International sale and price payment: 5 critical aspects to pay attention to

Marcello Mantelli
Lawyer in Milan and Turin


The buyer’s main obligation, as set forth in Article 53 of the Vienna Convention, is to pay the price.

However, beside this generic duty there are several rules that, to various degrees, extend this obligation to other ancillary aspects or regulate the manner and timing of their performance, in the absence of specific agreements on the point.

In particular, Article 54 of the Vienna Convention deals with preparatory actions for the payment of the price, specified in the contract or in applicable regulations, such as, for example, the opening of a letter of credit, the provision of a security to guarantee payment, or the obtaining of an administrative authorization necessary for the transfer of funds in order to make payment.

These are aspects to which the Italian exporter must pay the highest attention in order not to run into situations that could compromise the success of the deal or its convenience from an economic point of view.

Another critical aspect is the identification of the currency to be used for payment: most of the time the parties indicate the currency when setting the price and, as several court decisions have confirmed, this agreement is binding on the parties.

If, on the other hand, the price is not contractually stipulated or cannot be identified by reference to commercial usages or practices that the parties have established between themselves, the method of setting the price is unclear, and in these cases the Convention does not help us.

In fact, the CISG does not provide for the buyer’s right to settle his debt in the currency of the place of payment, nor does it provide for the seller’s right to demand payment of the price in the currency of the place of payment if the price has been contractually specified in a different currency.

Another case that frequently becomes the subject of dispute in relations between an Italian exporter and a foreign partner concerns the allocation of the payment made, which occurs when a buyer has several debts to the seller and does not indicate the debt he intends to settle at the time payment is made.

The Vienna Convention does not provide for a statutory allocation rule that can be applied in the absence of any indication from the buyer regarding the imputation of the funds paid or any agreement of the parties.

Consequently, since there is no relevant general principle on which the CISG is based, the courts tend to apply domestic law as established by the rules of private international law, pursuant to Article 7(2).

Article 57(1) then defines where payment is to be made, establishing three rules:

– first, the parties may have contractually specified the place of payment;

– second, in the absence of an express or implied choice, the buyer must pay the price at the place where delivery of the goods or documents has taken place;

– third, where the parties have not agreed on a place for payment and no payment is to be made against delivery of the goods or documents, the buyer must pay the price at the seller’s place of business.

Finally, with regard to the time of payment, without prejudice to the autonomy of the parties to determine the time at which the duty to pay the price of the goods arises, the Vienna Convention in Article 58 provides for the principle of simultaneity between the payment of the price and the making available of the goods, allowing the seller not to proceed with delivery unless the price is paid and the buyer to refrain from payment unless the goods are given an opportunity to examine them.

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Marcello

Dear Aurelia, the information you have provided are not sufficient for an answer which is subject to a professional engagement. In any case, we should study the provisions of the contract and identify governing law of the contract.If it does not provide anything on governing law then conflict law shall apply (in the most part of the countries likely the governing law will be the law of the country where the agent is domiciled). best regards Marcello Mantelli

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Aurelia

I signed a contract with a fashion agency but there were no termination clauses in the contract and decided to withdraw it before one week after signature so sent them an email but after 14 days they sent me an email and asserted that because i didnt withdraw in legal deadlines i have to perform the contract and pay whole money.Noboday told me about any deadlines and nothing was in the contract!! Why did they claim such a thing?

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