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Publication date: 21.05.2024
FEA (foreign economic agreement) contract is an agreement between parties from different countries that regulates their commercial relations, such as the sale of goods, the provision of services, the performance of works and other types of foreign economic activity. In Ukraine, such an agreement is regulated by both national legislation and international norms and agreements.
The main elements of the FEA contract:
- Subject of the contract: Description of the goods, services or works that are the subject of the contract.
Quantity and quality of goods (services, works): Detailed characteristics of goods, services or works.
Price and total value of the contract: Indication of the price per unit of goods or services and the total value of the contract.
Terms of payment: Methods, terms and currency of payment.
Terms and conditions of delivery: Indication of terms of fulfillment of obligations and conditions of delivery.
Packaging and labeling: Requirements for product packaging and labeling.
Insurance conditions: Obligations of the parties regarding product insurance.
Force majeure: Terms of release from liability in case of unforeseen circumstances.
Dispute Resolution: Designation of a body or method of dispute resolution (eg, arbitration).
Other Terms: Any other terms that the parties deem necessary.
FEA contracts can be diverse, as they cover a wide range of international trade agreements and contracts. Here are some of the most common types of foreign exchange contracts:
- Sale of Goods Contract: This type of contract specifies the terms and conditions between the seller and the buyer for the purchase and sale of goods, including price, quantity, quality, delivery and payment terms.
Supply Contracts: These contracts establish the terms of delivery of goods or services from the supplier to the buyer. They can be international or domestic and include terms about quantity, quality, delivery time and prices.
Service Contracts: These contracts define the terms under which one party undertakes to provide certain services to another party. Services can be diverse, including consulting, repair, maintenance, etc.
Distribution Contracts: These contracts regulate the relationship between a manufacturer and a distributor regarding the sale and distribution of products in different regions or markets.
Licensing Agreements: These contracts allow one party (the licensor) to grant another party (the licensee) the right to use its intellectual property rights, such as patents, trademarks, or copyrights.
Franchise Agreements: These contracts allow the franchisee to share its brand, business model and support with the franchisor in exchange for a certain fee and compliance with the terms.
Joint Venture Agreements: These contracts establish the terms and conditions of cooperation between two or more companies to jointly implement business projects or produce goods.
Consortium Agreements: These contracts are entered into between different companies to jointly carry out a specific project or task, where each party has a defined share of responsibility and costs.
Writing a contract / drafting a contract - types of FEA contracts can be adapted and modified according to the specific needs and circumstances of each agreement.
Legal aspects of the FEA contract:
- Applicable law: The contract must clearly state which country's law will apply to dispute resolution.
International Agreements: It is important to consider international conventions, such as the UN Convention on Contracts for the International Sale of Goods (CISG).
Export and import restrictions: It is necessary to take into account national and international restrictions on the export and import of goods.
The procedure for entering into a contract of foreign trade:
- 1. Negotiations.
2. Preparation of the draft contract.
3. Signing the contract.
4. Fulfillment of obligations.
The FEA contract is an important element of international trade, providing the legal basis for commercial transactions between countries. The correct drafting and execution of such a contract requires knowledge of both national and international legal norms.
The conclusion of foreign economic contracts (FEA-contracts) is regulated by the legislation of Ukraine, as well as international norms.
- 1. Foreign trade contracts may be concluded by entities of economic activity that have the right to carry out foreign economic activity. Such entities include legal entities, individuals, and state bodies.
The conclusion of foreign economic contracts (FEA-contracts) has its own specific requirements for the form and procedure of conclusion. In accordance with the legislation of Ukraine and international standards, the form and ways of concluding foreign exchange contracts include the following aspects:
The form of the FEA contract.
- Written form: FEA contracts must be concluded in writing. This is the main requirement for ensuring legal certainty and the possibility of protecting the interests of the parties in case of disputes.
Language of the contract: The contract can be drawn up in any language that the parties find convenient. English or bilingual versions of contracts (in Ukrainian and the language of the counterparty) are often used. In the case of a bilingual version, it is usually indicated which version takes precedence in the event of a discrepancy.
Mandatory details:
Name and location of the parties.
Description of the subject of the contract (goods, services).
Quantity and quality of goods.
Price and total value of the contract.
Terms of payment.
Terms and conditions of delivery.
Packaging and labeling.
Insurance conditions.
