Making a contract is an important part of business, yet most exporters ignore it. Other exporters do not follow it. To you as an exporter, a contract is a protection tool against fraudulent buyers, shipping company or suppliers. At the same time it guides you in keeping within the agreed terms with your buyer. Oral agreements are legal and binding in many situations, however, they're often difficult to enforce in court, hence, your contract should be in writing even if the law doesn't require it.

Why should you make a contract?

1. Making specifications of the business deal between you and your buyer. It acts as a communication tool between the concerned parties.
2. You define the terms and conditions of delivery and payment agreed to by both parties agree to
3. In case of disagreement, then it helps in dispute settlement between you and your buyer. It guides you in following who handles the case and under which law. In case a third party is to assist in mediation or arbitration, you know what to do.

With whom do you make a contract?

Generally, you make the contract with your buyer (in the importing country) and before you begin supplying any products. However, other contracts can be made with different parties involved in the export business at the different levels of the chain.

• The suppliers,
• The shipping company (it can be by rail, truck, air or sea),
• The handling company in your country,
• The handling company in the importing country.

What do you include in the contract?

• Exact names and address details
• Authorised signatory
• Description of the goods
• Quantities and Qualities (grade)
• Price and total amount (€ or US$)
• Delivery term (named place) and time
• Payment term
• Packaging
• Inspection agreement
• Documents to be provided
• Conditions for cancellation of the contract
• Liability for non-conformance (% of contract price)
• Liability for non-deliverance (% of contract price)
• Liability for late delivery (% of contract price/week)
• Limitation of liability
• Applicable law / Vienna Convention
• Dispute settlement: arbitration (who) or litigation (where)

• Changes in the rate of exchange
• Changes in the price of raw materials
• Availability of raw materials
• Availability of freight space
• Timely receipt of L/C
• Receipt of export licence
• Acts of God

Ten golden tips for a good contract

1. Get it in writing. A written agreement is less risky than an oral agreement, because you have a document that clearly spells out each party's rights and obligations in case of confusion or disagreement.

2. Keep it simple. Create short, clear sentences with simple, numbered paragraph headings that alert the reader to what's in the paragraph.

3. Deal with the right person. Make sure the person you negotiate with has the authority to bind the business and has a vested interest in making sure the business performs its obligations under the agreement.

4. Identify each party correctly. You need to include the correct legal names of the parties to the contract so it's clear who is responsible for performing the obligations under the agreement (and who you have legal rights against if things go wrong).

5. Spell out all of the details. The body of the agreement should spell out the rights and obligations of each party in detail. If you forget to include something, you can always create a short written amendment. Or, if you haven't signed the agreement, you can handwrite the change into the contract.

6. Specify payment obligations. Specify who pays whom, when the payments must be made, and the conditions for making payments, including the method of payment

7. Agree on circumstances that terminate the contract. Set out the circumstances under which the parties can terminate the contract.

8. Agree on a way to resolve disputes. Write into your agreement what you and the other party will do if something goes wrong. Can handle your dispute through arbitration or mediation instead of going to court,

9. Pick a state law to govern the contract. If you and the other party are located in different states, you should choose only one of your state's laws to apply as well as specify where you will mediate, arbitrate, or bring legal actions under the contract.

10. Keep it confidential. Your agreement should contain mutual promises that each party will keep strictly confidential any business information it learns of while performing the contract.