Key Takeaways

  • Export sales agreements are legally binding documents defining the rights and duties of exporters and foreign buyers.
  • They can be formal written contracts or informal agreements, depending on the relationship and transaction size.
  • Essential elements include product description, price, delivery terms, payment method, governing law, and dispute resolution.
  • Export sales agreements may be negotiated by phone, electronically, or through agents/distributors.
  • Exporters should prepare thorough checklists for indirect exports, direct exports, and agent/distributor relationships.
  • Proper documentation reduces legal risks, prevents misunderstandings, and ensures smoother international transactions.

If you're asking "what is export sales contract," you first need to understand that foreign companies have more buying power than ever before due to the standards of living improving all over the globe. Exporting provides optimal opportunities for industrial companies to experience growth.

Are Export Sales Contracts Formal or Informal?

Depending on the foreign buyer, an export sales contract can be either informal or formal. An informal contract may be a verbal agreement made over the phone while a formal contract will be more proper and official. There are multiple techniques and tools used to facilitate an export sales contract. Let's look at various courses explaining how export sales contracts are created.

Key Elements of Export Sales Agreements

Every export sales agreement should clearly outline the core elements of the transaction. While the level of detail varies, the following components are typically included:

  • Parties to the contract: Exporter and importer with complete business details.
  • Product description: Quantity, quality standards, and specifications of goods.
  • Price and currency: Unit price, total value, and applicable currency.
  • Delivery terms (Incoterms®): Defines risk transfer, shipping obligations, and costs.
  • Payment terms: Accepted methods such as letters of credit, wire transfers, or open account.
  • Inspection and insurance: Pre-shipment inspection requirements and allocation of insurance responsibilities.
  • Governing law: Jurisdiction that applies in case of disputes.
  • Dispute resolution: Arbitration, mediation, or court litigation procedures.

Including these terms helps reduce misunderstandings, especially when dealing with buyers across different legal systems.

Can Export Sales Contracts Be Made Over the Phone?

A verbal agreement is made between two parties over the telephone, with an understanding of the type and quantity of product(s) to be sold. The buyer has accepted the price(s) per unit, delivery, and payment terms, or an offer has been accepted from the importer.

Importance of Written Documentation

While verbal agreements may be valid, they are difficult to enforce internationally. A written export sales agreement:

  • Provides evidence of agreed terms.
  • Clarifies legal obligations under international trade law.
  • Protects both parties in the event of a dispute.
  • Is often required by banks for financing, letters of credit, and customs clearance.

Even simple transactions should be followed by a written confirmation—such as a signed pro-forma invoice or short-form contract—to safeguard both exporter and importer.

Do Negotiations Take Place When Creating Export Sales Contracts?

It is not uncommon during negotiation that multiple offers and counter-offers are made before settling on a final cost. The agreement and final cost may or may not be reflected in a sales contract. These types of agreements are often between longstanding trade partners, affiliated companies, or trustworthy companies that deal with various forms of merchandise that are subject to rapid price changes.

Electronic communication has become an accepted method of conducting business deals ranging from sales agreements to payment transactions. An offer to sell may be presented by facsimile, e-mail, Facebook, etc.

Commonly used are pro-forma invoices, which is an estimated invoice, sent by the seller to inform the buyer in advance of delivery. These can be sent by facsimile, air mail, Facebook, or other forms of electronic digital communication. A detailed formal contract is signed by both parties, along with a clear explanation of the terms and conditions.

Common Risks in Export Sales Agreements

International trade carries risks that a well-drafted agreement can mitigate. Common risks include:

  • Currency fluctuations that affect payment value.
  • Non-payment or late payment from foreign buyers.
  • Delays in delivery due to customs clearance or shipping disruptions.
  • Regulatory changes in the importing country.
  • Quality disputes if inspection standards are unclear.

To minimize these risks, exporters often use secure payment methods (like letters of credit) and include detailed clauses on delivery schedules, inspections, and remedies for breach

Indirect Export Checklist

1. Prepare a list of trade houses who might be of interest.

2. Research potential clients by gathering references and recommendations.

3. Contact potential clients and explain your interest and build rapport.

4. Visit potential business clients and make inquiries of their interest and motives.

5. Know which foreign markets you are most interested in.

6. Make note of the foreign markets you desire to export directly to for future contact.

7. Provide your company information to your top potential clients.

8. Begin negotiations by inviting the trading house to buy directly from you or act as your export agent.

9. Each export order should be filled as received.

Direct Export Checklist

  • Decide if you will export using an import agent or directly to a foreign user or a foreign distributor who would resell your product.
  • Inform and present product information, provide potential clients with your company's sales and marketing literature.
  • Prepare a sales campaign if you are selling directly to foreign users and make note of potential clients.
  • Follow up with prospective clients by sending letters.

Import Agent or Distributor Checklist

For each foreign market of interest, search and identify a suitable agent or distributor.

  1. Make your selection and negotiate to obtain an agency or distribution agreement.
  2. Observe the agent or distributor's performance.
  3. Enter into a written sales contract.

You will also need to state the names of all parties entering into the agreement. List the quantity and a detailed description of the product(s) to be supplied. Include detailed information regarding how inspections will be handled. A foreign buyer may demand the use of a specific inspection agency for pre-shipment inspection requirements.

When discussing money, indicate the currency that is reflected in the contract. Clarify in writing who will be responsible for paying taxes, along with any payment terms. Prices quoted by the seller may or may not include tax and fees. Details of which party will be responsible for the levies in the country of importation are matters that need to be addressed and specified in the contract. The contract should include the location of dispatch and delivery.

Governing Law and Dispute Resolution Clauses

Because international sales cross jurisdictions, export sales agreements should specify which country’s laws apply. Additionally, contracts should include a dispute resolution clause that:

  • Identifies the governing law (e.g., New York law, English law).
  • Establishes a dispute resolution forum, such as arbitration under the International Chamber of Commerce (ICC).
  • Clarifies whether disputes will be handled through mediation, arbitration, or litigation.
  • States the language of proceedings to prevent misunderstandings.

Such clauses provide certainty and avoid lengthy conflicts over where and how disputes should be resolved

Frequently Asked Questions

1. What is the purpose of an export sales agreement?

It sets out the rights and responsibilities of both exporter and importer, helping prevent disputes and ensuring smooth international transactions.

2. Are export sales agreements legally required?

Not always, but they are highly recommended. Some countries require written contracts for customs clearance or financing.

3. What Incoterms® are most commonly used in export contracts?

EXW, FOB, CIF, and DDP are widely used, depending on how risk and costs are allocated between buyer and seller.

4. How do exporters protect against non-payment?

By requiring secure payment methods such as confirmed letters of credit, advance payments, or export credit insurance.

5. Can export sales agreements be tailored to specific industries?

Yes. Sectors such as agriculture, technology, or chemicals may include industry-specific quality standards, inspection protocols, and regulatory compliance clauses.

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