Foreign economic sale and purchase contract

Foreign economic sale and purchase contract, a sample


In a world of global opportunities, a foreign economic sale and purchase contract becomes a strategic tool for expanding a business abroad. In this overview we examine what a foreign economic sale and purchase contract is and how it opens up new prospects for the global expansion of your business. We also provide a simple but effective sample foreign-trade contract that you can use in your import and export operations.


Definition of a foreign economic sale and purchase contract:
A foreign economic sale and purchase contract is a legal agreement between a seller and a buyer from different countries that governs the terms and procedures of international trade in goods and services.


Key aspects of foreign economic sale and purchase contracts

  1. Delivery and payment terms: Determining the terms of delivery of the goods, as well as an agreement on the payment terms, including the currency, timing and methods of payment.

  2. Quality and specifications of the goods: Specifying the quality standards, technical characteristics and other specifications of the goods.

  3. Liability of the parties: Establishing the parties' liability for the non-performance of obligations and regulating matters of insurance and compensation.

  4. Customs and tax obligations: Taking into account customs procedures and tax obligations in international trade.

Download a sample working foreign-trade sale and purchase contract: foreign economic contract

The clauses of the foreign-trade contract listed above are based on Order No. 201 of the MINISTRY OF ECONOMY AND EUROPEAN INTEGRATION OF UKRAINE of 6 September 2001. They are generally accepted when concluding sale and purchase contracts in world trade.
 

MINISTRY OF ECONOMY AND EUROPEAN INTEGRATION OF UKRAINE

ORDER

of 6 September 2001 No. 201

On approval of the Regulation on the form of foreign economic contracts (agreements)

Registered
at the Ministry of Justice of Ukraine
on 21 September 2001 under No. 833/6024
With amendments and additions introduced by
orders of the Ministry of Economic Development and Trade of Ukraine
of 12 September 2011 No. 51,
of 28 September 2011 No. 65,
of 8 July 2013 No. 767


    In accordance with clause 9 of the joint resolution of the Cabinet of Ministers of Ukraine and the National Bank of Ukraine of 17 July 1995 No. 523 "On the state of implementation of Decree of the President of Ukraine of 18 June 1994 No. 319 'On urgent measures to return to Ukraine currency valuables unlawfully held outside it'" and with the aim of bringing regulatory acts into line with Decree of the President of Ukraine of 15 December 1999 No. 1573/99 "On changes in the structure of the central executive authorities", I order:

    1. To approve the Regulation on the form of foreign economic contracts (agreements) (attached).

    2. The Head of the Legal Support of Foreign Economic Activity Division of the Legal Department, Yu. V. Fedorenko, is to submit this order for state registration to the Ministry of Justice of Ukraine within the period established by law and to ensure its further support.

    3. The Head of the Legal Support of Foreign Economic Activity Division of the Legal Department, Yu. V. Fedorenko, is, after the state registration of this order, to bring it to the attention of the Ministry of Economy of the Autonomous Republic of Crimea, the relevant structural units of the regional, Kyiv and Sevastopol city state administrations, and also to ensure its publication in the official mass media.

    4. To recognise as having lost force Order No. 75 of the Ministry of Foreign Economic Relations and Trade of Ukraine of 5 October 1995, registered at the Ministry of Justice of Ukraine on 9 October 1995 under No. 367/903, with amendments and additions.

