International Business

Management

Theme 6

International business correspondence

Commercial letters

Valeriu Potecea & Georgiana Surdu - Niu

11/8/2014

1. The Inquiry

Is a manifestation of the will of a firm (an importer) to buy a

merchandise or establish trade links with vendors.

Must be in writing, but may be made orally or by telephone,

but must be confirmed in writing.

Its content varies according to:

Purpose
Product
Market

Valeriu Potecea & Georgiana Surdu - Niu

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The Inquiry
Can be provided in the form of:

Circular letters (not recommended)

Individual letters

Depending on their nature, they are 2 kinds of

inquiries:

general nature;
for concrete goods.

Valeriu Potecea & Georgiana Surdu - Niu

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General inquiries
Are issued in order to get information from the vendor
on:

nomenclature of goods
prices of various types of goods
and
to receive catalogs, samples, etc.

Valeriu Potecea & Georgiana Surdu - Niu

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Inquires for concrete goods

Are issued in order to conclude a deal

The usual content is made of the following elements:

the good, its exact name

the quantity required
delivery time
price
payment terms etc.

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Inquiry for concrete goods

It can turn into an order if the importer is urgently needed goods

In this case, the importer must indicate:

goods;
quantity of goods
a threshold level of price

When it is assumed that the goods are ready for delivery, and
negotiations will not be long, the exporter is required, along with
full reply to the offer, to issue a proforma invoice

The proforma invoice normally shows the type and amount of

merchandise, unit costs and extensions, expected weights and
measures, and often other terms (including payment terms).
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Functions of the inquiry

a) To initiate negotiations with external partners to

conclude commercial transactions.
b) Information on foreign markets.
c) The research of foreign markets

Valeriu Potecea & Georgiana Surdu - Niu

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Letters of Intent

Dialogue between potential partners seeking to negotiate a

trade agreement to establish a system of rules, rights and
collateral obligations in a documentary form is called letters
of intent.

May take the form of:

Honor commitments
Agreement protocols
Agreements in principle etc.

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Valeriu Potecea & Georgiana Surdu - Niu

Letters of Intent

Classification letters of intent :

Letters of intent involved in the negotiation of the contract ( "After

examining the documents submitted and the previous meeting , we inform you of our
intention to [possibly] purchase the product" - such letters peg stages of negotiations
that last longer )

Letters of intent that having no legal effects ( "I confirm the interest in the
product you offer, but you will need to discuss in detail the terms of the eventual
agreement " )

Letters of intent containing legal firm commitments on particular

aspects involved in the negotiations (eg . Agreements whereby the parties agree
not to negotiate in parallel or not to disclose information - privacy statement )

Letters of intent expressing the traditional legal categories: offer,

acceptance, main contract (with the significance of definitive agreements , possibly
affected by the changes )
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2. The Offer/The Tender

It is the manifestation of the will of a manufacturer or supplier of goods to

deliver these products in some determined commercial conditions
An offer as "an expression of willingness to contract on certain terms, made with
the intention that it shall become binding as soon as it is accepted by the person to
whom it is addressed", the "offeree(Guenter Heinz Treitel )

An offer is a statement of the terms on which the offeror is willing to be

bound. It is the present contractual intent to be bound by a contract with
definite and certain terms communicated to the offeree

Offer may start either:

* on the initiative of the bidder or

* in response to a call for tenders (inquiries)

Offer has a double role:

* Commercial: aims to determine customer to buy a merchandise

* Legal: prepares carry out the will of the parties, resulted in the commercial contract
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The Offer

After the character, the offer may be:

a. Binding offer (with deadline option, or deadline for acceptance)

The exporter is obliged to keep the goods for the customer which gave
him or her a certain term of option. This period of availability varies
depending on the type of goods, market conditions, etc.

A binding offer is an agreement that is considered legally binding if an offer

is made and accepted between the involved parties. It contains elements
such as offer, acceptance and intention to create legal relations. Any breach of
contract can be disputed in a court of law
If the importer does not accept the offer until the date indicated, it is
considered rejected
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The Offer
b.

Indicative offer (non-binding offer, no obligation offer)

The seller has the option to accept the order transmitted, not to
take it into consideration or to change the terms of original offer (the
triple option)

Exporter can offer the goods to multiple clients, performing the

order of first the respondent to offer

Usually, in the case of an "no obligation offer, the sale is deemed

perfected only after the seller has accepted the order

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Counter-offers

When the recipient sends an acceptance of an offer which includes changes

in relation to this offer, we are dealing with a counter-offer.

