Automate your sales contract process in legal agreements

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hello there my name's Dan Gardner and from wherever in the world you're tuning into this broadcast I'd like to welcome you to this our first of three training modules on topics in global trade this one entitled understanding and negotiating International sales contracts the subsequent two modules that we'll be doing are very much tied into International sales contracts and they are entitled inco terms 2010 and letters of credit so while we suggest you watch all three modules it's not necessary but should you decide to do that they go for about 50 minutes a piece and one Builds on to the other so the first one being International sales contracts the second inco terms or international shipping terms and the third being terms of payment letters of credit for importers and exporters having said that let's get to work here in terms of our agenda we're going to bring some definitions to the table and then talk about the fundamental Clauses that are involved in international sales contracts as you'll very quickly see or perhaps know now AAL sales contracts is a is a game of awareness uh the calculus of contracts is very much based around understanding the nature of your industry and building Clauses into the contract that satisfy your needs as a seller or a buyer so those definitions and some of the main Clauses that go into contracts are really quite important and then we'll we'll talk about ways in which you can establish International sales contracts to be enforceable around the world so our first slide is the I'm not a lawyer slide what we're doing here here today is for educational purposes only so please don't misconstrue any of its content as being legal advice so our first slide don't like to make any assumptions about people's knowledge around International sales contracts so the first logical question to ask is what exactly is an international sales contract well it's a mechanism in which international buyers and sellers willfully enter into binding agreements for an exchange of goods and or services for compensation that's probably the simplest definition that we can put around it but clearly contracts have to demonstrate three or four key components the first one being what is the intent of the parties between the seller and the buyer what is it exactly you're trying to accomplish and can that intent be understood from the content of the contract so intent of the party is very important number two is the manner in which offer acceptance and consideration are achieved now those sound like fancy legal terms but they're really quite simple to understand offer is the offer to sell so if you're a seller if you're an exporter you're probably going to send a potential client overseas perhaps in Brazil a quotation an offer to sell that establishes what we'll be calling later on the documentation Trail and the consistency of documents that you use from inception of agreement till its final execution is really quite important so the first one is going to be that offer to sell most likely an export quotation now acceptance your customer overseas receives your quotation you go back and forth you negotiate a little bit and their acceptance will more than likely be in the form of a purchase order that they're sending to you so again that consistency from what you offered negotiated and then the customer accepted has to be complete consistent and correct more on that in just a little bit and then consideration again just a fancy term for the exchange of of funds so offer acceptance and consider consideration starting with the establishment of that documentation trail that becomes so important to the successful execution of an international transaction third point that you have to be able to to discern from a contract is the method for interpretation should something go arai in a contract how is that content of the contract going to be interpreted is it going to be in a court of law is it going to be through arbitration this is important in a in a contract and then finally what is the required conduct of the parties in an international contract who has to do what between seller and buyer to execute the terms of the contract so very quickly to summarize whatever you use in terms of contract modules and such intent of the party how do you discern offer acceptance and consideration what is the method for interpretation and what is the subsequent conduct required of the parties so if you can look at a contract and figure those four things out from its content you'll probably be in good shape obviously in a less than 60-minute presentation we won't even come close to covering the full body of work around International sales contracts that's really not our intent we do want to heighten people's awareness around International Sal sales contracts but certainly not going to cover every every subject in that body of work two areas two bodies of work very important that you understand and have access to that can help you broaden your base of knowledge our list in this particular slide so governing entities the international Chamber of Commerce whether you're a veteran of international trade or just starting out you have to acquaint yourself with the work of the international chamber chamber of commerce now the one we're interested in for now is the ICC model for international sales contracts published in 1977 so it's really a template that companies can use buyers and sellers to cover all the Clauses that they have to consider for an international sales contract now that has to be purchased through the ICC and we have no commercial affiliation with that entity but certainly want to make you aware of its availability second and this is published to the United Nations we'll see on this slide at the bottom is called the UN convention on contracts for the international sale of goods now you can find this online if you Google that title you can find that online and download it for free but lots of good Clauses in there so you're starting to create a frame of reference depending on your industry around which you can borrow Clauses and customize a contract for your particular needs so two important bodies of work you need to be aware of there so the formation of international sales contracts how does this really work between a buyer and a seller and for purposes of our discussion today we're going to switch back and forth and pose examples as you viewing as the seller or the buyer it's really a matter of capturing all the Clauses that you need