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I’ve created a checklist of twenty-five terms commonly found in a detailed contract for the international sale of goods. The previous terms can be found here https://iebusinessdaily.com/?s=John+Tulac
Here are the final ten terms:
- Breach, Default and Termination: Specifying the conditions of breach and default is sometimes valuable in and of itself, but it is more useful to couple grounds constituting breach or default with an opportunity to cure the problem before terminating the contract. Watch out that by specifying some grounds of breach or default does not get interpreted as the sole grounds of breach or default, thus negating other grounds by operation of law.
Be sure to work within the constraints of the UCC or UNCISG because there are material differences in the approach to breach, termination, and remedies. Remember, that courts generally try very hard to preserve the existence of a contract.
- Rights and Remedies: My typical approach is simply to state that the parties will have all the rights and remedies afforded to them under the UCC or UNCISG. This is balanced and fair, and fashioning unique remedies is rarely warranted.
- Inspection of Goods; Claims & Returns: Buyer always has the right to inspect goods (although this right could be waived), even though payment has already been made. If the inspection cannot be accomplished without some testing then it is appropriate to specify inspection rights; otherwise, it is acceptable to rely on the code provisions. A claim and return policy should be specified if the seller has one or needs one for a particular contract with a particular buyer. Obviously, this provision needs to tie to the breach and rights & remedies clauses.
- Assignment: Assigning contracts to a third party is rare in international contracts for goods. I generally prohibit assignment or strictly limit it.
- Amendment: Amending the contract must be done in writing.
- Force Majeure: This “boilerplate” clause is often used to expand the list of excuses of performance by including non-force majeure events. Do not do this and always read this clause carefully looking for “ringers” that don’t belong here.
- Administrative & Regulatory Compliance; US parties should reference appropriate US laws. Include a general statement that neither party will do any act under the agreement that might be in violation of applicable laws in either country. Always determine the extent to which the subject matter of your contract is subject to administrative or regulatory compliance; then make sure your contract and performance comply.
- Sovereign Immunity: Know whether you are dealing directly or indirectly with a foreign government. If you are, determine whether there is a written government claims process in that country. If not, you will have to bargain for a waiver of sovereign immunity (and good luck).
- Governing Law & Language: Always specify the law that governs the contract (i.e., UCC or UNCISG or Swiss law, etc.). If the contract is written in more than one language, a primary language governing the contract for interpretation purposes must be specified.
- Dispute resolution. Always specify a process for mediation and, if mediation is unsuccessful, binding arbitration to resolve disputes. Consider making the venue for dispute resolution an attractive neutral location. Avoid specifying expensive tribunals like AAA or ICC as the provider of dispute resolution services.
John W. Tulac is an international business attorney practicing in Claremont, adjunct professor of law at University of La Verne College of Law, and Lecturer Emeritus (retired) at Cal Poly Pomona. He is peer recognized as preeminent in international business law and holds the highest ratings for competence and ethics from the Martindale Hubbell National Law Directory. He can be reached at (909) 445-1100.
