CHAPTER 4 TERMS OF CONTRACT.pptx INCOTERM PRICE OA

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1. CHAPTER 4 TERMS OF CONTRACT 05/01/2019 70602 1 - Chapter 4: Terms of contract

2. CONTENTS 2 Definition 1 Features 2 Terms in Contract 3 05/01/2019 70602 1 - Chapter 4: Terms of contract

3. LEARNING OUTCOMES 3 Identify the structure of the sale contract 2 Understand the key clauses and provisions of the sale contract 3 1 Outline the obligation of the seller and the buyer 05/01/2019 70602 1 - Chapter 4: Terms of contract

4. Definition 4 Basa fish Deal Money Contract for the International Sale of Goods Goods & Documents 05/01/2019 70602 1 - Chapter 4: Terms of contract

5. 5 Model of the type of contract to be used by parties whose places of business located in different countries for the sale and purchasing of goods. The Seller (the “Exporter”) is obliged to deliver the stated products, and the Buyer (the “Importer”) shall acquire them under the agreed conditions of payment, delivery and transaction schedule. Definition 05/01/2019 70602 1 - Chapter 4: Terms of contract

6. The seller must (Art. 30): 6 Obligations of the Seller 05/01/2019 70602 1 - Chapter 4: Terms of contract

7. The buyer must (Art. 53): 7 Obligations of the Buyer 05/01/2019 70602 1 - Chapter 4: Terms of contract

8. Conformity (Article 35/ CISG)? 8 Deliver the Goods 05/01/2019 70602 1 - Chapter 4: Terms of contract

9. When (Article 33/ CISG)? 9 Deliver the Goods 05/01/2019 70602 1 - Chapter 4: Terms of contract

10. Where (Article 31/ CISG)? 10 Deliver the Goods 05/01/2019 70602 1 - Chapter 4: Terms of contract

11. 11 Hand over documents 05/01/2019 70602 1 - Chapter 4: Terms of contract

12. Where ( Art.57): 12 Payment 05/01/2019 70602 1 - Chapter 4: Terms of contract

13. 13 Payment 05/01/2019 70602 1 - Chapter 4: Terms of contract

14. 14 Features 05/01/2019 70602 1 - Chapter 4: Terms of contract

15. 15 Applicable law 05/01/2019 70602 1 - Chapter 4: Terms of contract

16. 16 Domestic law Country of buyer Country of Seller Vietnam commercial law 2005 Applicable law 05/01/2019 70602 1 - Chapter 4: Terms of contract

17. 17 Vienna Incoterms UCP Hamburg URC Brussels International Law Applicable law 05/01/2019 70602 1 - Chapter 4: Terms of contract

18. 18 GOODS 05/01/2019 70602 1 - Chapter 4: Terms of contract

19. 19 EXCLUSION 05/01/2019 70602 1 - Chapter 4: Terms of contract

20. 20 EXCLUSION 05/01/2019 70602 1 - Chapter 4: Terms of contract

21. 21 FORMS OF CONTRACT 05/01/2019 70602 1 - Chapter 4: Terms of contract

22. 22 MODEL OF CONTRACT 05/01/2019 70602 1 - Chapter 4: Terms of contract

23. Model Contract for the International Sale of Goods: two versions– the “standard” and the “short”; The short version is more practice-oriented. 23 MODEL OF CONTRACT 05/01/2019 70602 1 - Chapter 4: Terms of contract

24. 24 Opening Terms and conditions Final

25. 25 PERTINENT CLAUSES MANDATORY OPTIONAL Article 1: Commodity Article 2: Specification/ Quality Article 3: Quantity Article 4: Price Article 5: Payment Article 6: Shipment Article 7: Packing and marking Article 8: Penalty Article 9: Insurance Article 10: Force majeure Article 11: Claim Article 12: Arbitration Article 13 : Other terms and conditions 05/01/2019 70602 1 - Chapter 4: Terms of contract

26. 26 ARTICLE 1: COMMODITY 05/01/2019 70602 1 - Chapter 4: Terms of contract

27. 27 ARTICLE 1: COMMODITY 05/01/2019 70602 1 - Chapter 4: Terms of contract

28. 28 ARTICLE 1: COMMODITY 05/01/2019 70602 1 - Chapter 4: Terms of contract

29. 29 ARTICLE 2: QUALITY 05/01/2019 70602 1 - Chapter 4: Terms of contract

30. 30 Methods of Stipulating Quality of the Goods 05/01/2019 70602 1 - Chapter 4: Terms of contract

