International trade disputes are on the rise, despite efforts from international commercial organizations, governments, and lawyers. Many of these disputes can be prevented or the loss of non-breaching parties minimized by including basic clauses in sales contracts and giving careful consideration to these clauses.

In this article, I will highlight some of the most important elements that should be incorporated into an international sales contract to protect the rights and interests of the parties involved.

Governing Law

Parties must agree on which law will govern the sales contract and include a clause reflecting their mutual decision. This is important because rights and remedies under different laws vary. If the law is not chosen beforehand, it may cause problems in case of future disputes.

Risk

International sales of goods often involve carriage of goods by sea or air, and there is a risk of goods being lost or damaged during transit. The parties must decide who will take the risk during transit.

Currency

Exchange rate fluctuations can affect a transaction, so an international sales contract should always specify the currency.

Breach and Remedies

Issues such as time frames for completion of the transaction, payment, rejection, right to reject/replace defective goods, and rights to demand specific performance or replacement of goods must be considered. Remedies for non-breaching parties should be included in the sales contract.

Standard Terms

INCOTERMS, such as CIF, CFR, FOB, FCA, are standard terms used in international negotiations that provide a neutral agreement base for the parties. They help prevent disputes from occurring by defining the obligations of the parties.

Limitation Clauses

Terms that exclude or limit the liability of the parties in certain situations are often inserted to define the parties’ liability under the sales contract.

Dispute Resolution

The parties must determine how disputes will be resolved in connection with transactions under the sales contract. Whether the parties will go to court, arbitration, or another dispute resolution mechanism should be clearly stipulated in the sales contract, along with the venue for such arbitration/adjudication.

A sales contract with clearly written terms and conditions, including those mentioned above, can be prepared by a experienced lawyer. However, other clauses may also be required depending on the facts and circumstances of each transaction

This Article was earlier published here by the same author.