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Kurs: - Business English

Modul: Contracts - Ugovori

Autor: prof. Gordana Matorkić

Naziv jedinice: Making a Contract




The businessman concerned with contracts will normally learn about their contents, and the precise but intricate mode of expression that is common to them and to all legal documents, in his own language. Thus, when he comes to tackle a contract written in English, his main difficulties will be understanding the meaning of the language, or choosing the appropriate expressions when drawing up an English-language agreement himself.

This article sets out to give a selection of the vocabulary commonly found in contracts. It is largely drawn from the General Conditions concerning contracts prepared by the United Nations Economic Commission for Europe.

Formation of the contract

The parties to the contract should state when the contract is considered to become binding. A clause should be included stating something like this:

“The contract shall be deemed to have been entered into when, upon receipt of an order, the Vendor has sent an acceptance in writing within the time-limit (if any) fixed by the Purchaser. “

It may be necessary to add that where an export or import licence of a foreign exchange control authorization is required for the performance of the contract, the party responsible for obtaining the licence or authorization should make sure to obtain it in good time.

Terms of delivery

The delivery period should be stated. It will often run from the date of the formation of the contract, or the date of the receipt by the Vendor of such payment in advance of delivery as is stipulated. On expiry of the delivery period provided for in the contract, the Vendor may be entitled to an additional period of grace.

There will probably be a clause concerning delay in delivery, granting a reasonable extension of the delivery period. Should the Vendor fail to deliver the goods after the period of grace, the Purchaser is normally entitled to terminate the contract by notice in writing to the Vendor. The Purchaser will then be entitled to recover any payment he has made in respect of undelivered goods, and to reject goods delivered which are unusable.

Questions of Payment

The manner of payment and the time at which it should be made must naturally be agreed upon. The time may, for instance, be thirty days after notification from the Vendor that the goods have been placed at the Purchaser’s disposal.

If there is delay in payment, the Vendor may postpone the fulfillment of his own obligations until payment is made, or recover interest on the sum due. 6% is a common rate in such cases.


The contract will generally contain a guarantee, according to which the Vendor may undertake to remedy any defect resulting from faulty design, materials or workmanship. Certain limitations to the Vendor’s liability for defects will be stated.

If, when the goods are inspected, it is found that they do not conform with the contact, the Purchaser will be entitled to reject the goods.


Since it may sometimes be difficult for the parties to the contracts to settle by agreement some dispute arising out of or in connection with the contract, it is necessary to state an arbitrator who can settle such disputes out of court. Unless otherwise agreed, contracts are commonly governed by the law of the Vendor’s country.

Some general points

Other matters to be considered when drawing up a contract are packing, inspection and tests. In the case plant and heavy machinery, there will be drawings and descriptive documents, and such questions as working conditions and safety regulations while erecting the plant.


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