negotiating them out and getting them in writing between the parties first and foremost in the formation of an international sales contract the first piece of news is that you don't technically need a contract highly recommended that you do so highly recommended that you get everything in writing but arms length handshake agreements go on all the time wouldn't recommend that but technically you don't need a written contract so the preferred method is to have a written and signed agreement that demonstrates again offer acceptance and consideration and what are the subsequent documents that are generated that really show us the intent of the parties and I'm talking about things like the original quotation as we talked about an agreement in writing perhaps a purchase order and then certainly things like commercial invoices packing lists bills of lading Etc that's what we mean by the documentation Trail and the ability to demonstrate offer acceptance and consideration and of course the intent of the parties third bullet point as we said transactions can be conducted without a contract but should be supported by documentation already made reference to this so that documentation Trail likely in digital form PDF or what have you but you could go the oldfashioned way and have C copy documents as well really depends but that idea of a documentation Trail and the ability to demonstrate the intent of the parties and the subsequent conduct of the parties really very important moving on now this slide is pretty important because we start to talk about potential Clauses now depending on what industry you're in and whether you're the buyer or the seller you may want to include certain Clauses or leave them out that's what a negotiation process is but to be aware of the potential Clauses that are out there you can then kind of cut them down to still them down to fit your particular transaction your particular needs as it relates to being either the buyer or the seller one thing we want to point out lower right hand corner of this slide if you if you see a point a bullet point here with an AS that means that this particular point this particular Clause is covered by the inko terms 2010 the next module that we do is all about inco terms so we're not going to talk about details and definitions and such but it's important to note that inco terms cover a lot of things and if you make reference to an inco term in your contract or agreement any of these items that are asct and there's a question or an issue around it's going to be interpreted pursuant to the inco terms publication which as a brief aside is put together by the international Chamber of Commerce same people that put together the contract template I alluded to just a moment ago so Aster means covered by inco terms so quickly let's run through these number one contract date seems like a simple thing but in international trade you want to you want to be spelling out the the actual contract because here in the United States 81214 means August 12th means December 8th and lots of other places around the world so simple little things simple little details are really quite important start with that spelling out of a contract date identification of the parties who is entering into the contract and are there people authorized to enter into a contract you don't want to be negotiating with somebody who isn't authorized perhaps an off officer of a company to enter into a contract applicable law international trade involves at least two countries so if there are any questions or any issues whose law is going to apply if I'm an exporter here in Southern California and I'm selling to a customer in India should something go wrong is the applicable law of the United States going to apply State of California or might it be India I don't know that's something that you need to negotiate with your customer overseas severability this is somewhat of an obscure legal term but it just means if one clause in a contract is found to be unenforceable that the rest of the contract remains in place any good lawyer is going to tell you that anyway but one wanted to mention it here dispute resolution if there is an issue we talked a little bit about applicable law but there are options to go to arbitration as well to have a neutral third party decide who the who the winning party is in a in a type of dispute already talked about the inot terms rule you absolutely positively have to have an inot terms rule included in your agreement or International sales contract it just covers so many things as we'll see in our subsequent presentation that it's really quite important that you have that description of the goods when we we talk about consistency across documentation across that paper trail the description of the goods that you start to use in a quotation into a contract that you see in purchase orders commercial invoices packing lists Etc you want it to be compact easy to understand easily identifiable in terms of what that product is but you don't need to write a novel about what the description of your goods are very important point there starting with your contract quality grade size and condition if you're an agricultural buyer or seller these become important points substitution can products be substituted for the original product that you quoted or were quoted for if you're the buyer if you are indeed the buyer you want to have that point covered because perhaps you will allow substitution or perhaps you want specifically what it is you ordered important point there things like Logistics considerations preparation stuffing blocking and bracing of containers to avoid damage in transit again international trade important to have that delivery of the goods by the seller inco terms consideration as we see with our Aster the price of the goods probably the most important point of a contract including currency of sale if you're an exporter from the United States you want to be exporting in dollars if if you're an exporter from Hong Kong Hong Kong dollars you want to keep it in your currency uh buying in different currencies is a little bit of a different ball game it's nice to buy in your currency but sometimes the seller overseas won't allow that so something to consider as well but if you're the seller nine times out of 10 probably more 9.9 times out of 10 you want to be exporting in your currency warranty and repair depending on the nature of your product there might be some Clauses about subsequent warranties and repair you need to think about that what it means to the buyer to actually receive the goods that's