6. international business correspondence - commercial letters

International Business

Management

Theme 6 International business correspondence

Commercial letters

11/8/2014 Valeriu Potecea & Georgiana Surdu - Nițu 1

1. The Inquiry


Is a manifestation of the will of a firm (an importer) to buy a merchandise or establish trade links with vendors.

Must be in writing, but may be made orally or by telephone, but must be confirmed in writing.

Its content varies according to:

Purpose

Product

Market

The Inquiry


Can be provided in the form of:

Circular letters (not recommended)

Individual letters

Depending on their nature, they are 2 kinds of inquiries:

general nature;

for concrete goods.

General inquiries


Are issued in order to get information from the vendor

on:

◊ nomenclature of goods

◊ prices of various types of goods

and

◊ to receive catalogs, samples, etc.

Inquires for concrete goods


Are issued in order to conclude a deal

The usual content is made of the following elements:

the good, its exact name

the quantity required

delivery time

price

payment terms etc.

Inquiry for concrete goods


It can turn into an order if the importer is urgently needed goods

In this case, the importer must indicate:

goods;

quantity of goods

a threshold level of price

When it is assumed that the goods are ready for delivery, and negotiations will not be long, the exporter is required, along with full reply to the offer, to issue a proforma invoice

The proforma invoice normally shows the type and amount of merchandise, unit costs and extensions, expected weights and measures, and often other terms (including payment terms).

Functions of the inquiry


a) To initiate negotiations with external partners to

conclude commercial transactions.

b) Information on foreign markets.

c) The research of foreign markets

Letters of Intent


Dialogue between potential partners seeking to negotiate a

trade agreement to establish a system of rules, rights and

collateral obligations in a documentary form is called letters

of intent.

May take the form of:

Honor commitments

Agreement protocols

Agreements in principle etc.

Letters of Intent


Classification letters of intent :

Letters of intent involved in the negotiation of the contract ( "After

examining the documents submitted and the previous meeting , we inform you of our

intention to [possibly] purchase the product" - such letters peg stages of negotiations

that last longer )

Letters of intent that having no legal effects ( "I confirm the interest in the

product you offer, but you will need to discuss in detail the terms of the eventual

agreement " )

Letters of intent containing legal firm commitments on particular

aspects involved in the negotiations (eg . Agreements whereby the parties agree

not to negotiate in parallel or not to disclose information - privacy statement )

Letters of intent expressing the traditional legal categories: offer,

acceptance, main contract (with the significance of definitive agreements , possibly

affected by the changes )

2. The Offer/The Tender


It is the manifestation of the will of a manufacturer or supplier of goods to deliver these products in some determined commercial conditions

An offer as "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree“(Guenter Heinz Treitel )

An offer is a statement of the terms on which the offeror is willing to be bound. It is the present contractual intent to be bound by a contract with definite and certain terms communicated to the offeree

Offer may start either: * on the initiative of the bidder or * in response to a call for tenders (inquiries)

Offer has a double role: * Commercial: aims to determine customer to buy a merchandise * Legal: prepares carry out the will of the parties, resulted in the commercial contract

The Offer


After the character, the offer may be:

a. Binding offer (with deadline option, or deadline for acceptance)

The exporter is obliged to keep the goods for the customer which gave

him or her a certain term of option. This period of availability varies

depending on the type of goods, market conditions, etc.

A binding offer is an agreement that is considered legally binding if an offer

is made and accepted between the involved parties. It contains elements

such as offer, acceptance and intention to create legal relations. Any breach of

contract can be disputed in a court of law

If the importer does not accept the offer until the date indicated, it is

considered rejected

The Offer


b. Indicative offer (non-binding offer, no obligation offer)

• The seller has the option to accept the order transmitted, not to take it into consideration or to change the terms of original offer (the triple option)

• Exporter can offer the goods to multiple clients, performing the order of first the respondent to offer

• Usually, in the case of an "no obligation“ offer, the sale is deemed perfected only after the seller has accepted the order

Counter-offers

When the recipient sends an acceptance of an offer which includes changes

in relation to this offer, we are dealing with a counter-offer.

