Contracts & Incoterms

To use an Incoterm in a contract, the contracting parties must follow certain rules:

  • to avoid all ambiguity, only Incoterms recognized by the ICC should be used and preferably the latest version (Incoterms 2010)
  • the previous versions are still valid but the reference year must be stipulated (Incoterm 2000 or 2010)
  • the Incoterm must always be followed by the precise mention of the place of delivery

For example: CPT New York (Incoterms 2010 ICC), FOB port of Amsterdam (Incoterms 2010 ICC), etc.

  • other additional wording or restrictions may be added, for example the exact time of cost and/or risk transfer of seller to buyer or the exact address of the warehouse/port/airport.

For example: CPT Paris – Aéroport Charles de Gaulle, 95700 Roissy-en-France, France – excluding duties and taxes (Incoterms 2010 ICC).

Basic rules of international contracts

When drafting contracts for international use, certain rules must be followed:

The contract must be written in a language that is understandable by both parties. English remains the language of business and its use is preferred.

When a Luxembourg company establishes a contract with a foreign company the law of only one country applies in the case of a dispute. The parties can freely decide on the applicable law.  In some cases, the parties may decide to apply different laws to different parts of the contract. Unless an applicable law is mentioned in the contract, the judge will rely on international agreements in order to determine the applicable law.

The seller is normally responsible for packaging the goods that are the object of the sales contract. Transfer of this obligation to the buyer must be clearly mentioned and without ambiguity. The standards applied to packaging and packing must be those of the standard packaging for the same type of goods. When there is no standard usage, the ICC will refer to the ordinary usages in international commerce, and when none exists, to those of the place of the seller's business headquarters.  When there is no standard usage, the packaging must allow to preserve and protect the goods until the time when the goods are provided to the buyer.

The contract must include the method of payment (check, bank transfer, postal order, bill of exchange or promissory note), as well as the payment time.

For example: invoice payable within 60 days from the date of the invoice by bank transfer on our account, etc.

 

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