The Contract of Sale

Learning Objectives

  • Describe the role of the contract of sale as the master document in an international trade transaction.
  • Identify the key elements that must be included in an international contract of sale.

International trade transactions involve numerous contracts, with the contract of sale at the center. It defines the parties’ rights and obligations, the goods involved, their quantity and quality, and the monetary consideration.

Note

Key features of an international contract of sale include: 

  • Parties typically reside in different countries
  • Operate under different legal systems
  • Dealing in different currencies 

The contract must therefore address all these variables, including the applicable law and the forum for resolving disputes.

Any international trade transaction will include a contract of sale in some form. At a minimum, it will identify both parties, describe the goods (including quality and quantity), and state the price. Many contracts are more detailed, addressing the mode and means of transport, insurance, conditions and warranties relating to the goods, and other obligations. Terms and conditions may appear on a purchase order, sales order, or invoice, and each party may seek to incorporate its own standard terms — creating a risk of inconsistency. Consequently, resolving which set of terms governs the contract can be complex and time-consuming. 

As a general rule, any international contract of sale — however detailed — must operate under a governing law. That law will determine:

  • the validity of the contract
  • any obligations not expressly stated in the contract
  • whether a contract has come into existence
  • whether the contract has been terminated
  • the remedies available for breach, in conjunction with the law of the forum where the dispute is heard