How to conclude an international sales contract

Luca Davini
Avvocato in Milano e Torino


Background

Before concluding an international sales contract, the seller and buyer normally negotiate and exchange with each other various documents which may consist of, for example, an offer from the seller, an order from the buyer, and a final order confirmation sent by the seller to the buyer.

Such documents are often neither signed nor expressly accepted by the receiving party but are instead always followed by conclusive conduct, for example:

– the buyer sends a purchase order and the seller ships the goods;

– the seller sends an order confirmation and the buyer pays a down payment on the price.

This way of concluding contract is very common and is legally referred to as acceptance by conclusive facts.

In business practice it also happens that the documents exchanged between the parties have various conflicting clauses.

In these situations, traders certainly have doubts about which rules apply to the sale and which Court has jurisdiction to solve any disputes.

The ideal solution we propose here is to regulate the international sale, even if it is of low value, using the typical tools used by medium to large enterprises in all business sectors.

The instruments we propose are:

1.the general conditions of sale

2.the accepted order confirmation

3.the ad hoc contract



i. The general condition of sale


The general conditions of sale are useful when the seller and buyer conclude several sales between them over time, negotiating on a case-by-case basis only the prices and terms delivery.

However, for all other conditions of individual sales, such as those relating to the manner of return of goods and passing of risk, payment, conformity of goods and warranty, applicable law, and the manner of settling disputes, the parties will refer to the general terms and conditions of either party, which take the name of general terms and conditions of sale or general terms and conditions of purchase, depending on the role played by the party proposing them (seller or buyer).

They will then have the value of contractual conditions that will supplement each sale transaction.

To avoid doubts or disputes about their enforceability, general conditions of sales will have to be signed or at least expressly accepted by both parties.

A typical problem for the validity of the conditions is then to verify then if it is necessary to integrate the requirement of specific approval , the so-called double signature, provided by Article 1341 of the Civil Code.

According to our jurisprudence, this is a requirement of form, and based on Art.11 pt. 2 of the Rome I Regulation (Reg. CE/593/2008) a contract concluded between persons located in different countries is valid if it meets the formal requirements of the law governing its substance or the law of the country where one of the parties was habitually resident at the time of the sale.

Therefore it is enough that the law of the other party does not provide for the requirement of a double signature or other strict requirement to avoid the application of Article 1341 of the Civil Code and thus the double signature of acceptance.

On this point, it is pointed out that if the international sale is regulated by the United Nations Convention on Contracts for the International Sale of Goods (Wien,1980), to which Italy is a party, along with 84 other countries in the world as of today, freedom of form is in force and the application of the double signature requirement of Article 1341 of the Civil Code should be excluded.

In case of doubt, however, in order to avoid disputes in litigation, it will be appropriate to have the other party affix the aforementioned double signature at the bottom of its general conditions.

In favor of general conditions, we can say that they are a useful working tool and allow one to operate within a certain legal framework and minimize corporate bureaucracy.

The practical advice , to facilitate partner acceptance if you choose this working tools, is to have your attorney prepare simple general conditions that protect the main points of business risk.


ii. The accepted order confirmation


The order confirmation constitute another typical working instrument of business practice.

It is well known that in practice it is often used and also referred to as a final “proforma invoice”, as a document that closes negotiations and provides within it only the typical elements of a normal invoice (references of the parties, unit the price and total products, payments, deadlines, return of goods, etc.), with the purpose of facilitating communication between the parties.

It shall, however, in a legally correct and protective context be used:

1.following the signing of the general conditions, as seen above, to regulate the essential points of the individual sale (price, delivery date); or alternatively,

2.if the general conditions of sale have not been signed it may be used to protect the economic transaction through the inclusion of specific protection clauses.

The protection clauses concern in particular: the return of the goods (risk of travel and loss/deterioration), conformity parameters of the goods, warranty in case of defects, payment and guarantees on the risk of non-payment, retention of title, applicable law and the manner of resolution of any disputes.

The order confirmation must be expressly accepted by the contracting partner, taking into account what is written about the form in the previous paragraph.

The practical advantage of this instrument is the greater ease of acceptance by the contracting partner because of its simplicity and clarity.

Conversely, it requires an internal company procedure to be applied to each sale (sending confirmation and requesting acceptance in order to proceed with order processing).


iii. The contract for the specific sales transaction


An additional working tool is the so- called “ad hoc” contract for the individual economic transaction, it will be necessary to contact one’s legal counsel so as to propose an appropriate contract to the business partner, taking into account one’s commercial and marketing objectives.

In fact it could be a “spot” sales contract of high amount, a supply contract (and therefore with a constraint to supply over time) a distribution contract, to which one’s general terms and conditions of sale will have to be attached, or another contractual typology.


Conclusions

The choice between the tools seen depends on the specific case of business to be regulated, the internal business organization, the type of customers and from the level of protection one wishes to obtain for one’s business, payment in advance or by letter of credit not being sufficient to be fully protected.

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