TRADING TREATIES

Before carrying out an international commercial transaction, the parts (Mexican and foreign managers) should negotiate the terms and the conditions of the contract and confirm them in writing. It is important to consider that exist different clauses which are of a lot of importance and which are not mentioned in other documents like an order firm, letter of credit and other traditional documents.

The negotiation of the terms and conditions of all international contracts should state the rights and obligations of both parts, which are to be considered while carrying out the transaction.

It should be kept in mind that the international contract is the formal and juridical document that regulates step by step the whole commercial operation. It also states the price and type of the goods, the used INCOTERM and the transport modality.

Clauses of the Contract of International Sale
The salesperson's main obligation in a sale and purchase contract is the delivery of the merchandise and the transmission from the property and domain to the buyer. The goods described in the contract should fulfill the quality, quantity, class, type, use and specified specifications mentioned in the contract.

Price: the main obligation of the buyer in a sale and purchase contract is the payment of the merchandise to a certain price. It is recommendable to use the INCOTERMS in order to fix an international price rate together with the terms of delivery.
Terms of Payment: In the international trade there are various forms of how to carry out a payment, however, the term that provides the most security is the letter of credit. After the parts have agreed on a term of payment, this term has to be stated in the contract.

Pack and Packing: it is necessary to pack and bale the product according to their necessities and demands and effective regulations of the destination market. Regarding the above mentioned, the parts should specify the container type and selected packing, with the purpose of protecting the product throughout their transport and to assure that it arrives without damages at their destination.

Delivery of goods: To make sure that the delivery will be carried out without any problems, it is very important that the parts specify with clarity the delivery date, the point of delivery and the transport modality.

Civil responsibility on the product: the producer of a product can transfer the risk of civil responsibility completely or partially to the seller if this is stated in the contract. Another possibility to eliminate or reduce the effects of a denouncement is to hire an insurance.

Patents and brands: To avoid the “piratism” of a brand, design or patent one should state in the contract that the foreign buyer is obliged to register the Mexican company with its brand, design or industrial patent. Another way to avoid “piratism” is that the Mexican company registers its brand, design or patent at a lawyers office of the destination country.

Taxes: Based on the INCOTERM agreed upon, both parts will pay the taxes necessary to import/export the goods as well as provide the transport documents.

Warrants of rights and obligations: A letter of attorney should not be accepted by a third if the obligations and rights of the warrant are not specified in detail in the contract

Arbitration and controversies: it refers to the international commercial arbitration. The business partners decide to subject the arbitration to the controversies of the contract.

In this clause the parts can choose some reconciliation organism or private international commercial arbitration, in order to minimize the commercial risks.

Contract of commission, representation and/or international mercantile distribution
It is an agreement between two or more physical or moral people, domiciled in different countries, by which they transfer rights and obligations to each other.

In this contract, one of the parts is made responsible for the carrying out of orders
The clauses of this type of contract are:

Object: it is necessary to specify the type of responsibility that the Mexican company grants to the foreign person. It is convenient to describe the products in an itemized way to avoid misunderstandings. It should be clearly determined and thoroughly described what kind of representation is appropriate for the product with that the distributor or commission agent works. Also one can specify in the contract that the distributor or the commission agent does not have any labor relationship with the company, because his actions will be completely his own responsibility.

Area of Exclusivity: it is important that the Mexican company points out the exclusivity of the territory that the representative uses for his promotion, the representation or the distribution of the products. It is suggested that the area is a limited territory which can be a city or a country, but not a bigger area. In this case, the Mexican exporters rights should be clarified; if he is allowed to carry out sales directly in the same territory of his representative or if he grants the sole right of sale to his agent.

Obligations of the constituent: the obligations of the exporter, the Mexican company, should be clearly specified in this section, although they already have been stated in other clauses of the contract.

The Mexican exporter is forced to:
To consider the demands and wishes of the final clients and communicate them to the commercial representative (commission agent or distributor).

- To pay the conventional commission abroad to their commission agent, representative or distributor, according to the sales he has carried out..
- To provide their representative or distributor with a list of the products that he wants to be sold, as well as their prices, sales condition and quality.

- To include, starting from the date of the signature of the contract, the exclusivity that is granted to their representative or distributor in his area or territory.

- To maintain an inventory or permanent stock of goods in the commercial representative's establishment (commission agent or distributor) because buyers usually demand a sample to estimate the quality of the product.

Obligations of the commercial representative (Commission agent or distributor):
The representatives obligations are as follows:

-To take care of their client's commercial representation.

- To sell the goods from the Mexican company in a continuous way to direct buyers and/or other trade companies.

-To promote the product in the market.

-To control and to negotiate the distribution.

-To fulfill a minimum of sales.

-To elaborate informative reports on the current market condition.
Exclusivity on the product: the Mexican exporter can include a clause in that it is pointed out that his representative or distributor in the foreign country is put under the obligation to only carry out activities concerning the products of the Mexican company. This way you prohibit him to work with other companies and to accept the representation of other identical or similar products.

Amount of commission: Through a market study of the destination country, the exporter will be able to fix a percentage which will be paid to his representative for his sales (commission agent or distributor).

Terms of payment: the exporter should include in the contract a clause that authorizes him to send the merchandise directly to the client that has been contacted by his mercantile company. In this case the client can settle down a confirmed letter of credit directly with the Mexican company, irrevocable and payable at sight. Once the exporter has received the payment, it should transfer the respective commission to his commercial representative (commission agent or distributor).

Another option consists in orders that are directly covered by the agent with goods of his stock. When he receives the appropriate payment, in a period of time no longer than three days, he has to send the payment to the exporter, only retaining the part of his commission.

Deduction of bills: the commercial representative (commission agent and/or distributor) is put under the obligation to surrender bills, lapsed a conventional period on the carried out activities and the current market condition.
Publicity: Promoting the products in his country, the mercantile representative is obliged to use the most appropriate advertising material, previously checked by the Mexican producer to determine the costs.

Validity of the contract: it is advisable to fix the validity of the contract at about six months to one year, enough time to judge the skills and results of the commercial representative abroad.