Nüfle Tételek
1. Please define the interests, rights and obligations of a seller in a contract of
international sales!
Maybe most of his interest starts at General Principles of contracting where the
sellers aim to act in good faith which doesn’t disregard justifyable interest of others.
Cooperation takes place within sellers and buyers, there could be several losses &
damages and risks that they have to take into consideration. All the risks have to be
in balance to lead to the exchange of same values. There are also many obligations
that the seller has to take these are the following:-must deliver goods that are free
from any defence right, claim of a third party, -must deliver the goods of the agreed
quantity, quality should be packed in the required manner, - must transfer the title
to the goods, by transferring of the documents of title. –must hand over all
documents that are required to enable the buyers to have the right of disposition
upon the goods.-must provide proper information relating to the proper use of
goods. – must provide & send sufficient notices to enable the buyer to prepare the
payment to contract for the carriage. –arrange proper insurance. –taking over goods.
–let the goods to be inspected, -to finance the cost of documents, -attached to the
goods for transportation, -to apply for the export customs clearance, -to provide
evidence on the quality of goods, -to send sufficient notices regarding to the ETA
estimated time arrival, -
2. Please define the interests, rights and obligations of a buyer in a contract of
international sales!
Maybe most of his interest starts at General Principles of contracting where the
sellers aim to act in good faith which doesn’t disregard justifyable interest of others.
Cooperation takes place within sellers and buyers, there could be several losses &
damages and risks that they have to take into consideration. All the risks have to be
in balance to lead to the exchange of same values. There are also many obligations
that the buyer has to take these are the following: -must take over the goods as to
CISG, that conform to the contract, goods in conformity. – must pay. –must provide
notices regarding specification. – the buyer specify the goods like quality ,quantity
,handing over, labeling, packaging where is it originating from… - must control,
check or inspect the goods as to let a professional company inspect (measure it,
count it, depends on quality requirements).- To commit a bank to issue a
documentary credit, - to appoint a bank to issue a payment guarantee, -to enable/ to
repair of defective goods, -to apply for custom clearance procedure in order to
obtain domestic status, - to Check the quantity of goods before discharging, -to let
the replacement of defective goods, -to provide information on national labeling
requirements, - -to send the notices relating to the required form, manner or
material of packaging
3. Please define the interests, rights and obligations of a distributor in a contract
of international sales!
Intermediary, acts on its own behalf,and for the acconunt of his own and at the risk of
his own have to bear all the costs.
It is in the middle of the commercial chain, buys from foreign seller the property rights
of the goods, resells it to domestic customers. Creates revenue, profit margin, all the
responsibility is his. Represents a manufacturing company, sells the goods of the
manufacturer, not independent. The manufacturer defines: prices, exhibition places,
advertising, minimum quantity of goods to be reselled year by year.
Legal entity, contract of appointment and contract of sale.
Responsible for after-sale service, product liability, credit-risk of end buyer
diff between distributor and re exporter and re seller: distributor buys and resells
functions in his own country. re exporter/ seller: is a company buys foreign goods and
resells internationally.
contract of sales: manufacturer has negoitiating power and terms and conditions
general for all distributor of that manufacturer, distributor cannot send back not sold
product to manufacturer. if manufacturer introduces new product and final customer
doenst want to buy old ones it is the distributors risk. and distributor can through out..
set up for all transactions between all parties can be a contract of sale between
distributor and manufacturer, and a contract of sale between distributor and customer.
Distributors make money by differences between the wholesaler price and retail price
and its called mark up. Method of payment can be after delivery or 14-30 days.
Geographical exclusivity means: distributor can only sell to the country which it is
contracted to however if it is breaches the contract is still worth it.
4.Please define the characteristics of the contracts of counter-trade (types, risks,
mitigation-tools for risks)!
Relatively long-term contractual arrangement, the goods and services are paid by other
goods and services.
Reasons: restriction of payment (importer cannot pay), the importer’s home currency is
weak, exporter/importer hasn’t got money/credit line
General: lack of convertible currency, limited use of money, government level at-times ,
international or private contractual agreements can be 2 or more legs( bilateral- goods and
services exchanged by goods and service full or by part). can take place separatedly or
dependently. title of goods transferred simultaneously.
Types:
Barter: the seller gets goods in exchange for its goods in full. public or private exchange of
goods by no use of money at all, sometimes not equal value if one is not concious of market.
based on clearing arrangement ( in balance ) can be bilateral or multilatelar. difficulties in
customs procedure and pricing
Compensation: part of the value is paid by goods the other part is paid by money (the
barter is a 100% compensation). The full value is defined in currency to fulfill
administrative requirements.
Buyback: the seller will be paid by goods manufactured by the equipment sold by him.
Long-term (25 years or more), the seller provides maintenance services in the full length of
the contract. Buyer usually governmental body, the deal happens in form of a tender.
Intergovernmental arrangement for extreme high value and long term. Legs: Term-key
project, technology transfer versus products manufactured by the industrial facility in part
or full. Backed by long-term governmental credits (subsidies and guarantees)
Counter purchase: the seller is obligated to buy back from goods listed by the buyer, if he
wants to sell. being authorized to sell-> is obliged to buy.
offset trade: government agreements of large value involving private companies.: the seller
is obligated to buy and to build up new markets for products of the buyer. Typically military
aircrafts, deal is between governmental bodies.
Legs: military scale in general versus investments, purchase of domestic product, creating
market for domestic product, or intensifying manufacturing in domestic countries.
direct & indirect: direct : government that purchases inforces joint ventures to invest in
country. indirect: obligation of government is to create market in country which the
product is coming from.
Risks:
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Transport-related risks
Legal risks
Political risks
Force majeure = Ats of God
Financial risks
Market risks
Administrative risk
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Political risks → it is a mix of risk categories, such as
 nationalization
 currency inconvertibility
 regulatory and tax risks
In general banks have a continuing review process of country risk based on evaluation
of the political and economic outlook. EXIM Banks are willing to take some degree of the
political risk for certain countries. Some of these risks can be covered by governmentsponsored export credit agencies → organizations (like the OPIC for U.S companies).
The risk of currency inconvertibility is usually due to arbitrary government action
caused by serious balance of payment problems (which may/should have been
identified in the country-economic analysis process).
 non-government political activists (unions, environmentalist, land lowers);

the development agreements/projects with government (agencies) can be subject to
direct change, cancellation or to the exercise of other government power.
Mitigation,Supports, which are available:
 concession agreement;
 political risk insurance;
 tax indemnification;
 off-shore payment agent, proceeds account;
 local national participation;
 counter-trade
Some elements of the political risk group may be included in “force majcure” risk → both
the construction, both the operating phases such as strike or unavoidable delay.
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Engineering Risk → can arise from poor professional advice.
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Completion Risk
 the constructor has to finish the project on time (at a specified/certain date)
 at budget
 the completion test has to result in specified values.
Mitigation,Supports, which are available:
 completion guarantee
 completion undertaking
 overrun undertaking
 default agreement
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Supply Risk
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Market Risk (it can be defined by its prime characteristics of price and sales volume):
 occurs, when:
 the sales price falls;
 the market share drops;
 a demand for project reduces/ceases;
 sales are lost due to deteriorating
 quality of the projects facilities
 the best coverage comes from long-term contracts extending beyond the end of loan
life;
 the competitive position has to be examined in detail → because of monopoly on
technical links (if there is a technical link to industrial consumers → it is deemed
highly desirable).
Mitigation,Supports available:
 advanced sales (f.o.b. sales contracts)
 buy-back clause
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throughput guarantees
government commitments
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Environmental Risk and its mitigation tool:
 rehabilitation guarantee
 environmental insurance
Environmental compliance with the local regulations. (more information is available
http:///iaf.au.com)