an inco that's an inot terms consideration as well we'll get into that a little bit later country of origin it's really important to understand country of origin and include it in your contracts because customers overseas if you're exporting to them are going to pay customs duties based in part on the country of origin if you're the buyer conversely you want to know because your import Duties are going to be influenced by the country of origin as well so another important consideration type and timing of payments export packaging notice an advanced ship notice to the buyer or seller that goods are moving you want that in there mode of Transport is it Air Freight is it ocean Freight could it be multiple modes of Transport you need to stipulate that in your contract and of course who's going to pay all of these Transportation costs that's actually covered by inco terms as well couple of other points contract of carriage that's just some fancy terminology as in terms of who has to arrange for the international shipping of the goods that should be clearly defined in a contract provision of documents who's going to generate a commercial invoice packing list perhaps a certificate of origin that has to be in there the provision of those transport documents any allowances for e-commerce as we proceed through our bullet points inspection of the goods that's pre- shipment inspection prior to export so if you as a buyer feel the need to have Goods inspected prior to they being shipped you need to stipulate that in your contract and you as the buyer more than likely will have to pay for that service diversion Clause that there are certain rules around the world laws actually particularly in the United States Europe and and other countries where Goods have to be shipped where they're actually destined to go uh to avoid diversion of of perhaps high-tech or Goods with military applications getting into the hands of the wrong people you want to have a diversion clause on your documentation that says final destination of these Goods XYZ country diversion contrary to US law or european law prohibited that's important transfer of risk where does the responsibility for well-being of the good shift from the seller to the buyer inco terms will cover that as it does cargo Insurance a clause for insurance claims transfer of title transfer of title and transfer of risk are not the same thing sometimes people get confused about that inco terms deal with transfer of risk do not deal with transfer of title that's a separate Clause that you have to have in your contract penalties for late shipments who's responsible for Customs clearance who pays customs and duties any changes to a contract the assignment of a contract to a third party will that be allowed you have to negotiate that and then Force majour which are acts of God so some things to think about and again depending on your industry you're going to boil down this template to cover exactly what you need within your industry and and for your specific transaction wanted to list all of the we're not going to go through these again but to give you an idea of how important inco terms are and what the inclusion of an inco term in an international sales contract means that's what this slide does so every single one of these bullet points if you have questions or issue issues in an actual transaction on any of these points and you've included an inco term in your contract that issue will be interpreted pursuant to the inco terms 2010 rules so in terms of scope inco terms are probably the broadest Clause that you're going to have so strongly recommend that you have that in there so let's move on we we went on to talk we actually talked about some of these Clauses we're not going to cover all of them but what do they mean in actuality so we're going to break down some of the more key points here and elaborate a bit on those more Salient points for a contract so the first one is the date and and I already mentioned this you always want to spell out the date just to avoid confusion uh in the earlier part of my career I I saw this happen where people and I always pick August 12th because it's illustrative of the point that here in the United States 8214 means August 12th 2014 in other parts lots of parts of the world certainly in Latin America doesn't mean that at all it means December 88th so when you're getting into things like stipulations on Last Ship dates or payment on a letter of credit you want to have the date spelled out just to invoid avoid any confusion good practice there we talked a little bit about the identification of parties um here in the United States whether you're an importer or an exporter you cannot use a PO Box as an address in the post 911 world that just doesn't doesn't fly from a regulatory perspective from a legal perspective so always be dealing with full addresses whether you're the buyer or the seller full addresses only and you want to make sure as you identify the parties that the party you're negotiating with has the authority to enter into a contract I've seen scenarios over the years where people negotiated deals and it turns out that they weren't authorized to do so they weren't a senior executive they weren't an officer of the company and lots of time gets gets wasted so you want to make sure you're talking to and dealing with the right people description of the goods um we mentioned this briefly just a little while ago but description of the goods are really quite important because as the paper trail starts to unfold and goods actually start moving it becomes more and more important specifically from a customs clearance perspective so if you're an exporter you want to provide a description of the goods that can allow a third party that perhaps has no knowledge of your goods a customs agent let's say that they can identify what it is and properly classify that merchandise so whereas you might provide 30 pages of technical specs that that a that an engineer could understand the question becomes can a customs agent in South Africa understand that so the pros that you use starting with your contract starting with your quotations and certainly built out into commercial invoices and such remember it's going to be used for other purposes mostly for Customs clearance at at destination if you're the Importer of course you want to have a Pros description that's going to make it easy for you to classify and put a value on that merchandise as well well so succinct but easily identifiable Pros that a third party can identify and classify couple of quick tips here uh the harmonized