Did you know that nearly 40% of international sales of goods disputes stem from unclear or incomplete contracts?
Since you're reading this article, we'll guess you're familiar with this information – whether that's because you've experienced such dispute firsthand or because you're proactively seeking to avoid one.
Either way, you're in the right place.
In this article, we'll get into the key elements of a well-crafted international sales of goods contract and provide practical tips for preventing and resolving disputes.
Let's get into it!
1. Convention on International Sale of Goods (CISG)
The Convention on International Sale of Goods (CISG) has one priority-level goal: To make international trade smoother and more predictable.
To make this goal a reality, it provides a common set of rules for businesses in different countries that have agreed to the Convention.
So, what does this actually mean?
Well, it means that when companies from different Contracting States do business with each other, they follow the same legal guidelines for things like forming contracts, delivering goods, and handling breaches.
More importantly, the Convention in this case automatically applies to your transaction, even if you didn’t explicitly mention it in your contract.
Now, since Serbia is a Contracting State to CISG, it means that any international sales of goods contracts between Serbian and foreign companies will follow its rules by default.
If you’re working with Serbian companies, it's always good to be aware of the CISG basics and how they apply to your contracts. This can help ensure that your transactions are smooth and disputes are minimized.
2. Commercial Contracts in International Sales of Goods
If you’re reading this article, you're either:
a) looking to either create a strong commercial contract to protect your international sales; or
b) seeking how to file a claim against the Serbian company under the CISG after a breach of contract.
Assuming you’re not here because you’ve already run into a dispute, but because you want to be proactive about your international sales of goods, you probably know that having a solid commercial contract is a must.
Here's why:
For starters, a commercial contract, whether it’s a goods sales contract or a goods purchase contract, is your safety net when it comes to setting clear expectations and protecting your interests.
It ensures that both parties are on the same page about the terms of the deal from get-go, including payment conditions, delivery schedules, and responsibilities.
With a solid contract, you're leaving nothing to chance in a world where ambiguities in verbal agreements or poorly drafted documents can lead to disputes, misunderstandings, and costly legal battles.
Also, a well-drafted contract helps avoid potential pitfalls, such as the need for legal action in the defendant's home country.
This is especially important in international sales, where the stakes are even higher because different countries have different laws and regulations.
Now, we get that you might be tempted to search for a “commercial agreement sample” online to save time or money, which is fair. But while these templates can be a starting point, relying on them for important transactions isn’t the best idea.
You see, many templates you find on Google are generic and may not cover the specific legal requirements or nuances of your particular deal. They might also be outdated or not tailored to international trade laws, which can leave you vulnerable to issues you didn’t anticipate.
So, trying to use a one-size-fits-all solution for a custom-fit problem might not be the smartest choice ever. Instead, our advice for you is to always consult with a business contracts lawyer first, especially when drafting specific terms related to international shipping, customs, or dispute resolution.
3. Best Practices for Drafting International Sales Contracts to Avoid Disputes
1. Specify Product Conformity
First up, clearly define the standards for product conformity in your contract. Whether that's ISO standards or other relevant benchmarks, make sure to specify exactly what criteria the products must meet. Also, include detailed descriptions, model numbers, and any relevant specifications or images in the contract. Essentially, a clear and detailed description of your intentions and the desired product is a must. This approach ensures that both parties know exactly what is expected, reducing the chance of disputes over product quality or deviations from agreed standards. And, if a dispute over the international sales of goods does arise, having these details in your contract will make it much easier to prove non-conformity and resolve the issue effectively.
2. Prompt Inspection, Testing and Notification
Next up, include provisions for how and where product inspections will be conducted. This is crucial for verifying the product's conformity. Don't forget to specify the timeframe and standards for these inspections, too, as well as decide who will perform them (e.g., an expert from Serbia or another country). Generally speaking, the buyer should inspect the received goods immediately upon arrival and to notify the seller of any defects or discrepancies without delay. Note: It’s advisable to keep all communication in writing, preferably via email, to maintain a record of the notification and response.
3. Dispute Resolution and Governing Law
It's always advisable that you include a dispute resolution clause in your contract and specify exactly how international sales of goods disputes will be handled. Arbitration is often preferable to litigation, so consider stipulating arbitration through a reputable institution such as the ICC in Paris or a local arbitration center in your country. In Serbia, that would be the Permanent Arbitration at the Chamber of Commerce and Industry of Serbia or the Belgrade Arbitration Center. Note: When defining the rules for arbitration, don't forget to include who will bear the costs, as many arbitration rules do not follow the "costs follow the event" principle. Be sure to specify that both necessary expenses and legal fees are considered part of the procedural costs that the losing party must cover. Besides this, it’s also beneficial to specify the governing law that will apply beyond the CISG, whether it is Serbian law or that of a third country. This will avoid any confusion and ensure consistent interpretation of terms.