Consultants and Engineering companies set a feasibility study as well → (with an
accuracy of  5-20 % depending on the depth of the analysis) → which is a “bank-able”
document → which is adequate to attract investors and financiers.
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Risk categories → in an infrastructure project are as follows:
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operating risk ( = production / performance risk) → has interrelated components
(technical + management + costs)
The ability to achieve the desired operating rate → depends on the engineering,
experience and quality of staff.
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technical component
 as a general rule → know and proven technology
 the plant / project life is twice the funding life
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technology guarantee
technology warranty
technology insurance
quality assurance
fleet assurance
business interruption insurance
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cost risk component: on the basis of total and operating costs:
 cost guarantee
 cost waivers

management component:
 management agreements;
 key-man insurance;
 labor contracts;
 training agreements
Foreign Exchange Risk → the best hedge is to match the loan currency to the
(underlying) currency in which the price / tariff is set.
The further step is to match equipment purchases to the sales revenue currency.
Structures, that can be applied here: hedging, swaps, barter
Legal Risks:
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The burden of legal documentation (the risk share among the lenders, insurers,
governments, buyer and sponsor).
There is some risk that professional advisers or solicitors/lawyers will create risks
in the document, which can affect the tax position, enforcement.
The risk of professional advisers creating unworkable, faulty or unenforceable
documentary structure is difficult to mitigate.
5. Please define the characteristics of the bill of exchange! (Types, risks, fields
of use ;)
Bill of Exchange is an order to the other party to make a payment, is an unconditional
payment order, classified by the usage of documentary collection as a financial document. It
might be a security tool, it has to fulfil strict formal requirements to be valid.
Characteristics: it must be written, must be signed, parties must be certain, it must be
stamped, must contain an order to pay, it must be accepted by the party.
The following types of bill of exchange can be managed in and posted to the Accounts
Receivable (FI-AR) and Accounts Payable (FI-AP) application components:
_ Bills of Exchange Receivable
_ Bank Bills and Bills of Exchange Payment Requests
_ Bills of Exchange Payable
_ Check/bill of exchange in Accounts Receivable (reverse bill of exchange)
_ Check/bill of exchange in Accounts Payable (reverse bill of exchange)
-Promissory note:
6. Please define the characteristics of the bill of lading! (Types, risks, fields of
use ;)
A document signed by a carrier (a transporter of goods) or the carrier's representative and
issued to a consignor (the shipper of goods) that evidences the receipt of goods for
shipment to a specified designation and person.
Carriers using all modes of transportation issue bills of lading when they undertake
/responsible for the transportation of cargo. A bill of lading is, in addition to a receipt for
the delivery of goods, a contract for their carriage and a document of title to them. Its terms
describe the freight for identification purposes; state the name of the consignor and the
provisions of the contract for shipment; and direct the cargo to be delivered to the order or
assigns of a particular person, the consignee, at a designated location.
There are two basic types of bills of lading. A straight bill of lading is one in which the
goods are consigned to a designated party. An order bill is one in which the goods are
consigned to the order of a named party. This distinction is important in determining
whether a bill of lading is negotiable (capable of transferring title to the goods covered
under it by its delivery or endorsement). If its terms provide that the freight is to be
delivered to the bearer (or possessor) of the bill, to the order of a named party, or, as
recognized in overseas trade, to a named
7. Please define the characteristics and function of the D/A direct and indirect
documentary collection! (Types, risks, fields of use ;)
The documents attached to the draft (bill) drawn by the exporter and needed to obtain, goods are
deliverable to the importer only after he/she has accepted the draft for payment later.
Documents against acceptance (D/A) The presenting bank may only release the
documents against the buyer’s acceptance of a bill of exchange/draft with a specific due
date/time. The seller thus grants the buyer a period of grace for payment and in return
receives a draft accepted by the drawee as security, which he can redeem at maturity. The
seller thus bears the risk of non-payment until the draft matures. As in the case of
documentary credits, it is very important to specify “documentary collection” as a payment
condition during the contract negotiations and to stipulate this condition in the sales
contract.
8.
Please define the characteristics and function of the documentary-credit!
(Types, risks, fields of use ;)
The documentary credit is an instrument that serves to mitigate the risks coming
within international business both on the buyer’s and the seller’s side. It still is
the most effective and commonly used instrument to secure international
commercial transactions. A documentary credit represents a bank’s contractual
commitment to pay on behalf of the buyer, within a fixed period of time, in favour of
the seller, upon presentation of exactly prescribed documents which must satisfy the
requirements of the documentary credit.
Seller’s advantage
The payment on the part of the issuing bank is not linked to the underlying
transaction and takes place against presentation of the proper documents.
Therefore, the seller does not depend on the buyer’s solvency and/or willingness
to pay.
Buyer’s advantage
As the applicant of the documentary credit, the buyer has the option to prescribe/state
the type and content of the documents that need to be presented (e.g. invoice,
proof of transport, proof of insurance, etc.), depending on the type of the
underlying transaction. The seller can be certain that payments in the context
of the documentary credit will only be made if the documents are in conformity
with the required terms.
International trade procedure in which the credit worthiness of an importer is
substituted by the guaranty of a bank for a specific transaction. Under documentary
credit arrangement (also called letter of credit arrangement) a bank (usually in the
importer's country) undertakes to pay for a shipment, provided the exporter
submits the required documents (such as a clean bill of lading, certificate of
insurance, certificate of origin) within a specified period. In the US this arrangement
is called 'commercial letter of credit.'
Principles: -principal of independence ( independence separated nature of banks
undertaking pay)-strict compliance ( issuing bank that has undertaken to pay
compare the data letter by letter)- exception of road(if someone forced someone,
there is a clear evidence on fraud only a court can deny the payment, so bank has no
right to reject the payment if the document seemed to be original.)
9. Please define the characteristics and function of the dependent personal
security! (Types, risks, fields of use ;)
Methods of payment depending on the control of the buyer:
 Documentary collections;
 Documentary credit;
 Surety-ship (personal security)
 Open account trade ( wire transfer)
Because the methods of payment in international trade are based on documents, the
questions that must be answered are:
whether or not the documents described by the method of payment are available at all, or at
the proper time; (to the latest date of expiry date)
Open account
the least safe method;
 The exporter ships the goods to the order/to the business place of the buyer and
transmits the documents, too.
 The importer must pay later, at an agreed date by wire transfer.
 It presumes the absolute confident in the buyer credit-worthiness.
 It presumes the stable market of the goods.
Documentary collection
 At first it must be distinguished from the clean collection=open account trade and
from the normal collection ruled by the national law; ( by the tax revenue authority)
 It means a certain burden to get into the possession or the ownership of the goods
by the buyer without payment to the seller;
 It has got two types:
1. D/P=
2. D/A=
documents against payment;
documents against acceptance;
It can be divided into two main categories:
 Indirect or “spediteur” doc. Collection;
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 Direct or bank-collection;
Advantages:
 The procedure is relatively easy and inexpensive;
 In case of the indirect collection, the control over the goods can be preserved until
the payment of full amount;
 The buyer is not obliged to pay until he has got the opportunity to inspect the
documents. (not the goods!)
Disadvantages:
 The collection will be paid by the seller, who takes the risk of no-show and nonpayment of the buyer;
 The forwarding agent (=spediteur) can permit the buyer to inspect the goods or to
take sample of it or he gives out the goods without the bank-certification of payment;
 The costs of back-delivery and storage must be paid by the seller, if the buyer
doesn’t shows up;
 After the expiry date of storage at the public auction the buyer can get the goods at
25% of the original price;
The working model of the DOC
2.
Forwarding
Agent
9.
Oblige of
payment/
Seller/exporter
Obligor of
payment/Buyer
Importer
10.
1.
3.
8.
Collecting
bank
5.
4.
7.
6.
Presenting
bank
1. The contracting parties conclude a sale of contract, which determines the
documentary credit as a method of payment;
2. The seller transports the goods to a reliable forwarding agent with a strict
instruction, not to give out the goods until the buyer presents a statement of
payment, issued by the bank;
3. The seller manages his bank to collect the price of the goods;
4. The seller’s bank as collecting bank on the behalf of, at the risks and costs of the
seller causes its corresponding banking relationship (presenting bank) to contact the
buyer for arranging the payment; (D/A or D/P)
5. The presenting bank calls the buyer for performance;