    5. Control over the implementation of this order is assigned to Deputy Minister A. I. Honcharuk.

Minister of Economy and European Integration of Ukraine, A. Shlapak
 
 

APPROVED
by the order of the Ministry of Economy and European Integration of Ukraine
of 6 September 2001 No. 201
Registered
at the Ministry of Justice of Ukraine
on 21 September 2001 under No. 833/6024
REGULATION
on the form of foreign economic contracts (agreements)

(In the text of the Regulation the words "tolling raw materials" are replaced with the word "goods" in accordance with Order No. 767 of the Ministry of Economic Development and Trade of Ukraine of 8 July 2013)
    This Regulation is developed in accordance with Article 6 of the Law of Ukraine "On foreign economic activity" and clause 9 of the resolution of the Cabinet of Ministers of Ukraine and the National Bank of Ukraine of 17 July 1995 No. 523 "On the state of implementation of Decree of the President of Ukraine of 18 June 1994 No. 319 'On urgent measures to return to Ukraine currency valuables unlawfully held outside it'". It applies to the conclusion of contracts for the sale/purchase of goods (provision of services, performance of works) and barter contracts between Ukrainian business entities and foreign business entities, regardless of the forms of ownership and types of activity.

    A foreign economic contract (agreement) is a materially executed agreement of two or more subjects of foreign economic activity and their foreign counterparties, aimed at establishing, changing or terminating their mutual rights and obligations in foreign economic activity.

    The contract (agreement) is concluded in accordance with the Law of Ukraine "On foreign economic activity" and other laws of Ukraine, taking into account the international treaties of Ukraine. When drawing up the text of the contract (agreement), business entities have the right to use well-known international customs and the recommendations of international bodies and organisations, if this is not directly and expressly prohibited by the Law of Ukraine "On foreign economic activity" and other laws of Ukraine.

    A foreign economic contract (agreement) is concluded by a subject of foreign economic activity or their representative in simple written form, unless otherwise provided by an international treaty of Ukraine or by law. The representative's authority to conclude a foreign economic contract (agreement) may arise from a power of attorney, constituent documents, contracts and other grounds that do not contradict the Law of Ukraine "On foreign economic activity". Actions carried out on behalf of a foreign subject of foreign economic activity by a subject of foreign economic activity of Ukraine duly authorised for this are considered the actions of that foreign subject of foreign economic activity.
The contract (agreement) may be declared invalid in court if it does not meet the requirements of the laws of Ukraine or the international treaties of Ukraine.

    The rights and obligations of the parties to a foreign economic agreement are determined by the substantive and procedural law of the place of its conclusion, unless the parties have agreed otherwise, and are reflected in the terms of the contract (agreement).

    1. The following are among the terms that must be provided for in the contract (agreement), unless the parties to such a contract (agreement) have agreed otherwise regarding the statement of the terms of the contract, and such an agreement does not deprive the contract of its subject, object, purpose and other essential terms, without the agreement of which by the parties the contract may be considered not concluded, or it may be declared invalid due to non-compliance with the form in accordance with the current legislation of Ukraine:

    1.1. The name and number of the contract (agreement), the date and place of its conclusion.

    1.2. The preamble.

    The preamble indicates the full names of the parties — the participants in the foreign economic operation, under which they are officially registered, with an indication of the country, the abbreviated designation of the parties as counterparties ("Seller", "Buyer", "Customer", "Supplier", etc.), the person on whose behalf the foreign economic contract (agreement) is concluded, and the names of the documents that the counterparties are guided by when concluding the contract (agreement) (constituent documents, etc.).

    1.3. The subject of the contract (agreement).

    This section defines which goods (works, services) one of the counterparties is obliged to supply (carry out) to the other, indicating the exact name, brand, grade or the final result of the work performed.

    In the case of a barter (exchange) contract (agreement) or a contract for the processing of goods, the exact name (brand, grade) of the counter-supplies (or the name of the goods that are the final purpose of the processing of the goods) is also determined.

    If the goods (work, service) require a more detailed description, or the range of goods (works, services) is sufficiently large, then all this is indicated in an annex (specification), which must be an integral part of the contract (agreement), a corresponding note being made in the text of the contract (agreement).

    For a barter (exchange) contract (agreement), the mentioned annex (specification) is, in addition, balanced by the total value of the export and import of goods (works, services).

    In the annex to the contract (agreement) on the processing of goods, the corresponding technological scheme of such processing is indicated.

