Exercise 2. Answer the following questions.

1. Why are standard contracts widely used?

2. What are the essential items of a contract?

3. What information is contained in different sections of a contract?

4. How is quality determined in the contract?

5. What sort of prices may be indicated in the contract?

6. What is a firm price?

7. What is a fixed price?

8. Where may the injured party go in case of a breach of contract?

9. What is understood under a “specific performance of a contract”?

 

Exercise 3. Fill in the gaps with the words and expressions from the text:

 

1. An offer (a quotation) is ___________________ by the Sellers usually in______________ form expressing their wish to sell the ___________.

 

2. Offers (quotations) will as a rule include the following information:

The _______________ of the goods offered (their quality, quantity),

Details of ___________, ____________ and _________________,

The _________ or the _________ and _____________ of delivery.

 

3. A free offer (sometimes called Voluntary offer) is made when Seller ______________goods to __________________ without waiting for an __________________ and sends quotation to those who may be _______________ in the goods.

 

4. A firm offer is a __________________ to ___________________ on the terms stated i.e. at a ________________ price and within a ___________________ period of time.

5. The Sellers making a firm offer have the right to ____________________ it at any time before it has been ____________________.

 

6. Contract is an ________________________between the parties involved that creates a _________________ obligation.

7. Some of the items are necessary in any contract: __________________ of the contracting parties, ________________ of the contract, _____________, __________, ____________ and payment terms.

8. The quality of machines and equipment is to be in _______________ with the technical specification of the __________________.

 

9. The quality of ________________ and __________________ is determined, as a rule, by standards, by sample or by description.

 

10. In case of a breach of contract the injured party may go to______________ to sue for money damages, or for the contract to be _____________, for injunction, or for specific performance if money damages would not _________________ for the breach.

 

Exercise 4. Read and translate the text. Then study the vocabulary given after.

Terms of Payment

Payment in foreign trade may be made in cash and on credit. There are different methods of cash payment:

1. By cheque (but it is not practicable as a cheque is payable in the country of origin. That’s why cheques are mostly used for payment in home trade.)

2. By telegraphic or telex transfers or post (mail) remittance which is made from the Buyers’ bank account to the Sellers’ in accordance with the Buyers’ letter of instruction. Actually this method of cash payment may sometimes take several months, which is naturally very disadvantageous to the Sellers. The transfer is carried out at current rates of exchange.

3. By letter of credit (or just by credit) –L/C

The following types of letters of credit are usually used: irrevocable, confirmed and revolving.

An irrevocable L/C is one which can neither be modified nor cancelled without the consent of the party in whose favour it has been opened.

A confirmed L/C is an irrevocable L/C, payment under which is guaranteed by a first class bank in case the opener of the L/C (i.e. the Buyers) or the bank effecting payment defaults, or is unable to make payment.

A revolving L/C is one under which its value is constantly made up to a given limit after payment for each shipment, which saves the charges on multiple letters of credit.

The Letter of Credit is the most frequently used method of cash payment because it is advantageous and secure both to the Exporter and to the Importer though it is more expensive than payment by transfer. It overcomes the gap between delivery and payment and gives protection to the Sellers by making the money available for them on the fulfillment of the transaction and to the Buyers because they know that payment will only be made against shipping documents giving them the title for the goods. This method of payment is often used in dealing with developing countries.

4. For collection (Payment for collection does not give any advantages to the Exporter because it does not give any guarantee that he will receive payment in time or at all. That’s why the Exporter usually requires that the Importer presents a guarantee of a first class bank that payment will be effected in due time. Also, there is a long period of time between the delivery of the goods and actual payment. But it is advantageous to the Importer because there is no need to withdraw from circulation big sums of money before actually receiving the goods).

Payment for collection against documents (with subsequent acceptance or very often telegraphic collection with subsequent acceptance) is mostly used in trade with East European countries.

The costs involved in effecting payment for collection are twice or three times lower than those by letter of credit. Most modern business is done on a credit basis which may be:

1) by drafts (by Bills of Exchange – B/E) – the Exporter credits the Importer which is advantageous to the latter.

A draft (a bill of exchange) is an order in writing from a Creditor to a Debtor to pay on demand or on a named date a certain sum of money to a company named on the Bill, or to their order. It is drawn by the Sellers on the Buyers and is sent through a bank to the Buyers for acceptance (i.e. for acknowledging the debt). The draft becomes legally binding when signed and dated by the Buyers on its face (front) and is to be met when due, i.e. 30, 60 or 90 days after presentation. The draft may be negotiable, i.e. it may be used by the Sellers to pay their own debts, but in this case the Sellers are to endorse it by signing it on its back, then they can pass it on to the new holders.

