With the globalisation of the economy and the establishment of bilateral and multilateral legal frameworks on trade, commercial activities between individuals and organisations have transcended national geographic boundaries to become international activities. The fundamental legal means for individuals and organisations to conduct commercial activities internationally is through international commercial contracts, which include contracts for the international sale of goods.
1. Concept of international sale of goods contracts
An international sale of goods contract is a contract for the sale of goods that has an international nature or foreign element, whereby one party (the seller) is obligated to deliver goods, related documents, and the ownership of the goods to the other party (the buyer), who is obligated to pay for and receive the goods.
2. Parties to the international sale of goods contracts
In international sale of goods contracts, the parties usually have commercial establishments in different countries and/or hold different nationalities. This means that the seller and the buyer do not have their commercial establishments in the same country. In cases where a party has multiple commercial establishments, the address of the party will be identified as the commercial establishment most closely related to the contract and its performance. If a party does not have a commercial establishment, the address of the party will be determined based on their regular place of residence.
3. Object of contracts
Goods in an international sale of goods contract can be transported across borders from the seller’s country to the buyer’s country or a third country, especially when the contract is signed between parties with commercial establishments in different countries. In some cases, goods may be transported from a country other than the seller’s to the buyer’s country. For example, the buyer is based in India, the seller is based in China, and the seller outsources the manufacturing of the goods in Vietnam; once the goods are produced, they will be delivered directly from Vietnam to India without passing through China, the seller’s country.
4. Currency for payment
The currency used for payment between the seller and the buyer may be foreign currency for one or both parties. In international sale of goods contracts, the parties are free to choose the currency for payment, which can be the currency of the seller’s country, the buyer’s country, or a third country. However, in cases where businesses within the European Union sign contracts, the Euro will be the common currency used by both parties and will not be considered foreign currency for either party.
5. Dispute resolution authority
The authority to resolve disputes arising from or related to international sale of goods contracts can be a foreign court or arbitration, depending on the agreement between the parties. Additionally, the international nature of these contracts may lead to jurisdictional disputes between dispute resolution authorities, especially if the parties do not have a clear, detailed agreement on the dispute resolution authority.
6. Governing law of contracts
The law applicable to international sale of goods contracts can be the law of the seller’s country, the buyer’s country, or another country. The sources of law governing the international sale of goods contracts are diverse and complex, including not only foreign laws applicable to one or both parties but also international trade agreements, international trade practices, and case law.
7. Form of contracts
According to Articles 11 and 12 of the Vienna Convention 1980, a sale contract does not need to be concluded in writing or comply with any other formality requirements. The contract can be evidenced in any way, including through witness testimony. However, if one of the parties to the contract has its commercial establishment in a country that is a member of the Convention and that country has declared a reservation on the form of the contract, the parties may not be able to apply the form requirements of the Vienna Convention 1980. The parties will apply the law of the place where the contract is concluded or the law of the place of residence of the party to determine the form of the contract. Generally, the form of the contract is determined by the law applicable to the contract itself, in other words, the law governing the legal issues of the contract. In other cases, the form of the contract is still considered legal if it complies with the law of the place where the contract is signed. For contracts related to real estate, the form of the contract must comply with the law of the country where the real estate is located.
The above article, “Key considerations for international sale of goods contracts” is brought to you by TNTP. If you have any issues that need discussion, please contact TNTP for timely support.
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