International Sales Contract

I. Formation of an International sales contracts

“International Sales contract”: in different definitions

 (Article 27, Commerce Law 2005 - Vietnam) The international sale contract must
be made in writing or in other forms of equal legal validity, including telegram,
telex, fax, data message
 (CISG 1980) A contract of sale need not be concluded in or evidenced by writing
and is not subject to any other requirement as to form. It may be proved by any
means, including witnesses.
 (International custom) A contract = offer + acceptance to offer / a contract = order
+ confirmation of order

Electronic contract: The United Nations Convention On The Use Of Electronic

Communications In Electronic Contracts
1. Formation of the contract

a. Definition

Inquiry /
Invitation to
offer

Offer / Order

Acceptance (Sign
Rejection Counter offer
contract)

Confirmation Reject + Offer

Silent
(Sign contract) another

Step1: Inquiry/Invitation to offer Hỏi hàng/ chào hàng

(Article 14, CISG) “Inquiry Thư hỏi hàng – from buyer / Invitation to offer“: 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 offeror 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.

Step 2: Offer/ Order

Sau khi bên kia người ta nhận được iu cầu gửi báo giá, người ta sẽ gửi lại 1 cái offer
hoặc order mà thể hiện iu cầu hoặc năng lực cung ứng của ng mua.

Step 3: Response

1, If: Acceptance (sign a contract) -> confirmation (sign a contract)

“Acceptance”: A statement made by or other conduct of the offeree indicating assent to
an offer is an acceptance. Silence or in activity does not in itself amount to acceptance.

2, If: Rejection -> Silent (no contract)

3, If: Want to bargain -> Conter-offer (Rejection + new offer)

“counter offer” (Article 19, CISG): A reply to an offer which purports to be an acceptance
but contains additions, limitations or other modifications is a rejection of the offer and
constitutes a counter-offer.

#Read CISG article 14 to article 24

b. Example for each steps

Step 1: Inquiry/Invitation to offer

From buyer - inquiry: “Please quote lowest price CIF Hai Phong for 50.000 pcs flying
horse brand bicycles, shipment in Dec,.2009, L/C payment, reply as soon as possible.”

From seller – invitation to offer/ firm offer: “Can supply A1 in got 99 pct Dec, 2009
shipment under CIF/CFR available, Pls fax as soon as possible if interested.”
Step 2: officially offer/order

Step 3: Responses

1, Acceptance & confirmation

- Accept

2, Counter offer:
3, Silence

2. Case study

Case 1: Company A sent a firm offer to Company B with the validity for receipt of the
reply before 10 July. B called on 8 July requiring the reduction in the price. Then A
concluded the deal with another company on 9 July. However, on the same day, B
called to withdraw his counter-offer of 8 July and accept the terms of the original offer. It
was rejected by A as the goods had been sold out. B claimed that the acceptance had
been made within the offer’s validity and requested A to fulfill the contract. Are the
requirements of B reasonable? Why?

A send B offer include:

+ reply before 10 July

On 8 july, B counter-offer:

+ reduce price

On 9 july, A deal with another

On 9 july, B rethink and accept original offer -> A reject because sold out of goods
 B claimed that the acceptance had been made within the offer’s validity and
requested A to fulfill the contract.

Are the requirements of B reasonable? Why?

II. Structure of contract

A contract include:

1, Title + Preample

2, Body

3, Ending

1. Part 1: Title and Preample Lời mở đầu

Part Substitute Content Example

Title Title Sales contract/ Ex1: SALES CONTRACT

Purchase or Sales Ex2: CONTRACT
confirmation/
Export/import
contract

Contract Company a – Ex1: No: XYZ ABC/02/10

number company b - date Ex2: No.02-10-DB/KOLON-VINAPIMEX

Dates & Dates and places of Ex1: Date only

places making contract Date: 11th February, 2010
Ex2: Date + Time
This contract is made on June 2nd 2011 in HCM city by and
between …. and ….

