Purchase Contract between an Importer and a Supplier
A purchase contract is meant to create a binding and lawfully-enforceable obligation between an importer and a supplier and the key points below should be included in the contract:
1. The Products
This refers to the item/s and its specifications which include: the commodity’s name, its quality, quantity, packaging and a commercial invoice.
The commercial invoice summarises the whole transaction. It contains the particulars of the buyer, seller, Freight Company, export/import brokers, bank details and foreign customs. It also has the cost of the items in shipment plus the conditions under which they’re being shipped.
Traders may choose to use a proforma invoice which allows for the processing of payment before releasing the goods. You need to be clear on the products’ exact specification to enable you to know what to expect or what you are going to get.
2. The Sales Targets
This is where the quantities of commodities and shipment frequencies are specified.
This shows the prices of the commodities and the permissible markups.
This indicates the territory in which the distributor may sell the products and if they’ll all have exclusivity in that location.
5. Terms of Payment
Are you going to use a letter of credit, open account, sight draft, consignment or 30 days? or T/T, PayPal, Transferwise etc.
A letter of credit is a very significant inclusion in the export-import document risk and can be defined as a drafted commitment by a bank from the importer’s side which confirms that payment has been fully made for the supplied commodities. It gives the exporter security in this risky business. It’s useful for those who’ve no trading history, importers who are in politically- and economically-volatile countries or for anyone that values caution in business.
Quality Control related to payment terms
Are you going to arrange Pre-shipment Inspection before sending the balance of payment to supplier? Learn more from HERE
6. Shipping Terms
Are your terms going to be free alongside ship/FAS; free on board/FOB; cost, insurance & freight/CIF, cost and freight/C&F?
Are you going to arrange Container Loading Supervision to ensure goods well loaded in container?
Incoterms are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts. They are published by the International Chamber of Commerce (ICC) and are widely used in commercial transactions. Learn more.
7. Importer’s Level of Effort Required
This refers to how hard the importer has to work to sell the commodities, and this includes both the long-term commitments and the minimum order commitments.
8. Sales Promotion & Advertising
Who’ll do it, who’ll pay for it, and how much should be invested?
9. Order Lead Time & Price Increments
Lead time refers to the amount of time needed to ship products to the one purchasing the item. During negotiations with the supplier, agree on who’ll be responsible for increases in transportation or material from the moment the order is placed until it’s available for shipment.
10. Warranty & Service
This will explain how to handle unsold or defective products.
11. Copyrights, Trademarks & Patents
Who is required to register and in which person’s name?
12. Provision for the Termination of Contract
It explains the circumstances that can lead to the dissolving of the agreement.
13. Provision for Dispute Resolution
If there’s a defective product or a misunderstanding about an aspect of the sales or purchase agreement, which process is to be applied to resolve the disagreements?
A purchase contract between an importer and a supplier helps to facilitate payments, ensure the safety of products until they’re delivered builds trust between the traders and prove observance of regulatory requirements.
March 22, 2019
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