Incoterms in export contracts: Delivery, payment and risk are not the same

Read delivery terms, risk allocation and payment provisions together. Practical contract checks involving Incoterms and the CISG.

Three letters do not replace a contract

A delivery rule is important, but payment timing, title, quality claims and dispute resolution still need their own provisions. Incoterms do not settle all of them. Identify the named place and edition alongside the selected rule so both sides are working with the same delivery arrangement.

A delay scenario

Imagine that goods are ready but the buyer has not opened the agreed credit. A delivery term alone may not tell the parties how long the seller should wait, how storage costs will be handled or whether the shipment timetable moves. The remaining contract provisions matter.

At order confirmation, compare the credit-opening date with the planned production start. Letting the banking draft and commercial contract develop in isolation can leave an operational gap between them.

Transport and insurance documents

The transport arrangement should fit the documents required by the credit. A promise to produce an unobtainable document can become a collection problem. Ask the carrier early what it can issue, whose name will appear and when the document will be available. Include insurance documentation in that discussion where relevant.

Consider the CISG separately

Whether the CISG applies depends on matters including the parties’ places of business, the type of transaction and the relevant legal framework. Choosing the law of a country does not necessarily exclude it. Review the choice-of-law provision and the parties’ intention concerning the Convention together.

A short pre-signature review

Check the product specification, exact delivery point, availability of payment documents, notice process for delays and dispute-resolution method. Put the answers into one transaction schedule. The contract then becomes usable by sales, finance and logistics rather than a document consulted only after a problem develops.

Sources and further reading

The examples are hypothetical. The governing law, banking documents and contract terms need to be assessed for the particular transaction.