Preambl 2 Parties - Company name Ex:

e - Address Between
- Moblie number/
Fax number VIETNAM PAPER CORPORATION (VPCO)
- Presentative + Add: HCM BRANCH 17-19 Ho Tung Mau Str, Ho Chi Minh
 Director City – S.R Vietnam
- Role: Tel No.: …; Fax No.:
Buyer/Seller
Represented by Mr………………, Director:
Hereinafter called the Buyer
And
……………………………………………
Hereinafter called the Seller

Recitals Ex1: It has been mutually agreed that the Seller commits
Phần mở đầu
/ to sell and the Buyer commits to buy the under-mentioned
Wheares Xét goods on the following terms and conditions
rằng
clause1 Ex2: This contract is made by and between the Buyers
and the Sellers whereby the Buyers agree to buy and the
Sellers agree to sell the under-mentioned commodity
according to the terms and conditions stipulated below

2. Part 2: Body

This part includes the main clauses of the contract:

 General Definitions
 Description of Goods (Art.1 – 4): Commodity, Quality, Quantity, Packing and
Marking
 Delivery/Shipment (Art.5): Shipment/ Delivery
 Price and Payment Terms (Art.6-7): Price, Payment
 Legal terms (Art.8 – 13): Warranty, Force Majeure, Penalty, Insurance, Force
Majeure, Claim, Arbitration

1
– Phần mở đầu của hợp đồng (recitals/preamble)

Phần này, theo thông lệ, thường được bắt đầu bằng một số điều khoản bằng từ ‘Whereas’ (xét rằng)
dùng để nói rõ bối cảnh, mục đích, lý do, ý định lập hợp đồng của các bên có liên quan. Về mặt pháp lý,
các điều khoản này có thể được dùng làm căn cứ để các cơ quan trọng tài hoặc tòa án giải thích nội
dung chính của hợp đồng phòng khi xảy ra tranh chấp và thường được viết sau phần mở đầu
(commencement) để chuyển sang nội dung chính của hợp đồng.
 2.1. General Definitions

2.2. Description of Goods (Art.1 – 4):

Article: Content Example

Art.1: Ways to name: Ex1: Crude oil3

2
Commodity - Characteristics, Rice paste (base element for preparation of spring roll)
usage

- Different Ex2: Vietnamese long grain rice of 5% broken

specification, Chinese tea grade A
grade and style

- Commodities + Ex3: Huyndai passenger Car 45 seats model 2000 up made in

brand, KOREA
specification, Diesel, code HS 2710 19 31
origin, HS code

Art.2: Method to stipulate Ex1.1:

Quality quality: Moisture: 12,5% max.
- By Description Black and broken: 5% max.
+ Specification: Use Excelsa: 1% max.
indicators
(composition, Foreign matter: 0.5%max.
content, purity, Bean size > 5mm: 90% min
length, size,…)

+ Standard4: Ex1.2: Black cement C400 Portland,

2
Notices:
Main component of description of goods
Must be specific and concrete
Any irrelevant descriptions should be excluded
International standardized names are advisable
3
Dầu thô – character “thô”
Bột gao – Usage làm chả giò
4
FAQ: Indicating that the quality of the product offered is about equal to the average quality level of the
same crop within a certain period of time
Generally suitable for agricultural products
G.M.Q: Good Merchantable Quality
The quality of the goods offered are sufficiently good to satisfy the purposes for use or consumption which
are mutually understood by the buyer and the seller
Used sometimes as the bottom-line of quality
+ FAQ: là phẩm chất bình quân khá, hàng hóa có phẩm chất khong thấp hơn phẩm chất bình quân của
loại hàng đó
 F.A.Q: Fair Average TCVN 2682-1999
Quality
G.M.Q: Good
Merchantable Quality

+ Grade: Ex1.3: Fresh hen eggs, shell light brown and clean, even in size:
Grade AA : 60-65gm per egg
Grade A: 55-60gm per egg

