Module III·Article III·~2 min read
Key Types of Commercial Contracts
Contract Law
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Contract of Sale and Purchase
The foundation of trade. The seller transfers the goods, the buyer pays the price. Key issues: moment of transfer of ownership and risk of accidental loss, quality guarantee, liability for hidden defects.
INCOTERMS — international rules for interpretation of trade terms (ICC, latest revision — 2020). Determine who bears risk and expenses during delivery: EXW (ex works), FCA, FOB, CIF, DDP. For import/export, knowledge of INCOTERMS is mandatory.
Contracting / Service Agreement
Contracting work — the contractor undertakes to perform work and deliver the result. Payment — for the result. Liability for quality.
Provision of services — the service provider undertakes to perform certain actions. Payment — for the process. The boundary between contracting and services is important: it determines taxation and legal regime.
EPC contract (Engineering, Procurement, Construction) — in development and infrastructure: the general contractor undertakes design, procurement, and construction “turnkey” for a fixed price.
Agency Agreement, Commission, Instruction
Instruction — the attorney performs legal actions on behalf of and at the expense of the principal. Commission — the commissioner acts in their own name, but at the expense of the committent (commercial agent). Agency agreement — the agent acts at the expense of the principal, may do so in their own or the principal’s name.
Choice is important for tax purposes: when supplying through a commissioner, VAT is paid by the committent; with direct supply — by the supplier.
License Agreement
The right holder grants the licensee the right to use an IP object (patent, trademark, software, know-how). Types: exclusive (the right holder cannot use it themself or license others), non-exclusive (the right holder can license others).
Franchise Agreement — the right holder grants the right to use the brand, business system, know-how in exchange for royalties. Strict control over standards.
NDA: Non-Disclosure Agreement
Key elements of an NDA: definition of confidential information, parties’ obligations, exceptions (publicly known information, information received from third parties), term of effect, penalties for breach.
Practical Assignment
Develop a contract structure for the development of a corporate website (IT outsourcing). Determine: (1) contract or service? (2) How to describe the result of work? (3) Who owns the IP to the result? (4) How to structure payment (fixed, by milestones, time & material)?
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