HOW TO PROTECT YOUR INTEREST IN A SALE CONTRACT Focus on what you “get” when you sign!

What we will talk about?  Tips of how to protect your interest in a contract of commercial sale of products

Parties’ interest The Buyer  Protection of their acquired rights, guarantee that the products shall be received, risks of losing payment or rights acquired secured The Seller  Protection of their selling property, guarantee that they will get paid, risks of losing the products secured

Who needs a contract anyway?  The contract is the law of the parties according to the Civil code. The provisions of the Romanian law are general and are not in best parties’ interest in case of litigation.  The law provides special measures for rights protection or assets recovery based on the contract agreed upon by parties in writing.

Good standing, Solvability and Legal Authority to sign  Check the Trade Register certificate, which includes the good standing, any insolvency and criminal records and the empowered representatives;  Check the solvability accessing the financial situations and public debts from the Ministry of Finance site and in copy from the Trade Register;  Check the legal authority, asking Power of Attorney, ID and company docs.

Protect the property right  In the sale contract the seller transfers or agrees to transfer the property in goods to the buyer for a price. The property right transfer may be delayed at a later date. If one party becomes insolvent the question of who has property determines whether the other party joins the ordinary creditors or is able to claim the goods. In addition, since risk usually runs with property, who has property will bear the loss if goods are damaged or destroyed.

Insure the risks. Which party bears the loss or damage?  The general rule is that risk follows property: the owner of the goods bears any loss, irrespective of who has possession. The parties may agree that risk will pass before property is transferred, even the buyer has received only possession of goods, when payment is not made before delivery. Solutions for risks until payment are insurance of goods for risks or letter bank warranty granted by the buyer.

Protect against Force majeure  There is no law to provide the Force Majeure cases in Romania. The parties need to protect against contract blocking for an extended duration and cost or even against losing their rights.  Force Majeure is a clause which must be provided in contracts which frees both parties from contract execution and liability when an extraordinary event beyond the control of the parties, prevents the execution of the obligations under the contract.

Provide Force Majeure terms  The general accepted Force majeure events are the "acts of God" (fire, earthquake and similar). Depending on your interest, you may limit the Force Majeure cases or extend it to war, strike, legislative or authorities acts, utilities disruptions etc. Request the certification of the Force Majeure case by the Romanian Chamber of Commerce and Industry. Stipulate the termination of the contract after a determined duration of Force Majeure case.

Detail Acceptance procedure  Provide a clear and detailed procedure of goods acceptance and for objections remedy  Prepare and attach detailed warranty conditions and forms for acceptance  Determine fixed terms for acceptance after which the acceptance is considered granted  Do not deliver without acceptance forms and without invoice signed and stamped by the legal representative

FIX THE PRICE AND FEES  Determine the price in the contract or in an annex with the discounts and costs;  Depending on your interest, include or exclude taxes and fees for transport, delivery, customs, taxes, royalties etc.  Provide clause to protect against currency fluctuations or against price modifications;  Provide acceptance of invoice and products if not contested in a fixed term

LITIGATION AND CHANGES  Provide the competent court to rule the case and the applicable law. Depending on your interest, exclude or choose the Arbitration, a special complex procedure with higher costs.  Establish change request procedure and the applicable fees for supplementary or changes of services/products. Stipulate contract modification or transfer based only on parties written agreement.

Detail the Termination clause  Establish the automatic termination based on both parties agreement and in the legal cases. You may provide the automatic prolonging or the automatic termination in the expiration date.  Depending on your interest, you may provide the legal termination of the contract without any formalities and court intervention in specific cases or the termination upon granting notification and term for remediation.

Termination clause  Also, you may grant the option to unilaterally terminate the contract without any reason of fault or other, without paying any fees or after paying determined fees for the option;  Provide the continuation and payment of the actions under execution at the moment of termination.

Limitation of liability and penalties  A limitation of liability clause is a contractual provision that restricts or determines the amount of damages;  Limit or determine the value of the damages, except for the damages established by the law;  Determine clearly the liability of each party and exclude liability for damages which are indirect or collateral;

Limitation of liability and penalties  Provide a determined percentage or sum for the penalties or damages, and also the currency and payment exchange rate;  You may: -provide the responsibility for any non-execution due to any reason except for Force Majeure; -exclude the responsibility for damages which are not your exclusive fault, which are due to thirds or to fortuitous cases; -exclude the limitation of liability for negligence or breach.

Limitation of liability and penalties  Provide the retaining of the penalties with precedence from any payment ex contractu, unconditioned by invoice or notice issuing. Determine the sum to which it is applied, the term for calculation or a formula for the calculation. Provide the suspension of execution or the contract termination after the expiration of a period in which the other party is liable for penalties or is not executing its obligations due to reasons which are not exonerated from execution by the contract or law.