The relationship between trade terms and sales contracts

1. Trade terms are freely chosen by the parties in the sales contract

In international trade, the trade terms used by both parties should be clearly specified in the sales contract. Since international trade practices related to trade terms are based on the principle of "party autonomy" and are advisory in nature, the parties can freely choose the trade terms and the applicable practices governing them.

2. Trade terms generally determine the nature of the sales contract

Trade terms are an important factor in determining the nature of a sales contract. Generally speaking, the type of trade terms used will correspondingly define the nature of the sales contract.

3. Trade terms are not the sole factor determining the nature of the sales contract

Although trade terms usually determine the nature of a sales contract, they are not the only factor. Other factors also influence the nature of the contract. For example, if the parties agree to use CIF terms but also stipulate "payment conditional upon the arrival of goods at the port of destination," the contract signed under such conditions is not a shipment contract but an arrival contract, because the payment terms here are the decisive factor in determining the contract's nature. Thus, the nature of a sales contract cannot be determined solely by the trade terms used; other conditions in the contract must also be considered.

4. Avoid contradictions between trade terms and other conditions of the sales contract

To clarify the nature of the sales contract and define the obligations of both parties, thereby avoiding disputes, the trade terms chosen should be consistent with the nature of the sales contract. That is, both parties should select corresponding trade terms based on delivery and other transaction conditions, preventing inconsistencies or contradictions between the trade terms and other contract provisions. Special caution should be exercised when using C-group terms, especially when adding obligations for the seller, to avoid content conflicting with the meaning of the trade terms.

5. The relevant provisions in the "1990通则 [Incoterms 1990]" apply only to trade terms in sales contracts and absolutely not to terms in transport contracts (sometimes expressed similarly), especially not to trade terms in various charter parties.

Since charter party terms are more stringent regarding loading/unloading times and costs, trading parties should make explicit and specific provisions on these issues in the sales contract through special clauses. That is, when signing the sales contract, both parties should, as far as possible, consider the requirements of the transport contract to lay a good foundation for subsequent contracts, thereby facilitating the performance of the sales contract. On the other hand, since the transport contract is signed to perform the sales contract, the buyer or seller responsible for arranging transport must base the transport contract on the sales contract, ensuring the two contracts are aligned to guarantee the smooth performance of the sales contract.