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

Seminar Paper , 2005 , 21 Pages , Grade: good (83%)

Business economics - Law

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.

Contents

List of abbreviations

Executive Summary

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

2. ICC International Sales contract
2.1 Contract
2.2 Transportation of the goods
2.3 Bodies of Law & Jurisdiction

3. Problem description & solution
3.1 Which Body of Law?
3.2 The Judge of which country?
3.2 Can a court decision be executed in another country?

4. Evaluation of the assignment

Literature and Sources

List of abbreviations

Abbildung in dieser Leseprobe nicht enthalten

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.

illustration not visible in this excerpt¹

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

A Specific Conditions

These Specific conditions have been prepared in order to permit the parties to agree the particular terms of their sales contract by completing the spaces left open or choosing (as the case may be) between the alternatives provided in this document. Obviously this does not prevent the parties from agreeing other terms or further details in box A-16 or in one or more annexes.

illustration not visible in this excerpt

The present contract of sale will be governed by these Specific Conditions (to the extent that the relevant boxes have been completed) and by the Generals Conditions of Sale (Manufactured Goods Intended for Resale) which constitute part B of this document.

illustration not visible in this excerpt

B General Conditions

1. Placing of Order

1.1. Purchases will be initiated by formal purchase orders of the Buyer. All purchase orders shall be exclusively governed by the following terms and conditions of purchase. General terms and conditions of the Seller which are inconsistent therewith shall be without effect in respect of the Buyer. The Incoterms 2000 shall apply.
1.2. Purchase orders which are made orally need to be confirmed in writing in order to become effective. Purchase orders can be revoked until the Buyer receives an order confirmation. Order confirmations have to be made in writing and have to contain the signature of an authorized person and the company stamp. The same shall apply to order modifications.

2. Object of Purchase

2.1. The specification of the goods purchased shall be exclusively taken from the purchase order. Any variance in the order confirmation needs to be expressly reconfirmed by the Buyer.
2.2. The Seller shall deliver the goods with such accessories and provide such instruction material reasonably required for their ordinary use.
2.3. The Seller shall procure for each of the goods ordered a certificate of origin whether requested by the Buyer or not. Certificates of origin shall comply with EU preferential treaties. The Seller shall also be responsible for compliance of the goods with regulatory requirements applying in the country of destination.
2.4. Samples: The Seller has to provide to the Buyer or their representatives with one sample for tests. Seller bears costs of samples and freight to the defined Buyer office in the region. Once the sample is handed over, it doesn’t belong to the Buyer. The Buyer has to give the sample back after the tests are finished. Buyer bears freight back to the defined Sellers office in the region after the tests. The Seller warrants, that the delivered goods will comply with the samples released by the Buyer. Additionally to the samples, the following documentation as a minimum has to be provided: Bill of material including supplier and source, certificates etc., functional diagrams, design and construction drawings. The number and recipient of test samples are defined in the relevant Purchase Order.
2.5. Packing: The packaging of the goods ordered shall suit the method of transportation agreed upon. The packing must be resistant to (any) mechanical, chemical, climatic or optical impacts as well as attacks of insects or other animals on the goods. The packaging must be in accordance with the legal requirements of the country of destination. Details of packaging are defined in the product specification and / or Purchase Order. The packaging shall resist to any of the aforementioned impacts which may occur during the storage and transportation of the goods.

[...]

---

¹ Note http://www.toyota.com

• College: HAN University of Applied Sciences
• Course: International Law
• Grade: good (83%)
• Author: Diplom Betriebswirt (FH) Robert Borchel (Author)
• Publication Year: 2005
• Pages: 21
• Catalog Number: V39782
• ISBN (eBook): 9783638384704
• Language: English
• Tags: International, Sales, Contract, Toyota, Motor, Corp, German, Distributor, International