6. If the buyer pays, the bank gives out the required statement of the payment;
7. The presenting bank transfers the amount of purchase;
8. The collecting bank transfers it towards to the seller;
9. The goods will be handed over by the forwarding agent to the buyer;
Documentary credit
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The principle of independence:
o The terms of a credit are independent of the underlying transaction even if a
credit expressly refers to that transaction.
o The banks are no way concerned or bound by the contract concluded by the
applicant or by contracts of any type, even if any reference to such contracts
is included;
o LOCs are by their nature separate transaction from the sales or other
contracts (such as reimbursement contract);
o The banks are dealing only with documents;
o They are obliged to examine the documents required by the LOC, on their face
to decide whether or not they are in a strict compliance with the terms and
conditions of the LOC, and whether or not they are obliged to pay;
 The dependence on documents:
The compliance of the demand of the beneficiary depends on the documents, required by
LOC;
The banks must examine all documents stipulated by the LOC with reasonable care,
(international banking standards app. 500 identified problems) to ascertain whether or not
they appear on their face to be in compliance with the terms and conditions of the LOC;
To avoid unnecessary costs, delays, and disputes in the examination of documents,
however, the applicant and beneficiary should carefully consider which documents should
be required, by whom they should be produced and the time frame for presentation.
The instruction for the required documents origins from the applicant, so the applicant is
likely to have some dominance on the LOC;
Principle of fraud exception: Case of Sztejn v. Schroeder
Actors of the documentary credit
Advising bank means the bank that advises the credit at the request of the issuing bank.
Applicant means the party on whose request the credit is issued.
Banking day means a day on which a bank is regularly open at the place at which an act
subject to these rules is to be performed.
Beneficiary means the party in whose favour a credit is issued.
Complying presentation means a presentation that is in accordance with the terms and
conditions of the credit, the applicable provisions of these rules and international standard
banking practice.
Confirmation means a definite undertaking of the confirming bank, in addition to that of
the issuing bank, to honour or negotiate a complying presentation.
Confirming bank means the bank that adds its confirmation to a credit upon the issuing
bank’s authorization or request.
Credit means any arrangement, however named or described, that is irrevocable and
thereby constitutes a definite undertaking of the issuing bank to honour a complying
presentation.
Honour means:
 to pay at sight if the credit is available by sight payment. to incur a deferred payment
undertaking and pay at maturity if the credit is available by deferred payment.
 to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if
the credit is available by acceptance.
Issuing bank means the bank that issues a credit at the request of an applicant or on its
own behalf.
Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other
than the nominated bank) and/or documents under a complying presentation, by
advancing or agreeing to advance funds to the beneficiary on or before the banking day on
which reimbursement is due to the nominated bank.
Nominated bank means the bank with which the credit is available or any bank in the case
of a credit available with any bank.
Presentation means either the delivery of documents under a credit to the issuing bank or
nominated bank or the documents so delivered.
Presenter means a beneficiary, bank or other party that makes a presentation.
Discrepant Documents, Waiver and Notice
When an issuing bank determines that a presentation does not comply:
 It may refuse the payment; or
 it may in its sole judgment approach the applicant for a waiver of the discrepancies.
This does not, however, extend the period of 5 working days;
If it refuses the payment, the bank is obliged to give a notice that must state:
 each discrepancy in respect of which the bank refuses to honour or negotiate;
 whether or not it holds the document at the disposal of the beneficiary;
Buyer, Importer
Applicant
Obligor of
payment; must
cause the bank to
open LOC;
1.
5.
2.
Issuing bank
promises the
payment; examine
the documents;
Honour or
dishonour; Contact
other banks;
Seller, Exporter
Beneficiary
Oblige of payment
Must present
demand with
documents;
4.
3.
7.
8.
6.
8.
Nominated bank
Confirming bank
Advising bank
Negotiating bank
paying bank,
acting in behalf of
the issuer
1. The contracting parties conclude a sale of contract, which determines the
documentary credit as a method of payment;
2. The buyer causes its bank to issue an irrevocable documentary credit ( in
German language: Akkreditiv) concurrently signing a reimbursement agreement
with the bank, giving the required deposit to it; (cash, mortgage, promissory
note)
3. The issuer will open the LOC in favour of the beneficiary, sending it as a SWIFT
message to its corresponding bank relationship, and manages it to give an advice
about the issuing about the LOC. That is the point, when the LOC separates from
the underlying transaction, from which the bank must performance his own
obligations, disregarding any rights and obligations originating from the sale
contract;
4. The beneficiary will be advised about the terms and conditions of the LOC,
especially about the expiry date, the documents must be presented, the place of
presentations, date of delivery or sipping, the maximum amount of the LOC,
whether partial shipment is allowed or not, whether the LOC is transferable or
not. (Etc. app. Up to 20 different requirements; )
5. The seller transports the goods to the place of business or at the disposal of the
buyer, according to the agreed terms of INCOTERMS;
6. The seller presents its demand for payment by attaching the required documents
through the advising bank;
7. The advising bank sends the demand and the documents to the issuer, which will
examine and control them on their face, constituting whether or not they are in
strictly compliance with the terms of LOC;
8. In case of strict compliance the issuer pays, through the advising bank,
independently of the fact that there were no goods, or the goods have never
arrived (theft on the sea), or the goods were injured during the transportation,
or there is a non-compliance of the seller. In that case the buyer must sue the
seller.
10. Please define the characteristics and function of the independent personal
security! (Types, risks, fields of use ;)
Methods of payment can be divided into two main categories:
 Independent payment devices;
 Dependent payment devices;
Independent payment devices are ruled by the principle of independence→ the
payment is separate form the ability, readiness and willingness of the buyer and will
realised at the agreed time, disregarding any other events, especially the will of the
buyer:
 Bill of exchange, banker’s draft, promissory note;
 Bank-guarantees; ( independent personal security)
 Payment in advance;
 Trust agreements;
Payment in advance
 On one hand:
o the supplier has serious doubts about the creditworthiness of the buyer;
o the supplier has serious doubts about the political, economic or legal
stability of the buyer’s country;
 On the other hand: the importer takes a serious risk concerning non-compliance
of the seller;
 It works in case of high reputation of the exporter; (“too big to fall or to fail”);
 It is used to finance a production after special patterns;
 It is secured by advance payment guarantee;
Bill of exchange
 Is an unconditional order;
 in writing addressed by one person to another;
 signed by the person giving it requiring the person, whom its is addressed to pay
on demand or at a fixed (or determinable future time);
 a sum certain in money;
 to or to the order of a specified person (or the bearer);
 the compulsory content elements are fixed by the law, alterations make the bill
of exchange null and void;
The drawer: the person, who draws the bill (exporter)
The drawee: the person to whom the bill is addressed;
The payee: the person to whom payment is made (the drawer can be, too)
The acceptor:
the drawee, who accepts its paying obligation, signing his name
on/across the bill;
The holder in due course:
the person, who gets the bill in good faith, giving value for it, and who did not know, or
ought not to have known that the bill is forged or originates form a fraudulent
transactions;
His demand is without any claim of any third party;
The holder must prove that he acted in good faith, gave value;
Acts of bill of exchange
BEA 1882 (English)
UCC (American, Canadian, Australian)
Bill of exchange Act (Geneva) 1930 (European, Japanese, Russian)
11. What are the essential elements of a contract of international sale, in terms of
the quality of the commodity! (Legal requirements relating to it ;)
An international contact of sale is:
 a harmonizing manifestation of the will or
 a legally binding, clear and valid manifestation of the will
 of persons with adverse interests:
→
→
to perform services or to deliver goods on one hand and
to accept the performance or to receive the goods on the other hand;
2. 1. International sale contract is determined by
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The national law: according to the business place of the “strongest” party, or to
the most characterizing performance ( see: Rome Convention) or with special
regard to regulations on tariffs and duties, of foreign exchange regulations and
civil + commercial codes;
International agreements or treaties such as CISG (Vienna Convention on
Contract for the International Sale of Goods) to the explicit choice of contracting
parties;
International trade usages such as Incoterms UCP, URDG, ISP 98 etc;
The international sale contract is an agreement:
→ of entities (legal or personal) of their own level;
→ of exchange of goods and services of the same value;
The performance of one contracting party must be compensated by the other giving
equal value for it → that keeps the balance of the contract, by identifying the
rights and obligations.
Each commercial contract might be divided into three main parts:
 Precise description of goods or services to be performed;
 Pricing in compliance with the terms of INCOTERMS;
o → that clearly allocate the costs and risks of international transport;

