1 Documentary Sale and Terms of Trade Chapter 5 ©

Transcript:1 Documentary Sale and Terms of Trade Chapter 5 ©:
1 Documentary Sale and Terms of Trade Chapter 5 © 2002 West/Thomson Learning 2 Contracts as a way to manage risk Negotiate terms to fit specific transaction Allocate risk - moving goods and money Fix performance obligation and responsibilities Fix price and quality Make sure understanding is reflected in contract 3 Where is the the risk in an international transaction? Payment risk Delivery risk Quality risk Differences from domestic transaction? 4 Definitions Documentary Sale: Buyer is required to pay upon presentation of NEGOTIABLE DOCUMENT OF TITLE by seller Document of title: evidences ownership of goods: dock receipts, warehouse receipts and bills of lading Documents transfer ownership of goods, while goods may stay with bailee Negotiability: ability of document to be transferred legally from one party to another in return for value 5 Bill of Lading A document of title issued by a carrier to a shipper upon receiving goods for transport; also serves as receipt for goods delivered and contract of carriage Negotiable bills must be either to order or to bearer (but bearer instruments not used in international transactions) Order instruments must be delivered and endorsed 6 Documentary Collection: Payment against documents Separation of goods and documents facilitates trade and payment Control of documents gives control of goods 7 Stages in Documentary transaction Seller gives goods to Carrier and gets bill of lading Seller endorses bill of lading and gives it to bank with other required documents (insurance,certificate of origin or inspection, documentary draft) 8 Documentary draft Facilitates payment Negotiable order to pay made out by seller Drawn on buyer, payable to the seller May be used with letters of credit (discussed in Ch. 7) 9 The Documentary Sale Japanese Importer American Exporter Collecting Bank Exporter’s U.S. Bank (Remitting Bank) 10 Stages Seller’s bank forwards documents to collecting bank in buyer’s country Documents released to buyer when buyer pays 11 Purchasers of Bills of lading Special protection for purchasers who take bills of lading by negotiation -- they take possession free from any adverse claims “Good faith purchaser” is one who purchases for value (not to settle debt) in good faith and without notice of antecedent claim in the ordinary course of business Purchaser not in good faith only takes rights of transferee Protects rightful owner 12 Types of Contracts: Shipment and Destination Shipment Contract: Contract calls for seller to ship goods by carrier, but not to deliver goods