2. Practice of International Trade – Subject Matter of the Contract Chapter 4-2 www.epowerpoint.com

3. The Basic Contents of a Sales Contract Subject Matter of the Contract The Clause of the Name of Commodity The Clause of Quality The Clause of Quantity The Clause of Package The Price of the Contract Commodity The currency and measure used The price term (or trade term) used The method of pricing used The Obligations of the Seller The Clause of Shipment The Clause of Insurance

4. The Basic Contents of a Sales Contract The Obligations of the Buyer Payment instrument used Time of payment Manner of payment The Prevention and Settlement of Disputes Clause of Inspection Clause of Force Majeure Clause of Arbitration

5. Name of Commodity It a part of the description of commodity. Attentions on the Clause of the Name of Commodity The clause must represent the features of the subject matter; Use the name that is in common use; Select a proper name from different names of certain commodity, if possible; The name of the goods must be the same on the contract, L/C, other documents needed and label of goods.

6. Quality of Commodity Quality refers to the combination of the internal characters and external appearance. The quality of goods influences not only the usefulness of the goods, but also the price and the market share. It also concern the reputation of relevant enterprises and countries. Considering the intensive competition in the international market, quality has become one of the most important factors to strengthen the competitiveness.

7. Selling goods to another country, you must be aware at the special requirements for quality: Consider the customs and the level of consumption of foreign market. Consider the local and traditional customs and interest, especially the stipulations on religious belief of relevant countries. Consider the stipulations of relevant laws and regulations of importing countries. Consider the sales seasons and natural conditions.

8. Methods to stipulate the Clause of Quality Sale by actual goods Sale by actual quality Sellers have goods in hand; Buyers or their agents can come to inspect the goods; The quantity of the contract is small. Sale by samples Samples are small amount of goods that can represent the quality of the whole lot of goods. The sample to appraise the quality of the whole lot is called “Standard Sample”. Sellers are bound to submit the goods with quality not lower than that of the sample.

9. Quality as per Seller’s sample The samples that the Sellers provide must be the “Representative Samples”. Sellers should keep “Duplicate Samples” after they deliver the samples to Buyers. Pay attention to the difference between representative sample and “Reference Sample”. Quality as per Buyer’s Sample Sellers should consider the possibility of delivering the goods within the stipulated time limit. Both parties should consider the disputes on patent may occur. Sellers should offer “Counter Sample(s)” to Buyers for confirmation to avoid possible disputes on quality.

10. The quality of goods is seldom to be indicated only by sample. Instead, the sample is usually used as standard for one or several aspects of quality, while other aspects are often indicated by words. Color sample, for example

11. Sale by description Sale by description means to clarify the quality of goods by words, pictures or charts in contracts Sale by specification, grade or standard Sale by specification Specifications refer to the important indexes that can reflect the quality of the goods, such as the composition, content, function, length or thickness etc. Different indexes should be selected for the certain commodity according to its different uses.

12. Sale by grade Grade is summarized on the basis of the features of the industry and the businesses’ experience, and it’s usually expressed by words, figures or symbols. Sellers and Buyers are not bound to the grade stipulated by a certain enterprise, so they can make modification on it in the negotiation. Sale by standard Standards are specifications stipulated by government organizations or business organizations. The standards may probably vary in different publications. The contents of the standard used must be well understood To be sure if the standard used has the binding force. Pay attention to “FAQ”.

13. Sale by trademark or brand It is suitable for the commodities with stable quality and high reputation. The Sellers must promise the quality of the goods submitted is not worse than that of the goods under that trademark or brand though there may be no stipulations about quality in the contract. Sale by origin It is suitable for agricultural products and local specialties Sale by directions and/or drawings The goods such as machines, electrical equipments or instruments are complicated in their structure.

14. Important points to be noticed in stipulating Clause of Quality The words used to clarify the quality must be simple, concrete and definite. The contents of the clause should not contradict each other. The quality should be decided according to the manufacturing possibility of the export country. Try to avoid stipulating the quality of goods by words and by sample at the same time. The Clause of Quality for certain goods should be flexible. Quality Tolerance

15. Remedies for Breaches of the Clause of Quality Reduce the price Reject the goods Compensation for damage Exchange the goods Repair the goods

16. Quantity of Commodity The Systems of Weights and Measures in Common Use The Metric System (M.S.) British System (B.S.) The U.S. System (A.S.) International System of Units (S.I.)

17. The Method of Weight Measuring Gross Weight Net Weight N.W=G.W-Tare Real tare Average tare Customary tare Computed tare Conditioned Weight Conditioned Weight = [Actual Weight×(1+stand regain)]÷(1+actual regain) Theoretical Weight Legal Weight

18. Quantity Allowance Use the word “about”, “circa”, “approximately” More or Less Clause Quantity latitude Option Price for the excess or deficient goods An example: Quantity: 100 000 M/Ts. More or less 2%, at Seller’s option; such excess or shortage to be settled at contracted price. In case there is no stipulations on quantity allowance

19. Remedies for Breaches of the Clause of Quantity In case the Sellers don’t deliver the goods In case there is shortage in the quantity delivered Within the stipulated time of delivery After the end of the period of delivery In case there is excess in the quantity delivered

20. Package of Commodity Requires for shipping package Shipping package should be strong enough to stand long voyage, rough handling, jolting and shock, and to discourage pilferage. Shipping package should meet the regulations and customs of the import country Method, materials of packing; weight of each piece of goods, special regulations on dangerous goods etc. Attention should be paid on the standardization of packing

21. Marks on Shipping package Shipping Marks Should be stipulated in the contract Indicative Marks To protect goods better Warning Marks To protect people who handle the goods

22. Pay attention to sales package Inner package, small package, immediate package Decoration of sales package Customs and traditions of consumption Regulations on sales packages of the import country

23. Appointed Brand and Neutral Package Appointed Brand: Sellers use brands or trademarks that are appointed by Buyers for the export goods Neutral Package: is the package without the name and address of the manufacturer, the origin of country, the trademark and brand. Thus the source of the goods cannot be found from the package.

24. Remedies for Breaches of the Clause of Package The Clause of Package is one of the main clauses of a contract. Buyers can take different actions to the breaches of contract at different degrees: When the “substantial identity” of contract goods is badly influenced by the improper package, the Buyer can reject the goods and lodge a claim on the Seller. If only a part of goods are in improper packages, the Buyer can reject only that part of goods and accept the rest, but the Buyer can also reject all the goods while claiming on the Seller for compensation.