International sales: red light of the buyer in case of non-compliant goods

Marcello Mantelli
Luca Davini
Lawyers in Milan and Turin

With regard to the general discipline of the international sales contract it is good to remember that, without prejudice to the application of the Vienna Convention of 1980 (hereinafter Convention or CISG) in the cases provided for by it, the contracting parties remain always free to derogate from the content of the CISG also-and above all – with reference to clauses of the contract that regulate parameters that are of fundamental importance to be able to conclude business safely.

Thereby, the Convention will automatically integrate, where necessary, the contractual provisions expressly agreed between the seller and the buyer within the text of the contract, following the negotiations.

But what are the clauses of an international sales contract that Italian exporters cannot absolutely overlook during negotiations?

Since it is by far the most widespread contract in international trade, it can appear to be easy to use by the commercial operator given that, as a rule, attention is mainly placed on the traditional basic elements of the contract, or on commercial aspects such as price, payment and delivery time of the goods.

However, it is essential to pay the same-if not even higher – attention to some critical points of the relationship, illustrated below, which can be considered as the basic clauses of an international sales contract.

Parameters of conformity of the goods

For what concerns the conformity of the goods, it should be clarified that at the time of delivery, the goods must reflect the specifics identified contractually, because in the event that the conformity of the goods to the parameters is not respected, the buyer will have the right not to accept it.

In the absence of specific agreements on the point, the Convention establishes that the seller must ensure the quantitative, qualitative, type and packaging conformity of goods supplied, while providing a series of guarantees, deriving in large part from the practice of Anglo-Saxon commerce.

Warranty given by the seller to the buyer

The right not to accept the goods, established in favour of the buyer, is not unconditional; in fact, the buyer, to assert his reasons, must express his exceptions in compliance with the term established contractually or, in the absence of specific contractual agreements, within a reasonable period in accordance with the provisions of the CISG.

As for the warranty offered by the seller to the buyer in the event of defects, it will be good for the exporter to provide certain remedies to be offered at its discretion to the buyer, thereby derogating from the provisions of the Convention, as well as limiting the duration of the warranty within a period shorter than that established by the Convention of two years from the delivery of the goods.

Delivery of goods and transfer of risks

Deferring to the next section, which focuses entirely on ICC Incoterms, further attention should be drawn here to the need to identify with absolute certainty, within an international sales contract, the place, term and particular modality of return of goods.

Incoterms are, for this purpose, an invaluable working tool.

With reference, on the other hand, to the discipline dictated by the Convention in relation to the time of delivery of the goods, where the parties have not indicated anything in the contract, it will be necessary to remember that the seller is obliged to deliver the goods within a reasonable time from the signing of the contract.

Risk of non-payment or delayed payment

With reference to the possibility of preventing or at least limiting the risk of non-payment, given that there is no absolute “best payment method,” it is necessary for the Italian economic operator already negotiating with a foreign counterparty to carefully evaluate as much information as possible, which, put in relation to each other, will make it possible to identify the means of payment that is most suitable for the specific transaction.

As far as the contract is concerned, it will be necessary to pay attention to the clauses outlined here, so as to limit specious disputes as much as possible by clearly defining what is to be done or transferred and by determining in advance before which judge or arbitrator the dispute, if any, is to be brought, as will be seen below.

Ways of resolving any possible disputes

As a rule, when negotiating a contract, the parties are free to choose the court competent to settle disputes that could potentially arise in the execution of the contract.

This is an aspect that the economic operator, when concluding a deal, rarely considers, even for the little “impact” from a commercial point of view that lies in negotiating with the counterparty the place “where you will quarrel” even before starting the relation.

In the absence of a valid choice between the parties, however, it will be the international conventions, namely the individual national regulations of private international law, to settle the question about the identification of the competent court, which could lead to unwelcome surprises, which is why it is advisable to pay the utmost attention to the clause of choice of competent court.

Incidentally, among the methods of dispute resolution, one should take into account, especially in the context of cross-border transactions, to the possibility of recourse to arbitration as an alternative to ordinary courts.

Only through a proper examination of these aspects of the international sales contract will Italian exporters be able to negotiate with their foreign trading partners with a clear, complete and secure text, which allows them to minimize the risks of the transaction.

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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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