International Business Law Outline
Rotham – Fall 2010
Basic Sales Transaction
Sales K
1. Request for quote – requesting proforma invoice
a. Proforma invoice – breaks down the costs of each item
2. Purchase order
3. Acknowledgement
Letter of Credit – protects buyer
1. By your drafts – indicates negotiable instrument
2. You can write a check against commercial bank IF draft is accompanied by the following documents:
a. Bill of lading
b. Insurance policy or certificate
c. Packing list
d. Commercial invoice in triplicate
e. Shipper’s export declaration
Carrier gives negotiable bill of lading to seller
Seller takes bill of lading, draft, and all other documents to domestic bank – because bank promised to buy draft – endorses negotiable documents à $$$
Buyers bank gives all documents to buyer in exchange for payment
Buyer goes to ship with negotiable bill of lading and buyer gets good
Sales Documents
Conflicts of Law
1. American Principles
a. Restatement of Conflicts of Law
i. If no directive:
– Needs of the interstate and international systems
– Relevant policies of the forum
– Relevant policies of other interested state and the relative interests of those states in the determination of the particular issue
– The protection of justified expectations
– The basic policies underlying the particular filed of law
– Certainty, predictability, and uniformity of the result, and
– Ease in the determination and application of the law to be applied
ii. Basic rule if no directive: Must have significant relationship to the transaction
b. UCC
i. Just needs some relation
Contract formation/battle of the forms
Convention for the international sales of goods
1. Establishes substantive law with respect to international transactions involving commercial goods
2. CISG is applicable when states have not made a determination and parties ratified CISG
3. If you want to get rid of CISG – MUST BE SPECIFIC that don’t want it to apply
4. Differences from UCC
a. [Add from slides – week 2]
International Trade Financing
[add from slides – week 3]
Factors in deciding what terms to use:
1. Buyer v. Seller
2. Trade usage
3. Course of dealing
4. Availability of capital
5. Experience with international transactions
6. Which party can get better deal
Bills of Lading
1. Berisford Metals Corp. v. S/S Salvador – Berisford lost bundles because they were not inspected
a. Loaded contents into containers
b. FOB – S obligation was over ships rail
c. S duty continues until ships rail – left contents in storage area
d. COGSA is American law
i. Unless a value is declared, there is a $500 limit/package
e. A bill of lading was issued was a false weight – not allowed to take advantage of bill of lading
Distribution of Products
Letter of Credit Issues
1. General Types of Letters of Credit
a. Documentary or commercial letter of credit
i. A payment undertaking given by a bank (issuing bank)
– Issuing bank (buyers bank)
§ Issuing bank’s liability to pay becomes absolute once the preconditions in the L/C are met
§ Effectively substitutes its own creditworthiness
ii. On behalf of a buyer (applicant)
iii. To pay a seller (beneficiary) a given amount of money
– Beneficiary (seller)
§ Entitled to payments as long as he provide the documents required in the L/C
§ L/C arrangement is a separate K from the underlying commercial deal – interested only in documents – not goods
o Bank only cares about documents
iv. On presentation of specified documents representing the supply of goods
v. Within specified time limits
vi. Documents must conform to terms and conditions set out in the L/C
vii. Documents to be presented at a specified place
b. Standby Letter of Credit
i. Almost like a guarantee
ii. L/C constitutes primary source of payment – in a standby – it is a secondary source of payment
iii. Beneficiary able to
eceives a L/C from the buyer and then opens another L/C in favor of the supplier
– The first L/C services as collateral for the second draft
Direct Sales
Situations where you want a direct sale:
1. B2B (business to business) – normally involves the sales of goods with no trademark or similar rights
2. B2C (business to consumer)
a. Increasing regulation since internet sales have made easier
b. Local cts or regulatory agencies may have jurisdiction over transactions if solicitations aimed at citizens of jurisdictions – i.e. local language advertisements or websites
c. May not lend itself to sales of complex products requiring after sales servicing
d. Payment through credit card system
Agency Relationships (sometimes called sales representatives)
Generally – commission arrangement agreement – sale still takes place from factor directly to use
1. Still has an agent involved
2. Normally – involves a K between the manufacturer and a local entity that acts as a middleman in arranging sales directly from the manufacturer to local person
Compensation – must be in line with documented market rates
1. Excessive compensation of commission agent will raise questions with respect to improper payments to local official
Government requirements
1. Standard form K’s may be a de facto requirement in some countries for registering an agent or distributor
Distribution Agreements
A. Generally – sale from distributor and either sells product directly OR sells to sub distributor who sells to use
1. In many countries, these arrangement are heavily regulated, normally to protect the distributor
B. Pricing
1. In most developed countries with competition laws, vertical price fixing legally unacceptable, although subject to a “rule of reason” analysis
a. Distributor normally free to set its own prices
C. Anti-trust
1. Per se violations
