Contracts in international business transactions

What is a Contract in general?

A Contract is an agreement of buy-back transaction between the Buyer and the Seller. In foreign trade transactions a Contract is drawn up to give legal expressions to the intention 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.

In accordance with a Contract the Seller has sold and the Buyer has bought goods on some kinds of 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 of goods.

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 of sale include turnkey contracts and large-scale contracts on a compensation basis.

Ознакомьтесь с содержанием текста и выполните задание к нему.

1. Ответьте на вопрос: «What is a Contract in general?», охарактеризовав этот вид документа.

2. Найдите в тексте оборот речи, который всегда используется в контрактах, касающихся купли-продажи, выпишите его.

3. How many languages is a Contract drawn up in?

4. How many copies do the Seller and the Buyer issue?

Stages of foreign trade activities and clauses of a Contract

Foreign trade activities comprise several stages:

1. market research work (analysis of the market conditions)

2. choosing proper methods of trade on this particular market

3. planning foreign trade operation

4. carrying out a publicity campaign

5. preparations and conclusion of a Contract of sale with a foreign counterpart

6. fulfilment 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.

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).

7. The Sellers’ guarantees (the quality of the goods).

8. Sanctions and compensation for damage.

9. Insurance.

10. Force majeure circumstances.

11. Arbitration.

12. General provisions.

Ознакомьтесь с содержанием текста и выполните задание к нему.

1. Переведите первый абзац текста на русский язык, озаглавьте его на английском языке.

2. Какой пункт этого абзаца касается непосредственно заключения контракта.

3. Выпишите из текста «clauses of a Contract» и переведите их на русский язык».

Methods of payment

Today a modern businessman must be very educated in all spheres of market trade. So the knowledge of the main methods of payment under the different contracts becomes very necessary.

There are a lot of methods and manners of payment in private and international trade. They are classified by the numerous features and signs, for example:

l) cash payment; cashless payment

2) full payment; separate payment (payment by installments)

3) advance payment; payment after executing a transaction

4) payment by credit; immediate payment for the full value of the contract.

The main methods of payment are: cash payment and payment on a credit basis. Cash payment is divided into several methods:

1) by cheque:

as a cheque is payable in the country of origin it is not very often practiced in international business. That's why cheques are usually used for payment in home trade.

2) by telegraphic or telex transfers or post (mail),

3) by a Letter of Credit (or just: by credit),

4) by payment for collection.

Ознакомьтесь с содержанием текста и выполните задание к нему.

1. К какому пункту раздела «методы оплаты» относится абзац «payment by cheque»?

2. Why are cheques usually used for payment in home trade?

3. К какому пункту раздела относится этот микротекст?

Payment in advance: the Importer credits the Exporter, for a example, the Contract may stipulate a 10 or 15% advance payment, which is advantageous to the Sellers. This method is used when the Buyers are unknown to the Sellers.

4. When is this method used?

Terms of delivery

There are various terms of delivery. Most frequently used terms of delivery in international trade are CIF (cost, insurance, freight) and FOB (free on board). A CIF price includes apart from the value of the goods the sums paid for insurance and freight (and all other transportation expenses up to the place of destination). An FOB price only includes the value of the goods, transportation and other expenses until the goods are on board the vessel. On FOB and CIF terms the Sellers bear the risk of accidental loss of or damage to the goods until the goods pass the ship's rail.

Ознакомьтесь с содержанием текста и выполните задание к нему.

1. Переведите текст, приведенный выше.

2. Расшифруйте аббревиатуры, объясните, что они обозначают.

3. What does a CIF price include?

4. What does a FOB price include?


Packing and marking are important clauses of a Contract. Packing is a means, which helps to keep goods safe during transportation and storaging. There are a lot of kinds of packing. For example, some goods have inside and outside packing: perfume has inside packing (a bottle) and outside packing (a box). Packing can also be made of different materials: paper, glass, plastic, cardboard, iron and so on. Goods must be packed in full conformity with the specifications of each particular type. You can't transport glass in paper, it needs a firm kind of packing, or packing of food must keep it dry. And if packing correctly conforms with the features of goods, the latter would arrive safe and sound and can even withstand rough handling.

In a Contract all the above characteristics of packing should be stated. Improper or faulty packing may cause damages and breakages of goods.

Ознакомьтесь с содержанием текста и выполните задание к нему.

Составьте к нему вопросы, употребив в них данные слова: kind of packing, inside packing, outside packing, materials, in full conformity with the specifications, a firm kind of packing, arrive safe and sound1, keep dry.

1safe and sound – цел и невредим.


Marking is usually made on packing. It must include the name and address of the Buyer, the Seller and the manufacturer of the goods, numbers of standards or technical documentation, numbers of roads, kinds of transport and some other details concerning this particular consignment of goods: weight, quantity and others. There are also various kinds of marking for goods that need careful handling, for example, WITH CARE, TOP, DO NOT TURN OVER, USE NO HOOKS and so on. There may be also pictures in marking. Some of them require careful handling too: "fragile", "avoid heat", "open here", etc.

There is also marking that states that the products or their packing are ecologically pure and don't make harm to environment: "green point", "produced of used materials", "this marking says for itself'', etc. Marking should warn of poisoned and harmful materials contained in packing.

If goods are transported by sea, their packing must be seaworthy and marking should be made with indelible paint.

It is also very important that marking should be made right. Wrong marking can lead to many unpleasant problems. Usually all these characteristics are stipulated in standards.

Ознакомьтесь с содержанием текста и выполните задание к нему.

1. What must marking include?

a) ..........................................................................

b) ..........................................................................

c) ..........................................................................

d) ..........................................................................

2. What kinds of marking can be used for goods that need careful handling?

3. What kinds of marking for ecologically pure goods can be used?

4. Should marking warn of poisoned and harm full materials contained in packing?

5. What problems can wrong marking lead to?

Force majeure

Force majeure is a force against which you cannot act. Every contract has a force majeure clause. It usually includes natural disasters such as an earthquake, flood, lice, etc. It can also list such contingencies as war, embargo, and sanctions. Along with this there are some other circumstances beyond the Seller's control. The Seller may find himself in a situation when he can't fulfil his obligation under the Contract. It may happen if there is a general strike in the country, a strike of coal-miners, transport workers, etc. Production may be suspended if there is a shortage of the energy supply. When negotiating a Contract a list of contingencies must be agreed on and put into the Contract.

When a manager makes up a contract he must not think only of his one-sided interest. He must think in terms of common interest with his counterpart. Only then will he prove loyal to his partner.

Ознакомьтесь с содержанием текста и выполните задание к нему.

1. Дайте определение на английском языке, что есть форс-мажорные обстоятельства.

2. Has every contract force majeure clause?

3. Перепишите известные Вам форс-мажорные обстоятельства на английском языке с их переводом на русский язык.

4. Is it necessary to put a list of contingencies into the Contract?

5. When a manager makes up a contract, what must he think of?