31. 31 QUALITY BY SAMPLE 05/01/2019 70602 1 - Chapter 4: Terms of contract

32. 32 QUALITY BY SAMPLE

33. Quality by Category/ Grade or Standard 33 05/01/2019 70602 1 - Chapter 4: Terms of contract

34. EXAMPLE Vietnamese bean coffee, crop 2004, Grade I as per TCVN 4193:2005 34 05/01/2019 70602 1 - Chapter 4: Terms of contract

35. Quality by Specification 35 05/01/2019 70602 1 - Chapter 4: Terms of contract

36. 36 Example 05/01/2019 70602 1 - Chapter 4: Terms of contract

37. Quality by a standard in the trade FAQ (Fair Average Quality): upon discharge at destination, an average sample is drawn (by buyer/ B/L holder) from the vessel GMQ (Good Merchantable Quality): means the goods is free from defects and is good enough for use or consumption 37 05/01/2019 70602 1 - Chapter 4: Terms of contract

38. Vietnamese peanut, 2012 crop, F.A.Q., Moisture (max.) 13% Admixture (max.) 5% Oil content (min.) 44% 38 EXAMPLE 05/01/2019 70602 1 - Chapter 4: Terms of contract

39. Quality by technical documents In the sales of machines, precision instruments, complete sets of equipment and the like. 39 05/01/2019 70602 1 - Chapter 4: Terms of contract

40. Quality by content 40 05/01/2019 70602 1 - Chapter 4: Terms of contract

41. Quality by inspected and approved The buyer inspect the goods before delivered If approved, the buyer has to receive and pay for the goods  Auction, Trade Fair, EXW 41 05/01/2019 70602 1 - Chapter 4: Terms of contract

42. Quality by tale quale The seller is selling, and the buyer is buying an item in whatever condition it presently exists, and that the buyer is accepting the item "with all faults“ Ex: As it is/ As is sale/ to arrive sale 42 05/01/2019 70602 1 - Chapter 4: Terms of contract

43. Quality by trademark 43 Sales by brands or trade marks are conducted mostly for goods with fixed quality. It is unnecessary to inquire much about the quality of these products in business negotiation. But you should state the types and specifications of the products you want 05/01/2019 70602 1 - Chapter 4: Terms of contract

44. ARTICLE 3: QUANTITY Quantity clause is one of the necessary conditions for the conclusion of a sales contract. 44 05/01/2019 70602 1 - Chapter 4: Terms of contract

45. ARTICLE 3: QUANTITY 45 05/01/2019 70602 1 - Chapter 4: Terms of contract

46. ARTICLE 3: QUANTITY Units of Measures: - Area  in the calculation of plank, board, or leather, etc. 1 square meter = 1.1956 square yards = 10.7639 square feet - Volume  in the trade of wood, and the like. 1 cubic meter = 1.308 cubic yards = 35.315 cubic feet - Capacity 1 liter = 0.22 British gallon = 0.264 American gallon 1 British gallon = 4.546 liters = 1.201 American gallons 1 American gallon = 3.785 liters = 0.833 British gallon 1 American barrel= 31.5 American gallons=31.5ⅹ3.785 = 99.03 liters 1 British barrel = 36 gallons = 36ⅹ4.546 = 163.66 liters 1 hogshead = 63 American gallons = 52.5 British gallons 1 bushel = 36 liters 46 05/01/2019 70602 1 - Chapter 4: Terms of contract

47. ARTICLE 3: QUANTITY 47 05/01/2019 70602 1 - Chapter 4: Terms of contract

48. 48 ARTICLE 3: QUANTITY 05/01/2019 70602 1 - Chapter 4: Terms of contract

49. The Calculation of the Weight of Goods G.W: the over-all weight of the commodity, including the tare, i.e. the package weight. N.W: the weight of the commodity alone, the tare is not counted in. 49 GROSS WEIGHT = NET WEIGHT + TARE WEIGHT 05/01/2019 70602 1 - Chapter 4: Terms of contract

