What is Export Sales Contract (ESC)? Discuss the Principle Provisions of ESC.

Export Sales Contract (ESC):

All export transactions are made through Export Sales Contracts. Exports Sales Contract or Export Contract may be defined as a contract whereby the exporter (seller) transfers or agrees to transfer the property in goods to the importer (buyer) for a price. From this definition the following essentials of ESC emerge:

Two Parties:

There must be at leash two parties. An export has to be lateral because the property in goods has to pass from one person to another. The exporter and the importer must be different persons. A person cannot buy his own goods.

Also read | Political Risk for Business and its main types.

Goods:

The subject-matter of ESC must necessarily be goods i.e, movables. Goods may be existing goods or future good.

Transfer or Agreement to Transfer:

In a ESC it is the ownership that is transferred or agreed to be transferred. Transfer of more possession of goods is not covered by ESC.

Price:

Price is the consideration’s of ESC. If goods are offered as the consideration for goods, it will not amount to sale; it will be called barter. Further, in case there is no consideration it amounts to gift. However, if goods are sold for a definite sum and the price is partly paid in terms of valued up of goods and partly in cash that is export (sale).

Also read | The Ricardian Theory of Trade.

Essentials of a Valid Contract:

ESC should have all other essentials of a valid contract as per the general law of contract. These essentials include capacity of parties to contract, free consent legal object etc.

Principle Provisions of ESC.

Generally ESCs are written agreements containing standard terms and conditions. Sometimes ESCs may be in the form of letters, telex or fax messages, purchase orders or letters of credit. ESCs may also be oral contracts and may be made over telephone.

However, there should be a. standardized ESC containing standard term and conditions so that possibility of disputes is minimized. Export sales contract should be comprehensive hi terms of both structure and contents to avoid and/or reduce the possibility of any differences and disputes between the contracting parties.

Also read | The BOP (Balance of Payments) Accounting system.

ESC consists of following two parts:

  1. Substantive Part.
  2. Regulatory Part

Substantive Part:

Substantive part of ESC defines the contractual rights and obligations of the parties. Following are included in the substantive part af ESC:

  • Name and address of parties.
  • Specification and description of product.
  • Product Quality/Standards.
  • Quantity.
  • Price per unit.
  • Total value.
  • Price Escalation.
  • Currency.
  • Packing requirements.
  • Marking and labeling requirements.
  • Mode of transport including Port of Shipment /discharge, part and transshipment etc.
  • Delivery place and schedule.
  • Insurance.
  • Inspection.
  • Documentation.
  • Mode of Payment.
  • Passing of Property/risk.
  • Availability/Non-availability of export-import licenses.
  • Conditions.
  • Warranties.

Also read | Balance of Payments (BOP) & its significance.

Regulatory Part:

Regulatory part of ESC contains the provisions to regulate their commercial relations. Following are included in the regulatory part of ESC:

  • Force Majeure.
  • Settlement of disputes.
  • Proper law of the contract.
  • Jurisdiction.
  • Termination clause.
  • Liquidated damages/Penalty

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