Table of Contents
Review an international sales contract in four passes. Pass one: the parties, the goods and the quantity. Pass two: follow the goods, meaning delivery term, risk, carriage, insurance and title. Pass three: follow the money, meaning price, currency, payment method and security. Pass four: the clauses that only matter when something breaks. Escalate anything that moves liability or changes the governing law.
Most people who review these contracts are not lawyers. They are export managers, procurement leads, credit controllers and compliance staff. That is fine. A structured read catches the majority of commercial damage long before a lawyer sees the draft.
What follows is a sequence you can run on any draft, in order, with a rule for when to stop and call for help.
Before the clause by clause read
Answer three questions first. They change how you read everything else.
- Is this a one off shipment or the framework for a repeating relationship? A framework agreement needs price adjustment, forecasting and exit terms. A single shipment does not.
- Whose paper is it? If the draft came from the other side, the defaults will favour them. Read for what is missing, not only for what is written.
- Which documents already exist? A purchase order, a quotation, a pro forma invoice and a set of general conditions may all be in play. Whichever wins in a conflict is the document you are really signing.
That third point deserves attention. Many cross border deals are formed by an exchange of forms rather than a single signed agreement. The buyer’s purchase order refers to the buyer’s conditions. The seller’s acknowledgement refers to the seller’s conditions. If nobody resolves that, a court or tribunal decides later which set applied. Look for an order of precedence clause and check that it lists every document by name.
Also check whether the United Nations Convention on Contracts for the International Sale of Goods applies. In many cross border sales it applies automatically unless the parties exclude it in writing. It changes rules on formation, conformity of goods, notice of defects and the right to avoid the contract. Some drafts exclude it in a single line buried in the boilerplate. Know which way your draft goes, and know why.
Pass one: parties, goods and quantity
Start with the names. A trading name is not a legal entity. Check the registered company name, the registration number and the registered address against a public register in the counterparty’s jurisdiction. If the contracting entity is a holding company with no assets, your remedy clause is decorative.
Then check signing authority. Ask who is authorised to bind the entity and get evidence. In some jurisdictions an extract from the commercial register names the authorised signatories. In others you need a board resolution or a power of attorney. This takes ten minutes and it is the cheapest protection in the whole review.
Now the goods. A description that says nothing more than a model number is not a specification. You want the technical standard, the tolerance, the test method and the acceptance procedure. If the buyer can reject on a measurement, the contract must say which instrument, whose laboratory and within what window. Quantity needs the same treatment. State the unit, whether it is net or gross, and the permitted variance on shipment. Bulk cargoes almost always ship with a tolerance. If the contract has no tolerance, a short shipment is a breach even when it is physically unavoidable.
Check inspection rights. Who inspects, where, at whose cost, and what happens if the inspection is late. A right to inspect at destination combined with risk transfer at origin is a common and unpleasant combination for the buyer.
Pass two: follow the goods
Delivery term and named place
Find the three letter delivery term and read what follows it. Incoterms® rules are published by the International Chamber of Commerce, and each rule only works when it is paired with a named place or port and the version being used. A term with no named place is incomplete. So is a term chosen for the wrong mode of transport, such as a rule designed for sea and inland waterway used on an air shipment.
Then test the term against the rest of the contract. The delivery term fixes cost allocation, the point of delivery and the moment when risk passes from seller to buyer. It does not fix title, it does not fix payment timing, and it does not by itself decide who is the exporter or importer of record for customs purposes. Contracts routinely contradict themselves here. A clause saying delivery is complete on arrival at the buyer’s plant sits badly with a term where risk passed at the origin terminal.
Carriage, insurance and title
Two questions. Who contracts with the carrier, and who buys cargo insurance. Under some terms neither party is obliged to insure. That is the gap where both sides assume the other has cover and neither does. Write the insurance obligation out in full: who buys it, what level of cover, for whose benefit, and for what percentage above invoice value if any is agreed.
Title is separate again. Retention of title clauses are common, and their effectiveness depends on the law of the place where the goods physically are when the seller tries to enforce. A clause drafted for the seller’s home law can be worthless once the goods are in a warehouse abroad or mixed with other stock. Read the retention clause, then ask whether it has been checked against destination law.
Finally, list the transport and trade documents the contract promises. Bill of lading, packing list, insurance certificate, inspection certificate, and often a certificate of origin in a specific form. Then ask the operations team whether they can actually produce each one on the stated timeline. Contracts frequently promise a preferential origin document that nobody has confirmed the goods qualify for.
Pass three: follow the money
Price first. Check the currency, the unit of measure the price attaches to, and whether the figure is inclusive or exclusive of taxes, duties and local charges. If the contract runs for months, look for a price adjustment mechanism tied to a published index or a raw material reference. Without one, a long contract is a bet on input costs.
