International Sale of Goods involves the purchase and sale of goods between businesses located in different countries. These transactions may involve international shipping, payment arrangements, customs, import and export regulations, taxation, insurance, and the laws of multiple jurisdictions.
For Thai companies doing business with foreign buyers or sellers, an international sales contract should address much more than the purchase price and delivery date. Businesses should carefully consider the governing law, delivery terms, transfer of risk, payment terms, Incoterms®, customs responsibilities, product standards, and dispute resolution mechanisms.
If these matters are not clearly addressed in the contract, disagreements can arise and resolving a cross-border dispute may become significantly more complicated and expensive.
What Is an International Sale of Goods?
An international sale of goods generally involves a buyer and seller whose places of business are located in different countries.
Examples include:
- A Thai company selling products to a company in the United States
- A Thai company importing goods from China
- A Japanese company purchasing products from a manufacturer in Thailand
- A foreign company appointing a Thai company as its distributor
International commercial transactions may therefore involve the laws of more than one country.
Under international sales law principles, including those reflected in the United Nations Convention on Contracts for the International Sale of Goods (CISG), the international character of a sale is generally determined by the locations of the parties' places of business rather than simply their nationality.
For this reason, businesses should identify the applicable laws and contractual terms before entering into an international transaction.
Which Law Governs an International Sales Contract?
One of the most important provisions in an international sales contract is the Governing Law clause.
For example, a contract between a Thai company and an English company may state:
“This Agreement shall be governed by and construed in accordance with the laws of Thailand.”
Alternatively, the parties may agree to apply the laws of England, Singapore, or another jurisdiction. Clearly identifying the governing law can reduce uncertainty if a dispute arises.
However, choosing the governing law does not necessarily mean that the laws of other countries become irrelevant. Customs regulations, taxation, import and export requirements, product standards, licensing requirements, and other mandatory regulations may still apply in the relevant jurisdictions.
A legal review should therefore consider both the contract and the mandatory laws applicable to the transaction.
Is Thailand a Party to the CISG?
The United Nations Convention on Contracts for the International Sale of Goods (CISG) is one of the most important international legal instruments concerning the sale of goods.
As of 2026, Thailand is not a Contracting State to the CISG.
The CISG establishes rules concerning matters such as:
- Formation of international sales contracts
- Obligations of sellers
- Obligations of buyers
- Delivery of goods
- Conformity of goods
- Remedies for breach of contract
- Damages
- Avoidance of contracts in certain circumstances
Because Thailand is not a CISG Contracting State, businesses involving Thai parties should carefully consider whether the CISG could become relevant through the law governing the contract or through the legal framework applicable to the foreign counterparty.
The contract should therefore clearly address the governing law and, where appropriate, whether the parties intend to include or exclude the application of the CISG.
What Should an International Sales Contract Include?
A well-drafted international sale contract should clearly establish the rights and obligations of both parties. At a minimum, the contract should address the following matters.
Details of the Parties
The contract should identify:
- Full legal name of each company
- Country of incorporation
- Company registration details, where appropriate
- Registered address
- Authorized signatory
- Contact information
Businesses should also verify that the person signing the contract has the authority to legally bind the company.
Description and Specification of the Goods
The goods should be described as precisely as possible, including:
- Product name
- Model
- Quantity
- Quality
- Size
- Technical specifications
- Packaging requirements
- Applicable standards
- Product certifications
- Inspection requirements
If the product has detailed technical requirements, the Specification should be attached to the contract and expressly incorporated into it. A clear product specification can be particularly important when a dispute later arises over whether the goods conform to the contract.
Price and Currency
The contract should clearly specify:
- Purchase price
- Currency
- Whether transportation costs are included
- Insurance responsibilities
- Taxes
- Customs duties
- Bank charges
- Other transaction costs
For example, a price of USD 100,000 may result in substantially different total costs depending on whether freight, insurance, customs duties, and other expenses are included.
Why Are Incoterms® Important?
International sales contracts frequently use Incoterms® to allocate certain responsibilities, costs, and risks between buyers and sellers.