o →That expressly define the insurance responsibilities under the term
(CIP, & CIF);
o →That definitely determine the tasks to manage the customs formalities;
Forming the payments conditions;
These key chapters of an international contract of sale are to be built on each other, they
are in full interdependence with each other, and thereby they determine each other.
Each contract “begins” by making an offer, which:
 is intended to result in a contract if the other party accepts it, and it should
 contain sufficiently determined terms to form and to conclude the contract;
 it may be made to one or more specific persons or to the public as well;
 it is a binding legal statement;
A proposal to supply goods or services at stated prices made by a professional supplier
in a public advertisement or a catalogue, or by a display of goods, is presumed to be an
offer to sell or supply at that price until the stock of goods, or the supplier's capacity to
supply the service, is exhausted;
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The name, business place, the tax number, the contact partner of the seller;
The name, business place, the tax number, the contact partner of the buyer;
Description of the goods by tariff numbers and by individual names or numbers;
Quantity of the goods;
Quality of the goods; (referring to samples, CE, EN, ISO patterns etc.)
Quality of Performance
If the contract does not specify the quality, a party must tender performance of at
least average quality.



Mode and art of packaging;
Price of the goods with INCOTERMS, in the given foreign exchange;
Delivery date or time;
Time of Performance
A party has to effect its performance:
 if a time is fixed by or determinable from the contract, at that time;
 if a period of time is fixed by or determinable from the contract, at any
time within that period unless the circumstances of the case indicate that
the other party is to choose the time;

Delivery place;
Place of Performance
If the place of performance of a contractual obligation is not fixed by or
determinable from the contract it shall be:
 in the case of an obligation to pay money, the creditor's place of business
at the time of the conclusion of the contract;
 in the case of an obligation other than to pay money, the debtor's place of
business at the time of conclusion of the contract.









Delivery conditions;
Transfer of risks and property rights;
Inspections of goods;
Documents that must be attached;
Assignments of rights;
Warranties, guarantees;
Method of payments;
Securities; (bank guarantees, surety bonds ;)
Remedies; (such as performance, delivery of substitute goods, price reductions,
compensatory damages)
The ruling law;
The choice of forum;


12. Please define the following delivery terms, with special regard to their
inherent risks!
EXW, FOB, DAP!
EXW
Meaning: Ex Works (...named place)
Usage: Minimum obligations on seller
Incoterms provides the following explanation:
<<Ex works>> means that the seller delivers and fullfills his obligation when he places
the goods at the disposal (elrendezés) of the buyer at the seller's building or another
named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded
on any collecting vehicle. This term thus represents the minimum obligation for the
seller, and the buyer has to bear all costs and risks involved in taking the goods from the
seller's premises/building. However, if the parties wish the seller to be responsible for
the loading of the goods on departure and to bear the risks and all the costs of such
loading, this should be made clear by adding explicit wording to this effect in the
contract of sale. This term should not be used when the buyer cannot carry out the
export formalities directly or indirectly. In such circumstances, the FCA term should be
used, provided the seller agrees that he will load at his cost and risk.
This term, when used in an international export transaction, is the closest term to an ordinary
transaction in the Australian domestic market. This is because the term requires the overseas
buyer or the buyer's agent to collect the goods from the seller's works, factory, warehouse or
store.
FOB (...named port of shipment)
Meaning: Free On Board
Usage: Sea and inland waterway transport only.
Where the ship's rail serves no useful purpose such as for roll-on/roll-off and container
transport the FCA term is more appropriate.
Incoterms provides the following explanation:
<<Free on Board>> means that the seller delivers and fulfils his obligation when the
goods pass the ship's rail on board at the named port of shipment. This means that the
buyer has to bear all costs and risks of loss of or damage to the goods from that point.
The FOB term requires the seller to clear the goods for export. This term can be used
only for sea or inland waterway transport. If the parties do not intend to deliver the
goods across the ship's rail, the FCA term should be used.
This term means that all charges incurred up to and including the delivery of the
goods on board ship are to the seller's account while the buyer has to pay all
subsequent charges such as stowage of the goods on board ship.
FOB contracts and risk
Under an FOB contract the risk of damage to the consignment passes from the seller to the
buyer when the goods are shipped. However, difficulties arise under sale of goods legislation
unless the goods are "ascertained goods".
D Terms – Arrival group
DAP (.Delivered at place) no unloading
Seller delivers and fulfils his obligation when the good are placed at the disposal of the buyer
on the arriving ship means that transport ready for unloading at the named place of
destination. Parties are advised to specify as clearly as possible the point within the agreed
place of destination, because risks transfer at this point from seller to buyer. If the seller is
responsible for clearing the goods, paying duties etc., consideration should be given to using
the DDP term.
Responsibilities





