partnership agreement

 

 

Procedure for drafting for  partnership agreement 

Introduction

The partnership takes the form of a contract and is governed by the Partnership Act, 1932. The cosmetic companies seeking to scale up their economic capabilities and grow in the fast-growing and changing beauty market. The partnership collaboration is beneficial for the companies because the collaborations are 30 times cheaper than digital advertising as they already have an existing audience. The cosmetic company goes for partnership as they will have an advantage of cost-saving as well. For example- Katrina Kaif launched its cosmetic brand, Kay beauty on Nykaa, India’s largest beauty retailer.

Kay Beauty is a company of make-up products, it wants to launch its product in the market but it needs a platform to launch. Generally, Katrina Kaif will look for a prestigious platform which is famous among people. Therefore, she chose Nykaa, which is India’s biggest retailer and famous platform, having the availability of various other cosmetic brands. Hence, Kay Beauty has a great platform to launch its products having a wide range of customers. This is why cosmetic companies prefer to go for a partnership. The article discusses the procedure of drafting a partnership agreement along with why cosmetic companies go for a partnership agreement.

Partnership Agreement

A partnership agreement is an agreement between two or more persons who come together in a partnership and sign a contract to start a business together. The persons who enter the agreement are known as partners. The partnership agreement contains the details about the partnership and business such as profit and loss percentage, the relationship between the partners, etc. The agreement can be in writing or in oral and this has to be in accordance with the will of the partners.

It is not compulsory to register a partnership but it is always advisable to register the partnership and have a written agreement to avoid any future disputes. In the partnership, the relation of a partner is the most personal relationship because partners are like parents of the firm and business and they also spent most of the time working together to make the business successful. They grow the business together and take care of the same. 

Section 5 of the Indian Partnership Act, 1932 states that the relation between the partners results from the contract and the status. In the case of Hindu Undivided Family (HUF), the family members carrying on a family business or a Burmese Buddhist husband and wife carrying on a business as such, are not considered as partners in any such business. 

Use of Partnership Agreement in a Cosmetic Company

Initially in any business, the partners are motivated and happy to embark on the new adventure together. They agree almost on everything at the beginning. These new business partners think that they will stay in the business forever or until the company is wound up. They think nothing can go wrong and everything will be smooth. They also trust each other to a great extent. The partnership agreement plays an important role as it would state how the business should be managed, the rights and obligations of the partners and it also protects the investor’s interest. Therefore, there would be less chance of dispute, if there is a partnership agreement and especially in a written form.

Some of the reasons for the partnership agreement in a cosmetic company:

·         Having control over who owns the company– in a partnership agreement, there should be a reasonable restriction on sales and transfers of interests in a company to control its own business. If the interest is not specified in a written agreement then the owner can sell his interest to anyone else, including his competitor. If the parties do not address what happens upon the death or disability of an owner, the remaining owners could find themselves in business with the spouse or other relations of a disabled or deceased partner. If the agreement is properly drafted, the provisions of when, how, and to whom the interests may be sold or transferred in a company can be avoided. These provisions enable existing owners to retain their percentage stake within the company and protect them from unwelcomed partners. 

·         Approval on an important issue in advance– an agreement will allow partners to agree beforehand on important decisions, like dispute resolution. One of the most important provisions of a provision in their agreement needs mediation followed by binding arbitration. Without writing, there is no way to initiate mediation or arbitration of disputes and avoid costly and time-consuming litigation.

·         Removal of a Disruptive or Non-Performing partner– while the partners may form a corporation with the best of intentions. Over time, owners who were the best of friends or closest of the family members can grow apart, committing acts that endanger the business. A partnership agreement should include a process of removing such a non-performing or disruptive partner and reclaiming his interests before his actions jeopardize the corporation.

·         Protection of business and partner’s investment– an agreement should include provisions that address what happens within the event of an owner’s death, disability, or personal bankruptcy. Each of those events could have a negative impact on the company. Without an agreement that addresses these situations, owners might be forced to dissolve the company. Putting in danger the investments of all the partners. Provisions that address these scenarios can add predictability and stability when they are most needed. 