4. Incoterms
Another thing that's really important is to specify the specific Incoterm (e.g., FOB, EXW, CIF, etc.) in your contract. Incoterms define the responsibilities and costs associated with shipping, including risk transfer from seller to buyer. Although most parties do consider Incoterm in their international sales of goods, we've found that it is often agreed upon verbally. This is not the smartest approach, as relying on verbal agreements can lead to misunderstandings and disputes over who is responsible for various costs and risks. Clearly documenting the agreed Incoterm in the contract ensures that both parties have a mutual understanding and prevents potential conflicts over who's responsible for shipping costs, insurance, customs duties, and other charges.
5. Payment Terms
Settling on payment terms is especially important for buyers in the international sales of goods transactions. You should always have clearly defined payment terms regarding:
• Currency, payment method (for example, letter of credit or wire transfer) and exchange rates
• Payment schedule, including deadlines and milestones and whether payments are made upfront, upon delivery, or through installment plans.
• Responsibility for additional costs associated with customs duties, VAT, shipping, and any bank fees.
This way, you ensure that everyone has a precise understanding of their financial responsibilities.
6. Filing a Claim Against a Seller/Buyer in Serbia
If you’re here because you’re facing a dispute and need to file a claim against a seller or a buyer in Serbia, you'll need to know your rights and how to effectively address the breach of contract.
First things first: The entire process of filing a claim against a seller (or buyer) in Serbia is governed by the Serbian Civil Procedure Code.
Now, this process starts by determining the appropriate jurisdiction for filing the claim.
The general rule is: if there's no commercial contract in place, you'll have to file your claim in the defendant's home jurisdiction. Whether the defendant is the buyer or the seller—it makes no difference.
However, if your contract includes a forum selection clause, you'll file the claim with the court or arbitration tribunal specified in that clause.
After you've determined the proper jurisdiction, your next step is to hire a business contracts lawyer to thoroughly review your international sales of goods contract, along with all invoices, delivery receipts, and any communication with the Serbian buyer or seller.
If you do have a contract in place, your lawyer will focus on key terms, including:
• Dispute resolution mechanisms;
• Delivery obligations and timelines;
• Payment terms (incl. commission costs);
• Conformity of goods;
• Warranties or guarantees; and
• Any clauses that may exclude or limit the application of the CISG.
This thorough review ensures you're prepared to move forward with your claim, armed with all the critical details that can impact the outcome.
But, before you do file a claim, you first need to notify the Serbian seller/buyer of the breach or issue.
You see, under the CISG, the buyer must notify the seller of any lack of conformity within a reasonable time.
As for what 'reasonable time' is, this is often interpreted as within a few weeks after discovering the issue, as guided by case law and legal commentary on the CISG. For obvious defects, it must be within two years from the date of delivery.
Failing to notify the seller or buyer promptly may result in losing the right to file a claim.
Only after you've done all this can you move on to filing the claim in the appropriate Serbian court.
The claim must be filed in the Serbian language and include:
• detailed description of the dispute;
• legal grounds; and
• the relief you're seeking, whether that's performance of contract, compensation for losses due to the breach, or termination of the contract.
After filing the claim, the Serbian court will notify the defendant, compel the defendant to submit a written statement, and schedule the initial hearing, usually within the next 6 months depending on the court's caseload.
Note: A typical commercial dispute has multiple hearings and can take 1 to 3 years to resolve in the Serbian courts and reach the first instance decision. Failing to provide all necessary evidence, translations, and contract details can delay the process even further, so it's advisable that you hire an experienced Serbian law firm to help you move things along.
7. Why Choose a Serbian Law Firm for International Sales of Goods Disputes?
When facing an international sales of goods dispute in Serbia, choosing a local law firm is practically essential.
The first reason for that is: If there’s no contract in place and you need to file a lawsuit in Serbia, court proceedings will be conducted in Serbian language. Now, if you don’t speak Serbian or have someone to manage the language barrier, you can imagine how this can create significant challenges. For instance, Serbian law requires that foreign parties appoint a local representative to receive legal documents. Without a Serbian law firm handling this, crucial court communications could be missed or misunderstood, leading to delays or unfavorable outcomes.
Moreover, Serbian lawyers are not only familiar with the Civil Procedure Code and possess the procedural expertise to ensure your case is properly handled, but they also have a deep understanding of how Serbian courts interpret and apply the CISG. Their knowledge of local judicial practices and precedents related to the CISG ensures that your case is presented effectively, aligning with both international and local legal standards.
Lastly, if your case involves local laws beyond the CISG, only a lawyer well-versed in Serbian regulations can effectively handle those complexities and prevent you from missing critical legal details that could jeopardize your case.
The same reasoning applies to arbitration. While arbitration might seem less formal than court proceedings, it’s no less complex. Opting to represent yourself in either setting without legal assistance is risky and often unwise.
If you have any additional questions on this topic or need legal assistance with international sales of goods disputes, feel free to reach out to us at [email protected].