Seller bears the responsibility and risks to deliver the goods to the named place
Seller is advised to obtain contracts of carriage that match the contract of sale
Seller is required to clear the goods for export
If the seller incurs unloading costs at place of destination, unless previously agreed
they are not entitled to recover any such costs
Importer is responsible for effecting customs clearance, and paying any customs
duties
13. Please define the following delivery terms, with special regard to their
inherent risks! Please define the documents and their right issue!
CIF, DAT, FAS!
1.1 CIF (...named port of destination)
Meaning: Cost, Insurance and Freight 2 pointed-exporter and importer’s risk & cost is at diff
places. – seller paying for main carriage, insurance, but the importeré a risk attól hogy
onboardon van a cargo.
Usage: Sea and inland waterway transport only. Where the ship's rail serves no useful
purpose such as for roll-on/roll-off and container transport the CIP term is more appropriate.
Incoterms provides the following explanation:
<<Cost, Insurance and Freight>> means that the seller delivers when the goods pass
the ship's rail in the port of shipment.
The seller must pay the costs and freight necessary to bring the goods to the named port
of destination BUT the risk of loss of or damage to the goods, as well as any additional
costs due to events occurring after the time of delivery, are transferred from the seller to
the buyer. However, in CIF the seller also has to procure: marine insurance against the
buyer's risk of loss of or damage to the goods during the carriage.
Consequently, the seller contracts for insurance and pays the insurance premium. The
buyer should note that under the CIF term the seller is required to obtain insurance only
on minimum cover. Should the buyer wish to have the protection of greater cover, he
would either need to agree as much expressly with the seller-exporter or to make his
own extra insurance arrangements.
The CIF term requires the seller has to clear the goods for export.
This term can be used only for sea and inland waterway transport. If the parties do not
intend to deliver the goods across the ship's rail, the CIP term should be used.
This is a type of contract which is more widely and more frequently in use than any
other contract used for purposes of seaborn commerce. An enormous number of
transactions, in value amounting to untold sums, is carried out every year under CIF
Contracts.
The obligations imposed on the seller under a CIF Contract are well known, and in the
ordinary case, include the tender of a Bill of Lading covering the goods contracted to be
sold and no others, coupled with an insurance policy in the normal form and
accompanied by an invoice which shows the price and, as in this case, usually contains
a deduction of the freight which the buyer pays before delivery at the port of discharge.
Against tender of these documents the purchaser must pay the price. In such a case the
property may pass either on shipment or on tender, the risk generally passes on
shipment or as from shipment, but possession does not pass until the documents which
represent the goods are handed over in exchange for the price. In the result, the buyer,
after receipt of the documents, can claim against the ship for breach of the contract of
carriage and against the underwriters for any loss covered by the policy. A strict form of
CIF Contract may, however, be modified. A provision that a delivery order may be
substituted for a Bill of lading or a Certificate of Insurance for a policy would not, I
think, make the contract be concluded on something other than CIF terms.
The delivery of the Bill of lading is of great importance when the goods are lost in transit but
the shipping documents have been delivered.
There are a number of shipping documents which are important to a CIF transaction:
1
A clean Bill of Lading;
2
A marine Insurance policy;
3
The commercial Invoice.
DAT: unloading
Seller delivers and fulfil its obligations when the goods, once unloaded from the arriving
means of transport, are placed at the disposal of the buyer at a named terminal at the named
port or place of destination. "Terminal" includes quay, warehouse, container yard or road, rail
or air terminal. Both parties should agree the terminal and if possible a point within the
terminal at which point the risks will transfer from the seller to the buyer of the goods. If it is
intended that the seller is to bear all the costs and responsibilities from the terminal to another
point, DAP or DDP may apply.
Responsibilities





Seller is responsible for the costs and risks to bring the goods to the point specified in
the contract
Seller should ensure that their forwarding contract mirrors the contract of sale
Seller is responsible for the export clearance procedures
Importer is responsible to clear the goods for import, arrange import customs
formalities, and pay import duty
If the parties intend the seller to bear the risks and costs of taking the goods from the
terminal to another place then the DAP term may apply
1.2 FAS (...named port of shipment)
Meaning: Free Alongside Ship
Usage: Sea or inland waterway transport only
Incoterms provides the following explanation:
<<Free Alongside Ship>> means that the seller delivers when the goods are placed
alongside the vessel at the named port of shipment. This means that the buyer has to
bear all costs and risks of loss of or damage to the goods from that moment.
The FAS term requires the seller to clear the goods for export.
This term contains rights and obligations which are not contained in a domestic contract.
An important characteristic is that the actual loading of the goods over the ship's rail is the
buyer's obligation and at the buyer's cost. The seller has to place the goods near the ship's
anchorage, and where the ship cannot enter a port, has to provide and pay for lighters which
will take the consignment alongside the ship, unless the contract provides for delivery "free
on lighter".
The buyer also has the obligation of nominating a suitable ship under an Fas contract
(similarly a strict FOB contract) unless other arrangements have been made:
Where an export license is required, similar considerations apply as under an FOB contract,
and the parties will normally expressly, or by implication, agree that any export license shall
be provided by the seller. Where the contract does not expressly provide that in writing, the
implication arises as the contract is an export contract and the parties will normally be aware
of regulations requiring an export license.
14. Please define the principles of the documentary-credit and their interdependence
with the documents!
Documentary credit: The documentary credit is an instrument that serves to
mitigate the risks coming within international business both on the buyer’s and
the seller’s side. It still isthe most effective and commonly used instrument to
secure international commercial transactions. A documentary credit represents a
bank’s contractual commitment to pay on behalf of the buyer, within a fixed
period of time, in favour of the seller

The principle of independence:
o the buyer’s promise to pay is completely independent of the underlying of the
delivery of goods
o The banks are no way concerned or bound by the contract concluded by the
applicant or by contracts of any type, even if any reference to such contracts is
included;
o
o
o

LOCs are by their nature separate transaction from the sales or other contracts (such
as reimbursement contract);
The banks are dealing only with documents;
They are obliged to examine the documents required by the LOC, on their face to
decide whether or not they are in a strict compliance with the terms and conditions
of the LOC, and whether or not they are obliged to pay;
The dependence on documents:
o The compliance of the demand of the beneficiary depends on the documents,
required by LOC;
o The banks must examine all documents stipulated by the LOC with
reasonable care, (international banking standards app. 500 identified
problems) to ascertain whether or not they appear on their face to be in
compliance with the terms and conditions of the LOC;
o To avoid unnecessary costs, delays, and disputes in the examination of
documents, however, the applicant and beneficiary should carefully consider
which documents should be required, by whom they should be produced and
the time frame for presentation.
o The instruction for the required documents origins from the applicant, so the
applicant is likely to have some dominance on the LOC;
15. Please define the characteristics and function of the D/P direct and indirect
documentary collection! (Types, risks, fields of use ;)
Documentary collection = Documents against Payment= at sight payment
- The debiting will take place against documents, without acceptance of
attached, forwarded document to the goods.

Documentary collection (more secure for buyer and to a certain extent to seller)
Also called "Cash Against Documents". Subject to ICC's URC 525, sight and us acne, for
delivery of shipping documents against payment or acceptances of draft, where shipment
happens first, then the title documents are sent to the [collecting bank] buyer's bank by
seller's bank [remitting bank], for delivering documents against collection of
payment/acceptance



