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Essay: Sign Supply Contracts w/ Chinese Companies to Sell Portable Fitness Tracker Parts

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  • Published: 1 April 2019*
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I. Contractual arrangements to be made with the parties involved in the sale and transport of goods

Smart Ltd. must sign supply contracts with the Chinese companies that will supply the parts that are essential for manufacturing the portable fitness tracker in the form of a wrist bracelet. Each of the Chinese companies, which are responsible in producing the important parts that will form Smart’s fitness tracker should sign separate contracts that will require them to package the products and deliver them to a specific port. With these contracts, each of the Chinese manufacturers will be accountable for the shipping of the parts, loading and sending them to a particular destination at the port of Cardiff.

These Chinese companies must also be required to undergo thorough inspection for each cargo that will be shipped to Smart Ltd. The investigation of each cargo must be done by an expert before shipping to ensure that the parts were manufactured to perfection and all parts are packaged and correctly labeled.

These contractual arrangements are beneficial for Smart in order to hold each of the Chinese manufacturers liable for failure to comply with their obligations or failure to deliver the parts on time and in the condition agreed upon by the parties. Each contractual arrange must contain a provision requiring the goods must be delivered in conformity with the conditions stated in the contract. Smart Ltd. as the buyer should be vigilant to protect its interest by ensuring that they Chinese manufacturers (sellers) will deliver the goods after passing the quality standards.

Contractual Obligations of the Seller

On the part of the sellers, particularly each of the Chinese manufacturers in this case, should be able to provide the goods and the commercial invoice or may be in the form of an electronic message or its equivalent to show that the said goods are in conformity with the conditions set forth in the contract of sale. The failure of the parties to comply with the duties and responsibilities as indicated in the contract will be considered as breach of contract. After the delivery of the parts of the portable fitness tracker and having satisfied the requirements of the condition of the goods as mentioned in the contract, the buyer has to obligation to pay the price or cost of the products as provided in the contract of sale.

These Chinese manufacturers or sellers in this case are required to obtain the necessary licenses, authorization and formalities that are needed at their own risk and are willing to pay the expenses for such licenses. It is part of the duty of the sellers to be in conformity with the formalities that are necessary to export the goods or products based on the contract.

In the aspect of contract of carriage and insurance, the seller has no obligation to pay for any expenses. On the other hand, the buyer shall pay for cost of the shipping of the goods based on the contract of carriage of the goods. The buyer is given the option to choose the port of shipment or the particular destination where the cargo or products will be shipped. In this case, the chosen port of Smart Ltd as the buyer is at the port of Cardiff. It shall be the main duty of the Chinese manufacturers or the sellers to deliver the goods on the date that was agreed upon and stated in the contract, at the designated shipment port that was chosen by the buyer.

On the aspect of transfer of risks, the obligation of the seller is obligated to shoulder the risks for any loss or destruction of the goods until such time that they goods have reached the railing of the ship at the port of Cardiff, which is the port of shipment chosen by the buyer in this particular case.

It shall be the duty of the Chinese manufacturers (sellers) to give the buyer ample notice that the goods had been delivered and complied with the conditions provided in the contract. Consequently, Smart Ltd as the buyer must give the seller a notification of name of the vessel that carried the goods, loading point of the vessel and approximate delivery time of the said goods at the port of Cardiff.

The sellers are required to give the buyer a copy of the actual proof of delivery and activity shall be for the account of the seller which is indicated in the contract. Aside from providing the transport document, the Chinese manufacturers (sellers) are obligated to give assistance to the buyer to get a copy of the transport document if the buyer shall make a request. However, all risk and expenses to obtain a copy of the transport documents shall be paid by the buyer. Some of the common transport documents are bill of lading, sea waybill that is non-negotiable, inland waterway documentation, or other transport document, where the buyer is given the option to choose among them. If both parties have agreed to communicate through electronic message, the transport document can be in the form of an electronic data interchange (EDI) message as agreed upon by Smart Ltd (buyer) and the Chinese manufacturers (sellers).

It shall be the duty of the Chinese manufacturers as the sellers to shoulder the costs of the checking operations of the goods. Part of the activities of checking include the  checking quality, counting, measuring and weighing of the goods, before they are actually delivered to the buyer. The Chinese manufacturers (sellers) are required to transport the goods to their intended destination and are required to pay for the packaging costs and to ensure that each of the packages is properly marked.

