Elements of Shipping Contract

There are four (4) elements of a basic contract:

  1. Offer
  2. Acceptance: acceptance must be in identical terms to the offer, otherwise it will be a counter-offer, and acceptance must be given in a reasonable manner and in a reasonable time
  3. Consideration: consideration is the price of the two sides of the bargain i.e. what each person will receive in consideration for performing his part of the contract
  4. Intention: intention to create legal relationse. parties of a contract must intend legal consequences to attach to their agreement

In a contract for the sale of goods there are three (3) important points:

  • Time or circumstances under which the ownership of the goods passes from the seller to the buyer
  • when payment is due
  • at what stage the risk of damage to or loss of the goods moves from seller to buyer

In international sales it is common for one party to make an offer on his own Standard Terms, and another party to accept that offer on his own Standard Terms. If seller’s and buyer’s terms are different, there will not, in strict legal theory, have been an acceptance in identical terms to the offer. This may well lead to the conclusion that there was no valid contract. Adoption of an internationally recognized set of standard terms (such as INCOTERMS) of governing International Sales prevents this by ensuring that both parties (buyers and sellers) are in agreement as to the terms contained in their contract, there is a valid contract and both parties are well aware of their rights and obligations. INCOTERMS form produced by the International Chamber of Commerce.

Under English law, a sale of goods is defined as ‘A contract to pass the property in goods for a money consideration, the price’. Hence, the ownership of the goods are transferred in exchange for a payment of money.