-
Buyer gives real money in exchange for the documents
Then the documents to the order of the bank should be transferred to the order of the
buyer
The buyer takes a look at the documents, and pays immediately (D/P = at sight)
It can be divided into two main categories:
 Indirect or Forwarder’s doc. Collection;
 Direct or bank-collection;
Seller/Exporter/Supplier
(Principle) and Applicant
2.
1.
.
Buyer/Importer/Purchaser
3.
6.
8.
.
.
Remitted Bank (taking over
the doc. and forwarding)
(Seller’s Bank)
5.
7.
.
4.
.
Presenting Bank
Collecting Bank
(Buyer’s Bank)
.
.
1. Conclusion of the contract
2. Forwarder performs -> sends the goods to the address of the buyer
Documents:
1. Commercial papers: Commercial invoice; doc. issued by the seller (eg.
Packing list, weight list, CE statement, different type of transp. Doc.
and B/L); Warehouse receive; certificate of origin, of quality or
inspection; any other doc. as to parties decisions.
2. Financial Documents: Bill of exchange; Check
3. Contract of appointment (contract of agency)
4. Connecting SWIFT message=> request for presentation and collection ->
corresponding banking relationship (choosing inform. with each other)
5. Request on visiting
6. Buyer visits (accepts the doc., permits the collection, takes over the doc.)
7. Doc. collection-> debited by the seller’s credit
8. Account will be credited
1. Commercial papers:
 Docs will be addressed to the buyer- buyer is the consignee=
the buyer has been consigned=> the place of destination
 To the order of the buyer – reflects the buyer’s dissertation, the
buyer’s right to dispose upon (entitled to take the goods over to
the carrier)
=Open Account Trade= all docs will be issued to the order of the address of the buyer. (It is a
great risk for the seller)
o Parent Companies are using this type of method of payment
o Docs will be addressed to the buyer, but to the order of the BANK(of the
Seller) -> when the money has been transferred to the seller’s bank, the docs
will be send to the buyer (the right of the docs)
16. Please define the following delivery terms, with special regard to their
inherent risks!
DDP, CPT, FCA!
1.3 DDP (...named place of destination)
Meaning: Delivered Duty Paid
Usage: All modes of transport
Incoterms provides the following explanation:
<<Delivered duty paid>> means that the seller delivers the goods to the buyer, cleared
for import, and not unloaded from any arriving means of transport at the named place
of destination. The seller has to bear all the costs and risks involved in bringing the
goods thereto including, where applicable92/, any "duty" (which term includes the
responsibility for and the risks of the carrying out of customs formalities and the
payment of formalities, customs duties, taxes and other charges) for import in the
country of destination.
Whilst the EXW term represents the minimum obligation for the seller, DDP represents
the maximum obligation.
This term should not be used if the seller is unable directly or indirectly to obtain the
import licence.
However, if the parties wish to exclude from the seller's obligations some of the costs
payable upon import of the goods (such as value-added tax: VAT), this should be made
clear by adding explicit wording to this effect in the contract of sale.
If the parties wish the buyer to bear all risks and costs of the import, the DDU term
should be used.
This term may be used irrespective of the mode of transport but when delivery is to take
place in the port of destination on board the vessel or on the quay (wharf), the DES or
DEQ terms should be used.
1.4 CPT (...named place of destination)
Meaning: Carriage Paid To
Usage: All modes of transport, including combined transport
Incoterms provides the following explanation:
<<Carriage paid to..>>means that the seller delivers the goods to the carrier
nominated by him but the seller must in addition pay the cost of carriage necessary to
bring the goods to the named destination. This means that the buyer bears all risks and
any other costs occurring after the goods have been so delivered.
"Carrier" means any person who, in a contract of carriage, undertakes to perform or to
procure the performance o I transport, by rail, road, air, sea, inland waterway or by a
combination of such modes.
If subsequent carriers are used for the carriage to the agreed destination, the risk
passes when the goods have been delivered to the first carrier.
The CPT term requires the seller to clear the goods for export.
1.5 FCA (...named place)
Meaning: Free Carrier
Usage: All modes of transport, including combined transport
Incoterms provides the following explanation :
<<Free Carrier>> means that the seller delivers the goods, cleared for export, to the
carrier nominated by the buyer at the named place. It should be noted that the chosen
place of delivery has an impact on the obligations of loading and unloading the goods
at that place. If delivery occurs at the seller's premises, the seller is responsible for
loading. If delivery occurs at any other place, the seller is not responsible for
unloading.
This is an important and frequently used container term based on the same principles as an
FOB clause except that the seller's obligation is to deliver the goods into the custody of the
carrier at the named place or port.
17. Please define the typical forms of the breach of a contract and the potential
remedies!
Breach of contract may take 5 forms:
– Mora debtors
– Mora creditors
– Repudiation
– Positive mal performance
– Prevention of performance
1. Mora debtors
- Occurs when performance is possible but debtor, who is aware that performance is
required, fails to perform on time.
- Requirements for a debtor to be in mora:
1. Performance due and possible
- Date for performance stipulated in contract (gives rise to mora ex re)
- No date stipulated: demand made by creditor (interpellatio) – gives rise to
mora ex persona
o Demand made by creditor must give debtor a reasonable time to
perform.
2. Obligation must be enforceable
- Creditor must have valid right to performance and debtor must have no
defence for non-performance.
2. Mora creditors
•
•
•
•
Occurs when creditor delays in giving assistance to debtor where this is required for
him to perform.
A creditor who obstructs performance is in mora if:
1. Performance is due
- If no time for performance has been agreed upon, the creditor must be
given reasonable notice to accept performance.
2. The debtor tenders proper performance
- Debtor must tender performance in terms of contract to creditor, who must
be given opportunity to accept it.
The creditor’s mora does not excuse the debtor from performing
When the creditor is in mora, she cannot argue that debtor’s failure to perform was
breach of contract
3. Repudiation
•
•
•
•
•
Occurs when a party, who has no lawful excuse not to perform, indicates an intention
not to perform some/ all duties under a contract.
Under certain circs, a party may lawfully repudiate.
– Eg. Misrepresentation, duress, material breach by other party.
Repudiation which occurs before due date for performance = “anticipatory breach”
For repudiation the debtor must notify the creditor that he will not be performing
under the contract.
– The debtor’s intention may be inferred from the facts.
Where repudiation is anticipatory, the creditor may seek remedies for breach
immediately, or wait for performance date.
4. Positive mal performance
•
•
Occurs when debtor performs, but performance is defective or contrary to terms of the
contract.
2 forms of positive malperformance exist:
– Debtor’s performance is incomplete or defective. (Positive obligation)
– Debtor does something which contract prohibits him from doing. (Negative
obligation)
5. Prevention of performance
•
Occurs when there is an inability to perform as a result of the actions of one of the
parties.
May result from the actions of the creditor or the debtor.
Declaration of rights
•
•
Where there is confusion about a right or obligation in a contract, either party may
apply to the High Court for an interpretation of that right or obligation.
A party who seeks an interdict or specific performance will often seek a declaration of
rights in addition
Specific performance
•
•
•
An order of specific performance compels the defaulting party to perform as promised
under the contract.
May be obtained via an interdict, which prevents a breach/ threatened breach of
contract.
Interdict may be:
– Mandatory: requires a party to perform a particular act
– Prohibitory: prevents a party from performing a particular act.
Cancellation
•
•
•
•
•
•
Parties may at any time agree to cancel a contract.
Here we deal with unilateral cancellation. This may only be done:
– For material breach
– In terms of a cancellation clause
– Aggrieved party has election whether to cancel contract or uphold it (and
claim S.P.).
If a party elects to cancel the contract, he must notify the defaulting party.
– In some circumstances conduct may be sufficient notification of cancellation.
Effect of cancellation:
– Contract ceases to exist
– Restitution must occur (to extent possible)
Cancellation may occur where:
– There has been a material breach
– There is a cancellation clause
If on breach, the aggrieved party does not cancel within a reasonable period of time,
in the circumstances of the contract it may be argued that he has waived the right to
cancel.
Damages
•
Object of contractual damages is to put the aggrieved party in the (financial) position
he would have been in had the contract been properly performed.
•
Contractual v delictual damages:
– Contract damages aim at making the contractual bargain available (positive)
– Delictual damages aim to compensate for loss suffered as a result of the
wrongful conduct of another (negative)
• A contractual claim is limited to financial loss.
• A delictual claim extends beyond this to non-financial loss, such as injured feelings or
pain and suffering.
Under certain circumstances a party may have a claim under contract or delict.
18.What are the types of risks in international trade? What are the
mitigation tools can be used?
Transport-related risks:
→
Risks of damage, loss and theft;
→
Legal problems with the carriers, and forwarding agents;
→
Extent of insurance coverage, legal disputes about the remedies offered by the
insurance company;
→
Lack of geographical knowledge; (network or existence of roads etc.)
→
Lack of climate knowledge;
Credit risks:
→
Risk of non payment or late, or partial payment;
→
Risk of fraudulent behaviour;
→
Risk of fraud in transaction;
→
Risk of wrongfully honour of LOC; for the applicant/buyer;
→
Risk of dishonour of LOC; for the seller/beneficiary;
Risk of non-conformity of goods:
→
the goods can not meet the requirements of contract;
→
the goods are not able to satisfy the requirements of “merchantable quality”;
Risk of foreign exchange;
Political risks;
Unforeseen events;
Social and cultural risks;
Legal risks:
→
The foreign laws and regulations differ from each other (completely or in some
degree);
→
Laws on the same legal basis can judge the consequences of the same situation e.g.
non-compliance of the contract in different ways;
19. Please define the types of insurance used in international trade!
Mostly used in transportation by sea
Actors:
1. Proposer
2. Contractor
3. Assured person
4. Underwriter
5. Insurance company
6. Re-insurance company
Factors:
1. Proposer = CIF and CIP = seller has to inform about all circumstances->type of
merchandize; loading port; via=through; unloading ort =>route (from where to where)
- is made by the seller/buyer
- In case of CIF and CIP, the proposer is the seller
- FOB, we assume that the buyer takes over the insurance
- Adventure= carriage by sea -> says the proposer
2. Insurance company -> contracting party =>provides a contract to the proposer
3. Contractor -> contracting party => idem as above
-> Duty of the contractor is to pay the insurance premium (insurance fee) prior to the loading
Eg. Loading time: 11 of May
Premium fee should be credited latest 10 of May
 Contractor will be the UNDERWRITER -> BROKER=AGENT
 Insurance comp. will be the CONTRCTING PARTY -> he receives the doc. of title
o Insurance policy -> will be ISSUED TO THE ORDER OF THE SELLER
(eg. Continental AG DE) -> HOLDER IN DUE COURSE (only this person
has the RIGHT TO CLAIM -> in case of doc. credit, B/L, insurance policy
should be endorsed BLANK - > once the issuing bank takes over the doc. the
issuing bank is the holder= bearer
o Document of title -> the person WHO HOLDS THE DOCUMENT holds the
CLAIM FOR COMPENSATION!!! – HOLDER=BEARER ( the person who
holds the doc., but is not specified that he owns it) -> TO THE ORDER OF
BEARER
4. Assured person -> the person who has the RIGHT to execute the claim for the
compensation
- Holder=Bearer
- Holder in due course
5. Re-insurance company -> the insurance company shares the fee to the re-insurance
company (50%-50%)
Principles:
1. Ut most good faith – the proposer has to provide all necessary, reliable inform.
2. Indemnity – if smb suffer losses/damages should be compensated as nothing had
happened
The original should be recreated. May not gain money from the insurance
3. Subrogation – The insurance company, after having paid compensation to the seller
and thereafter turns towards the …
 Obtains the right to the insured person
4. Financial interest -> refers to the person who might suffer losses, like losing the
value of the goods, or losing the freight contract and insurance premium.
Has at least 3 elements:
o Value of the goods
o Freight (CIF, CIP)
o Insurance fee
o Agent fee
o Losses of profit
 CIF and CIP price includes insurance + 10% loss profit
 CIP= CPT+ (CIP) x 1,1 x Fee –insurable
 CIF= CFR + (CIF) x 1,1 x Fee – insurable
Three basic/major forms
 All Risks = Institute Cargo A
 WPA = With Particular Average = with partial losses- pay if 1 package has
been damaged/loosed
Average- losses/damages COMPENSATION
Particular- partial
 FPA = Free of Particular Average = free of partial losses – pay if ALL the
packages have been damaged/loosed
o For goods in bulk – crop, gain, oil, sugar
Exceptions