    The technological scheme of processing the goods must reflect:

    all the main stages of processing the raw material and the process of transforming the raw material into finished products;

    the quantitative indicators of the raw material at each stage of processing, with a justification of the technological losses of the raw material;

    the losses of the party performing the processing at each stage of processing.

    1.4. The quantity and quality of the goods (the volumes of the performance of works, the provision of services).

    This section defines, depending on the range, the unit of measurement of the goods adopted for goods of such a type (in tonnes, kilograms, pieces, etc.), their total quantity and quality characteristics.

    In the text of the contract (agreement) on the performance of works (provision of services), the specific volumes of the works (services) and the period of their performance are determined.

    1.5. The basic terms of delivery of the goods (acceptance and handover of the completed works or services).

    This section indicates the mode of transport and the basic terms of delivery (in accordance with the "Incoterms" rules), which define the counterparties' obligations for the delivery of the goods and establish the moment of the transfer of risks from one party to the other, as well as the specific period of delivery of the goods (individual consignments of goods).

(the second paragraph of subclause 1.5 of clause 1 as amended in accordance with Order No. 51 of the Ministry of Economic Development and Trade of Ukraine of 12 September 2011)
    In the case of the conclusion of a contract (agreement) on the performance of works (provision of services), this section defines the terms and periods of the works (services) performed.

    1.6. The price and the total value of the contract (agreement).

    This section defines the price of the unit of measurement of the goods and the total value of the goods or the value of the works performed (services provided) supplied in accordance with the contract (agreement), except in cases where the price of the goods is calculated by a formula, and the currency of the contract. If, in accordance with the contract (agreement), goods of different quality and assortment are supplied, the price is set separately per unit of goods of each grade and brand, and the total value is indicated in a separate clause of the contract (agreement). In this case the price indicators may be indicated in the annexes (specifications), which are referred to in the text of the contract (agreement).

    When calculating the price of the contract (agreement) by a formula, the approximate value of the contract (agreement) as of the date of its conclusion is indicated.

    In a contract (agreement) on the processing of goods, in addition, its pledge value, the price and the total value of the finished products, and the total value of the processing are indicated.

In a barter (exchange) contract (agreement), the total value of the exported goods (works, services) and the total value of the goods (works, services) imported under this contract (agreement) are indicated, with a mandatory expression in a foreign currency attributed by the National Bank of Ukraine to the first group of the Classifier of Foreign Currencies.

    1.7. The terms of payment.

    This section defines the currency of payment, the method, procedure and timing of the financial settlements and the guarantees of the parties' performance of their mutual payment obligations. Depending on the payment terms chosen by the parties, the text of the contract (agreement) indicates:

    the terms of a bank transfer before (an advance payment) and/or after the shipment of the goods, or the terms of a documentary letter of credit, or collection (with a guarantee), determined in accordance with the resolution of the Cabinet of Ministers of Ukraine and the National Bank of Ukraine of 21 June 1995 No. 444 "On the standard payment terms of foreign economic contracts (agreements) and the standard forms of protective clauses to foreign economic contracts (agreements) providing for settlements in foreign currency";

    the terms of the guarantee, if there is one or when it is necessary (the type of guarantee: on demand, conditional), the terms and the period of validity of the guarantee, the possibility of changing the terms of the contract (agreement) without changing the guarantees.

    1.8. The terms of acceptance and handover of the goods (works, services).

    This section defines the timing and place of the actual transfer of the goods and the list of shipping documents.

    Acceptance and handover are carried out by quantity according to the shipping documents, and by quality according to the documents certifying the quality of the goods.

    1.9. Packaging and marking.

    This section contains information about the packaging of the goods (boxes, bags, containers, etc.), the corresponding marking applied to it (the name of the seller and the buyer, the number of the contract (agreement), the destination, the dimensions, special conditions of storage and transport, and other), and, where necessary, also the conditions of its return.

