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ADVICE: THE CONTRACT



DATE POSTED: Dec 9, 2019:



BUYER SUPPLIER AND CONTRACT 

Personal  opinions served on this complex subject matter  are reflective of actual experience gained by FTNX over a long period of time; the kind of insight not found in trade publications. A person acting as an ill informed trader, new exporter, or intermediary  taking up the internship or study with FTNX, finds it difficult to comprehend, that within 12 months of taking up the study, such entities are delving in complex contract matters. The FTNX advanced trading contract is a formidable document, because it’s supported by standing trade laws and rules as well as added aspects, designed to serve both the end buyer, supplier and seller forming contract fairly. The one country that has influenced the rest of the world via its colonies in matters of ‘contracts’ is England (U.K) not USA. English contract formation laws are universally acceptable type of contracts, the basis of which FTNX applies as a standard. English language ostensibly is the universal language of business as well, as is the language used by customs, ships, air-craft controllers and captains. Anyone wanting to utilise  the western banking system,  on an international trade deal, would need to enter into such a deal applying English language and contract basis expressed therein. From the standard contract basis FTNX adds advance  terms and conditions to the contract to arrive at the ‘advanced contract trading aspect’ (ACTA)–used when  more  complex dealings have become evident. The best kind of contract, are those expressed clearly and simply. A standard contract could be made utilising under 30  A4 pages, as expressed on one side of the page. Adding ACTA may need up to 10 pages more. FTNX has seen contracts  exceeding 100 pages, as the supplier ( Lawyers used by such) try to cover every possible trading aspect, whether relevant or not. The one rule FTNX has learned over a great period of time is that; the more conditions that are placed on the contract, the more scope  for ‘loopholes’ to  exist inevitably will develop as well. Once preliminary negotiations by the parties to the contract  are over, a quote and subsequent   offer is advised-–from this point, everything must be expressed in writing. Unless agreed upon differently, the offer is signed as legally binding. From the time the offer is issued, to when ‘first delivery’ is  due, a strict schedule is in force (1) without considering time spend to issue and secure  a signed quote, which is a  non binding type kind of document. It is not unusual ( it is allowable ) for a deal to commence from the offer aspect. As the end buyer is considering  the final  contracting terms and conditions, the supplier is already  working to prepare goods  for export, and there is a lot of ‘paper work’ to do , many ‘phone calls’ to make (2) - and much ‘running around’ will also apply, long  before moving the first MT of product to port of loading. 


From when the offer is issued, to when the contract  is retuned as signed, a preset number of transactional days are created. When the contract is retuned on time, the financial instrument to  pay for goods is lodged by the buyer to the seller within 3 days thereafter. If the offer is returned within 7 days , and the contract must be returned within 14 days. A period of 21 days becomes apparent, which establishes  the first delivery date, usually 30 days later. In effect  51 days exist as a ‘minimum aspect’ ( its often much more) before first delivery eventuate from the time the offer was issued. If a deal has taken a months to arrive at the offer/contract signed stage to which another 30 days is added to the aspect,  then this  kind of contracting  time frame would be deemed as being a normally acceptable time framw (3). What type of contract would one need to apply if  i.e: Iron ore needs to be reserved ‘today’ for delivery in 6 months time? FTNX has in recent times  closed complex deals to contract stage after 14 months or more  of actively pursuing one single  revolving NBC deal. (4)


