Business Contracts Presented By: Bahman Motevali

DBA – London University

2011

Part II-1Part II 1

THE ICC MODELTHE ICC MODEL COMMERCIAL

AGENCY CONTRACTCONTRACT

Model Form of International Agency ContractICC C i l A C t t

ARTICLE SUMMARY

ICC Commercial Agency Contract

ARTICLE SUMMARY

Article 1- Territory and Productsy

Article 2- Good faith and fair dealing

A ti l 3 A t’ f tiArticle 3- Agent’s functions

Article 4- Acceptance of orders by the principal

Article 5- Undertaking not to compete

Article 6 Sales organization Advertising and FairsArticle 6- Sales organization, Advertising and Fairs

Article 7- Sales Targets – Guaranteed Minimum

targets

Article 8- Sub-AgentsArticle 8 Sub Agents

Article 9- Principal to be kept informed

Model Form of International Agency ContractICC C i l A C t tICC Commercial Agency Contract

ARTICLE SUMMARY

Article 10- Financial responsibilityArticle 10- Financial responsibility

rticle 11- Principal’s trademarks and symbols

Article 12- Complaints by customers

Article 13- Exclusivityy

Article 14- Agent to be kept informed

A ti l 15 A t’ C i iArticle 15- Agent’s Commission

Article 16- Method of calculating commission

and payment

Article 17 Unconcluded businessArticle 17- Unconcluded business

Article 18- Term of the Contract

Model Form of International Agency ContractICC Commercial Agency Contract

ARTICLE SUMMARY

g y

Article 20- Earlier termination

Article 21- Indemnity in case of terminationArticle 21 Indemnity in case of termination

Article 22- Return of documents and samples

Article 23- Arbitration – Applicable laws

Article 19- Unfinished business

Article 24- Automatic inclusion under the present

contractcontract

Article 25- previous agreements – Modifications –

Nullify

Article 26- Prohibition of AssignmentArticle 26 Prohibition of Assignment

Article 27- The Authentic Text

A ' F iAgent's Functions

Acceptance of orders by principal

U d t ki t t tUnder taking not to compete

Sales organization g

Sales target

Sub agent

Giving information to principalsGiving information to principals

Trade mark / symbol of principal

Del credere Agent ضمانت فروشنده حق العملکار نسبت بهمعتبر بودن خريدار،تضمين کننده طلب هاط

Is an agent, who , when he sells the goods on creditti th l f th h t higuaranties the solvency of the purchaser to his

principal. He is obliged to pay that principal if thec stomer defa ltscustomer defaults.

Dejure قانونی بطور و مشروع ، قانونی حق قانونی ، مشروع و بطور قانونی Dejureحق

Description of a condition in which there has been totalDescription of a condition in which there has been total compliance with all requirements of law.

AGENCY CONTRACT

In "AGENCY CONTRACTS" the agent does not have to

buy the goods, Agent acts on behalf a the principal, reports

hi b h bto him about the buyers.

The word "Importer" or "General Importer" is used toThe word Importer or General Importer is used to

define that the distributor is responsible for organizing

distribution in a given country.

The Supplier encounters a privileged position in theThe Supplier encounters a privileged position in the

territory on the distributor, generally the exclusive right to

purchase.

The Supplier has a good collaboration with

distributor on long period.

Th l ti hi t f i l l ti fThe relationship creates a fairly close ties of

loyalty between parties, that distributory y p ,

refrains from distributing the competing

products.

The distributor is virtually alwaysThe distributor is virtually always

distributing Brand-New product.

The applicable law is not governed by a

S ifi N i l L b i AGENCY hSpecific National Law, but in AGENCY, the

contract could be modified by National Law,contract could be modified by National Law,

but if parties insist, it could be by national law.

Part II-2Part II 2THE ICC MODLE COMMERCIALTHE ICC MODLE COMMERCIAL

DISTRIBUTION CONTRACT( Sole Importer – Distributor )

Article 1 – Territory and Products

Article 2 – Good faith and fair dealing

Article 3 – Distributor's functionsArticle 3 Distributor s functions

Article 4 – Undertaking not to compete

Article 5 – Sales organization

Article 6 – Advertising and Fairsc e 6 dve s g d s

Article 7 – Conditions of supply Prices

Article 8 – Sales Targets – Guaranteed Minimum Target

Article 9 – Sub-distributors or agentsg

Article 10 – Supplier to be kept informed

A ti l 11 R l iArticle 11 – Resale prices

Article 12 – Sales outside the Territory

Article 13 – Supplier's trademarks and symbols

Article 14 – Stock of Products and spare parts – After-sales serviceArticle 14 Stock of Products and spare parts After sales serviceArticle 15 – Sole distributorshipA ti l 16 Di t lArticle 16 – Direct salesArticle 17 – Distributor to be kept informedArticle 18 – Term of the ContractArticle 19 – Earlier terminationArticle 19 Earlier terminationArticle 20 – Indemnity in case of terminationA ti l 21 R t f d t d d t i t kArticle 21 – Return of documents and products in stockArticle 22 – Arbitration – Applicable lawsArticle 23 – Automatic inclusion under the present contractArticle 24 – Previous agreements – Modifications – Nullity –g y

AssignmentA ti l 25 A th ti t tArticle 25 – Authentic text

Distributor / Sole importer

This model is intended in principal to apply

only to international agreements where

di t ib t t "b ll " ddistributor acts as "buyers – resellers" and as

"Importers" who organize distribution in thep g

country they are responsible. This model does

not apply to dealers selling at rebel level.

The distributor is not only distributor or brokerThe distributor is not only distributor or broker,

but rather than a dealer who buys goods to

resell in its own name and its own behalf, even

if distributor is called "agent".

Part IPart I

Business ContractsBusiness Contracts I d iIntroduction

B i C t tBusiness Contracts

There is mainly one word in Persian

language but in English language

different words are used to

express the same meaning, but

different connotations.

LETTER OF INTENT (L.O.I)

Letter of Intent is customarily employed to reduce towriting a preliminary understanding of parties whowriting a preliminary understanding of parties whointend to enter into contract.

MEMORANDUM OF UNDERESTANDING  (M.O.U)

In the Law of Contract (M.O.U) is an agreement.It i i t l t lid t tIt is an internal agreement, or a valid contactengagement of a somewhat informal character.M O U shows that it constituted a meeting ofM.O.U. shows that it constituted a meeting ofthe minds of parties upon something respectingwhich they intended to be boundwhich they intended to be bound.

AGREEMENT

In simple definitions: Coming together of minds inopinion or determination and/or the act of two oropinion or determination and/or the act of two ormore persons, who unite in expressing a mutualand common purpose with the view of alteringp p gtheir rights and obligations, and mutual assent todo a thing. “Agreement” is a broader Term thang g“Contract”. Agreement is made for broader andmore general Cases. Each case then could be aContract.

CONTRACT

A contract is an agreement between two ormore parties, which intend to have legalp gconsequences

PROTOCOL

It is a brief summary of the text of a document.Also, is the minute of a meeting which makes theparties present to reflect their assent, to theaccuracy of the minutes of the meeting which is

ll i i i d P l ll d bgenerally initiated. Protocol usually used byGovernment and must be approved by Parliaments.

TREATY( ) d bA compact (agreement) made between two or

more independent nations with a view to the publiclfwelfare

PACTAn agreement between two or more nations,states usually less elaborated than treaty.states usually less elaborated than treaty.

Characters of a Good Contract:

A good contract must be:A good contract must be:

1. Comprehensive

2. Clear & simple

3 Concise3. Concise

4. Correct

5. Coordinated in content & Articles

A CONTRACT COULD BE DIVIDED INTO FOLLOWING CATEGORIES:FOLLOWING CATEGORIES:

1‐ SUBJECTS l t h EPC t tSales; procurement; purchase; EPC; contractService contractGranting Royalties patents contractGranting Royalties, patents … contract

2 TIME2‐ TIMETemporary/Tentative contractLong term and continuous contractLong term and continuous contractSpecific (Business, Service) contract

3‐ OTHERSGuarantee contract (Bid Bond, PBG, GPBG,Guarantee contract (Bid Bond, PBG, GPBG, 

Retention …)Loan & credit contractTechnology transfer, know how, … contracts, 

Etc 

THE CONTENT OF AN INTERNATIONAL TRADE  CONTRACT

Article 1 – PreambleArticle 1  Preamble

Article 2 – Definitions

Article 3 – Subject of the contract/scope of work

Article 4 Description and introd ction of bothArticle 4 – Description and introduction of both 

parties, individual, or company; full address and 

residence.

