International trade in coffee would not be possible
without general agreement on the basic conditions of sale. Otherwise it would
endlessly be necessary to repeat each and every contract stipulation for a
proposed transaction, essentially very time consuming and open to mistakes. To
avoid this the coffee trade has developed standard forms of contract of which
the most frequently used are those issued by the European Coffee Federation (ECF
- 04.04.02; www.ecf-coffee.org ) in Amsterdam and the Green
Coffee Association (GCA - 04.04.03; www.green-coffee-assoc.org) of New York. Although
many individual transaction details must be still agreed before a contract is
concluded, the basic conditions of sale, unchanging conditions that apply time
and time again can be covered simply and easily by stipulating the applicable
standard form of contract. Even so, an offer to sell (or a bid to buy) must of
course stipulate the quality, quantity and price, the shipment period, the
specific conditions of sale, the period during which the offer or bid is firm
(valid), and so on.
When things go
wrong
There will always be problems and
mistakes, delays and even disasters, both avoidable and unavoidable. The most
important rule is: Keep the buyer informed! If a problem is advised in time the
buyer may be able to re-position the contract and resolve the problem. If buyers
are not promptly informed it becomes impossible for them to protect themselves
and, indirectly, often the exporter as well. If it is clear the quality is not
quite what it ought to be, do not hope to get away with it but tell your buyer.
If a shipment will be delayed, do not wait to announce this but tell the buyer
immediately - Article 11(v) of the European Contract for Coffee specifically
requires that the buyer be kept informed without delay. If a claim is
reasonable, settle it, promptly and efficiently. The buyer is not an enemy but a
partner, and should be treated as such.
Arbitration (07.00) always dents reputations and
usually spells the end of a business relationship, but correctly settled claims
can help to cement relationships. Bear in mind that many buyers will not bother
to lodge smallish claims or pursue them through to arbitration - their time is
too expensive. Instead they will simply strike the name of the offending party
off their list of acceptable counterparts, often without saying so. And..
Mitigation of loss
When loss is likely, both the seller and the
buyer are required to mitigate the loss as much as possible: that is, they must
keep the loss to a minimum. Regardless of who is liable to pay, both parties are
responsible to keep the loss to a minimum. A good example is when documents are
lost. Yes, it is the responsibility of the seller to trace and present them as
soon as possible. Yet the buyer cannot just let the coffee sit on the dock
building late penalties (demurrage, container charges, etc.). The buyer is
required to take all reasonable action necessary to keep the late charges to a
minimum and when claiming damages has to prove
both the reasonableness of the claim and that all possible action was taken to
keep the loss to the unavoidable minimum.
Variations to standard
forms of contract
Commercial contracts can
be and often are concluded with conditions other than those of the standard
forms of contract, as long as these are well understood and are clearly set out
in unambiguous language (leaving no room for differing interpretations). For
example, one might agree to change the shipment quantity tolerance in Article 2
of the European Contract for Coffee (ECC) from 3% to 5%. In this case the
contract should then include a paragraph to the effect that "Article 2 of ECC is
amended for this contract by mutual agreement to read a tolerance of 5%".
If a modification to an
existing contract is agreed it should be confirmed in writing, preferably
countersigned by both parties. Adding the words "without prejudice to the
original terms and conditions of the contract" ensures that the modification
does not result in unintended or unforeseen change to the original contract. If
a modification is not confirmed in writing then one of the parties could
subsequently repudiate or dispute it. Human memory is fallible and there is
nothing offensive in ensuring that all matters of record are on record.
The same applies to
business under GCA contracts. Some North American roasters have small booklets
containing their proprietary terms and conditions, which all suppliers must sign
on to before they become approved vendors. In the * GCA XML contract there is a
huge field (350 characters) entitled exceptions.