+ Technical data Ex1.4: Sony Televisions TH-42PV65C,

As per attached specification and designs. These documents are an
integral part of the present contract

- By sample: Ex2: (Buyer Sample) As per sample submitted by the seller, signed
and sealed by both parties, No 20/07 date 20 Nov. 2007, each party
+ Seller’s sample
keeps one. The sample is a part not to separate from this contract.
+ Buyer’s sample:
(Đính kèm sample vào contract lun)
Based on sample
provided by buyers, - Similarity Sample vs. Actual Commodity (In quality)
Seller made a replica + per sample
– counter sample
+ correspond to sample
+ similar/nearly the same with sample
+ accordance with sample

- By actual Ex3: Gửi hàng thật lun

commodity: As it is/ as is sale/ to arrive sale
Exporter will bear no responsibility for the quality of goods

Art.3 - Units of quantity calculation

Quantity + Weight: metricton (MT), kilogramme, long ton (LT), short ton (ST)
 Methods of calculating weight
 Gross weight: Cargo + Tare/Packaging
 Net weight: Cargo
 Conditioned weight : Material with (standard) moisture / cargo + unstable moisture
contents
 Theoretical weight: caculated based on size/volume/density Tỉ trọng

+ GMQ: phẩm chất tiêu thụ tốt,ng bán phải giao hàng hóa có phẩm chất thông thường được mua bán
trên thị trường mà một khách hàng mua bình thường ,sau khi xem xét đầy đ,ủ có thể chấp nhận
 Conditioned weight: WC = WA x (100 + MS) / (100 + MA)
WC : Conditioned weight
WA : Actual weight
MA : Actual moisture (nhớ bỏ %)
Ms : Standard moisture (nhớ bỏ %)
Ex1: Below are quantity term in the contract of exporting wool:
Quantity: 10.000 MT/ standard moisture 10%. On delivery, the actual moisture is 15%.
What is the acceptable weight of wool?
WC = WA x (100 + MS) / (100 + MA) = 10,000 x (100 + 10)/(100+15) = 9565
+ Number: piece, dozen, set, drum, bag
+ Length: meter, kilometer, yard, foot, inch
+ Area: km2, yd2, ft2
+ Volume: km3, yd3, ft3
+ Capacity: liter, gallon, quart, pint, bushel
- Stipulating quantity
+ Accurate: Chính xác lun ko xê dịch
Ex2: 100pcs
+ With tolerance Dung sai:5
 Latitude: About/ Approximately/ More or less/ Plus or minus/ From…to….
Ex3.1: Tolerance to ship 3% more or less than the contracted weight.
 Decision: At whose option? Buyer? Seller? Carrier?
Ex3.2: 1,000 metric tons 5% more or less, at Buyer’s option with more or less portion
priced at the market price at the time of shipment
 Pricing: Contract rate or market price
Ex3.3.: 5% or 12MT6, whichever is less
(Thuật ngữ Tolerance:
- Min/Max (Nil) Tolerance: Requires the provider to deliver the precise quantity outlined in
the contract - no more, no less.
- 5% or 12mt, whichever is less: This tolerance varies depending on the quantity of the
commodity that is specified in the contract.
If contract says a quantity of 240mt or less (<=240): tolerance range plus or minus 5%.
If contract says a value exceeds 240mt (>240): Tolerance will plus or minus 12mt from
base.
- +/- 25mt, 50mt, 10mt, 10%, 5%, 3%: Contract will be fulfilled once the delivered amount

5
Ví dụ:
Hợp đồng mua/bán quy định số lượng giao hàng là 100MTs +/- 5%. Có nghĩa là người bán được quyền
giao từ 95 MTs đến 105 MTs đều được. Đương nhiên, khi người bán giao 98 MTs thì người mua thanh
toán 98 MTs, giao 103 MTs thì thanh toán 103 MTs.
6
MT = Metric Tons = 1000kgs hoy, hok có j
 falls within the quantity outlined.
e.g. for a 100mt contract with +/- 10mt tolerance, the contract will be fulfilled when
delivered at least 90mt or up to 110mt. )