The "mirror image rule" states that if you are to accept an offer, you must
accept an offer exactly, without modifications; if you change the offer in any
way, this is a counter-offer that kills the original offer and the original offer
cannot be accepted at a future time

However, a mere request for information about the terms of the offer is
not a counter-offer and leaves the offer intact. It may be possible to draft
an inquiry such that it adds to the terms of the contract while keeping the
original offer alive.

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Rejection of offer or lapse of time

An offer can be terminated on the grounds of rejection

by the offeree, that is if the offeree does not accept the
terms of the offer or makes a counter-offer

Also, upon making an offer, an offeror may include the

period in which the offer will be available. If the offeree fails
to accept the offer within this specific period, then the
offer will be deemed as terminated

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The terms contained in the offer

Unless the offer included the key terms of the contract, it

cannot be the basis of a binding contract. For example, as a
minimum requirement for sale of goods contracts, a valid offer
must include at least the following 4 terms:

delivery date
price
terms of payment that includes the date of payment and
detail description of the item on offer including a fair description of the
condition or type of service (quantity, quality, etc.)

Unless the minimum requirements are met, an offer of sale is

not classified by the courts as a legal offer but is instead seen as
an advertisement.
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Rules of acceptance of offer

There are several rules dealing with the communication of

acceptance:

The acceptance must be communicated. Prior to acceptance, an offer may be withdrawn.

An offer can only be accepted by the offeree, that is, the person to whom the offer is made.

An offeree is not usually bound if another person accepts the offer on his behalf without his
authorisation, the exceptions to which are found in the law of agency, where an agent may have
apparent or ostensible authority, or the usual authority of an agent in the particular market,
even if the principal did not realize what the extent of this authority was, and someone on
whose behalf an offer has been purportedly accepted may also ratify the contract within a
reasonable time, binding both parties

If the offer specifies a method of acceptance (such as by post or fax), acceptance must be by a
method that is no less effective from the offeror's point of view than the method specified. The exact
method prescribed may have to be used in some cases, but probably only where the offeror
has used very explicit words such as "by registered post, and by that method only

However, acceptance may be inferred from conduct

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United Nations Convention on Contracts

for the International Sale of Goods

The United Nations Convention on Contracts for the International Sale of Goods
(CISG; the Vienna Convention) is a treaty that is a uniform international sales law. As of
September 2013, it has been ratified by 80 countries that account for a significant proportion
of world trade, making it one of the most successful international uniform laws (Bahrain was
the most recent state to ratify the Convention).

The CISG was developed by the United Nations Commission on International Trade Law
(UNCITRAL), and was signed in Vienna in April 11, 1980. The CISG is sometimes referred to
as the Vienna Convention

According to the Vienna Convention, an offer to contract must be addressed to a person, be

sufficiently definite that is,

describe the goods,

and expressly or implicitly fixes or makes provision for determining

the quantity and

the price

and indicate an intention for the offeror to be bound on acceptance .

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United Nations Convention on Contracts

for the International Sale of Goods

The CISG, subject to clear indication by the offeror, treats any proposal not addressed to a
specific person as only an invitation to make an offer. Further, where there is no explicit
price or procedure to implicitly determine price, then the parties are assumed to have
agreed upon a price based upon that generally charged at the time of the conclusion of the
contract for such goods sold under comparable circumstances.

Generally, an offer may be revoked provided the withdrawal reaches the offeree before or at the
same time as the offer, or before the offeree has sent an acceptance. Some offers may not be
revoked; for example when the offeree reasonably relied upon the offer as being irrevocable.
The CISG requires a positive act to indicate acceptance; silence or inactivity are not an
acceptance.

The CISG attempts to resolve the common situation where an offerees reply to an offer
accepts the original offer, but attempts to change the conditions. The CISG says that any
change to the original conditions is a rejection of the offer it is a counter-offer unless
the modified terms do not materially alter the terms of the offer. Changes to price, payment,
quality, quantity, delivery, liability of the parties, and arbitration conditions may all
materially alter the terms of the offer.
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Revocation of offer

An offeror may revoke an offer before it has been

accepted, but the revocation must be communicated to
the offeree (although not necessarily by the offeror)

If the offer was made to the entire world, the revocation

must take a form that is similar to the offer. However, an
offer may not be revoked if it has been encapsulated in an
option

If the offer is one that leads to a unilateral contract, the

offer generally cannot be revoked once the offeree has
begun performance
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Characteristics of commercial offer under the Vienna Convention, 1980

Formalism of offer

Formalism is absent no writing standard form required

Offer content

Set quantity and price

When the offer

becomes effective

When received by the offeree

Revocation of offer

Revocation of an offer is possible if the revocation reaches the offeree before he has dispatched an
acceptance. Revocation must be fair

Irrevocability of offer

an offer cannot be revoked:

(a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or
(b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted
in reliance on the offer

Termination of offer

An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.

