What is required if a British company desires to do business with a foreign company?

International Contracts       

How are most goods transported between different counties?

The majority of international contracts for the sale of goods are conducted by the use of shipping contracts. Many people may assume that most of the goods transferred between different countries in international sale contracts are carried by planes but this is in fact not the case.

What problems can be associated with International sales?

There are a number of potential difficulties and problems which can arise from international sale contracts. More prior investigation is required before completing an international sale contract than a contract which is conducted in one single jurisdiction.

Multiple contracts

In one international transaction there are normally multiple contracts involved. For example a sale and import of grain from one country to another could involve a sale contract, a carriage contract (for the shipping of the goods), an insurance contract and even an international payment mechanism such as a letter of credit. Using a number of contracts will mean that more legal work may be needed and more expense is necessary.

Physical separation of the parties

The buyer and seller in an international contract can often be separated not only by a long distance but also by language barriers. It is a wise decision to use the services of an agent who is perhaps based in the other country and familiar with the other country’s methods. Employing an agent means that there is someone in the other country who is able to investigate further into the prospective company and also investigate the goods themselves. A buyer in an international sale of goods may wish to request that the agent is present when the goods are loaded onto the ship for added protection.

Commercial risk

It can often be very difficult to initially investigate the credit rating of any potential new foreign company. It is obviously not desirable to work with a company which is insolvent. The other country involved may not have a very accessible system to investigate its companies. English companies are easy to investigate through the use of the Companies House organisation, which is a government register of all the limited companies in the United Kingdom and can be accessed online.

Political problems

The political stability of the prospective country with whom you wish to work is very important to address early on. There may be restrictions on import and export licenses because of a particular political regime currently in power in a certain country. This area needs to be investigated fully before any contracts are made.

International sale contracts

An international contract may be very complex because of the greater level of detail which is required. The contracts may contain specific terms that may be unfamiliar and confusing. The International Chamber Of Commerce has devised a set of contract rules which are widely accepted as the standard rules and definitions of international sale contracts. These rules can also be known as the ICOTERMS and are very useful when considering what to include in an international sale contract.

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For more information on:

  • Types of international sales contracts
  • Fee on board contracts
  • Cost, Insurance, Freight contracts
  • When does the risk pass to the buyer?
  • Bill of Lading