Then payment. Open account, advance payment, documentary collection and documentary credit all carry different risk profiles for each side. If the deal uses a documentary credit, the sales contract and the credit have to agree. Mismatches are the single most common cause of rejected presentations. Check that the latest shipment date, the presentation period, the required documents and the delivery term in the contract are all reproducible in the credit. A term where the seller cannot obtain a transport document naming the right consignee will cause a discrepancy every time.
Look for the small mechanical details that decide disputes. When is payment deemed made, on debit or on receipt in the beneficiary’s account? Who pays bank charges on each side? What is the default interest rate and when does it start running? Is there a set off right, and is it mutual? Currency conversion needs a source and a date, not just a currency name.
Where credit is extended, check the security. A parent guarantee, a standby credit or a bank guarantee each require their own wording, their own expiry management and their own governing law. An unsecured credit limit in a contract clause is not security.
Pass four: the clauses that only matter when things break
Read these last, and read them slowly. They are short, they look like boilerplate, and they carry most of the financial exposure.
- Warranty. What is warranted, for how long, running from what event, and what is the sole remedy. Repair, replacement and refund are not the same thing.
- Notice of defects. Many regimes require notice within a reasonable time and bar the claim afterwards. A contractual deadline overrides the vague standard, so know what yours says.
- Limitation of liability. Read the cap, then read the carve outs. A cap that excludes indirect loss but leaves an uncapped indemnity elsewhere is not really a cap.
- Liquidated damages. Check the trigger, the daily or weekly rate, the maximum, and whether the damages are the exclusive remedy for that failure.
- Force majeure. An event list is only half a clause. It needs a notice period, a suspension mechanism, an allocation of cost during suspension and a right to terminate if the event runs long.
- Termination. Separate termination for breach from termination for convenience, and check the notice periods and what survives.
Then governing law and dispute resolution. These two must be read together. A clause choosing one country’s law and another country’s courts is workable but expensive. Arbitration needs a seat, a set of rules, a number of arbitrators and a language. A clause that names arbitration without a seat is a fight before the real fight starts.
There is a practical test most guidance skips. Ask where the counterparty’s assets sit, then ask whether a judgment or award from your chosen forum can be enforced there. Arbitral awards travel across borders more easily than court judgments because of the widely adopted convention on the recognition and enforcement of foreign arbitral awards. Court judgments depend on bilateral arrangements and local rules. Choosing your home courts feels safe and can be useless.
Compliance clauses most sales contracts leave out
Standard commercial templates handle price and delivery well and handle regulatory risk badly. Three clauses are worth adding.
First, a sanctions and export control clause. It should include a representation that neither party nor its beneficial owners are restricted, an obligation to notify if that changes, a prohibition on re-export to restricted destinations or end uses, and a right to suspend or terminate without liability if performance would breach applicable controls. Without that last right, a party can be stuck choosing between breaching a contract and breaching a sanctions regime.
Second, a licensing condition. If any part of the transaction needs an export licence, say so, name who applies, and make the obligation conditional on the licence being granted. Licence refusal should not be a breach by the applicant.
Third, an information and records clause. The parties need each other’s data for customs declarations, screening and audit defence. Specify what is provided, in what format, by when, and how long each side keeps the file.
Customs and tax consequences hidden in the price
The price clause is a customs document in disguise. The transaction value declared at import is built from the price actually paid or payable, adjusted for specified additions. Royalties, licence fees, tooling supplied free of charge, engineering work performed abroad and later price adjustments can all change the declarable value. If the contract creates any of those flows and nobody tells the customs team, the declaration is wrong.
Check three things. Does the contract allow retroactive price adjustments, and if so who handles the customs correction? Does it require the buyer to provide tooling, moulds or design work? Does it split charges in a way that leaves freight or insurance outside the invoice? Each has a valuation consequence. A short read of how customs valuation works before you sign is cheaper than a post entry amendment later.
Allocate classification and origin responsibility explicitly. Say who determines the tariff code, who supports an origin claim, who holds the evidence and who bears the cost if a claim is disallowed on audit. Most templates are silent, and silence defaults to whoever is holding the customs authority’s letter.