·         Confidentiality– the partnership agreement should include non-competition and confidentiality. The provisions that prevent a partner from sharing the company’s confidential information with anyone else or seeking employment with a competitor are key for a business to maintain a competitive edge and to safeguard the investments of the partners.

Procedure for Drafting Partnership Agreement

Association of two or more persons

In a partnership agreement, there must be a contract between two or more persons. This is the minimum requirement. Unless there are at least two persons, there cannot be a partnership agreement. The person entering into a partnership agreement must be competent to enter into a contract i.e., he must be a major and must be of sound mind. The person can be natural or artificial, or some natural or other artificial.

Agreement 

The partnership agreement can be oral or composed. The Partnership Act does not necessitate that the agreement must be in writing. However, when an agreement is in a composed structure, it is known as “Partnership Deed”.

Minimum capital requirement

At the beginning of the business, there is no minimum capital requirement. Partners can start the business with as much as minimum capital they want. The stamp duty calculation also depends on the amount of capital that has been put in by the partners.

Business

The motive of partnership is to have business otherwise there would not be any need for a partnership. It is not necessary that the business must have long chains and ventures. The business must be carried on in a particular way to make the partnership valid. 

Sharing of profits

The partners must have agreed to carry on a business and to share profits in common. The division of profits in a partnership is a prerequisite condition to constitute a partnership valid as a whole. In the case of Cox v Hickman, it was held that the sharing of profits is considered the most important test in determining the validity of a partnership. Sharing of profits also involves sharing of losses. However, sharing of profits is an essential condition in a partnership agreement, the sharing of losses is not.

Mutual agency

It is the foundation of a partner’s liability. In the meaning of partnership, it is the fifth component that gives that the business must be carried on by every one of the partners or by any one of them at least, representing all of them, i.e. there must be mutual agency among them. In this way, each partner represents both as agent and principal to one another. 

Important clauses in a partnership agreement

·         Names and address of the firm and its main business- it is one of the first things to be done. The name of the business and the address of the partnership firm and what the main business purpose is. In this case, the main purpose of the business is cosmetic products.

·         Names and addresses of all the partners- it is also an important thing to do. The names and addresses of the partners must be written to avoid any confusion. 

·         A contribution of the amount of capital by each partner- the capital amount contributed by each partner and what are their proportions.

·         The accounting period of the firm- the partnership shall be will and may be dissolved at any time with the consent of the partners. 

·         The date of commencement of partnership- the date of commencement of the partnership must be included in any partnership agreement. It states the date on which the partnership came into force.

·         Rules regarding an operation of Bank accounts- the bank accounts are opened in the name of the partnership. It is used for the lawful purpose of running the partnership business.

·         Profit and losses sharing ratio- the profit and loss sharing ratio is decided by the partners. It can either be equal or divided in 60:40 ratio. 

·         The rate of interest on capital, loan, drawings, etc.- as per section 40(b)(iv) of the Income Tax Act, 1961 or any other applicable provision, the rate of interest can be simple 12%.

·         Mode of appointment of an auditor, if any- this clause includes how an auditor must be appointed and the auditor must thoroughly analyze the partnership agreement. 

·         Salaries, commission, etc., if payable to any partner- if any partner is liable to be paid any salary or commission that must be stated in this clause.

·         The rights, duties, and liabilities of each partner- this clause includes all the rights, duties and liability of the partners in a partnership such as the partner shall be pay his debts punctually, be entitled to carry on business other than business or similar to that in his capacity and etc.

·         Treatment of loss arising out of the insolvency of one or more partners- if any one or more partners becomes insolvent then such partner shall have no right in any share in the profits and losses of the firm.

·         Settlement of accounts on the dissolution of the firm- this clause states about the dissolution of the partnership firm whether the firm will be dissolve at any time mutually or by giving a prior notice.

·         Settlement method of disputes among the partners- how the disputes are to be settled between the partners. For example- the disputes shall be settled by way of arbitration, and thereafter who will appoint the arbitrator and the nature of proceedings.