Art.4: PACKING7:
Packing & Negotiation and deal
Marking about packing:
Properties of Cargo -
> Mode of the
Transport ->
Customs requirement
-> Weather -> Ease
of Handling and
stowage

MARKING
+ Shipping marks
 Name of Ex1.1: WSG
consignee Ex1.2: S/C NO.200801108
 Number of
contract Ex1.3: HAMBURG
 Port of Ex1.4: NOS.1-200
destination
 Packing
number

+ Indicative marks Dấu

hiệu chỉ thị :

Indicates the nature

of the content of the
package and
facilitate the shipping

7
Nude cargo Hàng trần: chất đống, ko bao bọc
Bulk cargo Hàng rời: cát; than đá; ngũ cốc, dầu mỏ,…
Packed cargo Hàng đóng thùng
+ Warning marks

+ Supplementary Ex2: 07CL — H08

marks ART.NO. : 904A
COLOUR : NAVY/GREY
N.W. : 11.3KG
G.W. : 16.4KG
MEAS. :45.5×52×55.5cm
MADE IN CHINA

Ex4: General marking article

 2.3. Delivery/Shipment (Art.5)

Art.5 Shipping Mark Ex: Made in Vietnam.

Delivery / Net weight: 50kgs.
Shipment
Gross weight: 50.150kgs.
USE NO HOOKS
One side printed in green color

2.4. Price and Payment (Art.6-7)

2.4.1. Article 6: Price

 Stipulation of export price:

 Code of currency: USD, CAD, CNY, EUR, GBP
 Number indicating the price unit
 A unit for measuring quantity: kg, gr, MT, yd, set…
 A certain trade term: FOB, CFR, CIF, (!!!Remember to put the version of
Incoterms)
 Types of price
 Fixed price
Unit price: Ex: USD 280/MT CIF Vietnam port, Incoterms 2010.
 Price to be advised:
Unit price: The market price in FOB term, Incoterms 2010 to be issued by Market
Price Bulletin at the date of delivery.
 Flexible price:
Price: USD 460/MT for 5% broken; USD430/MT for 25% broken FOB Sai Gon
Port, according to Incoterms 2010 It will vary by mutual agreement, if when
shipment the price be changed about +/- 10%
 2.4.2. Article 7: Payment

Purpose: The importer---get the goods as ordered; The exporter---the security of

payment

There are 4 main methods of payments: cash, remittance, collection and letter of
credit.

* The banking system provides a complete mechanism for settling trade transaction.
The method to be used in paying for exports is reached by agreement between the
exporter and the importer. The relative bargaining strengths of each will obviously affect
the final outcome. Exporters should try to maintain control of their goods through their
documentation. Surrender of this control is a calculated risk that the exporter takes and
the degree of risk varies with each method of payment.

Method Details

1. Cash - Types of Cash payment

+ Cash-in-advance: risk-avoidance for exporter

Ex: Wire transfer Chuyển khoản; Credit card; Escrow Service Chuyển khế8

+ Cash with order: pay when placing the order (Attract sales, High risk of loss)

+ Cash payment before shipment ---pay when the goods ready for shipment

2. Remittance - Remittance Chuyển tiền9: is transfer of money from one party to another party through banks.
Parties involved in remittance are:
+ Remitter (importer)
+ Payee/beneficiary (exporter)
+ Remitting bank
+ Paying bank
- It is used when:

