CONTRACT CHECKLIST FOR INTERNATIONAL SALE OF GOODS

WITH COMMENTARY
Ive created a checklist of twenty-five terms commonly
found in a detailed contract for the international sale of
goods. The purpose of a checklist is to make sure that the
negotiator or drafter of an agreement considers the terms
for use in the final agreement.
Not all terms will be found in every good sales contract,
sometimes other terms are needed, and most of them are
not legally required. There is no legal requirement that the
terms are separate and there is no required form for the
contract. Terms are often combined together.
It is good practice to be more thorough rather than less
thorough in international contracts to avoid disputes,
misunderstandings, and ambiguities. On the other hand, it is
also important to keep the contract as simple as possible.
The skilled drafter knows that this means careful drafting of
all useful terms rather than omission of terms for the sake of
brevity or simplicity.
Remember, that the commentary is merely providing an
overview of each term. You may need far more for your
contract or may not need a given term at all. If the subject
matter of the contract is important to you, you should always
consult with your lawyer. If your lawyer does not have
experience in international business contracts, you should
seek counsel from a lawyer who does.
1. Parties: Describe the parties to the contract with
particularity, including full name, address, telephone,
facsimile, email, and type of business entity. Thus, there is
minimal chance of mistaken identity. In some countries, the
government may own corporations wholly or partially. Care
should be taken to determine whether the entity is, in fact,
an arm of the government in which case sovereign immunity
must be addressed.

2. Description of Goods: The subject matter of the contract

must be described completely and accurately. If a product
line or different products are part of the same contract, the
goods are often described in detail in an exhibit that gets
attached to the main body of the contract. However, a
general description of the goods in the main body of the
contract is good practice and should still be sufficiently
detailed so that a substituted description of goods in the
exhibit can be readily detected. In other words, the parties
should not simply describe the goods by referring to an
exhibit.
3. Quantity: The number of units of goods sold is the only
term in contracts for the sale of goods that is always
essential. All other terms may be implied and the contract
can be enforced, although this is not good practice. In this
paragraph, the drafter will often state that seller is selling to
buyer and buyer is buying from seller the quantity of goods
described. If the contract is for different goods, it is essential
that the quantity of each good be separately stated, unless
the sale is an assortment or lot (like assorted flavors of jelly
beans).
4. Price: Except for CIF and C&F contracts, the unit price for
each good sold should be stated along with the total contract
price. The unit price is the price for the good itself, excluding
transportation costs, insurance or any other additional
charge. The price should also refer to and agree with the
trade term for the contract or the price may be ambiguous.
The total contract price may include any other charges such
transportation, insurance, duties, exit documents, etc. Thus,
the contract price often will not simply be product of the unit
price times the quantity. In many, if not most cases, the total
contract price will not state precisely the actual total amount
the buyer will pay, since the costs of transportation,
insurance, and other add-ons are determined later (the
buyer simply agrees in the contract to pay them). Since
these charges can be estimated in advance and the seller
has a legal obligation to make reasonable arrangements, or

the buyer can elect to make its own arrangements, there

should not be any unpleasant surprises for the buyer.
5. Payment Terms: In international contracts, payment terms
are often sufficiently detailed to require separate explanation
in the contract. For example, it is not sufficient to state that
payment shall be by letter of credit. The requirements for the
letter of credit should be stated with particularity and detail,
including the size and quality of a bank acceptable to the
parties to issue the letter of credit for the benefit of the
seller.
6. Currency: Although it is implied that payment is to be
made in the currency specified in the price term, it is better
practice to state the currency required for payment. Merely
specifying a currency does not address exchange-rate risk
and is often unacceptable to one of the parties, particularly
to the seller if the buyers currency is weak and vice versa.
There are numerous ways to allocate exchange-rate risk, but
it is advisable for a US company new to importing or
exporting to stick with dollars even if this practice costs an
occasional sale than to get involved in the complexities of
exchange rates. The primary business of an importer or
exporter involves the goods. Currency speculations,
arbitrages, and other such strategies, while potentially
lucrative, should be left to the experts. Obviously, a
company with a huge annual turnover in international sales
must be able to deal in multiple currencies and manage the
associated risks (and opportunities!).
7. Order Process; Term (Time) of Contract: This paragraph is
needed only if delivery of the goods will take place in lots
over time, particularly if the buyer specifies the time for
shipments or has a requirements contract. Companies new
to international sales should start with single lot shipments
of goods (with a renewal provision for subsequent orders)
and as they become more experienced move into longerterm contracts. The term of a requirements or output
contract must always be stated and should never be