50. 50 The Calculation of the Weight of Goods Four ways are used to calculate the tare of the goods. Actual tare or real tare : the package is weighed to have its actual weight Average tare : the packages of a number of the goods are weighed to get their average weight, then the total tare is got by multiplying the average tare with the total number of the packages Customary tare : Certain standard packages have generally recognized weight, which is used as the customary tare to denote the weight of such packages Computed tare : the tare previously agreed upon by the seller and the buyer. 05/01/2019 70602 1 - Chapter 4: Terms of contract

51. The Calculation of the Weight of Goods COMMERCIAL WEIGHT W C - The weight of the goods derived from such a process with which the moisture content of the commodity is removed and standardized moisture content is added by scientific means. - Commercial weight is chiefly applicable in the calculation of the weight of such commodities like raw silk, wool, etc., which are of high value and with unsteady moisture content Where as: W C : commercial weight W A : actual weight M S : standard moisture M A : actual moisture 51 05/01/2019 70602 1 - Chapter 4: Terms of contract

52. EXAMPLE Contract for 120MTS of Wool with agreed standard rate of water as 10%. When receiving the goods, the actual rate of water as 15%. Calculate the weight that the buyer has to pay for ? W C = 120 MTS x (100 + 10)/(100+ 15)= 114.78 MTS 52 05/01/2019 70602 1 - Chapter 4: Terms of contract

53. The Calculation of the Weight of Goods THEORICAL WEIGHT W T - Commodities such as galvanized iron and steel plate have regular specifications and regular size. They are often subject to the use of theoretical weight. Their unit weight is the same and the theoretical weight is calculated as: Where as: W T : theorical weight V i : volume of 1 unit m i : natural weight S i : the total number of goods 53 05/01/2019 70602 1 - Chapter 4: Terms of contract

54. The Place identified of the Weight of Goods 54 05/01/2019 70602 1 - Chapter 4: Terms of contract

55. ARTICLE 4: PRICE 55 05/01/2019 70602 1 - Chapter 4: Terms of contract

56. ARTICLE 4: PRICE The methods of calculation of price: Fixed price Flexible price/ Revisable price Deferred price Sliding price 56 05/01/2019 70602 1 - Chapter 4: Terms of contract

57. ARTICLE 4: PRICE 57 05/01/2019 70602 1 - Chapter 4: Terms of contract

58. ARTICLE 4: PRICE 58 05/01/2019 70602 1 - Chapter 4: Terms of contract

59. Code 706021 59 ARTICLE 4: PRICE 05/01/2019 70602 1 - Chapter 4: Terms of contract

60. Sliding price: Where as: A+B+C=100% P 1 : the payment price P : the contract price A : rate of fixed cost B : rate of material cost b : cost of material on the signing date b1: cost of material on the contract date 60 C: rate of wage cost c : cost of wage on the signing date c 1 : cost of wage on the contract date ARTICLE 4: PRICE 05/01/2019 70602 1 - Chapter 4: Terms of contract

61. ARTICLE 5: PAYMENT The contract should specify: The currency of payment The time of payment The method of payment: T/T, D/P, D/A, CAD,L/C The required documents 61 05/01/2019 70602 1 - Chapter 4: Terms of contract

62. ARTICLE 5: PAYMENT The time of payment: Advance Payment Prompt Payment Time Payment Mixed payment 62 05/01/2019 70602 1 - Chapter 4: Terms of contract

63. ARTICLE 5: PAYMENT Required documents: Bill of Exchange Commercial Invoice Packing List Bill of Lading Certificate of Origin Insurance Policy Certificate of Quality/ Quantity/ Weight 63 05/01/2019 70602 1 - Chapter 4: Terms of contract

