Winning bids and expansion:How to draft a contract when exporting
View transcript for Episode 23 - How to draft a contract recording
Let’s explore some contract elements that may need more consideration when exporting internationally.
Contract elements.
The terms of delivery should state whether you or the buyer are liable for any damages during shipping.
The period of shipment will include who is liable if your goods are delayed. It’s a good idea to set a specific date of dispatch from country of origin rather than a specific date of arrival.
You’ll need to agree terms on whether goods can be delivered in batches and what happens if more than one carrier is used. This is referred to as transhipment.
The taxes, duties and charges relating to the exportation of goods are normally part of the price. But this should be made clear.
Regarding terms of payment, it’s really important to get it in writing, including the mode and method.
What you’ll learn
- what contracts are
- when you need a contract
- everything you need to include in your draft
The difference between a contract and an agreement
A contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law.
An agreement covers any arrangement or understanding reached between 2 or more parties. For example, between your company and a local partner you’re looking to use in a new market.
When to draft a contract
It’s really important to draft a contract as soon as you’ve found a potential buyer for your product to make sure you have complete clarity on everything you agree. We recommend seeking international legal support to help you with this, both in the UK and within your chosen market — they will have expert knowledge of local laws and key contract considerations.
How to draft a contract
Every contract will be different and dependent on what you agree with the buyer. But there are certain elements you should always check and include:
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Product standards and specifications
For example, product name — including the technical name, if this differs. What’s required here is dependent on both your buyer and the regulations in the country you export to.
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Quantity
Put the quantity you want to ship, both in figures and words — clearly specifying whether it’s in terms of number, weight or volume.
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Inspection
State the nature, manner, and aspects of any inspections your buyer requires – especially if these are different from those laid out under the international quality control and pre-shipment inspection rules.
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Total value of the contract
This needs to be put in both figures and words. You should also specify the currency you’re using, along with the name of the country you’re shipping to.
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Terms of delivery — also known as ‘type of price’
For example, whether the buyer or your business are liable for any damages during shipping.
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Taxes, duties and charges
The taxes, duties and charges relating to the exportation of goods are normally a part of price – but this needs to be clear to help you manage costs.
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Period of delivery or shipment
For example, who’s liable if your goods are delayed. It’s a good idea to set a specific date of dispatch from the country of origin, rather than the arrival date in the country of import.
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Partial shipment or trans-shipment
You should agree terms on whether goods can be delivered in batches and what happens if more than one carrier is used (trans-shipment).
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Packing, labelling and marketing
Everything from the language, colour of labels, and even markings need to be agreed upon.
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Terms of payment
Make sure you get this in writing — including the mode and method of payment.
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Discounts and commissions
Agree on the terms and who will pay for these. Also, be clear as to whether they’re included in the export price.
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Licences and permits
The cost and type of licences and permits can differ between countries. So be clear on who’s responsible for what.
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Insurance
Insure against loss, damage or destruction of goods.
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Document requirements
Set the terms of termination from any contract. Otherwise, you risk been tied to something which might not be in your long-term best interests.
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Termination
Set the terms of termination from any contract. Otherwise, you risk been tied to something which might not be in your long-term best interests.
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