system is is a numeric system used by 189 trading nations around the world countries that belong to the world Customs organization so that when you classify Goods perhaps the classification of of this remote the first six numbers are going to be the same all the way all around the world so in those 189 countries Australia China France the list goes on and on most of the trading nations around the world are going to classify Goods the same up to six digits if you know what those six digits are ahead of time there's going to be a Pros product description associated with those and perhaps you can use that description but that is found in the world Customs organization it's called the harmonized system and of course in our last Point here you want to use the proper unit of measure it depends on what it is your shipping but it could be dozens it could be grams it could be kilos or just single units pairs of shoes depends really on what it is you're shipping but you have to have that unit in there price this is the big one of course you want to have the currency we talked about the country of export you as a usual good practice but for oneoff transactions it's just going to be one sale you want to list both the unit and the total price plus any discounts of course so you want to break that down a little bit as we said spell out the date for transactions for contracts you also want to spell out the currency USD for US dollars mxp for Mexican pesos uppercase three letters every currency has has that identifiable acronym if you will for longer term contracts you want to put in adjustments for Price fluctuations particularly in agricultural but in high-tech as well things like hard drive prices fluctuate all the time so if it's a longer term contract you might want to include bands of pricing Plus or minus 5% depending on what you can or can't negotiate we already said this beware of buying or selling in foreign currencies if you do you might want to consider a banful fluctuation there as well lots of currencies around the world are are stable or or easily measurable against the US dollar of course where we're broadcasting from here in the us but as a as a normal practice as a best practice try to negotiate in the currency that you're dealing in definitely as an exporter uh if you can get it as an impor although likely that you won't it's certainly some something that you might consider asking for in that negotiation process calat at the end of this Slide the negotiated inco term may impact the final price of the goods we see this all all the time that exporters aren't accounting for all of the expenses associated with what they agreed to in a contract which of course is driven by an inco term a shipping term who pays for Air Freight who pays for ocean Freight who pays for Customs clearance that's going to depend on the inco term but what happens is buyers and sellers don't understand what they're signing up for and as such end up leaving margin leaving profit on the table so you have to know not only include an inco term in your contract but know what it means because you could be leaving 10 15 $20,000 in margin on the table and you don't even know it sometimes or be responsible for those costs as a buyer and not have having had the opportunity to bake it into your financial calculation this is really an important Point more on that our second module type in terms of payment the the happiest part of of an exporter I should suspect is getting paid you have to negotiate those terms up front cash in advance while desirable not likely that you're going to be able to achieve that so you need to ask yourself do you want to give 30-day terms 60-day terms 90day terms whereas in a domestic environment you're much more likely to do that in an international environment it becomes a little more risky particularly in new transactions because you don't know your customer overseas or your vendor overseas doesn't know you as a as a buyer and they're a little hesitant to offer terms what's the what's the option well documentary collections or documentary credits our third module is on documentary credits or letters of credit those are two synonymous terms documentary credit and a letter of credit it's the same thing but in essence involves the international banking system where temporarily the creditworthiness of the customer overseas is being substituted or replaced by temporarily the international banking system now there are certain charges associated with that there are some fairly I wouldn't call stringent but there are some very clear rules around what type of documents have to be presented what needs to be done but a letter of credit as either a buyer or a seller is a good vehicle to use particularly in young relationships where the buyer and seller don't necessarily know each other very well the point for this conversation is you have to decide well in Advance what it is you're going to do let's continue on Ino terms I have a tendency to really harp on inco terms because I've seen what can happen in otherwise healthy relationships when questions around transfer of risk or who pays for what in an international shipping scenario kind of get confusing inko terms are really important that's why we have a whole module the next one dedicated to International commercial terms as they're fully called shipping terms things like X Works free on board deliver Duty paid that's what we're talking about for now just realize that you have to have an inco term negotiated in your International sales contract we'll get into the details of what that really means but you really need to have that in there because it covers as we saw in in previous slides probably 15 or 20 points who's responsible for the well-being of the merchandise and Transit who has to arrange for international Transportation who pays for that Transportation who if anyone has to get insurance Insurance all of these things are covered by inco terms so just be careful and make sure you get that into your agreement country of origin we touched on this briefly country of origin is almost always going to influence the customs duties payment in the country of destination here in the United States country of origin is very important because the US government has certain preferential Duty programs in place with hundreds of countries around the world and a series of free trade agreements in place with upwards of 18 we have I believe 18 free trade agreements in place so the country of origin is going to tell us does is a product eligible for a preferential Duty program a lower Duty rate or no Duty