A triage table you can run on any draft
Use this as a second pass once you have read the whole document once. The right hand column is the decision rule for a non-lawyer reviewer.
| Clause area | Typical defect | Fix in house or escalate |
|---|---|---|
| Parties and signing authority | Trading name used instead of the registered entity, or a signatory with no proven authority | In house, before signature |
| Goods description | Model number only, no tolerance, no test method, no acceptance procedure | In house with technical input |
| Delivery term | No named place, wrong term for the transport mode, or a term that contradicts the delivery clause | In house |
| Insurance | Neither party obliged to insure and both assume the other did | In house, confirm in writing |
| Payment and security | Credit terms that cannot be reproduced in the documentary credit | In house with finance |
| Retention of title | Clause drafted for the seller’s home law, untested where the goods will sit | Escalate |
| Limitation of liability | A cap that the indemnity and carve out clauses quietly remove | Escalate |
| Governing law and forum | Law of one country, courts of another, or arbitration with no seat named | Escalate |
| Sanctions and export control | No right to suspend or terminate if a party or end use becomes restricted | Draft in house, escalate if resisted |
| Force majeure | Event list with no notice period, no cost allocation and no long stop termination | In house first, escalate if disputed |
What to escalate, and how to ask
Escalate when a clause changes which law applies, caps or expands liability, creates security over assets, or commits the business to something operations cannot deliver. Everything else is commercial negotiation and belongs with you.
When you do escalate, send three things: the clause, the commercial outcome you want, and the worst case you are trying to avoid. Legal review is faster and cheaper when the reviewer is told what the deal needs rather than asked an open question about a clause.
Keep a record of your review. Note which version you read, what you flagged, what was accepted and what was waived deliberately. That record is the difference between a considered commercial decision and an oversight when the file is reopened two years later.
If clause level contract reading is the part of the job you have never been formally assessed on, the GTCS certification introduction sets out what an independent test of that skill looks like. It is a contracts assessment, not a licence and not a general compliance credential.
Key takeaways
- Read in four passes: parties and goods, then the goods journey, then the money, then the failure clauses.
- Verify the registered entity and the signatory’s authority before anything else. It is the cheapest check in the review.
- A delivery term fixes cost, delivery point and risk transfer. It does not fix title, payment timing, or who acts as importer of record.
- The sales contract and any documentary credit must be reproducible in each other, or presentations get rejected.
- Choose a forum whose judgment or award can be enforced where the counterparty’s assets actually are.
- Price clauses carry customs valuation consequences through royalties, free issue tooling and retroactive adjustments.
- Escalate anything that changes applicable law, alters liability, creates security, or promises what operations cannot produce.
Frequently asked questions
How long should a contract review take?
There is no fixed time, and speed is not the measure. A short one off sale on familiar terms can be read properly in under an hour. A multi year supply agreement with annexes, service levels and security documents needs several sittings and input from finance, operations and compliance. Build the review time into the sales cycle rather than treating signature as a formality at the end.
Do I need a lawyer for every international sales contract?
No. Commercial staff can and should handle description, quantity, delivery terms, payment mechanics and documents. Legal input earns its cost on governing law, dispute resolution, liability caps, indemnities, security and retention of title. A trained commercial reviewer who knows where the boundary sits will use legal time well and spend less of it.
What if the other side refuses to change anything?
Then you are pricing risk rather than removing it. Rank your flags into deal breakers, priced items and accepted risks. Deal breakers are usually the ones that make the contract unperformable or uninsurable, such as no right to suspend for sanctions reasons. Priced items can be handled with payment security, shorter credit or a margin adjustment instead of a redline.
Which clause causes the most disputes in practice?
Disputes cluster around three places: what the goods were supposed to be, when risk passed, and whether payment conditions were met. The underlying cause is usually the same. A term was written once and never tested against the rest of the document. Reading the contract as a chain rather than a list of clauses catches most of it.
Should the contract say which version of the delivery terms applies?
Yes. Name the rule, the named place or port, and the edition of the rules being used. Different editions allocate obligations differently, and an unversioned reference invites argument about which set the parties intended. Put the full reference in the contract itself, not only on the invoice or the purchase order.
How do I test my own contract review skills?
Take a live contract and write down, from memory, where risk passes, when payment is due, which law applies and what your remedy is for late delivery. Then check. Gaps in that exercise show you where to read. For a structured external check, what the GTCS exam covers maps to eight contract domains and reports results by topic.
Is a certification useful for someone doing this work?
It depends on the gap. Experience beats any certificate for judgement on a specific counterparty. A credential is useful when you need to show a structured grounding in contract terms rather than learned habits from one employer. The Global Trade Contracts Specialist certification is an online exam of 60 questions in 60 minutes with an 85% pass mark, one retake included, delivered and marked by ClassMarker.
GTCS is an independent Globalior assessment. It is not affiliated with, endorsed by, or accredited by the International Chamber of Commerce.
Questions about which of the eight domains matches the contracts you handle? Get in touch with the Globalior team and ask.