Contracts used in international trade

The International Sale in the Vienna Conventions - C.I.S.G. 1980 /1

It regulates contracts for the international sale of corporal movables - goods.

Incorporated property (e.g. trademarks, patents, intellectual property, software) between parties having their place of business in different states is excluded.

The Vienna Convention is a single body of law consisting of 101 articles divided into 4 parts:

1. scope (1-14): rules identifying the contract subject to the agreement;
2. formation of the contract (15-24): how the international sales contract is finalised;
3. obligations of the parties: obligations of the seller, obligations of the buyer, remedies for their non-performance;
4. Final Provisions: contains mainly rules of international law concerning ratification, which are only of interest with regard to Article 101, which provides which versions of the Convention are authentic.

The Convention under Art. 1(1) applies to contracts for the sale of corporeal movables between parties whose places of business are in different States:

• when those States are Contracting States;
• when the rules of private international law lead to the application of the law of a Contracting State.

The Vienna Convention applies first and foremost to contracts of for salebut it also includes contracts of administration. 
The sale must be international, i.e. between entrepreneurs who have their place of business in different countries.
It may be a contract of sale of something already built or of something yet to be built in the future.In particular, the Vienna Convention states in Art. 3:

• in paragraph 1: 'that contracts for the supply of goods to be manufactured are deemed to be sales or to be produced, unless the party commissioning the goods undertakes to supply the substantial part of the materials necessary for such manufacture or construction"(hypothesis of a so-called 'work account' contract);
• in paragraph 2: 'the Convention does not apply to contracts in which the predominant part of the obligations of the contractor supplying the goods consists in the provision of labour and other services"(procurement contract).

In both of the above paragraphs, obligations to "do" prevail over obligations to "give", and thus there is no contract of sale where the obligation to give (transferring ownership) prevails over the obligation to do (performing an activity).

In subsections 1 and 2 of Art. 3, labour and the provision of services constitute a preponderant part of the contract and therefore cannot be spoken of as a sale since, for the Prevalence TheoryIf the "doing" exceeds the "giving", a contract of sale is excluded.

The Convention takes into consideration the form of the contract, opting for a absolute freedom.

The rules of the Convention are derogable between the parties.

The International Commercial Agency Contract

L'commercial agent is an independent, permanently entrusted entity (hence different from a business intermediary - finder), to promote or conclude, if provided with representation, contracts on behalf of a principal.

Almost all jurisdictions have developed, in legislation or case law, their own rules applicable to the relationship between agent and principal, which leads to the result that the rules governing the relationship between principal and foreign agent must be sought within the national system whose law has been designated as regulating the relationship, which, if not regulated, is that of the agent.

Within the European Union the EEC Directive No. 653/1986on the subject of commercial agency, has led to an appreciable homogeneity of the regulations in force in the individual EU states.

The agency contract is concluded with the agreement of the parties.

La form of the contract is free.Turning to the structure of the contract in its drafting, it is advisable to regulate:

• obligations and rights of the agent
• exclusive
• duration and termination of the relationship
• indemnities due to the agent at the end of the relationship.

Obligations and Rights of the Agent

Obligations of the Agent

The agent is obliged to diligently promote business on behalf of the principal, thereby looking after the latter's interests.

In particular, it is recommended in the contract to regulate:

• how to promote and increase sales of the principal's products;
• how to inform the principal about business opportunities that may be of interest to the principal;
• following the principal's instructions;
• compliance with an obligation of confidentiality;
• the provision, if deemed useful, of a non-compete obligation:
  • during the term of the contract;
  • after the termination of the contract;
• any obligation to provide for collections.

In theU.E., in accordance with the requirements of Art. 20 of the Agent Directive, a clause providing for non-compete obligations on the part of the agent for the time after the termination of the relationship, in order to be valid, must be evidenced in writing and must not exceed two years.In the E.U. it is prohibited to star of belief as a general clause, or is very limited, as in Italy. On the other hand, if the contract is subject to a law outside an EU Member State, very often, it is still admissible.
Such a clause is understood to be the agent's obligation not to receive its commission if the customer does not pay.
Rights of the Agent

• remuneration/commission;
• right to obtain from the principal the necessary documents relating to the goods.

Exclusive

The stipulation of exclusivity is to be seen in the context of the cooperation relationship established between agent and principal under the agency contract.

If an exclusivity clause is agreed upon, the distributor or agent is entitled to be the only one to carry out its activity in the agreed territory and for the Products defined in the contract.

It can be unilateralif it only plays in favour of one side, bilateral when it is mutual.

Duration and termination of the contract

Being a relationship that presupposes a stable collaboration between agent and principal, based on personal trust, the agency relationship is by its nature a contract of duration.

It can therefore, according to the general rules, be fixed-term or indefinite.

