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Chapter 8 Export Business Negotiation and Conclusion of Contract Abstract: This chapter tells the general procedures of business negotiation, the basical contents and establishment of contract, etc. Section 1: Form and content of business negotiation Section 2: general procedure in business negotiation Section 3: Establishment time and essential conditions of contract Section 4: Formation and main contents of contact Slide 2 Section 1: Form and content of business negotiation 1. The form of business negotiation Two forms: Oral form and written form 2. Main contents of business negotiation 1 Main terms of trade It includes quality, quantity, packaging, price, delivering and terms of payment, etc. 2 General Terms and Conditions Slide 3 Section 2: general procedure in business negotiation 1. Inquiry The seller and the buyer both can make an inquiry. Usually, the inquiry made by the buyer is also called bid, and the inquiry made by the seller is also called selling inquiry. Inquiry will not bind upon both parties, but usually when you received an inquiry, you should reply it as soon as possible Slide 4 2. Offer 1 The meaning of an offer the definition of offer stipulated inconvention The party who makes an offer is called an offeror, in the case of the seller, the offer is called a selling offer, while in the case of the buyer, and it is called a buying offer. 2 The basic conditions of an offer 1. The offer shall be made to one or more specific persons The offer shall be the definite representation in which the offeror expresses that he shall conclude transaction on the terms and conditions stipulated therein. Slide 5 2. Contents of the offer shall be sufficiently definite, i.e., trade terms of the offer shall be complete, clear and final 1 The Convention stipulates that a sufficiently definite offer should include three basic elements: name, quantity and price 2 In our foreign trade practice, a complete offer shall include the quality, quantity, packing, price, terms of delivery of the goods and terms of payment. Slide 6 3. The offer shall indicate the intention of the offeror to be bound in case of acceptance This intention may be indicated by terms as firm offer, offer with engagement, etc. If the offer has a restrictive condition, i.e., subject to our final confirmation, then its a non-firm offer regarded as an invitation for offer. Slide 7 (3) Time of Validity or Duration of Offer 1 Stipulate the term of validity clearly The term of validity is not an indispensable condition of an offer 1 Stipulate the latest date for acceptance For example: OFFER SUBJECT TO REPLY HERE FIFTEENTH, JULY. 2 Stipulate a period of time for acceptance As to this method, there is a question of computing validity time. See article 20 of convention. Slide 8 2. If an offer doesnt clearly stipulate the time of validity, it will be valid within a reasonable time. An oral offer, unless otherwise agreed, must be accepted immediately unless the circumstances indicate otherwise. (4) Time that an offer becomes effective Different views of the time that a written form offer becomes effective 1 Despatch Theory 2 Arrival Theory Both convention and our contract law adopt arrival theory. Slide 9 5. Withdrawal or revocation of an offer 1. Withdrawal The British laws and the American laws have different explanations to withdrawal The spirit of Convention Suitable occasion for withdrawal: The offer is sent by mail or telegram 2. Revocation As to whether an offer can be revoked or not, different laws have different explanations The convention adopts a compromise regulation Slide 10 (6) Termination of an offer In the following cases, an offer is terminated: The time validity stipulated in the offer becomes due; The offeree rejects or makes a counter offer; The oferer revokes the offer before acceptance. Slide 11 3. Counter-Offer (1) A reply to an offer which alter the terms of the offer materially constitutes a counter-offer (2) An acceptance with restrictive conditions is another form of counter-offer, such as subject to our final confirmation. (3) If offeree accepts the original offer after he made a counter-offer, the contract is invalid. Slide 12 4. Acceptance A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. (1) The meaning of acceptance (2) The essential conditions of acceptance Slide 13 1.Acceptance shall be made by a specific offeree. 2.Acceptance shall be declared in certain ways Statement. Acceptance shall be declared orally or in a written form, silence or in activity does not in itself amount to acceptance. Performing an Act. Usually, this means that the seller has shipped the goods or the buyer has paid the purchasing price. Slide 14 3. Acceptance shall be in accordance with the offer 4. Acceptance shall reach the offeror within the time of validity 5. The offeree in sending his acceptance should use the means authorized by the offer. If the offeree varies the means the normal rule applies and the acceptance becomes effective only when it is actually communicated. Slide 15 (3) Time that an acceptance becomes effective The British laws and American laws adopt Despatch Theory The law of Continental countries and convention adopt Arrival Theory. An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. (4) Late Acceptance Late acceptance is generally considered invalid. Slide 16 (5) Withdrawal and modification of an acceptance The conditions of withdrawal and modification: See article 22 of "convention" When acceptance becomes effective, the contract becomes effective too, so there is no withdrawal anymore. An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective. When we take the form of fax, EDI, e-mail, etc., to make a contract, neither offer nor can acceptance be withdrawal. Slide 17 Section 3: Establishment time and essential conditions of contract 1. Establishment time of contract Two standards for judgment: 1. When the effective acceptance reaches offeror; 2. When offeree make the behavior of accepting. 2. The essential conditions of a contract come into effective: 1, contracting parties should have signing ability 2, 3, the content of the contract should be legal 4, the contract should conform to legal formarity 5, contracting parties' meaning expresses should be true Slide 18 Section 4: Formation and main contents of contact 1.Formation of contact (1)Written contract It is the basis that the contract is established It is the basis of fulfilling contract It is the basis that the contract comes into force It is the basis of arbitration or lawsuit. Slide 19 (2) Oral form (3) Other forms 2. Main parts of contract Preamble Body Witness clause Slide 20 Summary This chapter has mainly introduced the general procedures of business negotiation, the basical contents and establishment of contract, etc. Key point of this chapter: offer, acceptance Difficult point: the explanation of offer and acceptance in convention. Slide 21 Questions: 1. What are the essential conditions of an offer? 2. According to the regulation of "convention", when the offer can be withdrawal and revoked? 3. When an offer is terminated? 4. Try to analyze the effectiveness of a late acceptance. 5. What are the essential conditions of a contract established?