evergreen (automatic renewal or extension). Contracts that

merely require delivery over time do not need a paragraph
stating a specific term of the contract, but a delivery
schedule should be established and stated in the contract.
8. Transportation and Trade Term: Arrangements for
transportation should be stated with particularity,
including the trade term governing the contract. Trade terms
are necessarily precise in international contracts, and the
choices are found either in Incoterms or the UCC. The
UNCISG does NOT contain its own trade terms. The
description of the transportation arrangements should not
vary or modify the requirements of the chosen trade term.
9. Delivery Schedule: The time for delivery is often material.
However, time is not of the essence unless the parties
expressly agree. Thus, merely stating a delivery date is not
sufficient if a deadline is truly material. The term delivery
can also be misleading in that a common interpretation is
that it refers to when goods are received. Since most
contracts for goods are shipment contracts and delivery is
complete at the shipment point, care should be taken in
using the term delivery to conform to date of shipment.
Finally, if the parties contemplate shipment in lots, a
schedule is appropriate to include.
10. Packaging; Insurance: Standard packaging of goods may
not be adequate for transoceanic transportation. When in
doubt, specify the required packaging. Insurance of the
goods should not be taken for granted. Although the seller
generally has the obligation to arrange insurance for the
benefit of the buyer, insurance may be weak or non-existent
in certain countries, in which case the buyer should make its
own arrangements.
11. Export License; Fees; Import Duties: These items often
exist and are frequently forgotten. How a good is classified
will determine the type of license to export that is required.
Classification will also determine its dutiable status as an

import in a given country. The seller should not presume the

buyer knows how the good will be classified. Once, both
parties ignored this issue and the duty imposed was 100% of
the value of the goods. It would have been possible to have
had the good classified differently at 17% duty had the
parties researched the issue in advance. As a result, a
$50,000 product cost the buyer $100,000; the buyer blamed
the seller and never bought from it again.
12. Title: When title passes is generally not important in the
US under the UCC but can be important in other countries
and under the UNCISG. Thus, the seller should always inquire
whether and this should be specified in the contract. If the
contract is silent title passes per operation of law depending
on the trade term used.
13. Warranties: Express warranties can be a strong selling
tool. From the 1970s to late 1980s warranties have been
limited in the United States in an attempt to deter certain
kinds of litigation. This policy was shortsighted and not
altogether successful. Today, many US companies are again
strongly warranting the specifications and performance of
products as a way to boost foreign sales.
14. Product Liability; Indemnity: Overseas parties are scared
of US product liability law. When I represent a US importer, I
subject the exporter to these laws. When the importer
objects, my reply is that it is standard. The importer is
subject to them by operation of law anyhow. When I
represent the US exporter, I do not include anything in the
contract about product liability. Again the US exporter is
subject to these laws but there is no obligation to call
attention to it. This term is often used to coordinate defense
against and indemnity for third party product claims,
specifying cooperation of the buyer and seller in defense of
these claims.
15. Performance Criteria; Conditions: This is a catch-all
provision that the parties can use to tailor their agreement to

specific circumstances, changed circumstances, etc.

Performance criteria beyond the basic terms above are
rarely needed in straightforward contracts for the sale of
goods but in a hybrid contract with both goods and services
involved, a section laying out how the parties will work
together can be valuable. I frequently use a provision like
this one to set up my clients right to recover consequential
contract damages, as a way of hiding the remedy in plain
view and obtaining agreement to it without negotiating it.
16. Breach, Default and Termination: Specifying the
conditions of breach and default is sometimes valuable in
and of itself, but it is more useful to couple grounds
constituting breach or default with an opportunity to cure the
problem before terminating the contract. Watch out that by
specifying some grounds of breach or default does not get
interpreted as the sole grounds of breach or default, thus
negating other grounds by operation of law.
Be sure to work within the constraints of the UCC or UNCISG
because there are material differences in the approach to
breach, termination, and remedies. Remember, that courts
generally try very hard to preserve the existence of a
contract.
17. Rights and Remedies: My typical approach is simply to
state that the parties will have all the rights and remedies
afforded to them under the UCC or UNCISG. This is balanced
and fair, and fashioning unique remedies is rarely warranted.
18. Inspection of Goods; Claims & Returns: Buyer always has
the right to inspect goods (although this right could be
waived), even though payment has already been made. If
the inspection cannot be accomplished without some testing
then it is appropriate to specify inspection rights; otherwise,
it is acceptable to rely on the code provisions. A claim and
return policy should be specified if the seller has one or
needs one for a particular contract with a particular buyer.

Obviously, this provision needs to tie to the breach and

rights & remedies clauses.
19. Assignment: Assigning contracts to a third party is rare
in international contracts for goods. I generally prohibit
assignment or strictly limit it.
20. Amendment: Amending the contract must be done in
writing.
21. Force Majeure: This boilerplate clause is often used to
expand the list of excuses of performance by including nonforce majeure events. Do not do this and always read this
clause carefully looking for ringers that dont belong here.
22. Administrative & Regulatory Compliance; US parties
should reference appropriate US laws. Include a general
statement that neither party will do any act under the
agreement that might be in violation of applicable laws in
either country. Always determine the extent to which the
subject matter of your contract is subject to administrative
or regulatory compliance; then make sure your contract and
performance comply.
23. Sovereign Immunity: Know whether you are dealing
directly or indirectly with a foreign government. If you are,
determine whether there is a written government claims
process in that country. If not, you will have to bargain for a
waiver of sovereign immunity (and good luck).
24. Governing Law & Language: Always specify the law that
governs the contract (i.e., UCC or UNCISG or Swiss law, etc.).
If the contract is written in more than one language, a
primary language governing the contract for interpretation
purposes must be specified.
25. Dispute resolution. Always specify a process for
mediation and, if mediation is unsuccessful, binding
arbitration to resolve disputes. Consider making the venue

for dispute resolution an attractive neutral location. Avoid

specifying expensive tribunals like AAA or ICC as the
provider of dispute resolution services.