LegalCheckPro Logo LegalCheckPro Start Analysis
Published on

Define: Incoterms

Authors
  • Profile Image
    Name
    LegalCheckPro
Table of Contents

Sales contracts, especially in international trade, rely on precise terms to manage logistics. Incoterms (International Commercial Terms) define who handles shipping, insurance, and risk in sales transactions.

1. Definition and Purpose

Incoterms are globally recognized rules set by the International Chamber of Commerce to clarify responsibilities in sales contracts, reducing trade disputes.

2. Key Examples

  • FOB (Free on Board): Seller delivers to the ship; buyer assumes risk thereafter.
  • CIF (Cost, Insurance, Freight): Seller covers shipping and insurance to destination.

3. Scope in Sales

Used primarily in cross-border sales, Incoterms specify when risk and cost shift from seller to buyer.

4. Common Applications

  • Export Sales: Defining who pays customs duties.
  • Bulk Goods: Allocating shipping risks for commodities.

Misusing Incoterms can lead to unexpected costs or liability; they must be explicitly stated in the contract.

6. Updates and Relevance

Revised every decade (e.g., Incoterms 2020), they adapt to modern trade practices.

Red Flags to Watch For

  • Missing Incoterms: Unclear responsibility for shipping costs.
  • Outdated Versions: Using obsolete rules like Incoterms 2010.
  • Misapplied Terms: E.g., using FOB for air transport.
  • Vague Language: Failing to specify the port or point.

How LegalCheckPro Can Help

Our AI-powered contract review tool checks your sales contract for proper Incoterms usage, ensuring clarity and compliance. Analyze your deal at LegalCheckPro to avoid trade pitfalls.

Sales contracts are negotiable. Confirm Incoterms match your intent before signing. Consult a legal expert if needed.

This article is for informational purposes only and does not constitute legal advice. For specific legal guidance, please consult with a qualified attorney.