8
1 tài khoản ngân hàng trung gian giữ tiền và sẽ chi tiền đúng như giao kèo giữa 2 bên
9
Chuyển tiền là phương thức thanh toán quốc tế, trong đó khách hàng (người chuyển tiền) yêu cầu ngân
hàng phục vụ mình chuyển một số tiền nhất định cho một người khác (người hưởng lợi) theo một địa chỉ
nhất định và trong một thời gian nhất định."
 + make a down payment/ deposit/ partial payment
+ Payment after arrival of the goods—open account: Slide
 Cost vs. Risk
Importer: None
Exporter: relies completely on the buyer to pay must know and trust the importer.
+ Payment in advance10:
 Cost vs. Risk
Importer: buyer relies completely on the exporter to ship the goods as ordered ->
must know and trust the exporter.
Exporter: None
- Types of Remittance (base on method of money transfer):
+ Mail transfer (M/T): transfer of money from the remitting bank to the paying bank by
mail (relatively low cost and speed).
+ Telegraphic transfer (T/T): transfer of funds by telecommunication system such as
telex or cable, SWIFT (fast speed and high cost).

3. Collection “A Bill of exchange / draft” Hối phiếu: a written, unconditional order by one party (the drawer) to
another (the drawee) to pay a certain sum11.

10
Process
(1): Remittance application
(2): Remitting bank debited the importer (payer’ account)
(3): Send Payment order by swift or Telex instructing paying bank to make payment
(4): The paying bank debited the remitting bank account and make payment
(5): The paying bank make payment to the exporter
(6): Exporter delivers goods and documents to importers

11
Hối phiếu là mệnh lệnh trả tiền vô điều kiện do một người kí phát cho một người khác, yêu cầu người
này ngay khi nhìn thấy hối phiếu hoặc vào một ngày có thể xác định trong tương lai phải trả một số tiền
nhất định cho người đó hoặc theo lệnh của người này trả cho người khác hoặc trả cho người cầm hối
phiếu đó.
 There are 2 types of draft:

+ Sight draft---payable on presentation

+ Time/usance draft---payable in a specified number of days after its date of

issue/acceptance/B/L/at a fixed future date (e.g. 90 days after sight)

- Terms in collection:
+ Drawer Người kí phát: Exporter
+ Drawee Người bị kí phát/ Người thụ tạo: Importer
+ Acceptor Người chấp nhận
+ Benificiary Người thụ hưởng:
+ Endorser / Assignor Người chuyển nhượng:
+ Avaliseur Người bảo lãnh
- 2 types of Collection Nhờ thu12:

+ Clean collection—the exporter gets paid with the draft only, without presentation of any
other business documents.

(NXK gửi hàng đi đồng thời nhờ ngân hàng thu hộ tiền bằng hối phiếu, chứng từ thì để
tự mình gửi trực tiếp cho nhà NNK)

+ Documentary collection—ensuring that goods (title documents) are only handed over
to the buyer (by a bank) when the amount shown on a bill of exchange is paid or when
the customer accepts the bill as a contract to pay by a specified date

(NXK gửi hàng đi nhưng không gửi bộ chứng từ trực tiếp cho NNK mà gửi qua Ngân
Hàng sau đó dựa vào D/P hoặc D/A để thanh toán)

 Parties invovled

 Principal---drawer, usually the seller

 Remitting bank---in the seller’s country working as the agent of the seller

 Collecting bank---in buyer’s country presenting the documents to the buyer, usually
12
Là việc ngân hàng thay mặt Nhà xuất khẩu (Người ủy nhiệm) thu hộ một khoản tiền từ Nhà nhập khẩu
(Người có trách nhiệm thanh toán hối phiếu) trên cơ sở các công cụ thanh toán quốc tế (bao gồm Bill of
lading như trên)
 the remitting bank’s overseas branch or correspondent bank

 Payer---drawee, usually the buyer

4. Letter of “Letter of credit”: A document in which a bank or other financial institution assumes liability
credit for payment of the purchase price to exporter on behalf of overseas customer

