Export contract with the buyer and basic requirements

Preparation of a foreign economic contract

According to established practice, the basis for exports is a foreign trade contract (agreement) with a foreign buyer. In Ukraine, the form of the contract is free, but must contain certain mandatory terms.

International Trade

In simple terms, but within standard terminology, a foreign trade contract is the main document in international trade. It performs several important functions. First, the contract protects the rights and interests of both parties. Second, it defines the risks and responsibilities of the participants in the agreement. Third, the contract serves as the basis for fulfilling the obligations outlined in the agreement.

Main Parts of a Foreign Trade Contract:

Preamble
It should contain the full names of the contract parties, physical addresses, and details about the specific individuals executing the agreement. Accurate identification helps avoid any inconvenience in the future.

Subject of the Contract
The subject of the contract is worked out in detail as a specific product of the agreement, which is specified in terms of strict nomenclature, quantity, and quality specifications. The more specific the product characteristics, the lower the risk of disputes related to it.

Price and Total Compensation Under the Contract
The price per unit of the product will then correspond to the total deal amount, along with the currency of payment, which is typically made in USD or EUR; it must be clarified whether transport, insurance, and customs fees are included in this price.

Based on Incoterms (FOB, CIF, DAP), this section of the contract defines the delivery terms. They clearly delineate the parties’ responsibilities for paying freight, insurance, and the point at which risks are transferred.

Delivery Timeframe
Exact dates of shipment and arrival of the goods should also be specified in the agreement text. This implies that specific dates may allow tracking of the entire logistics process and thus prevent delivery delays.

Payment Terms
These should include the form of payment (prepayment, letter of credit, bank transfer), as well as payment deadlines. Terms for providing guarantees and deferring payments are also important.

Packaging and Labeling
The contract should include requirements for product packaging and labeling specifications. This is necessary to ensure the protection of the goods and their seamless passage through the import clearance process in the importing country.

Force Majeure
This aspect concerns cases where circumstances are considered to relieve one or both parties of liability for non-fulfillment of obligations (e.g., natural disasters, military actions, etc.). The procedures for notification and documentation of force majeure are also outlined.

Sanctions and Claims
The contract should provide for monetary sanctions for breaching the terms and also specify the procedure for submitting claims regarding the quality of the goods or their completeness. This helps the parties protect their interests and ensures the effective functioning of regulators in disputed situations.

Arbitration
This section outlines how possible disputes can be resolved. The arbitration court, its meeting location, and applicable law will be specified in this section. Choosing the right arbitration institution resolves conflict issues without incurring disproportionate financial losses.

Contract Duration
The contract should specify its duration, as well as the conditions under which it may be extended or terminated early. This ensures transparency and sufficiency for the parties and prevents disputes over the terms of the obligations’ duration.

Recommendations for Drafting a Foreign Trade Contract

Compliance with Legislation
When drafting the contract, it is crucial to align its provisions with the legislation of Ukraine and international standards. This will help avoid the recognition of the document as invalid and protect the exporter’s objectives.

Language of the Contract
The contract should be drafted in a language understandable to both parties or in two languages, specifying the preferred one in case of ambiguity. This ensures mutual understanding and the accuracy of the obligations’ execution.

Signature and Seal
Both parties must sign the contract through their authorized representatives. In some cases, a company seal may also be required for the legal validity of the contract, but it is not mandatory under Ukrainian law.

Documents Accompanying a Foreign Trade Contract

Invoice
This is the primary document that accompanies the foreign trade agreement. It contains various data about the goods, their cost, delivery and payment terms, which are used for customs clearance and settlement.

Packing List
It provides a detailed description of the contents of each packaging unit, facilitating customs inspection and the process of receiving the goods by the consignee.

Transport Documents
Including bills of lading, the main transport waybill (CMR), air waybill, etc., these documents must confirm the shipment of the product and the conditions under which it is carried out.

Required Certificates and Licenses
For certain goods, certificates of origin, quality, conformity, or special licenses are required. The shipper must provide this documentation in advance to avoid problems during customs clearance of the goods.

Contract Registration and Currency Control
In Ukraine, foreign trade contracts are registered with banks for the purposes of currency control. The bank monitors the compliance with the terms of the contract, the timing of the receipt of foreign currency earnings, and adherence to Ukraine’s currency legislation.

Conclusion

A well-drafted foreign trade contract is not just a legal formality, but an important tool for conducting international business effectively and securely. Paying attention to the details in the contract helps minimize risks and ensures reliable, long-term relationships with foreign partners.