This article is written by Sourav Chakraborty pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from Lawsikho.
If any person is thinking of expanding their business then international trade will probably be its prominent solution. People may think that carrying out trade in their land is quite safer and controllable but international trading will help them venture out of their comfort zone eventually making their business stronger, more successful, and more profitable. Trade is only applicable internationally where two or more countries are involved. There is a section on international trade law that incorporates customary law of evidence and procedure, customary commercial law, and general principles of international law which is known as the “Lex mercatoria”. For carrying out a smooth international trade, both the parties involved in the trade are required to mutually draft an international sales agreement in which they mutually negotiate and include clauses to remove any kind of confusion and reduce the chances of disputes between both parties.
This article briefly discusses the concept of the international sales agreement from amazon’s point of view, key clauses that amazon must include to draft an effective international sales agreement, and lastly, provide a sample template of an international sales agreement for amazon.
What is an international sales agreement?
Before understanding what an international sales agreement is, it is very important to first have an idea about what exactly an agreement means. In simple words an agreement means where there is a promise with some sort of consideration, now another question might be tickling in your mind about the promise; so a promise means a proposal that has an acceptance. To collectively say a valid agreement is a legally binding arrangement where there is a proposal that is duly accepted with some sort of consideration.
Now moving on to the broader picture, what is an international sales agreement, in simple words, it is a mechanism in which international buyers and sellers willfully enter into a binding arrangement for an exchange of goods and services from different countries for some form of earnings. There are three essential components in an international sales agreement such are:
1. The intent of both the parties
What is the intent of both the parties between a buyer and the seller, what are they trying to accomplish, and can that intent be understood from the content of the agreement and that is why identifying an intent is very essential?
2. The manner to achieve the proposal, acceptance, and consideration
It is quite simple as a proposal is a way to offer something for sale, for example, if there is a company in France that is a seller they will typically send a proposal to their client to purchase certain goods and services. This is a simple and basic meaning of a proposal. An acceptance can somewhat be called a purchase order which your client will send as an acceptance after you make a proposal to them and consideration is just a fancy term for an exchange of funds. The manner to achieve all these three components are very much important for executing a successful International transaction.
3. Methods for interpreting the agreement
It means that how the content of the contract is going to get interpreted, is it going to get interpreted by a code of law or through arbitration (as these two are preferably used by the companies).
The parties who are occupied with the agreement are the purchaser and the seller and generally, these purchasers and dealers are organizations. For each gathering, The accompanying must be incorporated:
- Name of the organization, full address, and ethnicity.
- Sort of the company: Public restricted organization, restricted risk organization, and so on
- Name and position of organization agent who consents to the arrangement.
- Expense ID number of the two players.
The two important governing entities of an international sales agreement which every party should be aware of before executing an international sales agreement or formulating any clause under it are:-
(i) ICC model for International Sales Contract, published in the year 1997.
(ii) U.N. Conventions on Contracts for the International Sales of Goods (UNCISG), published in the year 1998.
What is amazon and why would it require an international selling agreement?
Amazon.com is an American worldwide technology organization that centers around internet business, distributed computing, computerized web-based, and man-made reasoning. It is one of the Big Five organizations in the U.S and it works practically everywhere. It is a tremendous Internet-based undertaking that sells books, music, motion pictures, housewares, hardware, toys, and numerous different merchandise, either straightforwardly or as the agent between other retailers and Amazon’s huge number of clients. Amazon has three central offices which improves them way more than their rivals, for example, huge information and data identified with their market and client, trend-setting innovation, and cost advantage. The other principle highlight that puts Amazon.com on another level is the multi-evened internet business procedure it utilizes. Amazon.com lets nearly anybody sell nearly anything utilizing its foundation. You can discover straight deals of products sold straight by Amazon, the membership program that allows anyone to post Amazon joins and acquire a commission on navigating deals. There’s currently a program that lets those partners (Amazon calls them “partners”) construct whole Web locales dependent on Amazon’s foundation. They can in a real sense make small-scale Amazon Web destinations assuming they need to, expanding on Amazon’s colossal data set of items and applications for their own motivations.