·         Rules to be followed in case of admission, retirement, the death of any partner- this clause states about what would be the rules if there is an admission of a new partner or death or retirement of an old partner. For example, in case of death, will the partnership continue to exist with the joining of the legal heir of the deceased partner or will the partnership continue with the remaining partners. 

·         Any other matter relating to the conduct of the business- all other matters relating to the conduct of the business will be mentioned in a separate clause.

Sample clauses in a partnership agreement of a cosmetic company

Let’s take the example of Kay Beauty and Nykaa for the drafting of clauses in a partnership agreement for a cosmetic company. There are several other clauses in an agreement, some of important clauses are in the following:

This Partnership agreement is entered into _________ (date) by and between Katrina Kaif (“First Partner”), and Falguni Nayar(“Second Partner”), at _________ (place).

Hereinafter collectively referred to as “Partners”.

Recitals

Recitals contain introductory statements in the agreement. It appears at the beginning of any agreement. It includes what the contract or agreement is for, who are the parties and etc. 

For example-

1.    First Partner is the founder and CEO of Kay Beauty and the Second Partner is the founder of cosmetic retailer, Nykaa. 

2.    The Partners have decided to enter into a partnership agreement for carrying on the business of cosmetic products.

Name

In the present case, name is not required since Kay Beauty was launched on Nykaa’s platform which was already an established platform and does not have a separate name. However, for any new business, this clause must contain the name under which the  partnership shall be carried on.

Term of partnership

The partnership shall be deemed to have commenced from _____ (date of execution) and shall continue unless otherwise determined by the Partners.

Capital contribution and interest rate

The capital amount _______ contributed by the Partners in the _____ proportions. The rate of interest shall be ______.

Profit-Sharing ratio

The capital amount contributed by the partners irrespective of that profits or losses of the partnership shall be divided and borne by the Partners equally.

Type of Products

The products shall be _______ which shall be cruelty free, vegan, paraben free and etc.

Remuneration

The Partners shall be entitled to get an amount of _________ as remuneration per month which shall be paid by the 7th day of the month.

Operation of bank accounts

The Partners shall operate jointly or by any one of them.

Goodwill

Since goodwill is the exclusive right of the firm, therefore, the partner who is retired or died or expelled shall not receive any amount for the goodwill. 

Insolvency

The First Partner or the Second Part whoever becomes insolvent shall cease to be a partner on and from the date of the insolvency of such partner. The amount which is due shall be paid to the Official Assignee in accordance with the provisions of this agreement.

Dissolution

If the partnership is expired during the lives of the Partners the partnership shall be wound up and assets shall be distributed as per the Indian Partnership Act, 1932.

Arbitration

·         Sole arbitrator or tribunal, as decided by the Partners.

·         The place of arbitration (name of the city). 

·         Law governing the arbitration.

·         Language.

Conclusion

A partnership is quite a common sort of business that is prevailing in the country. Cosmetic companies gain advantages by entering into a partnership agreement. It helps them to expand their business, collaborate with other huge, famous, and expensive brands. 

References

·         Partnership Act, 1932

·         https://legaldocs.co.in/partnership-deed

·         https://blog.ipleaders.in/nature-essentials-partnership-act/

 

nfringement of design: Parle’s Fabio biscuit is ‘deceptively similar to that of Oreo

Infringement of design: Parle’s Fabio biscuit is ‘deceptively similar to that of Oreo

 

Introduction

Isha is a 5-year-old who loves to have chocolate biscuits, she always buys the chocolate cream biscuits of a particular brand which is quite popular among the kids of her generation. What this 5-year-old however, lacks is attention to detail and the ability to read and remember names. It is the catchy colours of her favourite brand that makes her reach her hand out and pick them up from the supermarket shelves. This time around too, during her visit to the supermarket she jubilantly grabs her favourite biscuits, or what she thought were her favourite biscuits. However, as the taste reveals to her, she’s disappointed to find out that these were not her all-time favourite biscuits, but were merely similar looking to them.