Pay attention to the legal regulations on notice if the principal decides to terminate the agency contract.

Severance pay

La ratio of such a right is to be found in the desire of the various legislators to better protect the agent by guaranteeing him 'compensation' for the losses he normally suffers in connection with the termination of the contract in terms of both reduced revenues, resulting from a cessation of business, and the clientele that remains with the principal, as well as the agent's loss of 'livelihood' because his business has ceased. Entitlement to the allowance is subject to the fulfilment of two conditions:

• during the course of the relationship the agent must have procured new customers for the principal or substantially developed business with existing customers and the principal still receives substantial benefits from doing business with those customers;
• the payment of such indemnity shall be equitable, taking into account all the circumstances of the case, in particular the commissions that the agent loses or that result from business with such customers.

The allowance, however, is not due:

• when the principal terminates the contract because of a breach attributable to the agent that, due to its seriousness, does not permit the continuation, even temporarily, of the relationship;
• when the agent terminates the contract, unless the termination is justified by circumstances attributable to the principal or by circumstances attributable to the agent, such as age, infirmity or illness, for which the agent can no longer reasonably be expected to continue in business;
• where, pursuant to an agreement with the principal, the agent assigns to a third party the rights and obligations it has under the agency contract.

The distribution contract

A distribution contract is a contract whereby a party agrees to sell goods, under certain conditions, to another party, for the latter to 'resell' them, earning its own remuneration between the resale price and the purchase price, and subject to obligations to meet the distribution needs of the first party.

This contractual figure is known in almost all legal systems, but only a few actually provide for a legislative framework to regulate it (as, for example, Belgium did in 1961).

The uncertainty as to the rules applicable to the agreement, from a practical point of view, accentuates the need, for those who are about to enter into such a contract, to proceed with the drafting of a negotiating text that is as articulate and complete as possible, in which the obligations and rights of each party are clearly identified.

The distribution contract is concluded with the consent of the parties and is normally free-form.

The structure of a distribution contract

Three broad areas of clauses can be identified to regulate the rights and obligations of each contracting party:

• the area relating to agreements concerning the granting or not of exclusivity to the distributor in the territory entrusted to him
• the area relating to the distributor's obligation to promote business and in particular: 
  • the distributor's obligation to set up and maintain an adequate sales organisation
• the area relating to the manufacturer's undertaking to supply the contractual products to the distributor, and in particular
  • the manner and timeframe in which purchase orders are to be submitted and the manner and timeframe in which the relevant acceptances ("order confirmations") are to be communicated
  • the timing and method of delivery
  • recommended product prices
  • terms and conditions of payment
  • how to complain when products do not conform to those ordered or are defective, and any guarantees from the manufacturer

The joint-venture contract

The term joint venture in international trade can refer to the most diverse forms of collaboration between companies for the achievement of very different objectives, which can be of a very different nature:

• industrial (construction of civil works and/or production plants of particular technical complexity and economic commitment, exploitation of mineral deposits, etc.).
• commercial (creation of a sales network in new countries)
• financial (placement of bond or equity issues)

This term does not refer, therefore, to a single, well-defined legal case, but rather to a variety of situations in which the common element is represented by the cooperation between enterprises.

Even from a technical point of view, it is therefore not possible to give a definition of joint venture, but it can only be noted that the denomination joint venture generally designates a contract with which two or more companies undertake to cooperatewith obligations e liability between them apportioned, the realisation of an investment or work, in order to sharing the risks, e make a profit to be distributed proportionally.

Contractual joint venture and corporate joint venture

Such collaboration between companies may take the form of:

• contractual form (so-called contractual joint venture or unincorporated joint venture or non-equity joint venture)
• corporate form (so-called joint venture corporation or incorporated joint venture or equity joint ventures)

In the first case the parties coordinate their activities by means of a contract with a view to the attainment of a common objective without creating a new entity from a legal point of view.

In the second caseInstead, the contracting parties entrust a company formed by them with the task of realising the common objective, creating a genuine new legal entity.

Bibliographic and web references

Bibliography on International Contracts

Consultant Lawyer Marco Tupponi

• Edited by Marco Tupponi 'Handbook of International Commercial Law' - 3rd edition year 2019 - Edizioni Giappichelli
• Fabio Bortolotti 'Handbook of International Commercial Law' - 3rd edition 2009 - Cedam Editions
• Marco Tupponi 'Joint Ventures and Network Contracts' - Cedam editions
• Enrico Ghirotti - Marco Tupponi "I contratti della distribuzione commerciale" - Maggioli editions

 Sitography on International Contracts

• www.altalex.com
• www.international-arbitration-attorney.com/
• www.uncitral.org
• www.unidroit.org
• www.icc.org
• eur-lex.europa.eu
• www.theitalianlawjournal.it
• www.hcch.net
• www.trans-lex.org