whatsoever so as a buyer an importer in this case coming into the United States but it could be anywhere you want to know that country of origin to see if see what you qualify for if anything and if not what the actual Duty payment is going to be as a seller you want to provide that information to your customer overseas for the exact same reasons they need to know where the goods are coming from so that they can classify and put a value on those goods and pay duties to their home country very important there quick point on country of origin just because just because goods are shipped from a given country doesn't mean that they were made there we've seen scenarios in places like Mexico with which goods are actually physically in the country but they maybe they were manufactured elsewhere in China for example and then goods are resold just because goods are shipped from Mexico doesn't mean they're of Mexican origin it's where the product is made that's the most important so you need to be careful about that as well just a quick caveat point there let's move on mode of Transport this sounds like a simple consideration but I've seen deals go sour because a seller was under the impression that goods were going to ship by ocean Freight whereas the buyer thought the goods were going to be shipped by Air Freight air freight being much faster and much more expensive so you have to stipulate is it going to be air ocean multiple molds of Transport or for contiguous countries like the US and Canada or in the European Union can you use truck or rail transport there's a cost element there and there's a leadtime element there Air Freight obviously always being the fastest but more expensive so take care of that point as well transfer of title if there's a the gray area in international sales contract body of work both the ICC model that we talked about and the UN convention for contracts on inter International sale of goods it's around transfer title and one would think that this is the most important point to cover when does ownership change hands but both of those bodies um thought about the laws of countries around the world what's referred to as Sovereign law every country has its own Sovereign laws and they were so different around around title to Goods they kind of they actually left it kind of blank so you have to work a clause into your agreement stating when transfer of title is going to take place and although we'll enter into more detail when we get into inco terms I can tell you for sure that inco terms deal with transfer of risk not transfer of title that's unequivocal so transfer of title is not related to inco terms in any way inco terms is about or are about transfer of risk more on that later on penalty Clauses now obviously if you're the seller you don't want to offer up penalty Clauses for for late shipments in your contract however if you're a buyer you might consider asking your vendor overseas to include a penalty Clause you want your goods when you want them you need things for back to school for example or the holiday season or what have you you want to have stipulations that are going to inspire your vendor to ship on time one way to do that is through asking for a penalty clause again as the seller I wouldn't run around offering a penalty clause for late shipment but if your customer is Savvy enough to ask for them at least you're aware of it ahead of time and you can work out the details from there but you certainly don't want to be surprised by that request from your customer overseas couple of points here around late shipments they become more popular penalty Clauses or what are called chargebacks in in certain industries but the thing you have to understand about about is understand the essence of of lead time especially if you're shipping by ocean Freight which is clearly slower than air freight and what those lead times are what ports are a given vessel going to stop at what it refer to as Port strings or Port rotations you need to know these things before you commit to given lead times so you can avoid any type of penalty for example our third hashmark here be cognizant of overseas holidays that can cause delays I dealt with a client last year that was completely unaware of the impact of Chinese New Year which isn't a day like here in the United States it's over a period of days February March time frame and it changes every year by the way they were completely unaware unaware of CNY as it's called and got into some real trouble on some leadtime commitments because everything shuts down during this time period so be aware of where you're shipping and what's going on in those countries or if you're the buyer things going on in those countries that that could impact your receipt of goods conversely a couple of other things Peak shipping season uh peak season was uh is somewhat of a a mythical Beast now in the post financial crisis World Peak Seasons haven't had as big of an impact but we're talking about holiday season toward the end of the year where where space on ships and aircraft historically wor were in high demand and the availability for space was was considerably less or much more expensive should you have wanted to to gain access to that space on a ship or an aircraft it's not so much of a worry now but that's basically what we're talking about and then the other point is if you're committing to lead times stipulate calendar or business days if you're the seller not not a bad idea to say business days if you're the buyer calendar days because it it puts greater greater onus on your vendor overseas warranties and repairs if you're in the agricultural business you're not going to need a clause for warranty and repair but certainly in high tech or medical equipment anything that's manufactured there might be a clause for warranty and repair in there something you need to consider so it talks about things like details of the material workmanship and installation of goods that installation component being very important seen scenarios where high value equipment was damaged during an installation how do you deal with that contractually something to think about there Clauses could have a time limit how long is the warrant of course one year two year nine months you need to work that out the incoterm rule in mode of Transport should specified for replacement of returns what's referred to as reverse Logistics if you find yourself in a scenario either as a buyer or a seller where the possibility of having to ship goods back exists you need to have agreements around that again it's called reverse Logistics you'll