People use their creative ability to develop products that are different and haven’t been created earlier. They do this in order to attract a customer base and to use their unique individuality to make a mark in the industry. While it often happens that others end up replicating the original product and deviating a mass of their customer base. This might be done with the intention to deceive the customer into buying the ‘similar’ product in place of the original product. At other times, it might just be an unintentional coincidence of similar ideas. It is then on the court to decide and arbitrate on such matters depending upon the law that has been laid down.

Facts of the case

The parties involved

Intercontinental Great Brands which is a unit of the US-based, Mondelez International, a snacking giant has filed a suit against the Fast Moving Consumer Good (FMCG) company Parle. Mondelez International is the company that manufactures the famous Oreo biscuits, it has alleged that the Indian company, Parle has introduced a biscuit named Fabio in 2020, the design of which is decisively similar to that of the Oreo biscuit. Intercontinental Great Brands has filed a case against Parle for trademark infringement in the Delhi High Court.

The launch timeline

Oreo was launched in India, nearly a decade ago in the year 2010 and took a lead in the biscuit market in India. It is a premium cookie brand in the world and made a sale of $3.1 bn in the year 2019. While Fabio biscuits were launched by Parle in January 2020 in two flavours- Vanilla and Chocolate Cream.

Similarities

There are various similarities in the design of the two biscuits.

Packaging

The colour scheme adopted by both companies is similar and is blue and white in colour. Here, even the shade of blue used is very similar. They both are supported by blue and white branding.

Biscuit design

Both the biscuits are dark in colour and the structure is such that, two dark biscuits sandwich a white cream filling. The two dark biscuits of the Fabio biscuit are also stamped with a filigree design.

Which is the law that is being infringed in this case

The Trade Marks Act, 1999 is the law governing trademarks in India and it is the provisions of this law that are being infringed in the case at hand.

What is trademark infringement?

In India, trademarks are protected by legislation called the Trade Marks Act of the year 1999. The Act states all the necessary rules which deal with the registration, protection and penalties against the infringement of trademarks. These trademarks have been granted the status of intellectual property across the globe. Organisations both at the national as well as international level attempt to protect intellectual properties, such as trademarks. The Indian Patent Office which is administered by the Comptroller General of Patents, Designs and Trademarks is responsible to deal with the protection of trademarks in India.

Trademark infringement refers to the use of a mark that is unauthorised and is identical or deceptively similar to a trademark that is already registered.

Meaning of “deceptively similar”

Under this provision, the trademark that is being alleged to be used by a person who is unauthorised to do so has to be identical or “deceptively similar” to the original design in order to be called a trademark infringement. It has to be sufficiently similar so as the consumer might be confused and might mix up the two products thinking of them to be the same. Here, this only has to be a possibility, i.e. it “may” happen and there is no burden of proof to prove it to be actually happening, there only needs to be a possibility of this happening. Even if there is a chance of such confusion or misrecognition happening, it is enough to prove a trademark infringement.

Trade Dress

Meaning of trade dress

Trade Dress refers to the way a product looks in its physical shape or the visual appearance of a product. It includes packaging, shape, pattern, design, graphics, as well as the colour combination of the product. They are the attributes that attract a customer to the product and grab their attention towards that particular brand. Hence it is important to protect a brand’s trade dress from competitors who might try to use it for their personal gains and this is why companies get the trade dress of their product registered. The concept of a trade dress finds its origin in the US legislation- The Lanham Act. There is no specific and separate Act protecting dress in India. Rather, it is dealt with by the Trade Marks Act, 1999, the provision came into being in the year 2003 and is on the lines of the English Trade Marks Act, 1994.

Objective of trade dress

· The provision intends to protect the consumer from mistakenly buying a product that merely imitates the original product the consumer is willing to buy. It protects the consumer from the physical appearance or visual presentation of the product which might be misleading.

· It also aims at discouraging the copying of goods and services.

· To prevent any confusion regarding the product and its unfair use.

Legal provision related to trade dress in India

Section 2 of the Trade Marks Act, 1999 was added in the Act through an amendment. Indian courts had started recognising the concept of trade dress before 2003. In the context of the case at hand, trade dress refers to everything ranging from the blue and white packaging of the biscuits to the design imprinted on them and to their structural representation.