Amazon has its superb means to turn into the Earth’s most client-driven organization where individuals can discover anything they need to purchase on the web and for that reason Amazon realizes their clients’ tastes and inclinations truly well. The keen and powerful procedure that amazon carries out is that it gathers a tremendous measure of information on each enrolled client during each visit to the Web webpage, Amazon guides clients toward items they may really be happy to find and purchase. As a huge number of clients visit amazon’s site, this technique assists Amazon with social events and a ton of data identified with their clients across various nations. This is one of the great reasons why amazon can perform fruitful business universally. Amazon has a trillion-dollar business that has extended everywhere. They render administrations and services to their clients living in various nations and completely different business deals around the world, for these reasons they need to execute international sales agreements to guarantee a smooth exchange and lessen the odds of questions between parties.
Key clauses that amazon must incorporate in order to draft an effective international sales agreement
Amazon is a billion-dollar international e-commerce company that solely dominates the e-commerce market and to carry out their international sales transaction they must draft their international sales agreement by incorporating key content and essential clauses such as:
1. Identifying the applicable law
First and foremost Amazon needs to identify which country’s law is applicable because the International Sales Agreement is the engagement of buyer and seller from different countries so it is very important to identify whose law of the land is going to be applicable. For example, Amazon is in the United States and it is willing to enter into an International Sales Agreement with a company which is in India so it is very important for both the parties operating from different countries to negotiate and mutually decide whose law of the land is going to be applicable whether it’s Indian or the US laws. CISG is also executed to cover these circumstances. In the event that the agreement is quiet about the appropriate law, CISG naturally applies, and various laws can be applied by indicating them in the agreement.
2. Dispute resolution clause
It is very indispensable for Amazon to incorporate a dispute resolution clause in their international sales agreement which portrays that assuming any questions emerge, by which mode it is to be addressed. Both Amazon and the other party mutually engaging in the agreement have an option to go for litigation and arbitration. Arbitration is a more appealing method of question goal as it is expedient and financially savvy when contrasted with the suit. Most arbitrations occur under the arbitration foundation that offers a pre-set-up set of rules as the applicable law to govern the procedure. The most widely recognized and experienced establishment is the ICC International Court of Arbitration. On the off chance that the gatherings settle on arbitration, they ought to determine the spot of arbitration and language preference, and assuming they decide on litigation, the public or city courts in which a claim must be documented ought to be reflected in the agreement. Drafting a clear and explicit dispute resolution clause will drastically reduce the chances of a dispute between both parties mutually entering into the agreement.
3. Description of the product
This is one of the important clauses which Amazon needs to be really specific of, i.e, the description of the product. We talk about consistency across documentation or the paper drill but the description of the product is very essential that you start to use in a quotation or in an agreement, purchase order, invoices, packing list, etc. it should be compact, easily understandable, and identifiable in terms of what that product is and that is why a description of the product needs to be very clear, crisp and understandable because assuming the products are not depicted unequivocally enough that fulfill the purchaser, those merchandises are unsuitable for the purchaser’s business purposes.
4. Price of the goods
This clause is probably the principal element for Amazon in the international sales agreement as it includes the currency of sale as both parties are engaging in transactions from different countries. This clause will certainly specify whether Amazon is going to do the whole transaction in dollars or it will allow the other party’s currency as the dominant currency during the transaction. This clause can be mutually negotiated by both the parties engaged in the agreement, but 9.9/10 times it’s the seller who gets the benefit to do the transaction in their own currency as they are the party who will export the product.
5. Mode and terms of the payment
It is a highly negotiable clause which Amazon is required to do with the other party for addressing things like whether the party will do an advance payment, whether they will pay the full amount or amount on an installment basis, what is the assigned term within which the party is required to pay the total amount, what is the mode of the payment whether it through cash, cheque or bank transfer to the account or there is guaranteed letter of credit payable to the account decided by the seller. Whether there will be a Bill of exchange or direct debit to the account decided by the buyer.
