The Contract

The Contract

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What is a Contract 1. A binding agreement between two or more parties, 3. Evidence of an agreement between two parties which is legally enforceable 5. document specifying conditions for business relationship e.g. goods, services, licensing, franchising, etc. detailing rights and obligations of parties 2

Elements of a Contract 1. 2. 3. 4.

Same as the proposal, plus Allocations of risk and responsibility Clarifying articles Choice of laws, jurisdictions and dispute settlement mechanisms

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1. Subject Matter of Sale • Clear and accurate description of the goods or services being contracted for.

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2. Delivery • When • Where • When does title and risk of loss pass to buyer • What documentation will be included • Note: Positions are no longer STPS or STAP – they are firm between the parties except for excused performance 5

3. Price • All details of the pricing are included • Since the product has been defined the pricing that fits that product is shown • Any possible changes, such as escalation, or changes required to meet import regulations are identified and responsibility for paying the cost of any such changes is assigned 6

4. Taxes • Responsibility for payment of any taxes or duties is assigned

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5. Payment • The payment schedule is incorporated • The currency is stipulated • Responsibility is assigned to ensure that all currency controls have been complied with • Advance payments are primarily designed to provide surety for the performance of the buyer • Conditions about return or keeping of the deposit are not laid out – if buyer defaults then seller will keep any advance payments as well as seek further damages – common law 8

6. Excusable Delay • All reasons for any excusable delay plus “any other cause to the extent it is beyond sellers control or not occasioned by sellers fault or negligence” • Ability to terminate if the delay is too long, and what happens to rights and obligations of buyer and any advance payment already received • What happens if the goods or damaged or destroyed. • Limitation of liability – termination and receipt of any advance payment is buyers only remedy 9

7. Changes to the Product • Must be in writing and mutually agreed

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8. Changes to meet regulations • Responsibility is assigned – e.g. the importer’s country can create a nontariff barrier on behalf of the buyer for a number of reasons. It is imperative that buyer be assigned the obligation to meet import requirement, if only to keep his/her government honest

• What happens if documentation required in the contract changes. 11

9. Use of the product • Any use of the product for testing, proving etc. must be agreed to by the parties

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10. Assignment of rights and responsibilities • Not allowed without mutual agreement generally, and no increase in other parties possible liability • Exception – right to receive money • Seller wants to control resale, ‘flips’ of the product

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11. Termination of the contract for certain events • If buyer or seller ceases business, suspends operations, declares bankruptcy need/want the right to terminate

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12. Inspections • Conditions on inspection of the goods are agreed

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13. Product Assurance • Post delivery obligations are spelled out

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14. Notices • Official points of contact for all matters dealing with the contract are established.

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15. Others • Entire Agreement – supersedes any previous proposals, understandings, commitments or representations. No changes unless in writing and agreed by both parties • Governing Law • Negotiated Agreement • Alternative Dispute Resolution - arbitration 18