1. What is the “law”? And how can the two parties ensure that they achieve the best
possible protection?
Law was issued by the government to govern all activities of the society. Law exits in two forms:
public and private. Public law regulates the relationship between the citizen and the state. Private law
regulates relationship between private citizens (or companies). Private law is disposive, that mean the
parties to a contract are free to change or ignore them.
Contract law belongs to the private law. To protect each party the contract must be well prepared
and clarified which law they have chosen. The parties must understand the laws of his or her country as
well as those of his or her partner’s countries.
In conclusion, the best safeguard against the risks of exporting is a contract that is clear, workable
and enforceable.
What law would be applicable for a contract?
Both the buyer’s and the seller’s laws will be applicable to a contract. There is the article “Applicable
Law” in the contract – maybe the exporter’s or the importer’s law. However, this is only effective for
setting any dispute.
2. What is a step-by-step overview of the procedure for delivery negotiation?
When an exporter and a buyer negotiate the delivery terms, these steps should be followed:
1. It is necessary to discuss: “What is the date of delivery?”
2. Discuss with partner about “Where must the goods be sent?
3. Then, come to an agreement on “Who pays for transportation?
But other questions are often paid due attention to. One example: the transfer of risk. When exactly
does the risk of owning the goods - the risk of losing them, the risk of injury - pass from the exporter to
the buyer?
In particular, the procedure may be describled as follows:
STEP 1
STEP 2
STEP 3
STEP 4
STEP5
TIMING
LOCATION
TRANSPORT
RISK, TITLE AND
TERMS OF TRADE
Date of
delivery and
results of delay
Place of delivery
and alternatives
Mode(s) of
transport to be
used
INSURANCE
Incoterm to be
used
Transfer of ownership
and insurance
3. Discuss the difference among liquidated damages (tiền bồi thường), penalty, and
quasi-indemnity.
As you know, liquidated damages, penalty, and quasi-indemnity related to the delay of delivery.
Normally the exporter and the buyer agree a fair figure, a lump sum to be paid per day (week or
month) of late delivery. This is liquidated damages. The purpose of liquidated damages is to
compensate for any delay in delivery.
A penalty means that damages are paid to compensate for a loss—a real loss in the case of
compensatory damages. The purpose of a penalty is not to compensate but to punish, or, to use the
threat of punishment to achieve acceptable performance.
The quasi-indemnity is an attempt by the exporter to fix a compensation figure so low that, in effect,
it relieves him of responsibility for late delivery.
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In conclusion, liquidated damages, penalty, and quasi-indemnity are very different and we should be
careful.
4. How do you determine an appropriate insurance for your import-export transaction
Risks to one’s property must be insured, but insurance of exported goods is a difficult field for the
layman. The exporter must be able to decide what kind of policy or insurance cover is necessary, and
what risks must be covered.
Most exporters prefer an open cover arrangement, with the goods valued and insured from point-topoint. The exporter should consult a broker to ensure that all expected risks are covered.
5. How can the exporter avoid the “price trap” in negotiating a contract?
The exporter must perceive and preserve the independence of every aspect of an export
negotiation. He should guarantee that the contract price reflects any change in a set of assumptions
about delivery, payment and warranty terms. Terms of a contract relate to each other. Therefore, as
items in the contract are negotiated, the exporter should assess the influent of each factor on price, and
adjust the price accordingly. For example: a longer warranty period creates higher costs, it should be
reflected in the contract price. In fact, the most common term negotiated with the two sides is on price
6. What are the most important considerations for the first time exporter?
There are three particularly important considerations, includes: scope, delivery and price.
First, Scope: the product. An exportable product will normally be mature, in other words, the
manufacturer should have experience in making the product and enough production capacity in coping
with the size of the order, quality assurance problems should already be solved.
Second, the exporter must have access to safe and timely means of delivery. Unfortunately,
exporters sometimes contract to supply goods but fail to think about the problems of delivering their
goods until after the contract is signed. By then it is too late: a bad name in the trade or an expensive
lawsuit are the common results of this lack of foresight.
Finally, pricing is also a decisive factor. The contract price should leave a reasonable profit margin.
So careful calculations should be done. There are two pricing models are worth mentioning: the free
market and the loaded market model. The major problem of export pricing is the additional costs which
increase the exporter's price. For many exporters the crucial question is: will I make a profit from
exporting? Only careful calculation can answer that question, and the manufacturer must be wary of
entering a legally binding agreement until the answer is clear.
7. Accepting a personal check or trading on open account both are dangerous for the
exporter. What kind or third party security reduces the exporter’s risk?
Third-party security takes two forms: export credit insurance and the bank guarantee.
Export credit insurance allows the exporter to recover the major part of the contract price if the
buyer fails to pay after six months. To buy such insurance, the exporter explains the details of the
business to an insurance company and receives a quotation. Sometimes the insurer refuses to quote.
This is a sign to the exporter that the business is risky or the exporter in uncreditworthy.
The bank guarantee means that: the buyer may also approach a bank and ask for a bank guarantee,
the bank will pay the contract price if the buyer fails to do so. The bank guarantee will warranty
payment guarantee.
Attractive as it is, export credit insurance and the bank guarantee are expensive to set up. So few
exporters ask for them as security for payment, the letter of credit is much preferred.
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8. What is a sales contract? What is the main heading in an import-export contract?
A contract of sale is a legal contract an exchange of goods, services or property to be exchanged
from seller to buyer for an agreed upon value in money (or money equivalent) paid or the promise to
pay same. It is a specific type of legal contract.