    1.10. Force majeure circumstances.

    This section contains information about the cases in which the terms of the contract (agreement) may not be performed by the parties (natural disasters, military actions, embargoes, interference by the authorities, and other). In this case the parties are released from the performance of their obligations for the duration of these circumstances, or may refuse to perform the contract (agreement) in part or in whole without additional financial liability. The duration of the force majeure circumstances is confirmed by the chamber of commerce and industry of the relevant country.

    1.11. Sanctions and claims.

    This section establishes the procedure for applying penalties, compensating for losses and submitting claims in connection with the non-performance or improper performance by one of the counterparties of their obligations.

    In this case the amounts of the penalties must be clearly defined (as a percentage of the value of the under-delivered goods (works, services) or the amount of the unpaid funds; the timing of the payment of the penalties — from which date they are set and for how long they apply, or their maximum amount); the periods within which claims may be made; the rights and obligations of the parties to the contract (agreement) in this respect; and the methods of settling claims.

    1.12. The settlement of disputes in court.

    This section defines the conditions and procedure for resolving disputes in court regarding the interpretation, non-performance and/or improper performance of the contract (agreement), with the determination of the name of the court or clear criteria for determining the court of any of the parties depending on the subject and nature of the dispute, as well as the parties' agreed choice of the substantive and procedural law to be applied by that court and the rules of the court settlement procedure.

    1.13. The location (place of residence) and the postal and payment details of the parties.

    In this case the location (place of residence) and the full postal and payment details (account number, name and location of the bank) of the counterparties to the contract (agreement) are indicated.

    2. By agreement of the parties, additional terms may be defined in the contract (agreement):

    insurance, quality guarantees, the terms of involving sub-performers of the contract (agreement), agents, carriers, the determination of loading (unloading) rates, the terms of the transfer of technical documentation for the goods, the preservation of trademarks, the procedure for paying taxes and customs duties, various kinds of protective clauses, from which moment the contract (agreement) begins to be valid, the number of signed copies of the contract (agreement), the possibility and procedure for making changes to the contract (agreement), etc.

    3. The list of regulatory acts of Ukraine governing the issues of the form, procedure for the conclusion and performance of foreign-trade contracts (agreements):

    the Civil Code of Ukraine;
(the second paragraph of clause 3 as amended in accordance with Order No. 65 of the Ministry of Economic Development and Trade of Ukraine of 28 September 2011)
    the Law of Ukraine "On foreign economic activity";

    the Law of Ukraine "On the procedure for carrying out settlements in foreign currency";

    the fifth paragraph of clause 3 is excluded

(in accordance with Order No. 767 of the Ministry of Economic Development and Trade of Ukraine of 8 July 2013; in connection with this, the sixth to ninth paragraphs are to be considered respectively the fifth to eighth paragraphs)
    the Law of Ukraine "On the regulation of commodity exchange (barter) operations in the field of foreign economic activity";

    Decree of the President of Ukraine of 4 October 1994 No. 566/94 "On measures to streamline settlements under contracts concluded by business entities of Ukraine";

    the eighth paragraph of clause 3 is excluded

(in accordance with Order No. 65 of the Ministry of Economic Development and Trade of Ukraine of 28 September 2011)
    the ninth paragraph of clause 3 is excluded

(in accordance with Order No. 65 of the Ministry of Economic Development and Trade of Ukraine of 28 September 2011; in connection with this, the tenth and eleventh paragraphs are to be considered respectively the eighth and ninth paragraphs)
    Decree of the Cabinet of Ministers of Ukraine of 19 February 1993 No. 15-93 "On the system of currency regulation and currency control";

    the resolution of the Cabinet of Ministers of Ukraine and the National Bank of Ukraine of 21 June 1995 No. 444 "On the standard payment terms of foreign economic contracts (agreements) and the standard forms of protective clauses to foreign economic contracts (agreements) providing for settlements in foreign currency".

Head of the Legal Support of Foreign Economic Activity Division, Yu. Fedorenko