It is very important to correctly draw up foreign economic activity contracts. We turn to Pravoved for professional help. We asked Dmitry Svetlov, the head of Pravoved, to tell us which contract is better to choose when purchasing in China through an agent.
Choosing the right type and form of contract is one of the main stages of concluding a deal. When choosing the form of the contract, first of all, it is necessary to proceed from the specific parameters of the transaction and the commercial agreements of the parties. Each operating scheme has its advantages and disadvantages.
The main advantages of a contract for the supply of goods:
1. Direct interaction with the seller and his direct responsibility for the quality of the goods and the delivery time.
2. The transparent nature of the transaction for all regulatory authorities.
3. Simpler workflow compared to working under the agency scheme.
The main disadvantages of the contract for the supply of goods:
1. The risk of changing the terms of the transaction during its execution.
2. The risk of incurring additional costs during execution
3. Transparent transaction structure and accurate calculation of all costs for its execution.
The main disadvantages of the agency agreement:
1. Higher transaction execution costs compared to the costs of working under a direct contract for the supply of goods.
2. The risk of misunderstanding by individual customs and currency inspectors of the nature of agency agreements.
3. The risk of problems in determining the person responsible for the execution of the transaction (for example, in foreign jurisdictions there are often disputes about who should sue a foreign supplier in case of delivery of substandard goods: the agent who directly concluded the transaction with the supplier, or the principal on whose behalf the transaction was concluded).
International trade itself is a high-risk area of activity and it is impossible to completely avoid all commercial and administrative risks. At the same time, a competent choice and individual elaboration of the contract makes it possible to minimize possible foreign economic risks.
Choosing the right type and form of contract is one of the main stages of concluding a deal. When choosing the form of the contract, first of all, it is necessary to proceed from the specific parameters of the transaction and the commercial agreements of the parties. Each operating scheme has its advantages and disadvantages.
The main advantages of a contract for the supply of goods:
1. Direct interaction with the seller and his direct responsibility for the quality of the goods and the delivery time.
2. The transparent nature of the transaction for all regulatory authorities.
3. Simpler workflow compared to working under the agency scheme.
The main disadvantages of the contract for the supply of goods:
1. The risk of changing the terms of the transaction during its execution.
2. The risk of incurring additional costs during execution
3. Transparent transaction structure and accurate calculation of all costs for its execution.
The main disadvantages of the agency agreement:
1. Higher transaction execution costs compared to the costs of working under a direct contract for the supply of goods.
2. The risk of misunderstanding by individual customs and currency inspectors of the nature of agency agreements.
3. The risk of problems in determining the person responsible for the execution of the transaction (for example, in foreign jurisdictions there are often disputes about who should sue a foreign supplier in case of delivery of substandard goods: the agent who directly concluded the transaction with the supplier, or the principal on whose behalf the transaction was concluded).
International trade itself is a high-risk area of activity and it is impossible to completely avoid all commercial and administrative risks. At the same time, a competent choice and individual elaboration of the contract makes it possible to minimize possible foreign economic risks.