How to limit the commercial risks in international sales: confirming the order

The confirmation of order is considered a typical working instrument in the company practice in order to perfect an international sales contract.

The “pro forma” invoice is used in the common practice of some companies with the same function as the order confirmation; a document which closes the negotiations and usually indicates all the regular components of a sales invoice. (Fiscal data of the parties, unit price, total number of three products, the payment method, deadlines, products return, etc)

The collateral function of both documents is also to facilitate the communication between the parties so as they would not have any doubts about the agreements reached following the negotiations, which are often very intense and loaded with exchanging numerous emails and text messages.

However, in lots of cases the order confirmation or the pro forma solely contain the basic elements of sales which have been mentioned before; therefore there’s no sign of any protecting clause prepared by the vendor or by the buyer.

Moreover, a confirm request for receipt is not requested (and perhaps not everyone knows that silence or inactivity are not considered as receipt according to article 18 of UN convention on International Goods Sale Contracts)

In fact, both works instruments described can creat an important means of turn limitation of trades related to international sale: for example in order to limit the requests of damage repair because of on-conforming products, setting clear rules  on journey damage responsibility, obtain a quick conflict solutions and so.

So, how can you use an order confirmation in order to obtain the most protection necessary?

i- if the parties have previously written a general sales condition the protection clauses must be operative on the condition that they are written properly. In this case the order confirmation or pro forma can only indicate basic sale elements;

ii- If the parties have not written the general conditions down of sales or purchase, it will be necessary to insert specific protection clauses in the order confirmation or pro forma.

The clauses here discussed, which are added to the basic sale elements must at least comprehend:

i-Return methods (expenses, risks and responsibilities of goods transport) through the correct use of Incoterms 2020 of International Chamber of Commerce

ii- the goods conformity parameters, guarantees offered in case of flaws and the timing and condition of requests to be made

iii-the payment (previous analysis based on the complete information on the partner and eventual guarantees of the risks in case of lack of payments)

iv-property reserve on the goods being sold  

v- applicable laws

vi-methods of dispute resolution

The text of order confirmation can be graphically included in fields of models available in the management of the economic operator, but these clauses preferably have to be inserted in the first page.

The order confirmation has to be accepted expressly by the contractual partner; taking the contract form previously described on our website into account.

The advantage of this operation is the major ease of receipt by the contractual partner because of its clarity and straightforwardness.

On the contrary, the disadvantage is the procedure inside the company to be applied to each sale- confirm sending, receipt requests, on point solicitation to proceed with order evasion that can be passed through only by establishing sales condition between the parties.

Marcello Mantelli
Avvocato in Milano e Torino

#internationalsale #internationalorderconfirmation #securebusiness #Incoterms2020

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