According to Section 2 of the Act, the overall appearance and graphical representation of a product is what establishes it to be different from other goods and services. It is this shape, unique packaging and the combination of colours that distinguish a product.

This section of the Act defines the terms “Package” and “Mark”.

Section 9(3) provides that, for a mark to be registered it should be distinctive and easily recognisable i.e. it should add a substantial amount of value to the product. Also, the shape of the good should not be one that comes from nature.

Other instances of trademark infringement in the biscuit industry

· In the year 2016, ITC dragged the biscuit company, Britannia to the court on the accusations of trademark and copyright infringement. ITC accused Britannia and said that the packaging of Britannia’s NutriChoice Digestive Zero biscuits were identical to that of ITC’s Sunfeast Farmlite Digestive All Good biscuit. On this, Britannia told the court that it was ready to change the colour of the packaging of its biscuits. This legal battle was won by ITC and the court asked Britannia to curb the sale of its NutriChoice Zero biscuits.

· In December 2020, it was Britannia that moved to the Delhi High Court against ITC and claimed that the packaging of ITC’s Sunfeast Veda Digestive and Sunfeast 5-Seed Digestive biscuits was deceptively similar to that of Britannia’s NutriChoice Hi-Fibre and NutriChoice Digestive biscuits.

· The cases and allegations of trademark infringement are nothing new for the biscuit industry. The previous year, in February 2020, biscuit maker Britannia took to the court, Future Consumer and accused the company, it said that the packaging of Future Consumer’s, ‘Tasty Treat’ was deceptively similar to the biscuits of Britannia.

Oreo vs. Twins

Oreo biscuit has been in a similar dispute earlier as well. The case commenced in the year 2015 for the registration of an EU trademark. The plaintiff was Twins from Spain and presented their case in front of the European Court of Justice (CJEU). Intercontinental Great Brands filed their opposition to this and claimed their own popularity and earlier trade mark which was similar to the Twins.

In the year 2018, the trademark request was refused by the European Union Intellectual Property Office (EUIPO) citing as a reason the likelihood of confusion with the earlier and better-established Oreo, the similar shape of the biscuit was also cited as a reason.

Twins appealed against this decision. This dispute led to some important questions being raised, for example: Is a biscuit shape like that of the Oreo, distinctive?

The Spanish company, Galletas Gullon claimed that no company can be given an exclusive right over a round-shaped chocolate biscuit filled with cream. Hence, the only distinctive feature of the biscuit then remains the word “Oreo”. The CJEU then pointed out that in order to get a registered trademark by the European Union, there has to be at least a minimum level of distinctiveness. It also said that the assessment has to be done keeping in mind the similarities in the overall product as a whole and it cannot be limited to a single mark.

The CJEU did not answer the question of whether the biscuit shape of Oreo, distinctive, however, it said that in this case, the value regarded to the shape cannot be negligible. The application to consider the word “Oreo” as the only distinctive element failed as it was felt that customer attention would not be drawn to a particular word in a round biscuit joined with cream filling. The products were termed to be identical and the appeal made by the Spanish company was dismissed.

Conclusion

The Court has scheduled the next hearing for this case on April 12, 2021. Even though the US lawyers requested an earlier date of hearing for the issue, the Delhi High Court declined the request. With the advent of globalization and products reaching far off places and trade expanding beyond boundaries, the protection of intellectual property has become one of the major concerns for the twenty-first-century producer. On the other hand, the confusion created by the availability of multiple “deceptively similar” products in the market is a problem that dooms the consumer. Due to this, the consumer often ends up buying something he/she/they was/were not willing to or did not intend to buy. This brings loss, not only to the consumer but also to the producer who ends up losing on his/her/their potential sales and customer base.

It is important that laws are adequately put in place and implemented to defy such efforts which are malice in nature and can hinder ethical trade. The biscuit industry unfortunately has fallen victim to a number of such cases where leading brands had to sue each other for trade mark infringement. Some of the leading brands involved are Britannia, Parle, ITC etc. Though it remains unknown whether the present case is a result of intended, carefully thought out and organised imitation or a surprisingly similar-looking coincidence of ideas, the court has the duty to protect ethical trade and the intellectual property of producers.