Force majeure circumstances.
Dispute resolution procedure.
Signatures and seals of the parties (if applicable).
Ways of concluding foreign exchange contracts.
- 1. Negotiations.
2. Exchange of documents.
3. Signing the contract.
4. Remote contracting.
Conditions for concluding foreign trade contracts:
- 1. Registration of a business entity.
2. Compliance with statutory documents.
3. Availability of necessary licenses and permits.
4. Foreign economic legal capacity.
Specifics for natural persons - entrepreneurs:
- FOP can enter into foreign economic activity contracts if the types of activities provided for in their registration allow foreign economic activity.
FOP must comply with the requirements of the currency legislation of Ukraine regarding operations with foreign currency.
Additional terms and conditions in the FEA contract may be included depending on the specifics of the agreement, the characteristics of the goods or services, the requirements of the parties and international standards. Below are some of the possible additional terms and conditions to consider:
- 1. Intellectual property rights.
2. Liability for breach of contract.
3. Control over the quality of goods or services.
4. Supply chains and subcontractors.
5. Term of execution and termination of the contract.
6. Insurance and risks.
7. Ethics and corporate responsibility.
8. Confidentiality and Restriction of Competition.
9. Support and after-sales service.
10. Changes to the terms of the contract.
11. Other terms and conditions.
The language of the FEZ contract is usually determined by agreement between the parties to the agreement. However, in cases where the parties do not have a common language or where conflicts arise, the standard practice is to use English.
- 1. English is the language of international business and is used in many international trade agreements and contracts. It is understandable for many parties, helps to avoid misunderstandings and ensures legal certainty of the contract.
Where the parties have specific stipulations regarding contract language, those stipulations are usually reflected in the contract itself. For example, a contract can be drawn up bilingually (in the language of each of the parties), or the parties can agree to use another language.
When choosing a body to resolve disputes under a foreign exchange contract, it is important to take into account various factors, such as the complexity of the dispute, the location of the parties, the cost of the dispute and other features of the contract. Here are some possible options for dispute resolution bodies:
- 1. Judicial proceedings.
2. Arbitration.
3. Mediation or consultations.
4. Contractual settlement of the dispute.
The correct distribution of responsibilities and costs between the parties in a foreign exchange contract helps to avoid misunderstandings and conflicts during the execution of the agreement. Below are some steps to effectively share responsibilities and costs.
- 1. Analyze needs and resources: Carefully analyze the responsibilities that must be fulfilled to fulfill the contract, as well as the available resources of each party. Determine who has the necessary knowledge, skills, and access to resources to perform each responsibility.
2. Define Roles and Responsibilities: Clearly define each party's roles and responsibilities for performance.
3. Agree on the terms of the contract: Discuss and agree on the terms of the contract regarding the division of responsibilities and costs. Consider the wishes and capabilities of each party, as well as the standards and requirements in your field of activity.
4. Negotiate Financial Aspects: Discuss and agree on the financial aspects of the contract, including costs and how they will be shared between the parties. Use the principle of "fairness and equality": Strive for fairness and equality in the distribution of responsibilities and costs between the parties. Avoid improperly shifting a large part of the costs or responsibilities to one of the parties.
5. Negotiate changes and additional costs: If there are changes to the terms of the contract or additional costs, negotiate them with all interested parties. Arrangements for changes should be clearly reflected in the annexes to the contract.
6. Put everything in writing: It is important to have all the terms of the allocation of duties and expenses in writing in the contract or its annexes. This will help avoid misunderstandings and disputes in the future.
7. Review and update: Review the terms of the contract regularly and update them as needed or as circumstances change.
Contract development / contract development - the general principle is to agree on a fair and efficient division of responsibilities and costs that takes into account the needs and capabilities of each party.
Determining the responsibilities of the parties under the FZ contract is an important stage in ensuring the successful implementation of the agreement and avoiding conflicts. Here are some steps you can take to do so:
- 1. Analyze the obligations defined in the contract.
2. Use the principles of adequacy and reasonableness.
3. Consider the role of each party in the contract.
4. Agree on the terms of responsibility.
5. Consider possible risks and exclusions of liability.
6. Avoid non-cooperation.
Draw up an agreement / draw up a contract - the steps will help ensure clarity and transparency in determining the responsibilities of the parties under the FTA contract and will contribute to the successful execution of the agreement.