64. EXAMPLE 64 05/01/2019 70602 1 - Chapter 4: Terms of contract

65. EXAMPLE 65 05/01/2019 70602 1 - Chapter 4: Terms of contract

66. ARTICLE 6: SHIPMENT 66 05/01/2019 70602 1 - Chapter 4: Terms of contract

67. ARTICLE 6: SHIPMENT 67 Date of shipment: 05/01/2019 70602 1 - Chapter 4: Terms of contract

68. Code 706021 68 ARTICLE 6: SHIPMENT 05/01/2019 70602 1 - Chapter 4: Terms of contract

69. ARTICLE 7: Packing and Marking 69 05/01/2019 70602 1 - Chapter 4: Terms of contract

70. ARTICLE 7: Packing and Marking 70

71. ARTICLE 7: Packing and Marking 71 Code 706021 05/01/2019 70602 1 - Chapter 4: Terms of contract

72. ARTICLE 7: Packing and Marking 72 05/01/2019 70602 1 - Chapter 4: Terms of contract

73. ARTICLE 7: Packing and Marking 73 Simpler marking: 4 main parts

74. Code 706021 74 05/01/2019 70602 1 - Chapter 4: Terms of contract

75. ARTICLE 7: Packing and Marking 75 Code 706021

76. ARTICLE 7: Packing and Marking 76 Seafreight 05/01/2019 70602 1 - Chapter 4: Terms of contract

77. 77 Airfreight ARTICLE 7: Packing and Marking 05/01/2019 70602 1 - Chapter 4: Terms of contract

78. ARTICLE 7: Packing and Marking 78

79. 1. To be packed in new strong wooden cases / cartons suitable for long voyage and well protected against dampness, moisture, shock, rust and rough handling. The Seller shall be liable for any damage to the goods due to improper packing and for any damage attributable to inadequate or improper protective measures taken by the Seller. In such case all losses and/or expenses incurred shall be borne by the Seller. 79 05/01/2019 70602 1 - Chapter 4: Terms of contract In contract

80. In contract 2. Packing must be suitable for ocean shipment and sufficiently strong to withstand rough handling. Bales must be press-packed and hooped with adequate inside waterproof protection and the outer wrapping must comprise good quality canvas. Cases or other outside containers must be externally of the smallest cubic dimension consistent with adequate protection of the goods. Packages must bear full marks and shipping numbers stenciled in good quality stencil ink in large plain characters on two sides and one end of each package. All bales must be marked “use no hooks”. 80 05/01/2019 70602 1 - Chapter 4: Terms of contract

81. In contract 4. To be packed in double polythene bags of 20 kgs net, overpacked with a carton 5. Each package shall be stenciled with gross and net weights, package number, measurement, port of destination, country of origin and the following shipping mark: 81 05/01/2019 70602 1 - Chapter 4: Terms of contract

82. ARTICLE 8 : PENALTY In case one party fails to implement the contract: Non-delivery Delayed delivery Delayed opening of L/C, payment… Must pay a fine: A certain amount A certain percentage of contract value VN law < 8% 82 05/01/2019 70602 1 - Chapter 4: Terms of contract

83. ARTICLE 9 : INSURANCE Assured ? Document : Insurance Policy/ Certificate? Insured Value ? ICC ( A ), ICC( B ), ICC(C) War risk? SRCC ? 83 05/01/2019 70602 1 - Chapter 4: Terms of contract

84. ARTICLE 1 : FORCE MAJEURE 84 Force majeure or "hardship" clauses that excuse the parties from performance when their failure is due to impediments beyond their control or which were reasonably unforeseeable 05/01/2019 70602 1 - Chapter 4: Terms of contract

85. ARTICLE 1 : FORCE MAJEURE 85 05/01/2019 70602 1 - Chapter 4: Terms of contract

86. In contract The Force majeure (exemption) clause of the International Charmber of Commerce (ICC publication No.421) is hereby incorporated in this contract 86 05/01/2019 70602 1 - Chapter 4: Terms of contract 86

87. In contract Sellers shall not be responsible for delay in shipment of the goods or any part thereof occasioned by any Act of God, strike, lockout, riot or civil commotion, combination of workmen, breakdown of machinery, fire or any cause comprehended in the term "force majeure". If delay in shipment is likely to occur for any of the above reasons, the Shipper shall give notice to his Buyers by telegram, telex or by similar advice within 7 consecutive days of the occurrence, or not less than 21 consecutive days before the commencement of the contract period, whichever is the later. The notice shall state the reason(s) for the anticipated delay. .. 87 Code 706021 05/01/2019 70602 1 - Chapter 4: Terms of contract 87

88. In contract Neither Party shall be liable or responsible for any failure or delay in performance under the present Contract if such failure or delay is caused by Act of God, Government restrictions (including the denial or cancellation of any export or other necessary license), riots, civil commotions, wars, insurrections and/or any other cause beyond the reasonable control of the Party whose performance is affected. The Party experiencing the difficulty to meet the obligations under the present contract due to the causes beyond its control shall give the other Party prompt written notice, with full details following the occurrence of the cause relied upon. Dates by which performance obligations are scheduled to be met will be extended for a period of time equal to the time lost due to any delay so caused.” 05/01/2019 70602 1 - Chapter 4: Terms of contract 88

