Disputes in international sales contracts are disputes in socio-economic activities that have international characteristics, such as arising abroad, involving foreign assets, etc. and are conducted through the legal form of a contract. Due to the involvement of foreign elements, resolving disputes related to these contracts is often complex. Thus, identifying common types of disputes can help parties prevent risks and disputes.
1. Disputes due to seller’s breach of contract
Disputes arising from the seller’s breach of contract include main types such as failure to deliver goods; delivering goods not on the agreed time or at the agreed place; failing to deliver or delaying the delivery of documents related to the goods; delivering goods that do not meet the agreed specifications, quality, or standards; delivering incorrect, insufficient quantity, or type of goods; failing to refund the money that the buyer has paid as a deposit, advance, or payment when the seller fails to deliver the goods; failing to perform the warranty of the goods as agreed, etc.
Late delivery is a common type of dispute in international trade. The causes of this dispute vary, such as errors in production and delivery planning, delays in goods production, transportation issues, or force majeure events, etc. Parties should specify in the contract contents such as trade sanctions including compensation for damages, penalties for breach, etc.; the buyer’s right to unilaterally terminate the contract and the seller must refund the total amount paid by the buyer without receiving the goods, etc. Additionally, parties can negotiate and agree on changing the delivery time.
Disputes related to goods quality arise when the delivered goods do not meet the technical specifications or quality standards agreed upon in the contract. These disputes can arise due to differences in quality standards between countries, production process issues, transportation errors, etc. Parties should specify in the contract contents such as trade sanctions including compensation for damages, penalties for breach, etc.; refund of the money paid by the buyer corresponding to the quantity of goods that do not meet quality standards; warranty or replacement of new products, etc.
In domestic goods sales, the seller may not deliver to the buyer all the documents related to goods, depending on the agreement between the parties (unless otherwise required by law). Due to the characteristic of international sales activities where goods are transferred across different countries, to have goods cleared for import, the buyer must provide a complete set of documents as required by the law to the competent state authority in the importing country. Therefore, parties should specifically agree on the types of documents the seller needs to deliver to the buyer and the terms for delivering these documents, etc. Therefore, the buyer will have a legal basis to receive the goods and make payments, as well as to verify the origin, standards, and legality of the goods as agreed in the contract.
2. Disputes due to buyer’s breach of contract
Disputes arising from the buyer’s breach of contract include main types such as the buyer receiving the goods late or not receiving the goods; not paying or not fully paying or delaying payment for the goods to the seller, etc.
Accordingly, disputes due to the buyer’s failure to fulfil payment obligations are typical and often arise in international sales relations. The seller should require the buyer to pay in advance a part of the order value (which could be 30-50% of the order value), and for the remaining value, the payment method should be LC (Letter of Credit). Although this payment method costs more than the TT (Telegraphic Transfer) method, it is commonly used in international trade transactions because it is safer than the TT method, thus somewhat guaranteeing the rights of both the buyer and seller. In addition, the parties may agree in the contract on sanctions for the buyer’s breach of payment obligations, such as penalties for breach and interest on late payments.
3. Other disputes
Furthermore, the following disputes may arise if parties do not clearly and accurately agree on the contract, such as disputes about the applicable law, the dispute resolution body, the applicable language, etc. Since international sales contracts are often concluded between entities from different countries, the aforementioned disputes are likely to arise easily.
Therefore, clearly and accurately specifying in the contract the law applicable to dispute resolution, the law applicable to regulating the contract, the dispute resolution body, the preferred language in case of disputes, and the language used during the dispute resolution process, etc., is extremely important. This facilitates the quick and effective resolution of disputes.
Above is the article “Common types of disputes in International Sales Contract” that TNTP sends to the reader. If there are issues that need discussion, please contact TNTP for timely support.
Sincerely.