Counter-offer

A reply to an offer which purports to be an acceptance but contains additions, limitations or other
modifications is a rejection of the offer and constitutes a counter-offer.

Acceptance of offer

An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror.

Acceptance time

An acceptance is not effective if the indication of assent does not reach the offeror within the time he
has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances
of the transaction, including the rapidity of the means of communication employed by the offeror.

Late acceptance

A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs
the offeree or dispatches a notice to that effect.

Acceptance
withdrawn

An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the
acceptance would have become effective.

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Customer Relations Letters

These deal with establishing and maintaining good

working relationships. They deliver good news or bad
news, acceptances or refusals.

Follow-up Letters (a follow-up letter is sent to thank a customer

for buying a product or service and to encourage the customer to buy
more in the future; as such it is a combination thank-you note and sales
letter)

Complaint Letters
Adjustment Letters (adjustment letters respond to complaint
letters)

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Refusal of Credit Letters

Valeriu Potecea & Georgiana Surdu - Niu

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Principles of business letter writing

(i) Simplicity - Simple and easy language should be used for writing business letters. Difficult
words should be strictly avoided, as one cannot expect the reader to refer to the dictionary
every time while reading letter.

(ii) Clarity - The language should be clear, so that the receive will understand the message
immediately, easily and correctly. Ambiguous language creates confusion. The letter will serve the
purpose if the receiver understands it in the same manner in which it is intended by the sender.

(iii) Accuracy - The statements written in the letter should be accurate to, the best of the
senders knowledge. Accuracy demands that there are no errors in the usage of language - in
grammar, spellings, punctuations etc. An accurate letter is always appreciated.

(iv) Completeness - A complete letter is one that provides all necessary information to the
users. For example, while sending an order we should mention the desirable features of the
goods, i.e., their quality, shape, colour, design, quantity, date of delivery, mode of transportation, etc.

(v) Relevance - The letter should contain only essential information. Irrelevant information
should not be mentioned while sending any business correspondence.
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Principles of business letter writing

(vi) Courtesy - Courtesy wins the heart of the reader. In business letters, courtesy can be
shown/expressed by using words like please, thank you, etc.

(vii) Neatness - A neat letter is always impressive. A letter either handwritten or typed,
should be neat and attractive in appearance. Overwriting and cuttings should be avoided.

(viii) Promptness - Assume timely transmission of a response to any letter tendering

commercial nature

(ix) Persistence - It consists of permanent information partners on emerging products for

sale in the nomenclature of the bidder

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Common elements of a business letter

A business letter includes typically the following elements: header ,
recipient mailing address, salutation , the content itself, concluding
formula and greeting and signature.

1. The Senders address or the Letterhead - contains

the name, address and headquarters , telephone and so on
(the senders name is placed usually in the upper right
corner of the page
2. Receivers address (inside address) - contains the
name of the recipient , the title, or position in the company,
the name of the particular department of the company (if
known), and the company name or organization;
3. Salutation - placed under the recipient's address should
include the name of the person to whom the letter is
addressed. Greeting acceptable formulas for business letters include, for example : Dear Sir or Madam,

Dear Sir or Madam Smith ( Miss ) Smith . Do not write Dear Sir if the sender is not sure that the recipient is
male . If the sender is insecure and does not know the recipient's name , the salutation would be " Dear Sir or
Madam " .
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Common elements of a business letter

4. Body of the letter generally includes the paragraph
of introduction, the letter message and conclusion. Rarely
exceeds one page, the text is as concise.
5. Complimentary close - is placed usually 2-3 lines
below the body of the letter and includes the most
common expressions:Yours sincerely (if you know the name of the person
you're writing to), Yours faithfully (very formal as you do not know the person to whom you are
writing) ,Best wishes / Best regards (if the person is a close business contact or friend)
,etc..
6. Signature - involves inserting the full name of the
person signing the correspondence, and his or her position
in the company. Name and position are always typed and
handwriting signature is placed above them
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