ELEMENTS OF A CONTRACT

All contract are agreements whereas not all agreement are contracts.  6 elements  are needed to create a contract, which all starts when a deal is formed based on the intent of the parties involved. The quote is advised  which is  confirmed. This is the formal starting date which establishes the schedule if a quote is issued ( usually valid for 7 days). The offer, once accepted however  instigates  the said  legally binding period. The intent of the end buyer or supplier  when signing or issuing an offer, is to form contract and to formally become legally bound to each other by doing so. This ‘intent’ or state of the mind ( Legal maxim of ‘Mens Rea’)  is also a matter which is often not understood by many. If all the elements are apparent on a ‘legally binding ‘ offer, and the end buyer fails to sign the contract, then it can be held that the end buyer is in breach  of a ‘contracting condition.’  Seller could sue the buyer on  limited basis  pertaining to the expenses incurred  for ‘ going ahead to prepare  goods for export’ in anticipation that the contract would be signed. i.e: ‘The buyer claimed that his bank will not issues a Pre Advised DLC, after the contract was signed. Arbitration found that the end buyer  should have checked first if their bank can issue a such an instrument.’  These situation does not  occurs with FTNX contracts, because  FTNX would   have advised as much to the end buyer before any offer would be issued. This is where FTNX  trading premise  when acting as PCT, surpasses contract situations entered into by  others Corporations. This is  another unseen  advantage clients have  when  dealing with like minded honourable  traders and experts such as FTNX .   


The 6 Element Are :

  1. Intention: Parties to create a legal relationship
  2. Offer: No contract is apparent  if an offer is not  first accepted.
  3. Valuable Considerations: as a matter  record and in particular no contract can exist without a price
  4. Legal capacity: Lunatics, a drunk, a  minor. etc. cannot sign a contract.
  5. Genuine consent: Parties directly privy to the contract are signing the contract 
  6. Legal aspect of objects: Illegality at Common law or by Statute


 The added ACTA ‘element’ that FTNX also applies intently; 

  1. Contract ‘Uberrimae Fidei’: Legal maxims appear often in latin when associated with laws, especially those applied under current and past colonies of England influenced by the Westminster  legal system. Latin is used because it offers to explain a complex reference in a ‘pure and  simple’ way. To FTNX conducting business with ‘utmost good faith’ is a very important ‘element’ to the whole contacting basis. To conduct business with ‘good and  honourable intent’ means when a lack of such virtues become apparent, a judgement call is  made  whether or not to issue an offer or  contract because a person who show dishonourable intent early in the deal  being formed, will continue to displaying such bad intent  throughout the deal and after the deal is closed,  is the general assumption, which has been proven true on many occasions.    


The nature of business FTNX applies coincidently, is the same that all PCT’s,  suppliers  and end buyers ought to be applying as well but rarely do fully, especially when it comes to contacting matters. To have a ICC FOB contract  where the buyer is responsible for matters of shipping, describing pages upon pages about matters of shipping on the contract issued by the seller, is a useless endeavour, when the only aspect of shipping and obligations therein to do with the seller and supplier  is mostly  prescribing about matters to do with delays in having goods ordered, ready for loading when a ship berths at POL on time. The contract  is meant to express intently not only the conditions that ’need to apply,’ but rather,  the unseen obligations that  ‘must’ also apply when serving supply to the party signing the contract, regarding to  inter-alia;  the goods being sold, the schedule, the payment mode,  the  quality of  goods  being sold and what penalties are imposed should goods arrive at POD not as ordered or late, based on entires found on the contract. To FTNX the legally binding offer  is the most important document  because it  establishes the entries supporting the  pre set terms and conditions of  a standard FTNX trade contract. To write a good offer is therefore a skill acquired over time, whereas a contract needs little attention beyond the basic standards aspect, in accordance with  the delivery mode  used, unless advanced trading aspects  become apparent in where understanding what may, and may not be added to the standard contract format,  is an added skill that the PCT develops over time. Even specialised contracts  I.e: a grain association contract,  when stripped to its basic elements, will have ( or should have) all the aspects apparent is the basic standard FTNX contract.