Article 5 – General obligations of the 

supplier/sellersupplier/seller

Article 5 General obligations of the supplier/sellerArticle 5 – General obligations of the supplier/seller

Selling goods or servicesSelling goods, or servicesPrice (unit price, total of goods or services)PackingPackingShipment/partial shipmentDelivery terms (INCOTERMS 2000)Delivery terms (INCOTERMS 2000)Shipping documentNecessary documents & certificates/standards,…y / ,Shipment adviceInspections/surveillancepTechnical DocumentsDrawings & instructionsTransfer of property/Transfer of titleSpare parts (List of itemized price of spare parts, …

Article 6 General Obligations of the BuyerArticle 6 – General Obligations of the BuyerPrice of ContractRejection in whole or in partRejection in whole or in partReduction of the contract price (Pro rata)

Article 7 – Payment MethodLetter of Credit (L/C)Letter of Credit  (L/C)Bill of Exchange (D/A, D/P)Cash on Delivery (C.O.D)y ( )Advance  paymentOpen Account (consignment)p gPlace of payment

Article 8 – GuaranteesBid BondLetter of  Guarantee /  Performance Bank 

Guarantee (P. B.G.)Good Performance Bank Guarantee (G.P.B.G)Advance Payment Bank Guarantee (A.P.B.G)Retention Bond /  Money (R.M) 

Article 9 Training and Technical AssistanceArticle 9 – Training and Technical Assistance

Article 10 – Terms of provision of schedule of pservices

A ti l 11 T h i l i t f iArticle 11 – Technical assistance of services

Article 12 – Breach of contractArticle 12  Breach of contractRemedies for breaching contract

Article 13 – PenaltiesLiquidated/un liquidated damagesq / q g

Article 14 – Force Majeure

Article 15 – Contract SuspensionArticle 15  Contract Suspension

Article 16 – Governing law of the contract

A ti l 17 Th t t t b C h iArticle 17 – The contract must be Comprehensive.

Article 18 – Effective date of the contract

Article 19 – who is responsible to pay for:Tax,  Insurance,  Banking fees,  Customs clearance, …

Article 20 – Settlement of DisputesCommercial law,  International Commercial law

International Chamber of Commerce Law, (I.C.C.)

Practice (usage, amicably)

Article 21 – Training Services and Supervision

Article 22 – Weights and MeasuresArticle 22  Weights and Measures

Article 23 – Addenda and Amendments

Article 24 – Term & time of the Contract

Article 25 Copies of the ContractArticle 25 – Copies of the Contract

Article 26 – Notice and official address

Article 27 – Concluding provisions

Article 28 – Place and date of signing 

contract & signaturescontract & signatures

Article 29 – Language of the contract

Article 30 – List of Annexes

SALES  CONTRACT  NO.  NB – 2008/09/121‐2

THIS SALES CONTRACT CONCLUDED BY/AND  BETWEEN:

MANAGING DIRECTORE OF ……………………………………. COMPANY.MANAGING DIRECTORE OF ……………………………………. COMPANY.

………………………………………..

ADDRESS :……………………………………………………... TEHRAN – IRAN

TEL.  NO. : 00‐98‐21 …………………..FAX NO. : 00‐98‐21………………..

HEREINAFTER REFERRED TO AS THE “ SELLER ”

/S OAND  M/S:……………………………………COMPANY.

MANAGING DIRESTORE:

ADDRESS :ADDRESS :  ……………………………………………………………..

TEL NO. …………………………..:FAX NO. :……………………………

HEREINAFTER REFERRED TO AS THE “  BUYER ”

WHEREAS THE SELLER WITH FULL AUTHORITY CERTIFIESWHEREAS THE SELLER WITH FULL AUTHORITY CERTIFIES ,

REPRESENTS AND WARRANTS THAT THEY CAN PROVIDE

THE PRODUCT REFERRED TO IN TIME AND UNDER THE

TERMS AS SET FORTH HEREINAFTER.

WHEREAS THE BUYER WILL BUY THE PRODUCT

PROVIDED BY THE SELLER TO THE WORLD MARKETPROVIDED BY THE SELLER TO THE WORLD MARKET

UNDER THE TERMS AS SET FORTH HEREINAFTER.

THE SELLER AND THE BUYER DO HEREBY AGREE TO

HONOUR THIS CONTRACT UNDER THE FOLLOWING

CONDITIONS AND TERMS:

ARTICLE 1: PRODUCTS:BUTIMEN / & /BUTIMEN: GRADE 60/70 & GRADE 80/100

THE DETAILED SPECIFICATIONS ARE ACCORDINGTHE DETAILED SPECIFICATIONS ARE ACCORDING

TO THE ATTACHED SHEETS, WHICH ARE PROVIDED,

BY THE BUYER. IT IS AGREED BY BOTH PARTIES

THAT THE QUANTITY OF GRADE 80‐100 SHAL NOT

EXCEED 10% OF THE TOTAL QUANTITY.

