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Factors to be borne in mind when including standard terms and conditions in international legal transactions

Factors to be borne in mind when including standard terms and conditions in international legal transactions

Every day, countless purchase agreements are concluded around the world, between parties from different countries. To harmonise the rules applicable to those purchase agreements, many countries have signed up to the UN Sales Convention (CISG). There are currently 84 signatory countries, ranging from Albania to Zambia. The Netherlands and Germany are also member states. If, therefore, a Dutch company sells a product to a German company, the CISG applies to that purchase agreement, unless it has been excluded pursuant to standard terms and conditions that have been effectively included. In practice, however, the inclusion of standard terms often goes wrong, leaving them ultimately inapplicable. What factors need to be borne in mind?

The inclusion of standard terms must be assessed against the rules in the CISG, even if the latter is excluded by the standard terms. It must be borne in mind that the CISG sets more stringent requirements for the effective inclusion of standard terms than national legislation, such as German or Dutch law. This is on the grounds that commercial parties operating internationally are more worthy of protection, as there can be big differences between laws and trade practices around the world, meaning that the parties to the agreement may have differing expectations and the party applying the conditions cannot assume that the recipient is working on the same legal basis as he is.

In principle, under the CISG it must be ascertained by interpretation whether the offeror intends the offer to be subject to its standard terms, in which case the objective standpoint of the recipient must be taken into account and the customs and practices must be observed. The CISG also requires the text to be sent or otherwise made accessible to the recipient of the offer. It is not enough for the contracting party to have reasonable opportunity to take notice of the text, for instance by gathering information about the content of the standard terms to which reference is made. In some, but by no means all circumstances, it may suffice for the standard terms to be made available on the internet. It is not, for example, necessary to provide a copy of the standard terms if the contracting party is already familiar with them, for instance because the standard terms have been applied to prior business transactions between the parties. In this connection, it is also important to ensure that the standard terms and conditions are made available prior to the conclusion of the agreement, i.e. they are not simply included with the invoice, but are made available with the offer letter. To avoid subsequent argument about this and minimise the risk of ineffective inclusion, it is therefore advisable to attach the standard terms to each offer letter, either by post, or as an attachment to an e-mail. It is important that the sending of the standard terms can be proven.

The recipient’s standpoint must be taken as the basis. This means that the standard terms and conditions must be written in a language that can be understood by the recipient. In practice, this means that a Dutch vendor must provide a German buyer with his standard terms in a language that the buyer understands. If the contract negotiations were conducted in English, he may make the standard terms available in English. The safe course of action, of course, is to write them in German.

If this advice is observed, the requirements for the effective inclusion of standard terms and conditions are met under the CISG. However, effective inclusion does not mean that the standard terms automatically apply. If, for example, the applicability of Dutch law to the exclusion of the CISG has been agreed in the standard terms, the legal effectiveness of the individual provisions of the standard terms must be reviewed on the basis of Dutch law.

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