The Chinese manufacturers (sellers) are must give full assistance to the buyer upon request to get the documents or equivalent electronic message to ensure that the products or goods had been transmitted to the destination port. The buyer may require need such document for the importation of the goods and in the event that the goods will pass by other countries before reaching the port of final destination. The seller should also provide the buyer all the pertinent information that is required to apply for insurance of the goods.

Contractual Obligations of the Buyer

In the same manner, Smart Ltd. or the buyer in this particular case must pay for the import licenses, official authorizations and formalities for the importation of the goods or parts of the portable fitness tracker while they are in transit through any country.

 On the part of the buyer (Smart Ltd), it shall be responsible for any loss or damage to the goods from the moment that the goods had reached the ship’s rail, until it finally reaches the port of destination, which is at the port Cardiff. The goods must arrive on the date stipulated, or prior to the expiration of date of delivery.

The buyer must pay all duties, taxes and other charges to import the goods and while they are transit and pass through other countries and require payment of taxes, if applicable. The buyer should accept the proof of delivery, transport document or equivalent electronic message to show that the goods were received in good condition.

The buyer has the duty to inspect the goods to ensure that they are of good quality as stated in the contract. Smart Ltd, as the buyer should be the one to pay all the costs and charges that will be incurred for the purpose of getting the documents or equivalent electronic messages and to reimburse all the expenses incurred by the Chinese manufacturers as the sellers to obtain the transport documents. The sellers are duty-bound to render assistance to Smart Ltd to gather all the transport documents upon the request of the buyer.

II. Main Clauses to be inserted in such Contracts

These contracts should contain a provision that should state that the goods are compliant with the details particularly described in the contract. Another provision that should be included in the contract is for the seller must deliver the goods and provide a copy of commercial invoice, or an electronic message with similar content showing that it complied to the conditions mentioned in the contract of sale, and any other proof that shows that the provisions stated in the agreement were complied with.

One of the main clauses of the contract of sale is the price of the goods that should be paid by Smart Ltd as the buyer. Another important provision that should be stated in the contract of sale should cover the licenses, authorizations and formalities shall be for the account of the seller or the Chinese manufacturers in this particular case. Thus, the provision must state that the seller shall obtain an export license and official authorization to be paid by them at their own risk. The seller shall comply with all customs formalities that are required to export the goods.

Another provision must state that the buyer (Smart Ltd.) must obtain at his own risk and pay all the fees and charges for the licenses and authorizations or any other customs duties that are mandated by law to import the goods and for their transit to any country before reaching the final port of destination.

The main clause should also include the seller shall not be charged for any liability involving the contract of carriage and insurance since it will be buyer who should pay for such expense to transport the goods to the port of shipment, or the port of Cardiff in this case.

Another clause should specifically provide the terms and conditions for the delivery of the goods that must apply to the seller stating the date of delivery of the goods that was agreed by the parties, and to the chosen port of shipment by the buyer. The delivery must be done in the customary manner at the port while on board the chosen vessel of the buyer.

 The contract must also include a clause on the transfer of risks which will indicate that the seller shall take on the responsibility to pay for risks of loss or destruction of the goods up to the extent that they have reached the ship’s rail at the port of Cardiff, as the chosen shipment port. This provision on transfer of risks should indicate that the buyer must be responsible for the risks of loss of or destruction of the goods from the moment that they reach the ship’s rail at the port of Cardiff, and from the date stipulated, or before the date of expiration for delivery. The seller must give the ample notification in the event that the vessel chosen by buyer did not arrive as scheduled, or that the vessel was not able to take the goods, or closed the cargo, and send the notice to the buyer of such circumstances.

Another provision must contain the division of costs between the sellers and the buyer and the Chinese manufacturers (sellers) must pay all the expenses in relation to the goods until they have passed the rail of the ship at the designated shipment port or port of Cardiff. Part of the required expenses to be paid by the sellers are the taxes, duties, and other charges to cover the export of the goods.

On the part of the buyer (Smart Ltd), the company should pay all expenses in relation to transport of the goods from the time they reached the rail of the ship at the designated port  of Cardiff in South Wales. Other extra costs that may be incurred by the buyer are the cost of the transportation of goods if the chosen vessel did not arrive on time, cannot take the goods, or closes for cargo earlier than what was scheduled. I will advise Smart Ltd., the buyer to pay all the necessary taxes, duties, and other fees

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