ARTICLE 2: ORIGIN

I.R. IRANIAN ORIGIN AND SHIPMENT FROMSOUTH IRANIAN PORTS.

ARTICLE 3: DELIVERY TERMSARTICLE 3: DELIVERY TERMSF.O.B (FREE ON BOARD THE SHIP LOADED ANDSTOWED) IN PARTIAL SHIPMENTSSTOWED) IN PARTIAL SHIPMENTS.

ARTICLE 4: TIME OF DELIVERY:WITHIN 30 DAYS AFTER RECEIPT OF WORKABLEL/C. THE FIRST L/C WILL BE INITIATED AND WILL BEREVOLVING .THE WHOLE BUTIMEN UP TO 800,000M.T TO BE SHIPPED WITHIN 12 MONTHS.

ARTICLE 5: CONTRACT QUANTITY

80,000 MT (EIGHTHY THOUSAND  M.TONS)

ARTICLE 6: PACKINGPACKED BY NEW FULLY PAINTED IRON DRUMPACKED BY NEW FULLY PAINTED IRON DRUM.

NET WEIGHT OF EACH DRUM: 160 KG +/‐5 KG.

GROSS WEIGHT OF EACH DRUM : 172 KG+/‐5

KG.

WITH OR WITHOUT PALLET DEPENDING ON

END BUYER’S REQUIREMENT IF WITH PALLETEND BUYER S REQUIREMENT IF WITH PALLET.

THE COST OF PALLET WILL BE CHARGED AT USD

5 00/MT5.00/MT.

ARTICLE 7: PAYMENT

PAYMENT WILL BE MADE BY IRREVOCABLE AT

SIGHT L/C DIRECTLY IN FAVOR OF THE SELLER

FROM THE END BUYER, OR TRANSFERABLE L/C

TRANSFERRED IN THE FAVOUR OF THE SELLER

AT BUYER’S OPTION BUYER MAY ALSO ISSUEAT BUYER’S OPTION. BUYER MAY ALSO ISSUE

THE L/C ON HIS OWN ACCOUNT DIRECTLY TOTHE L/C ON HIS OWN ACCOUNT DIRECTLY TO

THE SELLER.

ARTICLE 8: PRICE

BOTH GRADES 70‐80 AND 80‐100 AT USD…… //

MT FOB BANDAR ABBAS. OR BANDAR IMAM IF

PALLETS REQUIRES, A SURCHARGE OF USD 5.00

/MT IS TO BE ADDED TO THE BASIC PRICE.

ARTICLE 9: INSPECTION

THE BUYER OR THE END BUYER HAS THE RIGHT TO

APPOINT SGS OR LLOYDS OR ANY INTERNATIONAL

INDEPENDENT SURVERYOR TO INSPECT THEINDEPENDENT SURVERYOR TO INSPECT THE

QUALITY, QUENTITY, PACKING AT PORT OFQ , Q ,

LOADING. THE INSPECTION CHARGE IS ON BUYER’S

ACCOUNT. THE INSPECTION CERTIFICATE IS TO BE

ATTACHED TO THE SHIPPING DOCUMENT AND

SUMITTED TO THE BANKSUMITTED TO THE BANK.

ARTICLE 10: SHIPMENT & SHIPPING DOCUMENTSDOCUMENTS

SHIPMENT : 10,000 MT PER MONTH IN ONE LOT.BASICALLY THE SELLER SHOULD PROVIDEBASICALLY, THE SELLER SHOULD PROVIDE:

1. SIGNED COMMERCIAL INVOICE

2. BILL OF LADING

3. PACKING LIST AND WEIGHT CERTIFICATE

4. CERTIFICATE OF ORIGIN

5. CERTIFICATE OF QUALITY

6. QUALIFIED CERTIFICATE OF INSPECTION ISSUED BY 

THE SURVEYOR

IF OTHER DOCUMENTS WERE NEEDED BY THE 

IMPORTING COUNTRY, THE SELLER HAS TO PROVIDE 

, BUT THE FEE IF ANY, WILL BE ON BUYER’S 

ACCOUNT.

