In the ranking of the International Doing Business Index 2020 carried out each year by the World Bank, Spain is ranked number 30 in this classification with a score of 77.9. This score is below New Zealand, Singapore, or Denmark, the countries where it is easier to do business around the world, and at the same level as other economies such as Turkey, Azerbaijan or China. At the European level, Spain is approximately on average, that is, behind 13 EU countries such as Germany, Norway, Sweden, and Latvia; at the same level as France or Switzerland and above Portugal, Belgium, and Greece.
Now, it should be noted that, in this World Bank report, various parameters are taken into account, such as (i) ease of opening a business, (ii) compliance with contracts, (iii) protection of minority investors, (iv) obtaining credit, among others. Thus, the strongest point of doing business in Spain is the ease it offers for cross-border trade, an aspect in which the World Bank gives Spain the best score among all the countries in the world (100/100) characterizing it as a world leader in cross-border trade. Additionally, other favorable aspects for Spain are the resolution of insolvencies (position 18) and the fulfillment of contracts (position 26).
Therefore, given that for any Spanish company that wants to export its products or services to third countries, whether European or not, it is essential to ensure both the applicable regulations and the accuracy of the transaction. The contract governing an international sale of goods is therefore the cornerstone of the transaction.
Checklist of the international sales contract clauses
Data of the parties
It is necessary to put the data of the parties and the legal representation of the natural person who will sign the contract to be able to prove that it has had the necessary authorization by the legal person that is part of the contract (buyer and seller) and to be able to prove that the sale is carried out within the scope of the statutes and the corporate purpose of the company. The content of the clause shall include, apart from the data of the buyer and the seller and the data of their representatives who will sign the contract, the domicile of both and their corporate objects.
The objects of the contract
This clause precisely mentions the type and quantity of the goods sold, the obligation of the seller to sell such products to the buyer, the price to be paid by the buyer and his obligation to purchase the products, the form of payment, i.e. in cash or by bank account, with letter of credit, etc. and also the currency (euro, dollar, etc). It is the most important clause of the contract as it constitutes the reason why the parties sign it.
Packaging of the goods
This clause contains the obligation of the seller to have the packaging of the goods which corresponds to the needs of the product and to the legislation in force, for example in the case of chemical products that are considered dangerous, there is the EU the relevant Directive on the packaging of dangerous products for transport.
The list of documents that the seller has to make available to the buyer is mentioned such as the commercial invoice, transport documents, packing list, insurance documents, certificate of origin, certificate of inspection, and customs documents.
Where the seller has to deliver the goods and when, for example, within X days counted from the date of written confirmation of the order, what means of transport will be used, who and even when has the risk to the products, and who has the obligation to ensure the products. It is a very important clause because it depends on the transfer of the risk of destruction of the goods during transport and the date until which the seller has responsibility and maintains the risk of destruction of the goods during transport.
In the case of transport, it is advisable to use the Incoterms 2010 published by the International Chamber of Commerce because they are internationally recognized and duly clarified to ensure the contractual obligations between the seller and buyer. Notwithstanding the use of Incoterms within the contract, it should be further clarified in the contract:
- International transport and administrative costs.
- The place where the risk of transport of the products is transferred.
- Responsibility and costs of customs clearance and tariffs
- Liability and cost of transport insurance coverage.
When using Incoterms, it is necessary to accurately describe the place and within that place the exact point of delivery of the products.
Non-conformity with the products and right of inspection
Until when the buyer can examine the products after their delivery by the seller and until he has the right to request the fulfillment of the contract, that is, the repair or replacement of the goods for hidden or obvious faults or request compensation, e.g. within 30 days from the days of the arrival of the products at the agreed destination.
Patents and trademarks
In case the goods have a patent, the seller has to declare that the products for sale are duly registered under the patent by which the seller owns or has the legal use of the patent.
Term of the contract
It is the clause that governs the time of termination of contractual obligations when the seller has delivered all the goods without any failure and the buyer has complied with the payment and receipt of the goods.
Termination for breach
This clause should mention which omissions or actions constitute an essential breach of contract, which gives the right to each of the parties to terminate the contract, e.g. in case one of them breaches its obligations on the payment of the contract, the delivery of the goods, packaging, of the right to use the patent, etc. and refrain from taking necessary measures to remedy the breach within the days agreed in the contract following the notice of the other party.
It is the right of each of the parties to terminate the contract in advance in the event that one of them is declared bankrupt, suspension of payments, bankruptcy or any other type of insolvency. It has to be mentioned to make it clear the exact time that the termination of the contract has to be declared by this clause, e.g. 3 months before the delivery of the goods, so as not to create ambiguities between the parties and legal uncertainty.
Assignment of rights and obligations
It is the clause that governs the obligation of the parties to fulfill the obligations of the contract themselves and not to assign or transfer all or part of the rights or obligations derived from the contract unless previously established in writing.
Limit of contractual liability
This clause establishes the limit of contractual liability for fortuitous events or force majeure, e.g. closure of airports due to current state anti-covid measures. Thus, the liability derived from fortuitous cases of force majeure will not be attributable to any of the parties and the rights and obligations established by the contract are suspended, which may be resumed by the common agreement at the moment in which the reason for the suspension disappears, as long as it is the foreseen cases of force majeure or fortuitous event provided for in this clause.
Applicable law and resolution of disputes arising from the contract
It is the clause according to which the parties have to choose the applicable law which can be the law of a specific country or the United Nations Convention on Contracts for the International Sale of Goods. The latter does not have as its scope the validity or not of the contract and therefore as for the validity of the contract the parties have to agree as the applicable law to the legislation of a specific country. Regarding the resolution of disputes, the clause must mention which will be the competent forum for the interpretation, execution and fulfillment of the clauses of the contract and the resolution of any dispute arising from it. It can be submitted to arbitration or to the judges of a specific country, for example, to the judges of the country where the seller has its permanent establishment.