In most countries, parties to commercial transactions may make their own bargains free of legal restraints. However, in most jurisdictions, the courts will enforce a contract only if the parties have agreed to four basic terms:
1. The description of the goods in terms of type, quantity, and quality
2. The time of delivery
3. The price
4. The time and means of payment
These terms are considered essential because they cannot be easily implied by law-they are the necessary parameters to the contractual relationship. Every international contract should provide for these terms.
As a brief aside, a current trend in the law of several nations-and eventually, no doubt, in international law among nations-is to recognize contracts that are the basis of commercial transactions even if they fail to provide the essential terms. If a dispute arises and any of the essential terms are missing or ambiguous, the intent of the parties may be implied from customary trade or financial practices. The bottom line is that judges, arbitrators, rule makers, and law makers prefer to uphold a bargain made by business folks-who are presumed to know what they are doing. In comparison, private individuals and consumers are given more protection against bad bargains that do not cover all of the essential agreement terms because there is a presumption that they are at the mercy of the business folks. In any event, it is best not to rely on trends or implied contract terms. You should always state your intent in clear and definite written terms.
Payment and Delivery Terms
Two of the essential terms take on further significance in international contracts: the payment terms and the delivery terms. In international transactions, it is essential to establish the payment terms. It may be assumed in a domestic transaction that the traders intend to exchange goods for domestic currency. When dealing cross-border, there will probably be a choice of currencies. You may also be subject to foreign exchange restrictions on the currency. Payment terms should be clearly defined to ensure that the contract will be enforceable.
In an international contract, a clear definition of the transport and delivery term is also essential. This term can have different meanings in domestic as opposed to international contracts. If each party interprets this provision differently, a breach of the contract is quite likely, and there is a greater risk of incurring a loss on the sale. Mutual agreement on the meaning of the transport and delivery term is extremely important.