Question

The New Me” is a company that has successful marketed health care products for the past 10 years in Canada. They decide that to ensure the long-term prosperity of the company to export their products to the U.K. After some research, they find an importer called “Personal Products PLC.” What are the key elements that should be included and covered in a contract between the two companies to enable the shipment and import of The New Me company’s products? (FITT pages 24 – 26

Answer 1

A Contract is a legal document which creates an obligation between two parties to stick to the contract and performed over the period of the Contract with defined termes & conditions. This document sometimes registered with regularity authority and applicable within the jurisdiction.It is a enforceable agreement between two or more parties. This contract either Domestically or Internatinally. International Contract are more risky in terms of Financial as well as Judicial point of view. Hence extra precaution has to be taken while drafting such Contract because any violation of the terms may bring the case to International Court & it is not only costly affairs but also time consuming.

In the given case there were Two Competent Parties which are ready to Act according to the Certain Terms and Conditions. Folloiwng are the Key Elements that should be included and covered in a Contract Betwwen the Two Companies to enable the Shipment and Import of The New Me Company's Product.

A Contract either made by Purchaser or Seller of the product on the agreed terms and conditions. Generally the formal contract consist of following terminology.

a) the name of the Commodity, b) the quality of Commodity, c) the quantity of commodity,d) the packing of commodity, e) Commercial Invoice,f) Payment Terms,g) Delivery Terms, h) Inspection, i) Insurance, j) Cargo Claims, k) Force majestices.

The Key elements which both companies have more emphasis are a) Price Methods & b) Payment Methods,

Price Methods have following types of Methods.

FOB basis (Free on Board Basis means the risk of the Supplier upto boarding of the goods to the either Ship or Air or by Vehicle if it is by Road, In other words the Seller of the goods make the good free for shipment from the port of export. From that point the risk & rewards are handed over to Purchaser. Its Purchaser's kitty.

CFR or C & F basis :- There were two further bifurcation in this terms. First at the port of shipment or at the Purchaser destination. If it is at the port of shipment all the cost & freight expenses has to bear by the Seller while in the case of Purchaser Destination it should be bear by Seller which include Cost of Insurance also.

DAF :- Delivery at Frontier means the seller bears all the cost of freight & other expenses to the defined destination or port of the frontier.

Ex-Factory Basis: -In this method the goods are taken over by the purchaser by his own vehicle and bear all the cost. The sellers obligation ended at its factory gate.

Payment Methods: -Generally in domestic market the (where there is not a huge value & Volume of the contract) the payment were settled by way of either Cheques or NEFT (National Electronic Funds Transfer) or RTGS (Rela time Gross Settlement) or by way of IMPS (Immediate Payment Service or Fund transfer). But in International Transaction as the buyer and seller are new to each other they take the help of the bankers who acted on behalf of the Purchaser as mediator and make the payment through Letter of Credit.

This Letter of Credit has various types i,e Revocable Letter or Credit, Irrevocable Letter of Credit, At Sight, against Documentation after acceptance.

The other mode of accepting the payments are DD (Demand Draft), Mail Transfer (M/T), Telegraphic Transfer (T/T) , Swift Transfer in case of Foreign remittance etc....

Other Judicial Terminology also used to safe guard the interest of both the parties but more in favour of Seller.

a) Jurisdictional Area, b) Liability of the Seller ,c) After sales service,d) Use of Goodwill of Seller, e) Restriction of use of other competative products, f) Non-Functioning at other specified area,g) Interest payments in case of violation of contract, h) liability of Purchaser etc....