All Risks => but there are exceptions such as:
o DELAY! ( if the cargo is late, the insurance comp. doesn’t pay)
o ORDINARY (normal)
o LOSS OF THE WEIGHT (off drying)
o UNADEQUATE PACKING
o INHERENT VICE (specific nature of the goods), such as explosions
20. Please describe the documents used in international trade with special respect of
their legal nature! (Documents of title, commercial paper!)
Document of title – Bill of exchange = quasi money
- Financial document
- Doesn’t testify property of the goods, but CLAIM FOR MONEY!! Also like B/L
- Unconditional claim or order immediately at the time of delivery, asks seller for
commercial credit -> seller is crediting buyer!!! = deffered payment
- 1. Delivery (by seller)
- 2. Buyer takes it over + don’t give money, but BILL OF EXCHANGE -> specific
type: promissory rate (Buyer promising money)
Promissory note
- Title of doc. in the language of issuance -> not subject to the law of England, but
to the law of country in which doc. had been issued (=German B/E law)
- Unconditional promise for payment
- Sum certain in money (in #’s + letters)
- Seller=payee(or beneficiary) -> to whom or to who’s order the money should be
paid
-
Time of payment
o Cab be paid at sight (but due on a certain date)
o On a certain day
o Within certain days after sight(presentation)
o Within certain days from the date of issuance (seller receives a p.note
which is BLANK!!!)= puts the delivery date on it
- Place of payment: the buyer has to bear ALL RISKS/COSTS to bring money to
Budapest
- Date and place of issuance
- Buyer=drawer(signs the B/E upon himself)
->credit relation of Promissory Note: payee + drawer
credit relation
->original form of the B/E: 2 credit relations!!!
Eg. of bill of exchange (feladat tipus)
Paper Mill
Maunfacturing Paper
Promise that book store Libri pay for P-H!!
->issue B/E (unconditional order to pay)
Printing House
(DRAWER)
1. Libri order 1 mill. Books from Print. H + Print. H agrees with Paper Mill to produce
paper
2. Deliveries (500,000 Huf)
3. Deliveries
Book storefinal
Libriproduct (1,000,000 huf)
Claims:
Paper Mill for 500 + printing House for 1 mill.
(DRAWEE)
-
The drawer:
The drawee:
The payee:
The acceptor:
bill;
the person, who draws the bill (exporter)
the person to whom the bill is addressed;
the person to whom payment is made (the drawer can be, too)
the drawee, who accepts its paying obligation, signing his name on/across the
Bill of Lading –document of title
-
Shipping doc
Contract of carriage by sea
Unquestionable of evidence of the receiver of the consignment
Bill= doc of receive
Lading= laden(German)=loading
Means property/ownership of the goods
The seller has to know the date of delivery; the place of delivery; quantity of the
goods; unit price of the g.; purchase price; taric nr. of the g.; name of the goods.
Issuing bank has 5 working banking days-> to check the doc. -> decide to pay or
not
Usage: UCP 600
Should be issued to the order of …=> has the title to the goods
…=no one= bearer/holder of the paper
-
If there is a name on the B/L this person is the HOLDER IN DUE COURSE- the
owner of the document/the goods
Cargo is often intended to be sold or sold on, after it has been consigned to a carrier. The
consignee either might be identified when the B/L is issued or might thereafter alter.
↓
The shipper will require some assurance that the cargo will not be delivered to the purchaser
or end-purchaser before the price has not been paid.
↓
Conversely if the cargo is sold or sold on and paid immediately after consignment to the
carrier, the purchaser will require some assurance that the cargo will be delivered to him, but
not the order of the shipper or not to the order of the original consignee.
↓
Similarly a bank might have advanced funds for the purchase of the cargo (either to the
original shipper or to the consignee or to a subsequent purchaser) and will require some
assurance that the cargo cannot be disposed of, before the bank is reimbursed.
It is both feasible and desirable for each of those transferees to control the disposition of the
cargo for the period of time and to an appropriate degree through a control of a
document, which represent the entitlement of the cargo.
Thus by mercantile custom both the received for shipment and shipped on board must be
treated as a document of title of the cargo.
The B/L made out to a consignee whose name is left “blank” or “ to bearer” or “to order” or
“to assigns” are transferable instruments=negotiable instruments.
The delivery or the transfer and the delivery of the documents transfer:
 The property of the cargo;
 The right and liabilities concerning the cargo;
Types of different B/L:
 Liner B/L → is a B/L issued by a particular shipping line that offers regular,
scheduled services between a specified load and discharge ports;
 Ocean or port to port B/L → is the classical form of B/L which covers ocean
port to ocean port carriage of a cargo, on one single ocean going vessel;
 Short form B/L → is a fairly standard face format but includes a clause that
incorporates the carrier’s standard clauses;
 Straight B/L → is a not transferable B/L which is used “in house” shipments;
 Claused B/L→ it is B/L that contains positive notation of a defective condition or
shortage either of the cargo covered or where material of its packaging; The usual
qualification such as “said to contain” or “condition, weight etc. unknown”;
 Clean B/L → it is a B/L that contains no positive notation of a defective
condition;
 Combined Transport/Multimodal Transport/ House to House B/L→ it is a
B/L that covers not only the carriage of the cargo on an ocean going vessel but all
or other stages and forms of the carriage e.g. by rail, by road etc. The issuer of
such a B/L generally accepts primary responsibility as carrier for all stages and
forms of a carriage;
Commercial papers:
Commercial invoice; doc. issued by the seller (eg. Packing list, weight list, CE statement,
different type of transp. Doc. and B/L); Warehouse receive; certificate of origin, of
quality or inspection;
21. Please define the legal sources of international trade dealing!
freedom of contracting ( freedom of choosing the contracting party,  freedom of
agreeing on terms and conditions) is restricted by legal sources
Legal sources:

Treaties:
o International character
o Agreement concluded by states and governments
o Built into the national legislative systems (binding)
o Example: Free Trade Zones (CEFTA, EFTA)

Conventions:
o Dominant international character
o Agreements by states
o Sponsored by international organizations (UN)
o Example: Vienna Convention (CISG  Convention on International Sales of
Goods) by 83 states
o Built into the national legislative systems (binding)
o International agreements related to transportation (they contain the
responsibilities, rights and obligations of the shippers, consignees and
carriers):

by sea: Hague-Visby rules, Hamburg rules, Rotterdam rules (23 states
haven’t accepted it yet)


by truck: CMR

by rail: CIM, COTIF

by air: Warsaw convention (1929), Montreal agreement (1999)
Relevant national laws, legal families:
o
Romano-German legal system – there are codes, statues  written text;
examples: Germany, Austria, Hungary, China
o Anglo-Saxon legal system – precedents; examples: commonwealth, USA
(Anglo-American legal system: there are codes  Uniform Commercial
Code)
o Islamic-Sharia legal system – statements of Mohamed and Scholars

Customs/Usages/Usus
ICC - Incoterms
22.Please define the interests, rights and obligations of an agent in a contract
of international sales!
 Agent: independent, legal entity, acting at the risk and cost and on behalf of its
principle
 Types of agents: retainer agent, stockist agent, dell credere agent

 Retainer or fix salaried agent: employed at the beginning of export, no sudden
success is expected -> the fix salary is an investment in the market for the agent’s
connections, information and knowledge. Risk: the agent is not performing (the
company must be well informed about the agent). Variable costs beside the
salary: telecommunication, showroom, invitation costs (dinner, presents),
travelling costs.

 Stockist agent: general, consignment, after-sale
 Used when the prompt delivery of the product is required by the customer
(spare parts, component parts). Required to have storage facility: it is the agent’s
property, he has to finance the maintenance of the facility, he is acting on his own
behalf in this case. For this additional activity the agent gets additional fee. If he
cannot sell the product the company buys it back at the same price.
 After-sale stockiest agent: the manufacturer has responsibility for the quality of
the product for a time-period defined by law (warranty period). The agent’s task
is to provide the after-sale service (repair, change), the agent is an expert (e.g.
engineer).

 Dell credere agent: makes connections between the foreign vendors,
responsible for non-payment, means higher security for foreign seller

 Obligations of the agent:
 Pre-contract: inform the principal about working for a competitor
 In contract: searching for customers, presenting the company, providing
information about the negotiations with customers
 Termination of the contract: provide information
 After-contract: preserving the secret business information
23. Please define the interests, rights and obligations of an export-import management
company in a contract of international sales! (illustrating it with a concrete example)
1) Domestic legal relationship: contract of agency/appointment to sell
Limit price: premium if in case of export the E-I MC can sell at a higher
price, in case of import the E-I MC can buy at a lower price
2) Foreign legal relationship: contract of sale with foreign buyer as if it was
the manufacturer  full responsibility
E-I MC participates in international tenders: it has to fulfill a large quantity order, so it buys
goods from many smaller manufacturers and then fulfills the tender
Example: if there is a computer parts manufacturer company, that wants to sell their products
abroad, then the E-I MC signs a contract of agency with the manufacturer, in which it agrees
to sell the product abroad. Then in the foreign country it acts like as it was the manufacturer
and directly signs the contract of sale with the foreign buyer.
24. Please define the interests, rights and obligations of a trading house in a contract of
international sales!

function of all intermediaries (agent, sales representative, E-I MC, distributor)

re-exporters (buy in country A, resell it in country B)
o goods often relabeled
o place of origin  removed
o goods  repacked  relabeled  transported
o revenue: price difference between different markets
o both contracts in their own name

financing institutions (credit institutions)

owners/operators of logistics centers, warehouses (because of re-exportation)

concentrate manufacturing from beginning to end
o all the raw materials for a whole industry  cheaper beacuse of large quantity
o they finance manufacturing procedure, then sell the goods

it includes marketing (an all markets of the world), sales reps., agents,
distributors)

Example: Mitsubushi (500 companies)
25. Please define the types of insurance, and the major characteristics of the contract of
insurance;
Two different types:

Insurance With Particular Average (WPA): the insurance company will pay
even if only part of the cargo was damaged

Insurance Free of Particular Average (FPA): the insurance company will only
pay if the complete consignment was damaged (mainly used in case of bulk
cargo)
Exeptions:

delay

loss of weight

inadequate packaging

inherent vice (az áru belső tulajdonságából fakadó kár, pl. törékeny terméknél
törésre nem fizetnek)

pirate attacks

tsunami

force majeure (extraordinary events)
26. Please define the content of the contract of insurance including the major principles
and actors!
Actors:

Proposer – depends on INCOTERMS

Contractor = Proposer once he sign the contract (contracting party)

Assured person; has the right to execute the claim for the compensation =
holder/bearer, holder in due course

Underwriter (broker, agent)
o the person the proposer will meet
o works on the behalf of the insurance company
o the money is paid to him and he has to pay it to the insurance company (the
proposer must trust him)

insurance company – (contracting party)

reinsurance company – shares risk with original insurance company
Factors:

seller has to inform about all circumstances
o type of merchandise
o ports (departure, through, destination)
o carrier
o type + condition of vessel (flag, captain, staff)
o packing (Sea, Worthy, Packaging  SWP)
Principles:
1. Acting in good faith: all the relevant circumstances has to be disclosed; B/L has to be
clean
2. Indemnity: loss has to be compensated, so that the assured person will be in the same
condition as if nothing had happened, but may not be in a better situation
3. Subrogation: in its most common usage refers to circumstances in which an insurance
company tries to recoup expenses for a claim it paid out when another party should
have been responsible for paying at least a portion of that claim
4. Financial interest: value of goods, freight, insurance premium  min. 3 agent fee,
loss of profit for buyers (resellers)
Insurance policy:

holder/bearer (in case of documentary credit)
o name not specified
o the holder has the right to compensation

holder in due course
o name specified
o he owns the paper, he has the right to compensation