6. Term of the delivery
Both Amazon and the other party entering into this agreement should mutually decide the time and place of delivery as clearly as possible. Both the parties can refer to the Incoterms Rules published by the International Chamber of Commerce which provides referable points widely addressed throughout the world. Both the parties should mutually decide the agreed place and the transport agent where the goods shall be delivered and for the betterment of the transaction, they can include a point that the goods must get delivered at least before 24 hours from the deadline established in the agreement. Another point can also be included in the delivery clause that the decided delivery period can be modified in case of force majeure or unforeseen circumstances, just to increase flexibility and reduce the chance of dispute between the parties.
7. Inspection of goods
Amazon and the other party mutually entering into the agreement should include an inspection clause in their international sales agreement. This clause should mention that there will be a pre-shipment inspection of the products. The products ought to be investigated at the two first by the vendor and afterward by the purchaser. Sometimes the review of the products is a piece of the public authority’s prerequisite, so before drafting the agreement, the necessities of the public authority of every country have likewise been mulled over.
8. Document handling
Lastly, both the parties should remember a provision in the international sales agreement i.e, requiring the significant rundown of records and particularly exporters ought to be fastidious in the administration of fare reports. The most significant is the point at which the installment is made as a letter of credit. This clause is sometimes ignored by the parties but it possesses great importance in the international sales agreement.
Sample international sales agreement for Amazon
International sales agreement
This International Sales Agreement (hereinafter referred as ‘Agreement’) is made at Seattle, Washington on the 17th day of July 2021.
BY AND BETWEEN
AMAZON.COM, INC whose registered office is at 410 Terry Ave. North, Seattle, WA, 98109-5210 USA and EIN number is 911646860, Central Index Key (CIK) as 1018724 represented by __________________________________ (Name and Surname, Position) (hereinafter referred to as “the Seller”),
FLIPKART INDIA PRIVATE LIMITED whose registered office is at Buildings Alyssa, Begonia & Clover, Embassy Tech Village, Outer Ring Road, Devarabeesanahalli Village Bengaluru Bangalore KA 560103, INDIA and CIN number is U51909KA2011PTC060489 represented by SANTOSH KUMAR BETHALA, DIN Number-078041G4 (hereinafter referred to as “the Buyer”).
WHEREAS the Seller is an American multinational technology company that merely focuses on e-commerce business and the buyer is an Indian e-commerce company, headquartered in Bangalore and Karnataka in India.
AND WHEREAS the Seller has agreed to sell the Buyer the assigned number of Sporting goods, Shoes, and Handbags (hereinafter referred to as “Product”).
AND WHEREAS both the parties have declared their interest and mutually agreed in the sale and purchase of the Product under this present Agreement.
Now it is hereby mutually agreed by and between the parties hereto as follows:
Under this Agreement, the Seller has accepted the proposal of the buyer and agreed to provide the 10,000 pieces of Volleyball and Basketball, 15,000 pairs of Puma shoes, and 12,000 pieces of Levis Handbags as per the orders and requirements of the Buyer. The detailed list of the Products is attached as Annexure-1 along with this present Agreement.
(i) That both the Seller and the Buyer have mutually agreed to do all the business transactions under this Agreement in United States Dollar ($). The total price of the products which the buyer has to pay to the Seller for the exchange of the Products has amounted to $.1,730,116.00 (One Million Seven Hundred Thirty Thousand one Hundred Sixteen Dollars only).
(ii) That both the Seller and the Buyer have mutually decided to renegotiate the agreed price as per the significant changes in the International market or by a political, social, or economic condition in the country of the Buyer or the Seller of the Product.
3) Delivery clause
(i) That the Seller shall deliver the Product to ___________________(Mention the place, it may be a warehouse, airport or port etc.) ________________(City and Country) under Condition ____________________________________ (Mention any rules according to the Incoterm Rules or both the Seller and the Buyer have mutually formulated any rules related to the delivery of the Product).
(ii) That the Product shall be delivered at the permitted place, and to the transport agent assigned by the Buyer, at least 24 hours before the deadline established in this Agreement.
(iii) That if the Buyer fails to take charge of the Product on its arrival, then also the seller shall be entitled to demand the fulfillment of the agreement and payment of the decided price.
4) Packaging clause
That the Seller hereby declares that they will deliver the quality Product in a good and well-packaged manner. The Products will be carefully packaged and packaged with their specific brands and travel conditions to be used.
