International Legal Counselling

Contract drafters and those who interpret them will know: when you’re preparing an international commercial contract, perhaps the most challenging part is framing the in-between stage — the moment when the goods are out of the seller’s hands but not yet fully with the buyer. That grey area of transfer, responsibility, and of course, delivery, is where things often get complicated.

When I first started working on international trade contracts, one thing became immediately clear: clarity is everything. Questions like “Who pays for what?”, “When does the risk transfer?”, or even “Where exactly is delivery considered complete?” can lead to confusion and, if left unanswered, serious disputes. That’s when I realized the true value of Incoterms.

Established by the International Chamber of Commerce (ICC) back in 1936, Incoterms (short for International Commercial Terms) have become essential tools in my legal practice. They provide a universal language for traders and legal professionals across borders, cutting through the noise of differing national interpretations and ensuring everyone is on the same page.

Understanding Incoterms

Each Incoterm outlines specific obligations for buyers and sellers, especially concerning the delivery of goods. I often explain it to clients like this: imagine a spectrum. On one end, there’s EXW (Ex Works), where the seller does the bare minimum—just makes the goods available. On the other, there’s DDP (Delivered Duty Paid), where the seller takes on nearly all responsibilities until the goods arrive at the buyer’s doorstep, duties paid.

What makes Incoterms particularly useful in my work is how they simplify complex logistics into a shared framework. When everyone understands who does what and when, everything—from quoting prices to drafting contracts—flows more smoothly.

Harmonizing Global Trade Practices

In negotiations, I’ve found that Incoterms can be a game-changer. Different parties may come from vastly different legal or logistical backgrounds. But when we use terms like FOB or CIF, it’s as if we suddenly start speaking the same language. The harmonization they bring isn’t just about legal clarity—it’s about building trust and efficiency across borders.

Legal and Contractual Clarity

From a legal standpoint, using Incoterms reduces risk significantly. I recall one particular case, referenced in Dutch court decision ECLI:NL:RBSHE:2010:BN2826, where the interpretation of DDP was pivotal. The court clarified that DDP includes not only cost responsibilities but also the legal and actual place of delivery. This was a wake-up call: even widely used terms need to be explicitly embedded in contracts to have legal force.

Cases like this show that Incoterms aren’t just theoretical—they play a concrete role in dispute prevention and resolution. I always advise clients to be as precise as possible when incorporating Incoterms, especially about the place of delivery.

Risk Management and Cost Allocation

One of the most practical benefits of Incoterms is the clear allocation of risk and costs. I’ve seen firsthand how misunderstandings about risk transfer—say, when a shipment gets damaged en route—can turn into major headaches. With Incoterms, it’s much easier to pinpoint responsibility. This clarity allows businesses to plan insurance, logistics, and pricing strategies with confidence.

Adaptability to Different Modes of Transport

Another aspect I appreciate is their flexibility. Whether a shipment goes by sea, land, air, or rail, there’s usually an Incoterm that fits. For instance, terms like FAS or CFR are tailored to maritime transport, while others like CPT or CIP apply across modes. This adaptability makes my job as a legal advisor easier, as I can tailor contracts to the specific needs of each transaction.

Limitations and Considerations

Of course, Incoterms aren’t a cure-all. They don’t govern payment terms, transfer of title, or what happens in case of breach of contract. I always emphasize to clients that while Incoterms are foundational, they must be supported by a well-drafted sales contract that covers the broader commercial relationship.

If you have any questions about this topic or other issues related to trade law, please feel free to reach out to us at any time.