If the exporter wants immediate payment, he can discount the draft in return for a cash advance with a bank for commission, i.e. sell it to a bank for its face value less interest, and by supplying a document (a letter of hypothecation) giving the bank the legal right to claim the goods if necessary. Besides, he may leave it with a bank as security for a loan. All this makes the Draft a very practical method of payment in foreign trade. To sum up its advantages – it simplifies the financing of export and import foreign trade and cuts down innumerable movements of currency.

There may be two main types of drafts:

Sights Drafts, which are payable on presentation (at sight) or on acceptance and Term drafts, which are drawn at various periods (terms) and are payable at a future date and not immediately they are accepted. Term drafts may pass through several hands before maturity and require endorsement by the Sellers.

2) in advance ( the Importer credits the Exporter, for example, the contract may stipulate a 10 or 15 % advance payment, which is advantageous to the Sellers). This method is used when the Buyers are unknown to the Sellers or in the case of a single isolated transaction or as part of combination of methods in a large-scale (transaction) contract.

3) on an open account. Open account terms are usually granted by the Sellers to the regular Buyers’ or customers in whom the Sellers have complete confidence, but sometimes they are granted when the Sellers want to attract new Buyers then they risk their money for that purpose. Actual payment is made monthly, quarterly or annually as agreed upon. This method is disadvantageous to the Exporter, but may be good to gain new markets.

The two methods of payment (in cash and on credit) are very often combined in a contract. Drafts, for example, may be presented under a letter of credit and there may be other, sometimes very complicated combinations of various methods of payment stipulated in a contract.

The currency to be used for payment is a matter for agreement between the counterparts.

 

Payment

A cheque is a written order to a Bank given and signed by someone who has money deposited there to pay a certain amount mentioned in the cheque to a person named on it. In the place of the cheque system Banks provide an international system of Bank Transfers. The Seller gives TT or mail remittance terms to a Buyer when he is a trusted customer or agent. It involves risk as the Seller ships goods without any assurance of getting payment.

Here is an example of a draft:

 

Draft

_____________________________________________________________________________________

Moscow, _________,200 ____________

ON ___________PAY AGAINST THIS BILL OF

EXCHANGE TO THE ORDER OF THE ALPHA

BANK RUSSIA, MOSCOW, THE SUM OF _____

ONLY FOR VALUE RECEIVED.

To – Promstrojimport

 

Like a cheque, a draft is an order to pay. It is made out by an exporter and presented to the importer. It is also called a bill of exchange. A sight draft is a bill which is paid at a later date is called a term draft. There are 30-day, 60-, 90 – and 120 day drafts.

A very useful method is to attach the shipping document (the Bill of Lading, the Insurance Policy and the Invoice) to the Draft and hand them to the Bank for Collection. The documents can be handed over to the Buyer either against payment (D.P. – Documents against Payment) or against acceptance of the draft (D.A. – Documents against Acceptance). D.P. refers to sight drafts. D.A. refers to term drafts.

A sight draft does not require acceptance. A term draft must be necessarily accepted. The drawee writes “Accepted” across it and signs his name.

The draft is then returned to the Seller, who can hold it until maturity.

This method of payment involves risk to the exporter or his bank as it may happen that a draft is not honored when it is due.

The shipper has full protection when drafts are presented against L/C. With a letter of credit, at least when it is confirmed and irrevocable, the payment is guaranteed.

The Bank at the Sellers’ end guarantees payment in case the opener of the credit defaults. Besides, the credit cannot be cancelled before the expiry date.

 

VOCABULARY

Cheque (англ.) check (амер.) чек

To deposit                              вносить деньги на хранение в банк

Telegraphic transfer (TT)       телеграфный перевод

Mail remittance                      почтовый перевод

Customer                               покупатель, клиент, заказчик

Bill of exchange / draft         вексель, тратта

To make a document             составлять документ

Sight draft                             тратта «на предъявителя»

Term draft                             тратта с оплатой в конце обусловленного периода

Bill of lading                         коносамент (подтверждение приема груза на борт

Insurance policy                    страховой полис (условия договора морского страхования)

Invoice                                   счет-фактура

Acceptance                            акцепт, согласие на оплату        денежных и товарных документов

Accepted                               акцептован, надпись на векселе

To honor a draft                    акцептовать тратту

Drawee                                  трассат (лицо, на которое выставлена тратта)

Maturity                                 срок долгового обязательства

Default                                  неуплата

To cancel                               аннулировать, отменять, расторгать

Letter of credit                      аккредитив

Confirmed letter of credit     аккредитив подтвержденный

Irrevocable letter of credit     аккредитив безотзывный

Revolving letter of credit      аккредитив револьверный, автоматически возобновляемый

Expiry                                    окончание, истечение срока

Value                                     стоимость

Multiple                                 многократный

⇐ Предыдущая3456789101112Следующая ⇒

Поделиться: