CONTRACTS IN INTERNATIONAL BUSINESS TRANSACTIONS
Trade is a major factor in economic development of any country including Russia. More than 145 countries of the world are our trade partners. But it was a very difficult process of forming good relations. One of the most important things in foreign trade is drawing up contracts.
What is a Contract in general?
A Contract is an agreement of buy-back transaction between the Buyer and the Seller. It foreign trade transactions a Contract is drawn up to give legal expressions to the intentions of the partners and to ensure that the obligations contained in the Contract will be fulfilled.
According to the purpose and contents Contracts can cover goods, services, licenses, patents, technology and know-how.
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In accordance with a Contract the Seller has sold and the Buyer has bought goods on definite terms from the ports agreed upon at the Seller or the Buyer's option. Grades, price and quantity are usually stated in the Contract.
The price for goods is understood to be per meter, kg, metric ton, box, case or per other units.
As a rule, a Contract is drawn up in two languages: in the languages of the Seller and of the Buyer. However, there are some difficulties within this process. It concerns the "rare'" languages. In this situation a Contract will be signed in English and in the “non-rare” language.
Usually a Contract is drawn up and then signed in duplicate for each partner. In other words, the Seller and the Buyer issue 4 copies of a Contract.
Contracts usually cover different forms of foreign trade. In turn foreign trade comprises 3 main activities: importing (buying goods from foreign Sellers), exporting (selling goods to foreign Buyers) and re-exporting (buying goods from foreign Sellers and selling them to foreign Buyers without processing in your own country).
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All commercial activities in foreign trade may be divided into basic ones associated with the conclusion of foreign trade contracts for the exchange of goods and auxiliary ones ensuring their successful performance, associated with the carriage of goods, their insurance, banking operations (financing the deals, settlement of payments between the Sellers and the Buyers, guaranteeing the strict observance of their mutual liabilities), as well as Customs and other activities. Conclusion of agency agreements with the Suppliers for export goods and with Importers for the purchase of goods, agreements with advertising agencies, firms dealing with the market research and with other organizations helping to achieve the targets set for foreign trade also refer to auxiliary activities. There may be about 10 or more auxiliary operations to one basic.
In accordance with commercial laws existing in highly developed countries, contracts of sale and other agreements may be concluded either verbally or in writing.
The laws of Russia do not recognize the validity of any agreement concluded verbally by the Trade Representation of Russia abroad or by export or import organizations in this country. According to Russian laws contracts must always be made in the form of duely signed documents containing the terms of an agreement between two firms or associates – called counterparts (or parties) to supply goods or services as a rule at a fixed price.
Agreements and contracts made in our country are to be signed by General Director of a foreign trade association or his deputies (first signature) and by directors of firms or their deputies (second signature). Sometimes senior engineers of the firms are legally authorized to sign these documents.
In international trade contracts of sale, contracts for construction work (very often for the delivery, erection and commissioning of the equipment for industrial enterprises) and lease are most frequent among a variety of basic deals. Contracts of sale include turnkey contracts and large-scale contracts on a compensation basis. There may also be barter deals and compensatory deals.
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Foreign trade activities comprise several stages:
1. market research work (analysis of the market situations)
2. choosing proper methods of trade on this particular market
3. planning foreign trade operation
4. carrying out a publicity campaign
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5. preparations and conclusion of a Contract of sale with a foreign counterpart
6. fulfillment of contractual obligations.
A written Contract of sale is made out in the form of a document signed both by the Buyers and the Sellers. When there is no necessity of introducing special terms and conditions into the Contract of sale, Russian associations use standard forms of contracts containing the following clauses (articles):
1. Naming (definition) of the Parties.
2. Subject of the Contract and volume of delivery.
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3. Prices and the total value (amount) of the Contract (including terms of delivery).
4. Time (dates) of delivery.
5. Terms of payment.
6. Transportation (=carriage) of goods (packing and marking, shipment).