Common Incoterms® include:
- EXW – Ex Works
- FCA – Free Carrier
- FOB – Free On Board
- CIF – Cost, Insurance and Freight
- CPT – Carriage Paid To
- CIP – Carriage and Insurance Paid To
- DAP – Delivered at Place
- DDP – Delivered Duty Paid
However, a contract should not simply state “FOB” or “CIF” without specifying the relevant location and version.
For example:
“CIF Laem Chabang Port, Thailand – Incoterms® 2020”
Specifying the location and applicable Incoterms® version helps reduce uncertainty concerning the parties' respective responsibilities.
It is also important to understand that Incoterms® do not regulate every aspect of the sales contract. They primarily address matters such as delivery, transportation responsibilities, costs, and allocation of risk. Other contractual issues — such as ownership, payment, warranties, breach, and dispute resolution — should be addressed separately.
Who Bears the Risk During Transportation?
One of the most common issues in international trade is damage to or loss of goods during transportation.
For example, suppose a Thai company purchases goods from China and the goods are damaged or lost during sea transportation. The key question may be: who bears the risk of loss?
The answer depends on the contractual terms, the applicable Incoterms®, the agreed delivery point, the circumstances of the transportation, and the relevant insurance arrangements.
Therefore, businesses should not select an Incoterm® solely because of the purchase price. They should understand:
- Where delivery occurs
- When risk transfers
- Who arranges transportation
- Who pays transportation costs
- Who arranges insurance
- Who is responsible for customs clearance
Properly selecting the delivery term can significantly reduce disputes over transportation risks.
Payment Terms in International Trade
International sales contracts should clearly establish how and when payment must be made.
Common payment methods include:
- Advance Payment
- Bank Transfer
- Letter of Credit (L/C)
- Documentary Collection
- Payment Against Documents
- Instalment Payments
For example:
“30% upon signing the contract and 70% upon shipment.”
The contract should also clarify when payment is considered completed and which party is responsible for bank charges. Depending on the level of risk, the parties may also consider payment security mechanisms such as a Letter of Credit, bank guarantee, advance payment, or other agreed security arrangements.
What Can a Seller Do If the Buyer Does Not Pay?
If a buyer fails to make payment when due, the seller may have contractual or legal remedies, depending on the governing law and the terms of the agreement.
Potential remedies may include:
- Claiming payment of the outstanding amount
- Claiming interest or damages where permitted
- Suspending further deliveries
- Terminating or avoiding the contract where the legal requirements are satisfied
- Claiming damages for breach of contract
However, the remedies available in a particular case depend on the contract, applicable law, and specific circumstances. Before suspending delivery or terminating a contract, a business should obtain legal advice to determine whether the required contractual and legal conditions have been satisfied.
What If the Seller Delivers Non-Conforming Goods?
A seller may breach an international sales contract by:
- Delivering goods late
- Delivering an incorrect quantity
- Delivering the wrong model
- Delivering defective goods
- Delivering goods that fail to meet required standards
- Delivering goods that do not comply with the agreed specifications
Depending on the contract and governing law, the buyer may have remedies for the breach. For this reason, the contract should establish a clear procedure for:
- Inspection of goods
- Acceptance
- Notification of defects
- Rejection of goods
- Replacement or repair
- Refunds
- Claims for damages
The parties should also specify how quickly the buyer must notify the seller of any defect or non-conformity.
Inspection, Acceptance and Product Warranty
International sales contracts should clearly establish the inspection and warranty process. The contract should specify:
- How many days the buyer has to inspect the goods
- How long the buyer has to notify the seller of defects
- The duration of the warranty
- Whether the seller must repair or replace defective goods
- Who pays the transportation costs for returned goods
- The procedure for warranty claims
These provisions can become extremely important after the goods arrive in the buyer's country. Without clear contractual procedures, disputes may arise over whether the buyer notified the seller within the required period or whether the goods actually failed to meet the agreed specifications.
