* International Sales Agreements Checklist-
NCMA CM Magazine in Jan 2010
International Sales Agreement Checklist for Sellers of
Products and/or Services
items to consider when drafting and reviewing international sales agreements.
Drafting an international contract can be a risky business, yet with the increasing
globalization of markets, these cross-border contracts are becoming a common practice for most companies. At the same time,
international contracts remain a difficult and mysterious subject for companies.
In your contract management activities supporting the seller of products and/or services,
it is likely that you will be asked by your employer to either draft or review an international sales agreement from the seller's
viewpoint. As with any substantive contract executed by an entity, international sales agreements are important contracts
that contain numerous issues that need to be properly addressed.
In my contracts management career, I have drafted and reviewed many international sales agreements
from both the seller's and buyer's viewpoints. Although this article focuses on international sales agreements for products
and/or services from the seller's viewpoint, it is also quite useful to the buyer in identifying issues of importance
to the seller.
In order to systematically
cover the multitude of unique issues in a typical international sales agreement for products and/or services from the seller's
viewpoint, I have developed the following "International Sales Agreement Checklist for Sellers of Products and/or Services."
- Are the parties to the international sales agreement accurately identified by
full legal name, type of entity, country of entity creation, and entity physical address?
- Is legal consideration cited (i.e., "in consideration of the mutual promises of the parties,
the parties agree as follows...")?
- Is there a "Background"
section that describes the reason for the agreement and states the purpose of the agreement?
- Is there a "Definitions" section that clearly defines the agreement's key capitalized
terms, such as:
Each party's "Proprietary Information";
Each party's "Rights," to include know-how, technical data, computer software, and inventions now in existence or
later developed by each party, including each party's applicable copyrights, mask works, trademarks, service marks, trade
dress rights, patents, provisional patents, patent applications, trade secrets, moral rights, and other related intellectual
property including related future developments and improvements; and
Any other key terms that need to be capitalized and defined?
there a "Relationship of the Parties" section that clearly states that each party is an independent contractor with
regard to each other under the agreement and that neither the agreement nor the operation of the agreement in any way causes
the parties to become legal partners, legal joint venture parties, or parties to any other legal entity?
- Does each party state that it is not-and will not-be a party to another contract
that would prevent or impair its performance or obligations under the agreement?
- Is it clear that nothing in the agreement shall prevent, preclude, or restrict either party from dealings with
outside parties to the extent such outside party dealings do not create a default under the agreement?
- Is the statement of work (SOW) adequate?
- What is the "Term" and "Schedule" of the contract?
- Consider whether or not your work should start before adequate initial payment is received.
What is the buyer's financial condition?
- After receipt of
the initial payment, is the remainder of the payment made under a letter of credit or secured by a standby letter of credit?
- Is the letter of credit irrevocable, advised, confirmed, transferable, issued
by a bank that you approve, and paid for by the buyer?
you receive payment under the letter of credit by presentation of your invoice to the issuing bank?
- Is the payment currency appropriate?
there late payment interest?
- Is the contract type (e.g.,
firm-fixed-price, time and materials, etc.) appropriate for the work?
on-site work is required, is demobilization/remobilization recoverable?
- Is there an "Exchange of Proprietary Information" section in the agreement? If so, is this a mutual
two-way nondisclosure/nonuse provision that addresses all the applicable nondisclosure/nonuse issues?
- Is there a "Termination" section that properly addresses termination
for default and termination for convenience?
- Is there a "Limitation
of Liability" section that reasonably caps the seller's monetary liability to the buyer for actions related to or arising
out of the agreement (excluding the harmed party's intellectual property infringement claims or wrongful disclosure/use of
proprietary information claims against the harming party)?
there a "Waiver of Consequential Damages" section that provides for an equitable, mutual waiver of consequential,
indirect, special, and incidental damages between the parties?
- Is there an "Indemnification" section in which each party reasonably agrees
to indemnify the other for:
Third-party general liability claims arising out of the agreement to the extent of the indemnitor party's proportional negligence
or willful misconduct, and
Third-party intellectual property infringement claims arising as a result of the indemnitor party's activities under the agreement?
- How is "Inspection and Acceptance" addressed? Is it reasonable? Are
there definite acceptance criteria?
- Is there an appropriate
"Warranty" provision, "Limited Warranty" provision, or a "Disclaimer of Warranties" provision?
- Is there a "Liquidated Damages" provision?