References

· https://www.latestlaws.com/latest-news/oreo-maker-takes-parle-to-delhi-hc-over-alleged-infringement-of-design/

· http://www.trademarkiso.com/ip-battle-of-biscuits-oreo-vs-fabio/

· https://economictimes.indiatimes.com/industry/cons-products/food/oreo-maker-takes-parle-to-court-for-copying-cookie-design/articleshow/81298570.cms

· https://www.naradasbuzz.com/court-case-against-parle-biscuits-orio-protests-against-design-of-biscuits-next-hearing-on-april-12

· https://www.bakeryandsnacks.com/Article/2021/03/03/Oreo-maker-takes-Indian-biscuit-giant-to-court-over-alleged-lookalike-cookies

· https://cleartax.in/s/trademark-infringement-india

· https://ssrana.in/articles/india-developing-jurisprudence-on-trade-dress/

· https://legal-patent.com/trademark-law/oreo-v-oreo-twins-well-known-earlier-mark-oreo-wins/

· https://www.mewburn.com/news-insights/oreo-vs-twins-the-biscuit-wars#:~:text=Since%202015%2C%20two%20major%20biscuit,in%2C%20%E2%80%9Csandwich%20biscuits%E2%80%9D

Important Export Agreement Clauses For An Exporter

·         Most important agreement clauses for an exporter

Introduction

 Export means sending goods from one place to another. Export may be either of goods or services. The import and export in India are regulated by the Foreign Trade (Development and Regulation) Act, 1992, which empowers the center to make provisions for the regulation of trade in the country. Currently, the Foreign Trade A policy of 2021-26 is followed in India, which gives a special emphasis to the export of research and development services (R&D). The taxes on goods and services are imposed as per the Integrated Goods and Services Tax (IGST).

According to Section 2(5) of IGST, export of goods means taking goods outside India.

According to Section 2(6) of IGST, export of services means, the supply of any service when:

1.    Supplier of service is located in India,

2.    The recipient of service is located outside India,

3.    Place of supply of service is outside India,

4.    Payment for service has been received by the supplier of service in convertible foreign exchange, and

5.    Supplier of service and the recipient of service are not merely establishments of a distinct person.

Basically, the import and export procedures involve the activities which ensure the licenses and compliance which shall be made before the shipment, arranging for the transportation and warehouse after the shipment, custom clearances as well as for the payment of taxes before the release of goods.

In this article, we shall discuss in detail the export procedures, export agreements, and important clauses for the export agreement.

The export contracts are used when there is any international sale of certain goods and services. Export contracts will be entered between the exporter and importer. The exporter is the one who is selling the goods and the importer is the one who is purchasing the goods.

The export contracts can be either formal or informal, but it is always preferred to have a formal export contract, where the terms and conditions shall be reduced into writing and signed by the parties.

The export contracts mainly concentrate on the provisions such as price, offer, acceptance, delivery of goods or services, shipping, acceptance of goods or services, complaints, and returns:

·         International Sale Contract: An international sale contract is an agreement that has been entered into between the buyer and seller for the sale of goods or services and it contains the terms and conditions of the sale. This contract is used for the contracts that occur only once.

·         International Supply Contract: The international supply contract is used for the long-term agreements between the manufacturer and supplier, which are used for the supply of the products for the regular orders.

Laws which regulate the trade in India

Some of the laws which regulates the exports and imports in India are the Customs Act, 1962, Customs Tariff Act, 1975, Foreign Exchange Management Act, 1999, Foreign Trade Development and Regulation Amendment Act, 2010, Foreign Trade Development and Regulation Act, 1992, Special Economic Zones Act, 2005, CGST Act, IGST Act and UTGST Act.

Export documents and their types

What is an export document?

When the trade is between the parties from different countries (international trade), there is a need to obtain certain documents from different authorities or the institutions for the fulfillment of the terms and conditions and to obtain the license and permits. Depending upon the type of the product being exported and the place of export, there is a need for an export document in India. The export document is nothing but the document which gives the complete details about the product being exported and the place of export. 