The "mirror image rule" states that if you are to accept an offer, you must

accept an offer exactly, without modifications; if you change the offer in any

way, this is a counter-offer that kills the original offer and the original offer

cannot be accepted at a future time

However, a mere request for information about the terms of the offer is

not a counter-offer and leaves the offer intact. It may be possible to draft

an inquiry such that it adds to the terms of the contract while keeping the

original offer alive.


Rejection of offer or lapse of time

An offer can be terminated on the grounds of rejection

by the offeree, that is if the offeree does not accept the

terms of the offer or makes a counter-offer

Also, upon making an offer, an offeror may include the

period in which the offer will be available. If the offeree fails

to accept the offer within this specific period, then the

offer will be deemed as terminated


The terms contained in the offer


Unless the offer included the key terms of the contract, it cannot be the basis of a binding contract. For example, as a minimum requirement for sale of goods contracts, a valid offer must include at least the following 4 terms:

delivery date

price

terms of payment that includes the date of payment and

detail description of the item on offer including a fair description of the condition or type of service (quantity, quality, etc.)

Unless the minimum requirements are met, an offer of sale is not classified by the courts as a legal offer but is instead seen as an advertisement.

Rules of acceptance of offer

There are several rules dealing with the communication of

acceptance:

The acceptance must be communicated. Prior to acceptance, an offer may be withdrawn.

An offer can only be accepted by the offeree, that is, the person to whom the offer is made.

An offeree is not usually bound if another person accepts the offer on his behalf without his

authorisation, the exceptions to which are found in the law of agency, where an agent may have

apparent or ostensible authority, or the usual authority of an agent in the particular market,

even if the principal did not realize what the extent of this authority was, and someone on

whose behalf an offer has been purportedly accepted may also ratify the contract within a

reasonable time, binding both parties

If the offer specifies a method of acceptance (such as by post or fax), acceptance must be by a

method that is no less effective from the offeror's point of view than the method specified. The exact

method prescribed may have to be used in some cases, but probably only where the offeror

has used very explicit words such as "by registered post, and by that method only“

However, acceptance may be inferred from conduct


United Nations Convention on Contracts

for the International Sale of Goods

The United Nations Convention on Contracts for the International Sale of Goods

(CISG; the Vienna Convention) is a treaty that is a uniform international sales law. As of

September 2013, it has been ratified by 80 countries that account for a significant proportion

of world trade, making it one of the most successful international uniform laws (Bahrain was

the most recent state to ratify the Convention).

The CISG was developed by the United Nations Commission on International Trade Law

(UNCITRAL), and was signed in Vienna in April 11, 1980. The CISG is sometimes referred to

as the Vienna Convention

According to the Vienna Convention, an offer to contract must be addressed to a person, be

sufficiently definite – that is,

describe the goods,

and expressly or implicitly fixes or makes provision for determining

the quantity and

the price

– and indicate an intention for the offeror to be bound on acceptance .


United Nations Convention on Contracts

for the International Sale of Goods

The CISG, subject to clear indication by the offeror, treats any proposal not addressed to a

specific person as only an invitation to make an offer. Further, where there is no explicit

price or procedure to implicitly determine price, then the parties are assumed to have

agreed upon a price based upon that ‘generally charged at the time of the conclusion of the

contract for such goods sold under comparable circumstances’.

Generally, an offer may be revoked provided the withdrawal reaches the offeree before or at the

same time as the offer, or before the offeree has sent an acceptance. Some offers may not be

revoked; for example when the offeree reasonably relied upon the offer as being irrevocable.

The CISG requires a positive act to indicate acceptance; silence or inactivity are not an

acceptance.

The CISG attempts to resolve the common situation where an offeree’s reply to an offer

accepts the original offer, but attempts to change the conditions. The CISG says that any

change to the original conditions is a rejection of the offer – it is a counter-offer – unless

the modified terms do not materially alter the terms of the offer. Changes to price, payment,

quality, quantity, delivery, liability of the parties, and arbitration conditions may all

materially alter the terms of the offer.


