29 Nov 2014

5 serious mistakes during execution of agriculture commodity trade contracts.

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When we do execution of the foreign-economical contracts we exposure ourselves to the risk of countless mistakes, which may lead to the unreasonable expenses and, in worst scenario, to default. Below are few mistakes to avoid:

  1. To count meaning of ambiguous terms of the contact (if any) as obvious to your counterpart.

Parties to the commodity sale contract must not refrain from clarifying each unclear requirement set out in the business confirmation before shipment is done and supporting documents are issued. The clearer text interpretations are the better contract performance is. If uncertain terms were incorporated, sellers and buyers have to clarify them beforehand.

  1. To issue shipping documents, which do not conform to the contract and/or documentary instructions.

Discrepant documents would entitle buyers to reject them upon presentation whilst re-issuance thereof is always subject to extra delays, expenses and could be even impossible in some cases. Drafts pre-check and buyers’ confirmation before printing will do the job and would keep sellers on the safe side thereafter.

  1. To ship goods, which are not durable and can’t withstand normal sea voyage.

“Quality final at loading” clause in the contract will not secure the shipper unless it is proved that cargo was damaged by vessel herself including but not limited to bad transportation and non fulfillment of safe voyage terms by the carrier.

  1. For CIF (CFR) contracts to fix sea going vessel, which doesn’t satisfy discharge port requirements legally and/or physically.

Vessel may be rejected by discharging port authorities as the case may be if she goes under flag of restricted country (sanction countries) and/or violates port requirements as for maximum allowed length, width, draught etc. Sellers will be left solely responsible to arrange vessel substitution or transshipment or lighterage whatsoever at their time and account.

  1. Not to serve contractual notices on time.

This may result in waiving a right or claim by either side in case of dispute, as well as to cause financial losses to the party which fails to notify the counterpart about something stipulated by the contract in time.

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