These export documents are very much necessary for the movement of goods from one country to another without any hurdles. It is important for every exporting agencies to get these exporting documents from the authorities mentioned below:

1.    Income Tax, Customs, and Exchange authorities of both the countries

2.    Authorities responsible for the loading and unloading of goods

3.    Warehouse and Shipping authorities 

4.    Inspection agencies 

5.    Bank Agencies of both the countries

Types of Export Documentations

There are four types of Export Documentations:

·         Regulatory Documentation: The regulatory documentation includes the pre-shipment documents which are issued by the exporting country and which has to be mandatorily complied with by an exporter or the exporting agency. The regulatory documentation include the documents such as shipping bill, insurance payment certificate, excise gate pass after the clearance of the goods and the application for export that has been prescribed by the port authorities.

·         Export Assistance Documents: The export assistance documents are necessary to obtain government assistance such as government subsidies. It includes documents such as quality control certificates and export-import contracts.

·         Documents Prescribed to the Importer’s Country: The exporter needs to follow the norms of the importer’s country as well to maintain the free flow of trade between both countries. The exporter has to submit a certain set of documents to the importer to show that the exporter has acted as per the terms of the contract and has abided by all the rules and regulations imposed by the importing country. Certain documents that shall be submitted by the exporter are documents relating to quality check, pre-inspection, etc.

·         Commercial Documents: These documents disclose the absolute transfer of ownership from the exporter to the importer. These documents include the bills of exchange, bills of lading, letters of credit, certificates that show the origin of goods, marine insurance policy etc.

Export procedure in India:

The company which is engaging in the export shall obtain the IEC Number (Import Export Code) from the regional joint DGFT (Directorate General of Foreign Trade). The IEC code number is a unique 10 digits code issued by the DGFT, Ministry of Commerce, Government of India to the Indian Companies involved in export or import business, without which no import or export shall be carried out.

The procedures that are generally carried out in India for the exports are as follows:

·         Quotation and Indent: The exporter gives the quotation of the sale to the importer, which includes all the terms and conditions on which the sale is being made such as, the quality of the product, quantity, price, delivery terms, payments, and discounts if any. The most common types of quotation and indent used by the exporters are:

oFree on-board quotation 

cost, Insurance, and Freight quotation

The exporter receives the indent from the importer, which contains the particulars of the export and how the export has to be made, how the packaging and mode of delivery, etc., shall be made by the exporter. 

·         Shipping Credit Enquiry: Once the importer and exporter agree to enter into the contract, the exporter must arrange for the shipping of the goods to the importer. Once the shipping company agrees to export the goods, it provides the order. The exporter has to open an account in the form of a letter of credit in the bank which operates in the importing company as well to grant the credit.

·         Preparation of Export: Upon the manufacturing of the product, the export commission housing, who is acting as an agent of the importer shall be liable to collect the goods as per the indent made by the exporters. The export commission house will take up the responsibility of packaging of goods as specified by the importer and prepare the same for the shipment after the inspection of the goods and issuance of the certificate by the Export Inspection Council (EIC).

·         Customs and Exchange Formalities: At At this stage, the exporter will complete the formalities of filling the shipping bills and issuing the same to the required authorities. The exporter is liable to get the export license from the controller of exports, which will be valid for the period of 3 months and the extension of the license can be made by the licensing authority.

·         Placing the Goods-board the ship: After completing the above-mentioned formalities, the exporter will place the goods on the ship for the delivery of the same. After placing the goods, the exporter shall receive the bill of lading from the steamship company.

Essential clauses of the Export Agreement 

These are some of the essential clauses of the contract agreements:

·         Parties: This clause of the contract shall contain the details of the parties such as the name of the parties entering into the contract along with their detailed address, nationality, company details along with the tax details of the parties.

·         Product: This clause deals with the details of the product, standards (applicable national or international standards) and specifications of the products.

·         Quantity: This clause specifies the quantity of the product which shall be measured in terms of the unit both in words and numerals.