ARTICLE 11: FORCE MAJEURE

NEITHER PARTY OF THIS CONTRACT IS

RESPONSIBLE FOR BREACH OF CONTRACT IF

CAUSED BY AN ACT OF GOD, INSURRECTION, CIVILCAUSED BY AN ACT OF GOD, INSURRECTION, CIVIL

WAR, MILITARY OPERATION OR LOCAL

EMERGENCY. THE PARTIES HEREBY ACCEPT THE

INTERNATIONAL CHAMBER OF COMMERCE OFINTERNATIONAL CHAMBER OF COMMERCE OF

GENEVA, SWITZERLAND TO MEDIATE THIS CLAUSE

IF DISCREPANCIES OR DISPUTES ARISE.

ARTICLE 12: TRANSPORTATION CONDITIONS

1. ON COMPLETION OF LOADING, SELLER’S SHIPPING

AGENT SHALL FAX OR E MAIL THE BUYER OF VESSEL’SAGENT SHALL FAX OR E‐MAIL THE BUYER OF VESSEL S

NAME, SAILING DATE, QUANTITY LOADED, B/L NO AND

SHIPPING AGENT NAME IN IRAN, NOT LATER THAN

SEVENTY‐TWO (72) HOURS AFTER LOADING WAS

COMPLETED.

2. ANY TAXES OR LEVIES AT THE PORT OF LOADING ARE

FOR THE SELLER’S ACCOUNT.

3. BUYER WILL ADVISE THE SELLER OF THE NAME OF THE3. BUYER WILL ADVISE THE SELLER OF THE NAME OF THE

CHARTERED VESSEL, HER PLACE AND POSITION (15)

DAYS BEFORE THE VESSELS ARRIVAL TO THE PORT OFDAYS BEFORE THE VESSELS ARRIVAL TO THE PORT OF

LOADING.

ARTICLE 13: VESSEL LOADING TERMS

AS PER CHARTER‐PARTY, HOWEVER THE LOADING,

RATE IS SET AT APROX. 1,500 MT PWWD ( PER

) /WEEKLY WORKING DAYS ), AND THE DEMURRAGE /

DESPATCH SHOULD BE ACCORDING TO

INTERNATIONAL CHARTER‐PARTY. IT IS AGREED THAT

DEMURRAGE AND/ OR DESPATCH AT LOADING PORTDEMURRAGE AND/ OR DESPATCH AT LOADING PORT

BE SETTLED BY THE BUYER AND THE SELLER WITHIN

FIVE BANKING DAYS FROM RECEIPT OF VESSEL’S

MASTER’S INVOICE.MASTER S INVOICE.

ARTICLE 14: ARBITRATIONARTICLE 14: ARBITRATION

THE PARTIES AGREE THAT ALL DISPUTES

ARRISING IN CONNECTION WITH THE PRESENTARRISING IN CONNECTION WITH THE PRESENT

CONTRACT SHALL BE FINALLY UNDER THE

RULES AND ARBITRATION OF THE

INTERNATIONAL CHAMBER OF COMMERCE ININTERNATIONAL CHAMBER OF COMMERCE IN

GENEVA, SWITZERLAND BY ONE OR MORE

ARBITRATORS APPOINTED WITH SAID RULES.

ARTICLE 15: NON‐ CIRCUMENTION

THE PARTIES ACCEPT AND AGREE TO THE PROVISIONSOF THE INTERNATIONAL CHAMBER OF COMMERCE,GENEVA, SWITZERLAND AND FOR NONCIRCUMENTION AND NON DISCLOSURE WITHREGARDS TO ALL AND EVERYONE OF THE PARTIESINVOLVED IN THIS TRANSACTION AND CONTRACT.

ARTICLE 16: PERFORMANCE BOND

10% PROFORMA BOND OF L/C VALUE WILL BEPROVIDE BY SELLER AFTER RECEIVING THE L/C THISPROVIDE BY SELLER AFTER RECEIVING THE L/C. THISWILL BE KEPT REVOLVING TILL CONTRACTCOMPLETIONCOMPLETION.

ARTICLE 17: 

BY ACCEPTANCE ON THE TERMS OF THIS CONTRACT, SELLER AND BUYER HAD SIGNED BELOW:

DATE: JANUARY 3RD 2008.

SELLER: BUYER:

SIGNATURES SIGNATURES

WITNESS WITNESSWITNESS WITNESS

SIGNATURES SIGNATURES