- Is there an "Insurance" provision that states the types of coverage and coverage
limits that will be required of the seller? Are the insurance requirements reasonable? Will there be any endorsements (e.g.,
waiver of subrogation, additionally insured party, etc.)?
there a "Governing Law" provision? Is the chosen country's law suitable? Does the provision exclude the chosen country's
choice of law provisions?
- Is there a provision that properly
addresses "Public Announcements, News Releases, and Advertising Materials"?
- Is there a reasonable "Allocation of Technology and Intellectual Property" provision?
This should address the current "Rights" of each party individually as to its currently existing technology and
related intellectual property. Also, it should address the future "Rights" of each party individually as to its
technology and related intellectual property solely developed by each party under the agreement. Additionally, the provision
must also address how the ownership and rights of use will be equitably allocated between the parties with regard to jointly
developed technology and intellectual property under the agreement.
the "Termination" clause reasonable? Does it include termination for convenience without cause?
- Is there a "Stop Work" clause?
- Will an International Traffic in Arms Regulations (ITAR) or Bureau of Industry
and Security (BIS)/Export Administration Regulations (EAR) export license be required?
- Is there an advanced payment bond, performance bond, or warranty bond requirement?
- How are taxes, tariffs, and import duties handled?
- Is English the controlling language of the agreement?
- Is the Foreign Corrupt Practices Act (FCPA)
- Is the agreement compliant with anti-boycott
- Are there any antitrust issues to consider?
- Is the customer listed as a "Denied Party" under any U.S. Denial Orders?
- Should software or technology licensing be addressed?
- Will a carnet be required?
the inflation rate in the customer's country been considered?
exchange rate issues been considered?
- Are there any repatriation
- Will the contract create a "presence"
in a foreign country that may create certain foreign country registration requirements?
- Are there specific foreign country quality standards that must be met?
- Will power of attorney documents be required?
- Will the metric system apply?
- Are there any
- Are there any in-country safety risks?
- Will you need to protect any of your company's patents or trademarks in another
country in order to do the work?
- Are there any special cultural
- Do any aspects of the legal/judicial system
of the customer's country present a problem?
- Are there any
foreign country economic/financial concerns?
- Are there any
labor-related issues to consider in the customer's country?
there any applicable import restrictions?
- Are there any local
- Are there any ISO 9000 quality issues?
there any ISO 14000 environmental issues?
- Are there any sustainability
- Do EU laws and regulations apply?
- Has "The United Nations Convention On Contracts For The International Sale
Of Goods" been waived?
- Do any "international commercial
terms" (INCOTERMS) apply?
- What are the foreign trade barriers in the customer's country?
- Is there a reasonable "Force Majeure" clause?
there a "Dispute Resolution" provision (e.g., arbitration, mediation, etc.) that addresses how disputes between
the parties will be resolved?
- Is there a "Business
Continuity" (i.e., disaster recovery) provision to address how each party plans for continuation of its business in the
event of interruptions?
- Is there a "Business Ethics"
provision to address how each party with operate ethically with integrity?
- Is there a "Data Privacy" provision that addresses how individual privacy will be safeguarded?
- Is there a "Records Retention" provision that properly addresses how
long applicable records and data will be retained and stored before deletion and destruction?
- Is there a "Score Card" provision so that the buyer can periodically assess and
evaluate the products or services?
- Is there an "Anti-piracy
of Employees" provision that reasonably prohibits one party from soliciting or hiring the other party's employees?
- Is there an "Export Compliance" provision that requires compliance with
the EAR, ITAR, FCPA, anti-boycotting laws, and other export compliance laws and regulations?
- Is the agreement assignable?
- Is there a provision addressing compliance with applicable laws and regulations?
- Is there a "General" provision that addresses notices between the parties, waivers,
headings, severability, survival, order of precedence, complete agreement, and modifications?
The goal of an international sales agreement
is to facilitate an ongoing, mutually beneficial, "win-win" contractual relationship between your entity and the
other party or parties. A good international sales agreement helps the parties in creating, sustaining, and enjoying the journey
of the relationship. This checklist will certainly help in creating or reviewing an international sales agreement. However,
this checklist is not exhaustive. Every international sales agreement has some unique aspects that may not be addressed above.
However, if you routinely use this checklist as one of several resources when you draft or review an international sales agreement,
you will be pleasantly surprised with the large number of substantive, material, risk reduction, performance improvement,
and cost-savings issues that will be surfaced for proper resolution.
SM is a domain name and service mark of John ("Johnny") E.