5) Means of payment
(i) That the Buyer hereby declares that they will pay the total decided price which appears in this present Agreement. Payment of the said Price shall be made by Bank transfer to the Account and Bank Branch designated and decided by the seller.
(ii) The details of the Bank and Bank Branch given by the seller are as follows:
- Name of the Bank: _______________________
- Branch: _____________________________________
- Full Branch Address: ________________________________
- Account Number: _____________________________
- IFSC Code: _______________________________________
- Account Holder’s Name: ___________________________
- Account Holder’s Residential Address: _________________________________
6) Date of payment
That both the Seller and the Buyer have mutually decided that the Buyer will pay 40% of the decided price on the date of execution of this Agreement i.e. 17th July 2021 and the rest 60% will be paid by the Buyer within 30 days from the date of the delivery of the Products.
7) Inspection of goods
That both the Seller and the Buyer have mutually agreed that they will carry out a pre-shipment inspection of the Products. The products ought to be investigated first by the Seller and afterward by the Buyer. Both the parties will mutually decide the time, place, and date for investigation of the Products before shipping them on the date mutually decided by the Parties.
8) Laws applicable
That both the Seller and the Buyer have mutually agreed that during the whole business transaction the law of the United States is going to be applicable to both the parties under this Agreement. Other than the laws of the United States any relevant law, rule, or statute will also be followed by both the parties which have any type of enforceability over International Trade or International Sales Agreement.
9) Dispute resolution clause
(i) That if there is a breach of any clause mentioned in the Agreement by one Party then the Aggrieved Party shall send a notice to the Defaulting Party stating to resolve the breach within the period of 60 days from the date of receiving of the notice.
(ii) That during the span of those 60 days both the Parties can collectively decide and try to resolve the dispute without involving any third party.
(iii) That if the dispute doesn’t get resolved within the span of those 30 days then both the Parties can opt for Arbitration without the interference of the Competent Courts but shall be allowed to approach the relevant courts in case the dispute elevates or is further not possible through arbitration (the Arbitrator can be mutually appointed by both the Parties or can form a bench by appointed Arbitrator from both countries or can approach ICC International Court of Arbitration). In the case of Arbitration, both parties have to mutually determine the spot of arbitration and language preference.
(iv) That the matter shall be presented before the Honorable Court as per the Jurisdiction if the matter doesn’t get resolved through Arbitration.
(v) That as this Agreement is signed and executed in Washington, so the provisions of this Agreement shall be governed by and construed in accordance with the Laws of the United States which is subjected to the jurisdiction of the Honourable Courts of Washington.
(vi) That both the Seller and the Buyer have mutually decided that the cost which will be incurred during the process of Dispute Resolution will be distributed among both the Parties and both the Parties under this Agreement will be responsible to pay the allotted cost incurred during the process of Dispute Resolution.
10) Document handling
That both the Seller and the Buyer hereby declare that they will both have a close look at handling the relevant documents related to the transactions, delivery, payments, product details, etc. and every document related to this trade should be recorded with due care by both the parties.
IN WITNESSETH WHEREOF the Parties hereto have herein unto set and subscribed their Respective Hands on the Day and Year mentioned hereinabove.
THE SELLER, THE BUYER,
(Through Authorized Representative) (Through Authorized Representative)
[Address Line 1] [Address Line 1]
[Address Line 2] [Address Line 2]
[City, State, Pin Code] [City, State, Pin Code]
International Trade has gradually become one of the desired sources for increasing revenue, cash-flow management, export financing, and enhancing reputation. International Trade has gotten extremely huge in this period as numerous nations trade labor and products from one another. There are numerous shows and deals identified with international business agreements, particularly worldwide deal Agreements which are applied in worldwide exchange and are viewed as valuable for the parties involved in the agreement. The international sales agreement is a key tool for carrying out an International Trade as it puts the parties involved under some sort of legal obligation which is necessary for the smooth functioning of the International Trade.
Therefore, in this article, we tried to clarify the concept of the international sales agreement from Amazon’s point of view by providing a sample template of the international sales agreement for better understanding. Hope this article has provided you with some sort of knowledge and insights related to the international sales agreement and provided a basic idea on how to draft an effective international sales agreement.
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