A contract once sealed  is difficult to make void or  cancelled outright without one party (or both) suffering consequences for their failure to perform. The contracting aspect  is about parties and ‘performance’ expected  thereon in accordance with the contract. When a dispute arises and  where ambiguity is apparent in the contract, the fall back position is  the examination of  offer because the intent of parties to form contract emanates from the time the offer is signed, now adds further why FTNX places  a greater effort is producing the offer than it does with advising a standard  contract which  is the easier of the two aspects to apply. It has become common practice for a supplier  to seek  a contract  copy from FTNX, more so from first time exporter, who is wanting to explore and attempt a large revolving sale. This aspect  greatly supports  FTNX own position  because now a ‘mirror aspect’ becomes apparent  when a deal is stuck  with the supplier  and later with the end buyer, as many suppliers only have their own contract format, some of which has not changed for decades and in where such ongoing deals  and therefore contract basis used is well suited for business being conducted with long standing clients. Recent compliments which are  ongoing, as served by some of the of the worlds leading exporters  has expressed on how impressed they were with the structure of the FTNX offer and contract. FTNX looks at this matter differently. Logic along with proper terms of reference effecting both parties to a contract  ‘on just and fair terms ‘ is the contracting premise that  we strive to achieve at all times. Being strict with formalities does not mean being ‘unfair ‘ as well.


CONTRACT AND THE INTERNET 

Matters  we have  stated in our formal best selling doctrine in 2010, have now become an important trading aspect today. With the onset of the internet and email system, the contract is still advised as a hardcopy signed ‘original’ by postal courier mail. So as not to stall the pending deal and schedule therein in, a PDF  ‘copy’ of  the contract is also advised by email along with a trackable  postal  receipt  proving that the  hardcopy contract has been posted. This method is what  allows the deal to proceed while waiting for the hardcopy contract to arrive. This aspect has now become a very  important matter in recent times, as  a PDF document may  be deemed as not bearing the properties  of  an  ‘original’ document , because to send a signed contract  only via email, Meta tags will need to be  added to the document which ‘alters it .’ Altering matters of the offer or contract could  reject the document outright, without  the effected party  surrendering  their right to take  legal action  for ‘breach of performance.’ Other new additions and directives to ACTA may soon need to become aspects of a standard FTNX  contract terms and conditions-that other trading bodies have missed thus far. Political Interference ( due to rising tariffs being used as political  tool by USA) Clause, is a new addition to our contract in 2020 tied to the ‘Frustration’ clause.New legally defined and lawful ‘Sanctions’  clause will be added to the ACTA as well, as it is  unfair nor just, to disallow citizens of  country to conduct business ( to earn a living)  with another country bearing Sanctions. The rule of law and not potential of ‘war’ or threats, should  dictate such actions. The much lauded ‘climate change’  has attract a new FTNX clause,  even though FTNX does not agree with this climate change  premise at all; will be added to the ‘Force Majeure’ clause. The newly added FTNX ‘Goods Samaritan’ clause has been tested for over two years to date without any ill effect. The buyer must be allow do walk away from it contract obligations, likewise  the PCT and the  supplier; when  dramatic  changes to a contracting situation falls into the  ‘murky grey area’  found  between  ‘Force Majeure’ and the legal ‘Frustration’ maxim. FTNX has eliminated ‘Act of God’ clause a decade ago, where standing international laws  have recently applied as much. All contract have ‘normal days’ in where all contract commences with a standard time attached regardless of actual time the contract was advised, as banks use rightly  ‘banking days’ regarding procedures being applied to the DLC. A PCT cannot be scouring a calendar  to find out what public  holiday exist  in which country, state or city,  and try to formulate its contract schedule accordingly.etc.etc.; are but some of the changes applies under ‘ACTA’ due in 2020 as already tried and tested silently by FTNX over that that 12 months or so. 


