• 2023.01.11
  • International Transaction

Basic Contracts and Individual Contracts in International Trade Contracts

Basic Contract and Individual Contracts

When purchasing goods from a foreign country, it is common practice to draw up a Basic Agreement and agree on the quantity of goods to be purchased, quality, payment terms, and so on. The basic arrangement entered into at the start of a transaction is called a Basic Agreement, while agreements for individual transactions are sometimes called Individual Agreements.

Formation of Contracts

In international transactions as well, the conclusion of a contract is based on an offer and an acceptance. Therefore, a contract is concluded when one party makes an offer to purchase a certain product at a certain price, and the other party accepts the offer. Of course, if there is a dispute over the formation of the contract and the case goes to court, it is a question of whether the offer is sufficient as an offer or an acceptance (e.g., if the purchase of goods is stated, but the price is not agreed, it is not considered that there is an agreement of sale).

Formation of individual contracts

After the basic transaction contract is concluded, the purchaser will place an individual order using an order form, and the seller will decide whether to accept said order. If the seller and purchaser agree on the basic terms of the transaction, a contract (individual contract) is formed and the parties are bound by the terms of the contract.

Superiority of Basic Contract and Individual Contract

If there is a discrepancy between the contents of the individual contract and the basic contract, the contents stipulated in the individual contract will, in principle, take precedence. Since the individual contract was concluded later than the basic contract, it is assumed that the parties’ intention was to be bound by the contents of the new individual contract. On the other hand, if the terms and conditions are stated in the besic contract but not in the individual contract, the contents of the basic contract will be applied.

Validity of Special Conditions under Individual Contracts

Thus, even if agreed in the basic contract, its contents can be changed by an individual contract, and therefore, the descriptions in the individual contract should be carefully considered. If the individual contract is usually applied for in the form of a purchase order without taking the form of a contract, and the purchase order contains descriptions that differ from those in the basic contract (e.g., descriptions of quality, delivery date, payment method, delivery location, etc.),you will be deemed to have agreed to the contents of the purchase order.

Agreements Contrary to the Basic Contract

On the contrary, since the basic contract is initially defined between the parties, it may be necessary to treat the contract differently from the initial agreement as the transaction progresses. Even in such a case, there is no need to revise the contents of the basic contract. If the parties agree on each transaction (by writing an entry in the purchase order and the seller agrees to the entry), the contract is concluded in accordance with the contents of the new agreement.

Clauses on the relationship between the basic contract and individual contracts

Buyer shall purchase from Seller and Seller shall sell to Buyer the Products. The specific sales transactions shall be performed through the execution of Individual Contracts as explained below.

From time to time, Buyer will place orders for Products to Seller by issuing a Purchase Order by facsimile or email, specifying the Product names, quantities, prices, requested delivery date, ship-to address, insurance etc. Seller will inform Buyer, by facsimile or email, whether or not it is able to accept each order within [three (3)] business days after its receipt of the order. Seller shall not unreasonably reject or delay acceptance of any order. If Seller accepts an order, it shall send Buyer an Order Acknowledgement that confirms all particulars of the order, including but not limited to Product names, quantities, prices, delivery date, ship-to address and insurance.

The Parties’ exchange of the Purchase Order and the Order Acknowledgement shall create a contract for the sale and purchase of the subject Product(s) in accordance with the agreed-upon order terms (an “Individual Contract”).

The Parties intend for this Agreement to set forth terms and conditions applicable to all Individual Contracts. Therefore, the terms and conditions of this Agreement shall be deemed to be incorporated into each Individual Contract. For any given Individual Contract, if the Parties mutually desire to apply terms and conditions that are inconsistent with those in this Agreement, they shall state such terms and conditions in the Purchase Order and Order Acknowledgement for the subject Individual Contract, and such terms and conditions will supersede those in this Agreement as to the subject Individual Contract.