Conflict of laws:
One of the distinctive features of international marketing is that exporters have to deal with different legal systems. An Indian manufacturer selling his products domestically knows that he and his customer are governed by Indian laws and subject to the jurisdiction of India’s Courts.
But an Indian exporter selling his products to an importer, say in the USA, must contend with the fact that US; laws may well have some influence either on the contractual terms to be agreed upon between him and the importer, or on the settlement of dispute, if any arising out of the contract. This is what is known technically, as the conflict of laws which can be settled in advance by incorporating specific provisions in the contrast as to the proper law governing the contract and jurisdiction.
Further, because the buyer and the seller are at great geographical distance from each other, many intermediaries like shipping, airlines, insurance companies and banks are involved and trade terms and usage differ across the countries, it is advisable for the exporters to enter into written export contracts, incorporating all the necessary details.
Written Vs Constructed Contacts:
Though as a rule all large export orders, including those for long term supply contracts and project exports, are invariably quoted on the basis of detailed documentation and written agreements signed by both the parties are entered into, a fairly large part of India’s exports is carried out without the backing of written export contracts. This is especially true in the case of export of products like handicrafts, garments, jewelry etc.
It does not mean that because there is no written contract, there is no contract at all. There has to be a contract if exports are to be made. There exists, in such cases, what is known as a constructed contract. A constructed contract is one where the existence of a contract can be inferred from relevant documents, viz., telex messages, proforma, commercial invoice or letter of credit. The exporters must however, make sure that all the information on which agreement is required are available on any or all of these documents.
Export contracts are private contracts and the State does not interfere in the conclusion of such contracts provided the subject matter is not malafide. But all private contracts must be concluded in such a way that no provisions of the public laws are violated. The Government of India has promulgated various laws governing the conduct of export import business in India. The terms of export contract must be consistent with the provisions of such enactments.
Export/Import Contract: The Boundary Relationship
Foreign Trade Development and Regulation Act, 1992 This Act has replaced the Export Import (Control) Act 1947. However, all orders made under the latter Act shall continue to be in force if these are not inconsistent with the provisions of the FT (D&R) Act, 1992.
Under this Act, a Code No., once granted can be suspended or cancelled if a person has made exports or imports in a manner gravely prejudicial to the trade relations of India with any foreign country or to the interest of other persons engaged n import or export or has brought disrepute to the credit or the goods of the country.
Under the authority of this Act, the office of Director General of Foreign Trade; brings out the export import policy and lays down the procedures. The policy determines among other things whether export of a product is banned whether the export of the product is subject to quota restrictions or licensing arrangements whether export of a product is canalized through a government undertaking and whether there is any floor price regulation regarding that product.
If an exporter wants to enter into an export contract for a product for which there is a floor price provision, he must make sure that the price he is quoting is not lower than the floor price as fixed by the government. Or, if the product under consideration is subject to quota restrictions the exporter should sign a contract which would specify that the performance of the contract will be subject to the availability of the quota from the concerned government department, with a view it ensuring that he will not be sued for non-performance of the contract by the importer in case he cannot export because the quota is not made available by the government department.