The main heading in an import-export contract are:
Commodity/Specification, Quality, Quantity, Price, Packaging and Shipping Marks, Shipment,
Payment, Force Majeure, Applicable Law, Disputes,...
9. What is the purpose of Incoterms? What do these terms mean? Explain the rights
and duties of the buyer and seller under an Incoterm contract? (p86)
Incoterms or International Commercial terms are a series of sales terms. They are published by the
International Chamber of Commerce (ICC) and are widely used in international commercial transactions.
The purpose of Incoterms is to provide a set of international rules. Incoterms are internationally
accepted terms defining the responsibilities of exporters and importers in the arrangement of shipments
and the transfer of liability. Incoterms significantly reduce misunderstandings among traders and
thereby minimizing trade disputes and litigation. Incoterms do not cover ownership or the transfer of
title of goods.
According to Incoterms 2010, there have 11 terms instead of 13 terms of Incoterms 2000:
Group 1: apply to any mode of transport are: EXW, FCA, CPT, CIP, DAT, DAP, DDP
Group 2: apply to sea and inland waterway transport only: FAS, FOB, CFR, CIF
10. Are a warranty and a guarantee the same thing? Why do some contracts replace a
warranty with a defects liability provision”?
A guarantee is a promise about somebody else’s performance; a warranty is a promise about your
own. To avoid confusion, many drafters today use the term “Defects Liability Provision.”
There are two parties to a warranty: buyer and seller. A guarantee, on the other hand, involves
three parties. The guarantor makes a promise to one party at the request of another. There is a major
confusion of terminology.
A defects liability provision (or warranty) covers defects that are present at the moment of delivery.
The defects that give rise to the most serious problems between exporter and buyer are hidden or
latent defects. Defects may be (a) in workmanship, (b) in materials, or (c) in design.
The defects liability period is the period during which the exporter is liable for defects that are
apparent on delivery or that come to light later. It is important for both sides in a contract negotiation
to understand that a defect is a fault provably present in the goods on delivery. In principle, under most
laws, the exporter is liable only for problems that arise from defects.
11. Discuss some legal loose ends in an import – export contract. How must these be
tied down if a good sales technique is to mature into a profitable way of doing business?
Many exporters are gifted salesmen, and their contracts reflect this emphasis on sales.
Unfortunately, there are a number of legal loose ends that must be tied down if a good sales technique
is to mature into a profitable way of doing business.
The first question about the legal framework of the contract is always: what law have the two sides
chosen for their agreement. Then the question arises is the document the parties are signing really a
contract, or is just a piece of paper? If it is a contract, is it the entire agreement? And if it is the entire
agreement, how do the two sides ensure that it includes everything they want it to include?
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Once the full legal nature of the contract is established, it is time to turn to the parties signing it. Are
the parties all they seem to be? And will they remain the same during the lifetime of the contract?
Good relations usually prevail during the negotiation of a contract. However, things can go wrong. A
good contract allows for this by foreseeing circumstances under which the parties might wish to end
their agreement. If a dispute arises, some means of settling things should be agreed beforehand: that
way at least some goodwill might be preserved and the cost of the dispute minimized.
12. What the reason are common in international cases for deciding that the parties
have “no contract”?
Under most legal system, a contract is enforceable only if the parties achieve a “meeting of minds”
through a process of offer and acceptance. An odd twist of Anglo-American law is that the contract must
give both sides rights and duties, one-sided contract are “no contract”.
Some reasons common in international cases for deciding that the parties have “no contract” are no
meeting of minds, duress, mistake and fraud, failure to follow the rules of offer and acceptance.
Meeting of minds is when one side says "I make you this offer" and the other side says "I accept."
But sometimes there is a written agreement and no "meeting of minds". So, they can’t sign the contract
or in other way, they have no contract.
Duress means illegal or unfair threats. If I hold a pistol to your head and force you to sign a
contract, this is duress. When you signed the contract under-pressure like this, the contract have no
valid or we can say it’s no contract.
Mistake and fraud mean that: a mistake about the goods or a deliberate fraud can mean that there
was no meeting of minds. A contract never came into existence.
In conclusion, for the exporter or importer, it makes no difference if the lawyer tells him he has "no
contract" or an "invalid contract" - either way he is in trouble. To avoid these troubles, we should know
above case to avoid no contract.
13. What is flex-time system? Discuss its advantages and disadvantages?
Flex-time system means everyone puts in at least a period of time, say 40 hours, but when they do
is pretty much up to them. For example, you are busy for your family on Tuesday, you can stay at
home. So on Wednesday, Thursday and Friday, you can compensate for the time you lose. The
advantages of this system are very obvious: the employees feel very comfortable. However, it may
cause trouble for meeting. In this case, they try to schedule them well enough in advantage so that
everyone can plan to be at the meeting on time. I think it is not practical and feasible in Vietnam.
14. How do you set up networking at work?
Each company has a different culture and style. Its staff can come from many different region in
over the world. What is mentioning is that if everyone can coordinate closely together as a network, not
only each and all can make a longtime effect at work but also a cementation can be created. So, I think
we should establish networking at work.
To do that, each of us should know their names and titles. Once your relationship more closer, you
should enquire for their family situation and their healthy but in polited way. Besides, we willing to help
each other at work. Each person has a different personality, so it’s necessary to learn more skills to
communicate to other. In the other hand, there should has a bind between superior and supordinate.
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