- Parties to the L/C Contract

+ Sales contract: Exporter (beneficiary) and importer (account party)
+ Credit reimbursement contract: Importer and issuing bank
+ L/C contract: Opening bank and beneficiary
+ Confirmation agreement: Confirming bank and beneficiary
- L/C process13:
- International Rules on L/C
+ The Uniform Customs Practices for Documentary Credits (UCP), 1993 revision,
International Chamber of Commerce Publication No. 500
+ Latest Revision was in 2007. UCP 600 has made certain changes over UCP 500.
- Key points
+ The LC is a separate contract from the sales contract; therefore, the banks are not
concerned with the quality of the underlying goods or whether each party fulfills
the terms of the sales contract.
+ The bank’s obligation to pay is solely Conditioned upon the seller’s compliance with
the terms and conditions of the LC . In LC transactions, banks deal in documents only,
not goods.
+ In cases sellers have little confidence in the financial strength of the buyer’s country or
the issuing bank, they could require a bank in their country to confirm L/C

13
Step 1: A sale contract between seller and buyer (in 2 different countries)
Step 2: A contract between buyer and the bank (buyer’s country)
Step 3: Bank (buyer’s country) Sent LC to bank (seller’s country)
Step 4: Bank (seller’s country) confirm seller
Step 5: Seller work with carrier
Step 6: Seller work with Bank (seller’s country)
Step 7,8: Bank (seller’s country) work with bạn (buyer’s country)
Step 9
Step 10
Step 11
 - Fraud (xem sau)

2.5. Legal terms

2.5.1. Warranty Article (Art.8)

 Applicable law and Jurisdiction:

+ Parties have freedom to choose the law and jurisdiction which will apply to the
contract.
+ Jurisdiction: refers to the court that may hear and determine the dispute betwwen
the parties

Ex: Applicable law

2.5.2. Penalty (Art.9)

2.5.3. Insurance (Art.10)

2.5.4. Force Majeure (Art.11)
2.5.5. Claim (Art.12)
2.5.6. Arbitration (Art.13)

Case 2: One of Chinese company in Yantai city, Shandong province, exported 500
cartons of apple wine to Cambodia. Our company received L/C in which the brand
name of the goods was “Snow Apple Wine”. Thus, all the documents from our party
were made out, using “Snow Apple Wine” as the brand name in order to conform with
the stipulations in the relevant L/C. When the buyer cleared the goods for import, the
customs detained the wine for the reason that “Snow Cider” instead of “Snow Apple
Wine” was stenciled on both the inner packing and outside packing. Discussion
Whether the customs detention is justifiable? Why?

Case 3: Chinese company A export beans to company B based in Germany. Both

parties agreed the quality of the commodity needed: mixture (max. 15%), admixture
(max.3%) according to commercial inspection. Company A further faxed the B that the
sample has been delivered. When the goods arrived Germany. Company B claimed the
actual beans’ quality level is lower than the sample beans and wanted A to compensate.
Shall company A compensate? Why?

Case 4: A Chinese coal export company concluded a sales contract with a Japanese
company for exporting coal. It was stipulated in the contract that the exporter supply
10,000 metric tons of DATONG coal of Shanxi origin, with more or less 5% at seller’s
option. When the consignment reached Japan, the buyer found the actual weight of the
coal was 10,550 metric tons after inspection. As the price of the coal was decreasing,
the Japanese side demanded reduction of the coal price by 5%, or they would not take
the delivery of 550 metric tons, because the total weight did not confom to the
stipulations in the contract. Is the Japanese party’ demand acceptable? Why

3. Part 3: Ending

Validation of contract

This contract becomes valid after the buyer’s having the import

license from the Ministry of Culture and Information of S.R.Vietnam

Number of originals

This contract is made in HCM city in 06 English originals of the

same value of which 02 for the seller and 04 for the Buyer.
 Amendment

Any amendment of this contract must be made by fax or in writing

and confirmed by both parties.

Signature and seal

For and on behalf of the Buyer For and on behalf of the Seller

III. Draft Commodity clauses, Shipment & Insuance clauses