·         Price: This clause specifies about the price or the total value payable for the goods or services along with the currency in which it is payable, whether it is payable at once or in the installments and the mode of payment.

·         Delivery Terms: The terms in which the delivery has to be made shall be mentioned under this clause.

·         Taxes, Duties, and Charges: This clause specifies the tax that the parties are responsible to pay and whether the price quoted by the exporter is inclusive of tax or excluded shall be clearly mentioned in this clause.

·         Shipment Clause: This clause includes the details about the shipment specifications along with the mode of shipment.

·         Packaging, labeling, and marking: The packaging, labeling marking shall be made as per the terms of the contract i.e., as agreed by the parties under this contract.

·         Insurance: The contract shall specify about the insurance that shall be made for the goods against the loss or damages caused during the transportation and this clause shall also include the type of risk that is involved during the transportation and to what extent the insurance is covered.

·         License and Permits: This clause shall specify whether there is any need for license and permits if there is a need to obtain the same, who shall obtain such license and who shall bear the expenses shall be specified.

·         Documents required: This clause shall specify as to what documents are required for the transactions such as invoice, bill of exchange, insurance policy, and such other trade documents.

·          Delay in Delivery: This clause shall specify about the delay in delivery of goods, remedies available to the importer for suffering damages or losses due to the delay in delivery and exceptions and under what circumstances such delay shall be condoned shall be mentioned in detail.

·         Product Guarantee: This clause specifies in detail as to what guarantee shall be available to the importer and the period till which such guarantee shall be available.

·         Warranties Clause: This clause shall specify whether the importer can get a warranty for the goods which have been damaged and what kind of damages can be covered under warranties and till what period the guarantee can be covered.

·         Remedial Actions: In the event if, there exists any default in the obligations of the parties, what remedies are available under the law shall be specified in this clause.

·         Force Majeure Clause: This clause shall specify the circumstances under which parties can be relieved from the mutual obligations for the non-performance of the contracts on the occurrence of such circumstances and the relief available to such parties.

·         Applicable Laws: This clause shall specify as to which country’s law shall govern the contract.

·         Dispute Resolution/ Arbitration Clause: This clause shall define how the parties shall amicably settle the dispute in case if any dispute arises between the parties to the agreement. The Ministry of Commerce, Government of India, has set up a model of a contract which shall benefit the exporters to have suitable contracts, which shall help the small and medium exporters to have a standard contract.

·         Signature of the Parties: Both the parties to the contract shall sign the agreement or the contract to prove that there is the consent of both the parties to enter into the contract without any force, coercion, or fraud, and both the parties agree for all the terms and conditions of the contract. 

Conclusion

In a nutshell, International trade is one of the important means which promotes the welfare of the country. It not only extends the country’s market beyond the national frontiers but helps to make the domestic business of the country efficient by helping it to compete at the international level. It is essential for both the parties (i.e., exporter and importer) to understand the complete details and information of the products or services that are imported or exported. Both the parties have to abide by the laws, rules, regulations, norms fixed by the other country for the purpose of trade or any other business. One of the most important advantages of the trade agreements or the contracts are, it lowers the trade barriers on the goods that have to be imported from the other country. The exporter needs to develop a standard general agreement, wherein he fulfills all the terms and conditions of such agreements and the complexities. 

Referred articles

·         https://www.economicsdiscussion.net/international-economics/export-documentation-and-its-types-with-specimens/4273

·         https://www.netlawman.co.in/d/export-contract

·         https://www.globalnegotiator.com/international-trade/dictionary/export-contract/

·         http://www.tradeforum.org/Export-Contracts/

·         https://www.businessmanagementideas.com/international-trade/exports/export-procedure-in-india-11-steps-export-management/18635

·         https://www.businessmanagementideas.com/international-trade/exports/export-procedure-in-india-11-steps-export-management/18635

·         https://www.indiantradeportal.in/vs.jsp?lang=0&id=0,31,224

·         https://www.india-briefing.com/news/import-export-procedures-india-19125.html/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration

·         https://www.publishyourarticles.net/knowledge-hub/articles/what-are-the-list-of-documents-generally-used-in-export-trade/3671/