Questions and answers on international trade contracts and cross-border supply

Incoterms 2020 address transfer of the risk of loss or damage, allocation of transport, insurance and customs-clearance responsibilities, relevant documents, and obligations to deliver and take delivery under the selected rule.

Incoterms do not replace terms on quality, quantity and composition; inspection and recording defects; delay remedies; claims and notice periods; termination; defect liability; changes to a shipment; governing law; or dispute resolution.

Address those issues in the contract separately from Incoterms. A specification and an Incoterms rule alone may leave important questions unresolved when quality, timing or payment is disputed.

Warning signs include vague price, specification or acceptance terms without tolerances, inspection methods or consequences of defects. Changes agreed through WhatsApp, WeChat or Telegram may not be formally linked to the contract. Check how performance and breach are recorded, how force majeure is notified, which documents support a claim, the response deadline, available remedies, governing law and dispute forum.

Also check sanctions clauses, particularly for arrangements affected by changes since 2022; any unilateral price-review right; the payment currency and exchange-rate mechanism; and provisions for defective returns or replacement supplies.

Reviewing the terms before a shipment can avoid a much larger dispute later. The work required depends on the contract; neither the review time nor the cost of a future dispute should be assumed in advance.

Useful evidence includes bank statements, SWIFT messages and transfer confirmations linking payments to the transaction; negotiations and agreed changes; bills of lading, CMR documents and acceptance records; account reconciliations; orders, invoices and internal approvals; and later conduct such as attempted performance, debt acknowledgments or partial payments.

Where the contract leaves gaps, examine the governing law, including the 1980 UN Convention on Contracts for the International Sale of Goods where applicable. Relevant trade usages, established dealings between the parties and principles such as good faith may assist within that legal framework. Lex mercatoria or general fairness does not automatically replace missing terms.

For example, a contract may describe pricing loosely while invoices and payments consistently follow a particular method. That course of dealing may help establish the agreed price, depending on the governing law and evidence.

Unclear terms can make it harder to establish an exact contractual penalty or damages calculation. Reconstructing what the parties agreed may require more evidence and create more uncertainty than enforcing clearly recorded terms.

Contract records: the agreement, schedules and amendments; shipment specifications; correspondence agreeing the supply terms; and records of any changes.

Performance records: bills of lading, CMR documents and supplier invoices; payment instructions, SWIFT messages and bank confirmations linked to the shipment; insurance and carrier records; and customs documents.

Evidence of breach: acceptance records noting defects, non-conformity reports and joint inspection records; photographs; independent expert reports where appropriate; correspondence about the problems and settlement attempts; and internal inspection or technical reports.

Remedy and calculation: specify the refund, damages, replacement goods or contractual penalty sought. Link each amount to its supporting document or legal basis and explain how the breach caused the loss.

Build the factual case before sending the demand. Unsupported allegations can weaken negotiations and require later explanation, although an initial weak claim does not automatically prevent further evidence or a stronger legal position.

Governing law determines interpretation, available remedies, relevant time limits and consequences of breach. Options include the buyer's law, the seller's law or a neutral choice such as Swiss, English or Singapore law. The CISG may apply to international sales between parties in contracting states, subject to its scope, reservations and any valid exclusion.

The forum may be a state court or international commercial arbitration, including ICAC at the Russian Chamber of Commerce and Industry, SCC, LCIA, SIAC, HKIAC or ICC. Compare neutrality, procedure, cost and timing in the actual case rather than assuming that courts are always faster or arbitration always more expensive.

Consider the likely dispute, available assets, enforceability, the parties' experience, fees and timing. The 1958 New York Convention provides a framework for recognising and enforcing arbitral awards, subject to its conditions and refusal grounds. Compare actual institutional fees, including ICAC's, rather than relying on a general cost ranking.

Possible combinations include Russian law with ICAC arbitration, taking account of any applicable CISG rules, or Swiss law with ICC or SCC arbitration. None is suitable for every transaction. Record the governing law and arbitration or jurisdiction agreement clearly to avoid a separate dispute over the forum.

Check the required address and method of service, and retain proof of delivery. Observe the contract's response period; a 30–60-day period is an example, not a universal rule. A further demand may be useful, but do not let it delay a necessary court or arbitration filing.

At the same time, assess interim measures over the supplier's accounts or goods in Russia or another asset jurisdiction. Record settlement efforts, examine any bank guarantee or letter of credit, and identify assets against which a decision could be enforced.

For a supplier affected by sanctions, check enforceability and asset locations. An offshore company may require more extensive ownership and asset enquiries; the New York Convention does not guarantee recovery. Liquidation or bankruptcy requires a separate assessment of creditor procedures and deadlines.

International arbitration can take one to two years or longer, but duration and cost depend on the procedure and case. Compare the likely recovery with the expense, especially for a small claim. A well-supported demand and credible readiness to pursue it may help settlement without guaranteeing a response.

Possible grounds include the other party's fundamental breach, an agreed termination clause or a legal obstacle that makes performance unlawful. Under the CISG, a qualifying fundamental breach may give the aggrieved party a right to avoid the contract, not the party in breach. Force majeure, hardship and sanctions do not automatically confer the same termination rights in every legal system.

Give the required written notice identifying the contractual or legal ground. Observe any notice period, record when termination takes effect and assess the resulting obligations. State any claim for repayment, return of goods or recoverable damages with supporting evidence.

Commercial inconvenience, temporary financial difficulty, a change of strategy or general dissatisfaction does not by itself establish a termination right. Check whether the contract expressly permits termination in the particular circumstances.

Wrongful termination may expose a party to recoverable losses, including proven lost profit or preparation costs, contractual remedies and, where available, a claim for performance. The governing law determines the limits; not every alleged loss is automatically payable.

Before terminating, assess the legal basis, document the other party's breach and preserve any settlement attempt or refusal to perform. After termination, record losses promptly and prepare the appropriate recovery procedure.

Define the base price, permitted triggers, approval procedure and any cap. Options include a fixed-price period or an objective formula linked to exchange rates, raw-material indices or market quotations. A negotiated trigger might be an exchange-rate movement exceeding 10%. Specify when the supplier must obtain written agreement before applying a change.

Other options include a right to terminate without a contractual penalty above an agreed price threshold, renegotiate shipment volumes or specifications, or verify a most-favoured-price or market-price commitment. Each needs workable definitions and a checking mechanism.

Check whether the supplier has a price-review right. If not, reject the proposed change in writing. If the right exists but the procedure was not followed, identify the defect and require compliance. Assess alternative suppliers, substitute goods or revised shipments, and record negotiations.

Do not leave a material price change as an undocumented oral or messenger exchange. Respond within the applicable deadline and make any objection clear before continuing to accept goods at the new price. Silence or conduct may have legal significance under the governing law and the parties' dealings.

For long-term supply projects, use a detailed pricing mechanism. For a short, one-off transaction, consider a fixed price without a review right during the contract term, subject to the applicable law and negotiated terms.