Force Majeure in International Trade Contracts
International commercial contracts should also consider Force Majeure provisions. Potential force majeure events may include:
- Natural disasters
- War
- Port closures
- Major transportation disruptions
- Government restrictions
- Import or export bans
- Epidemics or other extraordinary events, where appropriately defined
- Other events beyond the reasonable control of the parties
A force majeure clause should explain:
- What events qualify
- How and when notice must be given
- Whether performance may be suspended
- How long the suspension may continue
- Whether either party may terminate the contract
- What happens to outstanding payments or undelivered goods
A carefully drafted force majeure clause can be particularly important in international transactions because transportation and supply chains may involve multiple countries.
Where Should an International Trade Dispute Be Resolved?
An international sales contract should clearly establish how disputes will be resolved. The parties may choose the courts of a particular country.
For example:
“The courts of Thailand shall have exclusive jurisdiction over any dispute arising out of or in connection with this Agreement.”
Alternatively, the parties may choose international arbitration. An arbitration clause can allow the parties to determine matters such as:
- Seat of arbitration
- Language of arbitration
- Number of arbitrators
- Applicable arbitration rules
- Institution administering the arbitration
- Applicable substantive law
For cross-border transactions, arbitration may be attractive where the parties want a neutral forum and an internationally enforceable dispute-resolution mechanism.
Thailand is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is important in the international recognition and enforcement of arbitral awards.
The arbitration clause should nevertheless be drafted carefully. An unclear or defective arbitration agreement can create additional disputes before the merits of the commercial dispute are even considered.
Customs, Import and Export Regulations
International trade is not governed solely by contract law. Businesses should also consider:
- Customs classification
- Customs duties
- VAT
- Import licences
- Export licences
- Controlled goods
- Product standards
- Transportation documents
- Certificates of origin
- Rules of origin
- Import restrictions in the destination country
Certain products may require specific licences, permits, registrations, or certificates before they can legally be imported or exported. Businesses should therefore check the regulatory requirements applicable to the specific product and destination country before entering into the transaction.
Failure to comply with customs or import/export requirements can result in delays, additional costs, penalties, or other legal consequences.
Key Issues Thai Companies Should Check Before Signing
Before signing an international sale contract, a Thai company should consider the following:
- Is the foreign counterparty a legitimate and properly registered company?
- Does the person signing the contract have authority to bind the company?
- What law governs the contract?
- Does the contract address the CISG where relevant?
- Which court has jurisdiction?
- Will disputes be resolved through arbitration?
- Which Incoterms® apply?
- Where does delivery take place?
- When does risk transfer from seller to buyer?
- Who pays transportation costs?
- Who is responsible for insurance?
- Who pays customs duties and taxes?
- What are the payment deadlines?
- Is payment secured by a Letter of Credit or other security?
- What product standards and certifications are required?
- What happens if the goods are defective or non-conforming?
- What remedies are available for breach of contract?
- Is there a clear limitation of liability?
- Is there a force majeure clause?
- What language controls if the contract is bilingual or multilingual?
Conclusion
International sale of goods is much more than a transaction involving the delivery of products and the transfer of money between countries.
It is a complex commercial transaction that may involve contract law, international trade rules, customs regulations, taxation, transportation, insurance, product standards, and dispute resolution in multiple jurisdictions.
A well-drafted international sales contract should clearly address governing law, price, payment, delivery, Incoterms®, transfer of risk, inspection, warranties, force majeure, breach of contract, and dispute resolution.
For Thai businesses dealing with foreign buyers or sellers, having the contract reviewed before signing can help identify legal risks and reduce the possibility of expensive cross-border disputes.
Legal Assistance for International Trade
Nathee Legal Firm provides legal services for Thai and foreign businesses involved in international trade and cross-border commercial transactions. Our legal services include:
- Drafting and reviewing international sale contracts
- International commercial contracts
- Import and export contractual matters
- Contract negotiation
- Breach of contract disputes
- International payment disputes
- International arbitration
- Cross-border commercial disputes
- Legal advice for Thai and foreign businesses
If you are preparing to enter into an international sales contract or are involved in a dispute concerning non-payment, delayed delivery, defective goods, non-conforming products, transportation risks, or breach of an international commercial contract, obtaining legal advice before taking action can help protect your business interests.
Nathee Legal Firm provides legal services for international commercial matters and can assist Thai and foreign clients with contract review, negotiation, dispute resolution, and cross-border legal issues.