International Sales Contract between the Toyota Motor Corp.
and an free German Car Distributor

by: Robert Borchel

Contents

1. Negotiations p.1

1.1 Brief description p.1
1.2 Influence of the INCOTERMS 2000 on the price p.2

2. ICC International Sales contract p.3

2.1 Contract p.3
2.2 Transportation of the goods  p.13
2.3 Bodies of Law & Jurisdiction p.13

3. Problem description & solution p.14

3.1 Which Body of Law?  p.14
3.2 The Judge of which country?  p.15
3.2 Can a court decision be executed in another country?  p.15

4. Evaluation of the assignment p.16

Literature and Sources
 

List of abbreviations

CISG = Contracts for the International Sale of Goods
COGBS = Carriage of Goods by Sea Act 1992
DUPRO = During Production Test
FRI = Final Random Inspection
ICC = International Chamber of Commerce
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Executive Summary

The following assignment gives a review about contract-drafting and legal problems which have to be solved while international trading processes. The first part of the available assignment contains an introduction about the contract negotiations and explains what influence the INCOTERM 2000 had on the sales price. In the second part I show the contract, describe the way the goods will be transported, give an overview about the responsibilities for entering the contract with the carrier, show the body of law and the concerned judges in the case the carrier damage the goods and answer the question if the seller has the obligation to send new goods replacing the damaged. The legal problem definition is the main topic at the third part of this assignment and answers the three international private law problems (I.P.L.). With the fourth part I give a brief evaluation about our assignment.

1. Negotiations

A German business man might drive to work in a car designed in the USA that was assembled in Japan by Toyota from components made in China that were fabricated in Korea from Malaysian rubber. The German Business man may have filled the car with gasoline pumped by an oil rig in a well off the coast of Africa by a French oil company that transported it to a Dutch oil refinery in a ship owned by a Greek shipping line. Before work the businessman stops for a quick breakfast, coffee and a chocolate muffin. The coffee beans were grown in Brazil and the chocolate in Peru. A large majority of the products mentioned in the above passage were transported by way of sea. Each of the products shares similar qualities, bulky, less high tech, large capacity moving long distances. But all these processes have one similarity – they have to be delivered from a seller to a buyer and need an international sales contract as its basic.

1.1 Brief description

In my case we have the Toyota Motor Corp. from Japan in the one hand and a free distributor in Germany in the other hand. The distributor will go for a business trip to the Toyota Motor Corp. Headquarter in Japan and negotiate the conditions for the delivery of Toyota Prius cars to Europe and sign an international sales contract. So in my imaginary case the Toyota Motor Corp. is the exporter and the free Distributor, which I call Europe Car Distribution Corp., is the importer. For the contract the two parties I will use parts of the ICC Model “International Sale Contract” (publication no. 556). In Generally the Europe Car Distribution Corp. wants to benefit from the increasing oil and fuel price and duo to this trend the increasing demand for energy-saving cars. That’s why the Distributor plans to import 1.000 Toyota Prius cars with new and fuel-saving hybrid-electric power engines. The cars shall be selling in special sales promotion after the silly season and need to be delivered on time end of August. Below you can see some pictures of the Toyota Prius with hybrid-electric power technology.

1.2 Influence of the INCOTERMS 2000 on the price

When commercial traders enter into a contract for the purchase and sale of goods they are free to negotiate specific terms of their contract. These terms include the price, quantity, and characteristics of the goods. Every international contract will also contain what is referred to as an Incoterm (international commercial term). The Incoterm selected by the parties to the transaction will determine which party pays the cost of each segment of transport, who is responsible for loading & unloading of goods, and who bears the risk of loss at any given point during a given international shipment. Incoterms also influence Customs valuation basis of imported merchandise. The goal of the Incoterms is to alleviate or reduce confusion over interpretations of shipping terms, by outlining exactly who is obligated to take control of and/or insure goods at a particular point in the shipping process. Further, the terms will outline the obligations for the clearance of the goods for export or import, and requirements on the packing of items. The Incoterms are used quite frequently in international contracts, and a specific version should be referenced in the text of the contract.

The international commercial terms are overseen and administered by the International Chamber of Commerce in Paris and are adhered to by the major trading nations of the world. There are currently 13 Incoterms in use, and they can be considered on the basis cited above. Furthermore they are recognized globally by courts and other authorities. Frequently, parties to a contract are unaware of the different trading practices in their respective countries. This lack of knowledge can lead to misunderstandings and disputes between customer and supplier – buyer and seller. The incorporation of Incoterms in international sales contracts reduces this risk. It is important to understand and use sales terms correctly. A simple misunderstanding may prevent exporters from meeting contractual obligations or make them responsible for shipping costs they sought to avoid. When quoting a price, the exporter should make it meaningful to the prospective buyer. Many Sellers makes their profit with the right using of Incoterms while they offer a very low price and have been bilked their goods. That means they benefit from quantity discounts of the carrier and make profit while billing their buyer for higher freight costs due to the Incoterms. That’s why the Incoterms have a strong influence on the price because the seller can offer their good for lower net prices.

2. International Sales Contract (Manufactured Goods Intended for Resale)

2.1 Contract

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