Revocation of offer

An offeror may revoke an offer before it has been

accepted, but the revocation must be communicated to

the offeree (although not necessarily by the offeror)

If the offer was made to the entire world, the revocation

must take a form that is similar to the offer. However, an

offer may not be revoked if it has been encapsulated in an

option

If the offer is one that leads to a unilateral contract, the

offer generally cannot be revoked once the offeree has

begun performance


Characteristics of commercial offer under the Vienna Convention, 1980

Formalism of offer Formalism is absent – no writing standard form required

Offer content Set quantity and price

When the offer

becomes effective

When received by the offeree

Revocation of offer Revocation of an offer is possible if the revocation reaches the offeree before he has dispatched an acceptance. Revocation must be fair

Irrevocability of offer an offer cannot be revoked:

(a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or

(b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer

Termination of offer An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.

Counter-offer A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer.

Acceptance of offer An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror.

Acceptance time An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror.

Late acceptance A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs the offeree or dispatches a notice to that effect.

Acceptance withdrawn

An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective.


Customer Relations Letters

These deal with establishing and maintaining good

working relationships. They deliver good news or bad

news, acceptances or refusals.

Follow-up Letters (a follow-up letter is sent to thank a customer

for buying a product or service and to encourage the customer to buy

more in the future; as such it is a combination thank-you note and sales

letter)

Complaint Letters

Adjustment Letters (adjustment letters respond to complaint

letters)

Refusal of Credit Letters


Principles of business letter writing (i) Simplicity - Simple and easy language should be used for writing business letters. Difficult

words should be strictly avoided, as one cannot expect the reader to refer to the dictionary

every time while reading letter.

(ii) Clarity - The language should be clear, so that the receive will understand the message

immediately, easily and correctly. Ambiguous language creates confusion. The letter will serve the

purpose if the receiver understands it in the same manner in which it is intended by the sender.

(iii) Accuracy - The statements written in the letter should be accurate to, the best of the

sender’s knowledge. Accuracy demands that there are no errors in the usage of language - in

grammar, spellings, punctuations etc. An accurate letter is always appreciated.

(iv) Completeness - A complete letter is one that provides all necessary information to the

users. For example, while sending an order we should mention the desirable features of the

goods, i.e., their quality, shape, colour, design, quantity, date of delivery, mode of transportation, etc.

(v) Relevance - The letter should contain only essential information. Irrelevant information

should not be mentioned while sending any business correspondence.


Principles of business letter writing


(vi) Courtesy - Courtesy wins the heart of the reader. In business letters, courtesy can be

shown/expressed by using words like please, thank you, etc.

(vii) Neatness - A neat letter is always impressive. A letter either handwritten or typed,

should be neat and attractive in appearance. Overwriting and cuttings should be avoided.

(viii) Promptness - Assume timely transmission of a response to any letter tendering

commercial nature

(ix) Persistence - It consists of permanent information partners on emerging products for sale in the nomenclature of the bidder

Common elements of a business letter


A business letter includes typically the following elements: header , recipient mailing address, salutation , the content itself, concluding formula and greeting and signature.

1. The Sender’s address or the Letterhead - contains the name, address and headquarters , telephone and so on (the sender’s name is placed usually in the upper right corner of the page

2. Receiver’s address (inside address) - contains the name of the recipient , the title, or position in the company, the name of the particular department of the company (if known), and the company name or organization;

3. Salutation - placed under the recipient's address should include the name of the person to whom the letter is addressed. Greeting acceptable formulas for business letters include, for example : Dear Sir or Madam, Dear Sir or Madam Smith ( Miss ) Smith . Do not write Dear Sir if the sender is not sure that the recipient is male . If the sender is insecure and does not know the recipient's name , the salutation would be " Dear Sir or Madam " .

Common elements of a business letter


4. Body of the letter – generally includes the paragraph of introduction, the letter message and conclusion. Rarely exceeds one page, the text is as concise. 5. Complimentary close - is placed usually 2-3 lines below the body of the letter and includes the most common expressions: Yours sincerely (if you know the name of the person

you're writing to), Yours faithfully (very formal as you do not know the person to whom you are

writing) ,Best wishes / Best regards (if the person is a close business contact or friend)

,etc.. 6. Signature - involves inserting the full name of the person signing the correspondence, and his or her position in the company. Name and position are always typed and handwriting signature is placed above them

6. international business correspondence - commercial letters

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