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Incoterms Explained: Legal Definitions and Their Role in Trade
Definition & Meaning
Incoterms, short for International Commercial Terms, are standardized trade terms established by the International Chamber of Commerce (ICC). These terms are recognized globally and are used in international and domestic contracts for the sale of goods. They provide a set of rules that help parties to a contract understand their rights and obligations regarding the delivery of goods, thereby helping to avoid misunderstandings and disputes.
Table of content
Legal Use & context
Incoterms are primarily used in international trade contracts. They define the responsibilities of buyers and sellers, including who pays for shipping, insurance, and tariffs. Understanding Incoterms is essential for anyone involved in commerce, as they help clarify the terms of sale and delivery. Users can manage contracts themselves with the right tools, such as US Legal Forms templates, which provide legally sound frameworks for various types of agreements.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
For instance, under the Incoterm "FOB" (Free on Board), the seller is responsible for delivering goods to a specified port and loading them onto a vessel. Once loaded, the risk transfers to the buyer, who then assumes responsibility for shipping costs. This helps both parties agree on their obligations and avoid potential disputes.
Comparison with related terms
Term
Definition
Key Differences
Incoterms
Standardized trade terms defining buyer and seller responsibilities.
Focus on delivery and risk transfer in international trade.
Shipping Terms
General terms related to the shipping process.
Less formal and may not cover all aspects of risk and responsibility.
Common misunderstandings
What to do if this term applies to you
If you are entering into a contract for the sale of goods, it is essential to specify the applicable Incoterms. Consider using US Legal Forms to access templates that can help you draft a clear and legally sound agreement. If your situation is complex, consulting a legal professional may be beneficial.
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