89. ARTICLE 12: CLAIM 89 05/01/2019 70602 1 - Chapter 4: Terms of contract 89

90. Claim resolution 90 ARTICLE 12: CLAIM 05/01/2019 70602 1 - Chapter 4: Terms of contract

91. ARTICLE 13: ARBITRATION If not friendly negotiation  third party for mediation Court Arbitration: + Trọng tài vụ việc / Ad hoc + Trọng tài thường xuyên / Institutional 91 05/01/2019 70602 1 - Chapter 4: Terms of contract

92. ARTICLE 13: ARBITRATION Place / Applicable Law 92 Exp country Imp coutry 3 rd country Process Board of Arbitration Mediation Adjudgment Arbitration Cost 05/01/2019 70602 1 - Chapter 4: Terms of contract

93. In contract All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. 93 05/01/2019 70602 1 - Chapter 4: Terms of contract

94. EXAMPLE Date of shipment: 20 Sept 2012 Port of Loading: HCMC port Port of Discharge: Singapore port Port of Destination: Hamburg port Partial shipment: not allowed Transshipment: allowed Where is the shipment on 20 Sept 2012? If trade term is FOB Cat Lai port, Incoterms 2010 If trade term is CIF Hamburg port, Incoterms 2010 If trade term is DDP Hamburg, Incoterms 2010 94 05/01/2019 70602 1 - Chapter 4: Terms of contract

95. Where is the shipment on 20 Sept 2012? If trade term is FOB Cat Lai port, Incoterms 2010 If trade term is CIF Hamburg port, Incoterms 2010 If trade term is DDP Hamburg, Incoterms 2010 95 EXAMPLE 05/01/2019 70602 1 - Chapter 4: Terms of contract

96. Other terms and conditions Any amendments or modifications to the contract shall be made by fax or in writing with the confirmation of the two parties The contract is made in English in 4 equal copies, 2 copies for each party The contract comes into force upon the date of signature and shall be valid until 10th Jan, 2012 96 05/01/2019 70602 1 - Chapter 4: Terms of contract

97. WORKED EXAMPLE Here are below the draft articles for a sale contract between the seller in VN and the buyer in Singapore. Pls check and correct the drafts if any: Price: dollars 325/ pcs CIF Cat Lai port, Viet Nam Quantity: 100 pcs Shipment: as soon as possible Payment: D/P after 30 days 97 05/01/2019 70602 1 - Chapter 4: Terms of contract

98. Here are below the draft articles for a import contract for Urea Fertilizer between the seller in Indonesia and the buyer in VN. Pls check and correct the drafts if any: Quantity: 10,000 Tons Quality: nitrogen 46% max, moisture 0.5%max Price: usd190/T CFR Shipment: prompt delivery to Khanh Hoi port Payment: by L/C Documents: Commercial Invoice, B/L, Insurance policy 98 WORKED EXAMPLE 05/01/2019 70602 1 - Chapter 4: Terms of contract

99. Here are below the draft articles for a export contract for Rice between the seller in VN and the buyer in Hong Kong. Pls check and correct the drafts if any: Q’TY:10,000 T SELLER OPTION QUALITY: BROKEN 10%MIN MOISTURE 14% MAX DAMAGED GRAIN 0.5% MIN YELLOW GRAIN 1% MAX FOREIGN MATTER 0.2% MIN UNIT PRICE:USD255/T FOB HCMC PORT SHIPMENT: AS SOON AS POSSIBLE PAYMENT: 180 DAYS AFTER SHIPMENT 99 WORKED EXAMPLE 05/01/2019 70602 1 - Chapter 4: Terms of contract

100. Here are below the draft articles for a export contract for Coffee between the seller in VN and the buyer in Osaka, Japan. Pls check and correct the drafts if any: Quantity: 1000 Ton delivered Quality: On sieve screen 18 90% max Moisture 8 % max Foreign matter 0.2% max Black & Broken 0.3% min Foreign beans 0.1% min Unit Price:625 Dollar /T FOB Shipment: Before 15 July 2012 Payment: By L/C 100 WORKED EXAMPLE 05/01/2019 70602 1 - Chapter 4: Terms of contract