done at The
Hague on 1 July 1964 (The 1964 Hague Sales Convention) shall at the same
time denounce, as the case may be, either or both the 1964 Hague
Formation Convention and the 1964 Hague Formation Convention of the
Netherlands to that effect.
4. A State party to the 1964 Hague Sales Convention which ratifies, accepts,
approves or accedes to the present Convention and declares or has declared
under article 92 that it will not be bound by Part III of this Convention shall at
the time of ratification, acceptance, approval or accesion denounce the 1964
Hague Sales Convention by notifying the Government of the Netherlands to
that effect.
5. A State party to the 1964 Hague Formation Convention which ratifies,
accepts, approves or accedes to the present Convention and declares or has

declared under Article 92 that it will not be bound by Part III of this
Convention shall at the time of ratification, acceptance, approval or accession
denounce the 1964 Hague Formation Convention by notifying the
Government of the Netherlands to that effect.
6. For the purpose of this Article, ratification, acceptances, approvals and
accessions in respect of this Convention by States parties to the 1964 Hague
Formation Convention or to the 1964 Hague Sales Convention shall not be
effective until such denunciations as may be required on the part of those
States in respect of the latter two Conventions have themselves become
effective. The depositary of this Convention shall consult with the
Government of the Netherlands, as the depositary of the Conventions, so as
to ensure necessary co-ordination in this respect.
iu 99.
1.
2.
3.
Article 100
1. This Convention applies to the formation of a contract only when the proposal
for concluding the contract is made on or after date when the Convention enter
into force in respect of the Contracting States referred to in subparagrph (1) (a)
or the Contracting State referred to in subpsrsgraph (1) (b) of Article 1.
2. This Convention applies only to contract concluded on or after the date when
the Convention enters into force in respect of the Contracting States referred to
in subparagraph (1)(a) or the Contracting State relered to in subparagraph (1)
(b) of Article 1.
iu 100.
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Article 101
1. A Contracting State may denounce this Convention, or Part II or Part III of the
Convention, by a formal notification in writing addressed to the depositary.
2. The denunciation takes effect on the first day of the month following the
expiration of twelve months by the depositary. Where a longer period for the
denunciation to take effect is specified in the notification, the denunciation
takes effect upon the expiration of such longer period after the notification is
received by the depositary.
Done at Vienna, this day of eleventh day of April, one thousand nine hundred
and eighty, in a single original, of which the Arabic, Chinese, English, French.
Russian and Spanish texts are equally authentic.
IN WITNESS WHERE OF the undersigned plenipotentiaries being duly authorized
by their respective Governments have signed this Convention.