need an inco term for the reverse Logistics as well seen scenarios where where companies are charged hundreds of thousands of dollars in return shipping charges that they never even contemplated so if your product is of a nature that it has to be returned or you're buying goods that you might need to return be sure you have that stipulation in there around reverse Logistics and who pays for what that's related to warranty and repair the last point on warranty and repair if you're going to give a warranty as a seller is that it should be based on the buyer not altering the product labeling or packaging that happens a lot kind people kind of jury rigging your equipment and something goes wrong with it you want to have an out clause there around that point getting down to the end and again these these are not meant to be an exhaustive body of work we we listed slides probably well over 30 Clauses that you need to be thinking about and then go into a little bit more detail about some of the more Salient points I can't emphasize enough the need to understand your industry the practices of the trade in your industry and the particular needs between buyer and seller obviously your view of the world is going to be different if you're the buyer versus the seller but the key here is broaden our frame of reference create some awareness and put you in a position where you can distill down these Clauses into specifically what you need an example of that again is returns sometimes stuff has to be sent back we put a term on that to call it reverse Logistics so the conditions for returns should be linked to in consistent with the warranty section of the contract so there's some tie-ins between the various Clauses this is an important Point too because some Clauses you want to have baked into or related to other Clauses they're not necessarily Standalone items there's a relationship between them in this particular case with between returns and the warranty section of your contract if you're a seller and you see yourself engaging obviously you don't want to be dealing with returns but in the unlikely event you have to you need to have what's a What's called an RMA program a return manufacturers authorization where Goods aren't being shipped willy-nilly and you don't know about it and things are coming back under expensive Air Freight terms you have to have a program in place that approves returns assigns it a reference number and then it can be tracked through the reverse Logistics chain that way you can control costs you can keep customers happy and there's a way to manage that process all of that begins with having stipulations in your contract in this case specific to returns decide on an inco terms rule lots of cases that we've seen where where clients are are very clear about the term they use on the main transaction the actual purchase or sale of goods but then they don't think about the inco term for returns and have seen scenarios where over the course of a year a couple hundred, in return shipping charges accured to a seller an exporter and they had no idea that that was going on so be cognizant of that and you stipulate your Mote of Transport as well Air Freight ocean Freight can it be done by truck Etc so reverse Logistics important exercise couple of key points before we wrap it up here uh governing law and choice of forum any contract should have a stipulation in it about governing law this contract is subject to the to the laws of the state of of California in the United States or it might be in India it might be in Russia it might be in Indonesia these are the things that you need to negotiate but you have to have that clause in the contract conversely you don't have to go to a court of law you can have a stipulation about Forum which basically alludes to arbitration where it's not a court case it's not there's no jury but there's a neutral party that looks at the facts of the case between the buyer and the seller and makes a binding decision if you choose to engage in that and normally this is done through places like Brussels Belgium in in Europe but you need to be aware of what the options are ahead of time and decide if that is something that you wish to participate in because once you go to arbitration for example and a decision is made unlike in a court there's no appeals process so arbitration is much more defining or definitive I should say one of the things that that will help you on this point as with the others is to look at the UN convention on contracts for inter un cisg or the ICC that International Chamber of Commerce model you want to have a look at that specific to governing law and choice of form there's some great great work in those in those texts remedies what happens if something does go wrong and I'm talking about things like liquidated damages penalties for late shipments Etc what what happens if something goes ay referred to as remedies liquidated damages similar to a penalty Clause but broader in scope obviously between whether you're a buyer or a seller you want to avoid these types of situations uh there's no such thing as a as a happy divorce in business but you have to have these stipulations in place not necessarily to punish people should something go wrong but to channel behavior that people know if I don't comply with the intent of our contract and the conduct that I engage to partake in there's going to be penalties so no one likes to talk about those things no one certainly likes to get to those points but having these Clauses in your contract are going to keep people aligned with what they have have to what they have to do so an unfortunate reality in business but you need to have those things included in your contract so that's a a quick review of international sales contracts bearing in mind that we in no way cover the entire body of work people study this topic for years before becoming uh an expert on the subject but in terms of people who have been in the business for a while getting a little refresher course or new people starting to establish that frame of reference upon which they can build I think this is a very good forum through which you can do that would urge you to watch the next modules on inco terms and then letters of credit for importers and exporters and have a much broader frame of reference so that'll be about three hours of training that'll put you in good shape as a review for veterans of international trade and as I said a good base for newer people upon which to build so thank you for tuning in and we look forward to seeing you in the next module thank you very much