Import & Export Theory

This document discusses the theory of import and export in international contracts. It explains the benefits of an International Contract of Sale and the inclusion of specific clauses. It also explores the United Nations Convention on Contracts for the International Sale of Goods (CISG) and its advantages. Additionally, it covers the risk management matrix and the calculation of risk rating.

Running head: IMPORT & EXPORT THEORY
Import & Export Theory
Name of the Student
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Author Note

1IMPORT & EXPORT THEORY
Table of Contents
Answer to Question 1...................................................................................................................2
Answer to Question 2...................................................................................................................2
Answer to Question 3...................................................................................................................3
Answer to Question 4...................................................................................................................3
References....................................................................................................................................6

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Answer to Question 1
An International Contract of Sale is highly beneficial to both the buyers and sellers when
they are entering into a contract with an unknown party for the first time. As it is ratified by 95%
of the countries in the world, its rules can be applied in most countries in the world. Hence, the
importer and exporter need not be worried about its validity in their nation. Another benefit of
the contract is that it is very clear and its contents can easily be understood by not only the
lawyers but also the common businessmen. This contract is both strict and flexible. It allows the
inclusion of specific clauses which are relevant to the parties entering into a contract. At the
same time, it also has a few general principles which have to be mandatorily included in the
contract. The exporter and importer do not have to worry about the inclusion of these principles
at the time of signing the contract (Schroeter 2013).
Answer to Question 2
In case of an international contract of sale, there are some general clauses which are
mandatorily included in the contract and cannot be changed by either of the parties. However,
there are a few optional clauses that can be added by the parties in a contract of sale. These are
not compulsory in nature. One of those clauses is known as the Expertise procedure. In this
clause, an independent expert is appointed for the settlement of disputes between the buyer and
the seller. Another clause that may be provided is the retention of the title clause. Under this
clause, the goods remain the property of the seller until the full payment is made by the buyer.
The parties can also set their own definition for the breach of a contract which is inclusive of any
activities that if undertaken may result in the breach of a contract (Arato 2016).

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Answer to Question 3
The United Nations Convention on Contracts for the International Sale of Goods (CISG)
is a treaty of international level which is responsible for codifying the international uniform sales
law. It was signed on 11 April in 1980 in Vienna, Austria and is sometimes referred to as the
Vienna Convention. It was developed by the United Nations Commission on International Trade
Law (UNCITRAL). The main advantage of this convention is that it allows exporters to avoid
issues related to the choice of laws and has a substantive set of rules which can be relied on by
the contracting parties, courts and arbitrators too. It also provides flexibility regarding the
additional clauses to be included in a contract of sale as it is dependent on the choice of the
parties and their requirements (Coyle 2016). The CISG has been considered to grow in terms of
prominence grown over the years than the time when it was first introduced. It is written in
extremely simple words to include the national laws of all the countries and is considered to
benefit both the exporters and importers without providing any undue advantage to any of the
parties.
Answer to Question 4
The two terms used to calculate the risk rating in the risk management matrix are
likelihood and consequences. Likelihood refers to the chances of the occurrence of a particular
event and consequences refer to the severity or impact of the damage caused due to the particular
risk. The likelihood of a particular risk is divided into further five categories based on their
frequency which are known as definite, likely, occasional, seldom and unlikely. A definite risk is
one which will occur in all probability i.e. more than 80% while an unlikely risk is something
that has very few chances of occurring, say less than 10%. A likely risk is one that has 60-80%
chances of occurring while occasional risks are a 50/50. Seldom risks have a low probability but

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may still occur. The consequences of a risk are also divided into five categories. They are
insignificant, marginal, moderate, critical and catastrophic. An insignificant damage is something
that does not have much impact on the business. Marginal damage refers to something that is
visible but is not too significant. Moderate damages are not a great threat but yet cause losses to
the business. Critical damage is one which leads to a great amount of losses to the business.
Whereas a catastrophic damage is a very severe one that is likely to impact the existence of the
business as a whole (Hopkin 2018).

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References
Arato, J., 2016. The logic of contract in the world of investment treaties. Wm. & Mary L.
Rev., 58, p.351.
Coyle, J.F., 2016. The Role of the CISG in US Contract Practice: An Empirical Study. U. Pa. J.
Int'l L., 38, p.195.
Hopkin, P., 2018. Fundamentals of risk management: understanding, evaluating and
implementing effective risk management. Kogan Page Publishers.
Schroeter, U.G., 2013. Defining the Borders of Uniform International Contract Law: The CISG
and Remedies for Innocent, Negligent, or Fraudulent Misrepresentation. Vill. L. Rev., 58, p.553.