Sales Agreements

SALES AGREEMENTS: some considerations on Contents and Applicable Law

In contracts for the sale of goods, in which both parties have their places of business in different States, the  law that has to be applied is the Convention of Vienna of  April 11 1980 which constitutes the law for the International Sale of Goods for the States that have signed it.

Article. 6 of the Convention, however, allows the contracting parties to completely exclude the application of the Convention or derogate from it or vary the effects of its provisions, in favor of contractual clauses between the parties that become applicable law between the contracting parties.

 It should be noted, however, that the above mentioned Convention does not apply to  sales to consumers, by auctions, on execution of law; sales of stocks, shares, investment securities or money,  sales of ships and aircrafts, sales of electricity (Art. 2)

It also does not apply to contracts for the supply of goods to be manufactured or produced when the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. and to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labor or other services.(Art 3)

The Convention does not govern the validity of the contract or of any of its provisions and the effect which the contract may have on the property in the goods sold. (Article 4), which are subject to specific extra agreements between the parties.

The Convention may provide also when the seller must deliver the goods (article 33), the compliance (the absence of defects) of the goods to be delivered, the remedies for any breach of contract by the seller (Art. 45-52) damages, interest for late payments of exemptions of responsibilities (art. 71-80) etc …

The International Commercial Terms (Incoterms) are normally found In Sales Agreements. There are rules concerning the delivery of goods that define the respective functions of the seller, the distribution of the costs, the transfer of risks and responsibilities regarding the delivery of goods between seller and buyer, etc…

Core business of the Sales Agreement are the general conditions of contract which, for the common law which is usually applied to these types of contract, prevail if inserted in the last accepted offer according to the adage Last Shoot Rule (whoever shots last wins).

In order for a contract to provide security to both parties and avoid unnecessary and expensive international disputes, the so-called Battle of forms between seller and buyer should be avoided at all costs. Battle of the forms refers to the not uncommon situation in which one party makes an offer in the form of a pre-printed form contract and the offeree responds with its own form contract. 

The Convention of Vienna places a tries to avoid this practice with the Mirror Image and the last shot rule. In this regard Art. 19.2 defines the acceptance criteria of the deals that can’t alter the content of the offers or put limitations or additions to orders that have not been discussed between the parties in agreement.

In conclusion, a contract sales agreement must aim to avoid conflicting interpretations by both parties and one of the methods, in addition to those mentioned above, consists in the attachment of a prevail clause which excludes the application of unequal conditions.