General Conditions in Export Contracts during Foreign Trade

By | October 8, 2016

The export contract refers to the subject of the contract. In addition, the contracts also mention the rights of the party concerned against the party which may have failed to honour his contractual obligations, except under some valid reasons. The transportation of goods in export for foreign countries involve risks and costs. The goods may get lost, stolen or damaged during transportation. The contract must specify who will bear the risk of goods and up to what point. Similarly, physical movement of goods will mean costs. Whose will be responsible for bearing these costs? Their issues are to be resolved through export contracts.

Most exporters have developed standard general conditions of exports to be incorporated in an export contract. Export contracts simplify the day-to-day export operations. It also reduces the possibility of missing out some important aspect, each time a contract is drafted. The complexity of the general conditions in export contracts depends on what type of goods are exported. If the product is standard, such as garments, handicraft or light engineering goods, a simple set of general conditions will suffice. On the other hand, a contract for the sale of petrochemicals plant may run into hundreds of pages. For a majority of products being exported from India to foreign countries, the following aspects should be covered under the general conditions:

  1. The parties
  2. The description of the products
  3. Quality
  4. Price per unit
  5. Total value
  6. Currency
  7. Tax and Charges
  8. Packing
  9. Marking and Labelling
  10. Mode of Transport
  11. Delivery: Place and Schedule
  12. Insurance
  13. Inspection
  14. Documentation
  15. Mode of payment
  16. Credit period, if any
  17. Warranties
  18. Passing of Risk
  19. Passing of property
  20. Availability/non-availability of export-import licences
  21. Force Majeure
  22. Settlement of Disputes
  23. Proper Law of the Contract
  24. Jurisdiction

Indian Council of Arbitration (ICA) which has been set up by the Ministry of Commerce, Government of India has developed a Model Contract form for the benefit of Indian exporters. This model contract form is suitable for most of the small and medium enterprises exporting standard products to foreign countries from India.