IN SUMMARY

FTNX trading position  is a difficult  one, much more so than the position held the end buyer or supplier, often not appreciated  by the entities we conduct business with. In 2020 FTNX will only be issuing contract to verified suppliers or end buyers who are end users, as our long  experience now confirms that this kind of business can only be applied among informed ’Principals’ prepared to bear responsibilities of their own actions. Major trading houses and trading companies will be unable to conduct business with FTNX. While not acting for a disclosed principal as its agent or broker, FTNX has to secure a contract of supply first only from a supplier in possession of goods, as ‘buyer’ and not another seller or trader. This is a standing rule of intentional agency and /or  law, defined under the virtues of ‘ostensible authority’ ( Corporation law: Intra Vires; for lawyers reading this article ) Once supply has been formally secured and  assured, FTNX prepares the documents  and  makes an offer to sell such goods on behalf of an undisclosed principal, as the lawful ‘seller’ to a qualified end buyer it is  engaging with. In this light,  FTNX has 2 contracts and  2 deals that must be applied in a very strictly applied manner. This now serves reason why FTNX has no tolerance for delays in suspect dealings, as such large deals require huge efforts to apply. FTNX will dismiss a pending deal quickly  as soon as trivial contracting demands are made which we cannot effectively apply, which will allow us to test many more end buyers at a faster pace.  To remain within the strict bounds of incoterms, UCP DLC rules,  international trade rules / laws and schedule found on the contract, FTNX is offering the ultimate trading routine pertaining to matters of  security, which in effect will protect not just our interest in the deal being ‘orchestrated’  but the interests of each  client we engage with as well–albeit once again,  is another unseen effected of doing business with FTNX. We simply cannot nor will not engage in demands made by a Principal that places us outside the said bound or ‘scope’ which could lead  us into an illegal or precarious trading aspect. In the perspective of corporation law this aspect is not uncommon and has meaning in contract law, defined under the doctrine of ‘Ultra Vires’, which defines a contract  application which ‘goes beyond the scope’ or ‘without authority’ of the party signing a contract. Disputes pertaining to matters of contract  is heard in the forum available in the country of the seller or supplier, often tied to  statutory  consumer laws; or as per the acceptable  forum indicated in the contract. London (Commission) Courts of International Arbitration (LCIA)  is a leading forum able to hear such trade disputes world wide. FTNX position on matters of arbitration is a simple one.  Legal action is avoided at all cost  even if it means  settling  upon the dispute using financial means even where it can be shown that one party is clearly in breach of contracting conditions. FTNX will always try it best to settled  disputes amicably and without added angst under the legal maxim of ‘Quid Pro Quo’ ( Something for Something). It is very important  to understand  this stance, as it cost  ten or hundreds of millions of dollars  and often will take years to arrive at a conclusion and a final  decision served, more so if jurisdiction became an issue. We hope Principals coming across this website  intently read the advice and opinions served herein before  making a business enquiry to FTNX  is the purpose of such advice. Assume there his much more aspects of contract  which have not been explained.  In 2020 new delivery modes exclusive  to FTNX will also be advised and offer to clients ( DPL and DPD)



Foot Notes:

  • (1) Many suppliers and end buyers don’t understand the underlying  aspects pertaining to a  ‘schedule.’ They don’t understand the importance of a ‘trading routine ‘ nor the inherited structure  supporting the whole deal.  A good deal and the schedule therein  is strictly served  and therefore  should be strictly observed. The matter of security depends on this one single business aspect built upon the auspices of ‘discipline.’ The end buyer dismissed or  reject offers , without a second thought, where  3 or 4 offer laters, the same aspect happens to the contract, as they take advantage of FTNX tolerance on such matters. Had the same end buyer signed a contract with the supplier directly and attempted to trade the same way as they do wth FTNX, many would face  legal action for breach of contract.  
  • (2) Many end buyers simply don’t understand that there is a lot of work to do  before goods can arrive at POL..
  • (3) It is  incredible to believe that we get offers sometimes stating something like ‘delivery 14 days ‘ which is thins of offer which is trashed.
  • (4) To provide FTNX with an offer carrying I.e: 20 or 30 days validity is simply wasting our time and that of the supplier; now serves reason why long term supply must be valid  for 4 months or more. 12  months is the preferable aspect.





 
 
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