Trade between companies

Always prepare a contract regarding the transaction with the other Party. The contract should cover all the details of the transaction as unambiguously as possible. The contract should also include matters related to cancelling a sale because cancelling sales between companies is difficult and requires very weighty reasons.

If possible, the contract should be in writing. In the event of a dispute, you can use a written contract as evidence of what was originally agreed. However oral contracts are also binding. Note also that a contract made by email may be binding even if the email is not titled as a contract.

Note that both parties must accept the contract for it to become legally binding. As a rule, neither party may cancel the contract or amend it unilaterally, either.

Review the regulations relating to business between companies and trade contracts in advance. The regulations include the Sale of Goods Act and the Contracts Act. If your company also undertakes foreign trade, familiarise yourself with the Contracts for International Sale of Goods (CISG) as well. Note that the Consumer Protection Act does not apply to contracts between companies.

You can also find templates for contract documents online, and the members of the Federation of Finnish Enterprises have access to a document bankOpens in a new window.. If necessary, ask an external expert, such as a lawyer, for help in drawing up contracts.

Always check the reliability of the new trading partner. Check, for example, whether the company is entered in the prepayment or VAT registers. Also check whether the company has any payment defaults and other credit data.

Specify and clarify in advance the details and characteristics of the transaction. Consider how responsibilities should be divided between the Seller and the Buyer.

The form and contents of the contract depend on what it applies to. The contract can often be freeform. In some cases, however, the law may specify the form of the contract, for example, for property sales.

In many sectors such as construction, standard contract terms and conditions have been drawn up to facilitate the conclusion of contracts. The need for them is highlighted in international trade where the different jurisdictions of various countries may cause problems.

If the trade involves the transport of goods, delivery terms should be included in the contract. Among other things they define the sharing of costs and the transfer of risk between the Seller and the Buyer. The most common delivery terms and conditions are Incoterms 2010  and Incoterms 2020 used in international trade, and Finnterms 2001 used in domestic trade.

However, if you include Incoterms in the contract, you should fully understand their content. Otherwise, there may be misunderstandings if you simply refer to a specific term.

Agree the division of responsibility with the other party separately in the sales contract.  If the contract does not contain separate terms regarding responsibility, the provisions of the Sale of Goods Act and the CISG will apply.

Under the Sale of Goods Act, the seller is generally responsible for the costs arising from the goods before they are transferred to the buyer. Responsibility for the goods is generally transferred to the buyer at the moment of the transaction.

If, for reasons independent of the seller, the goods are destroyed, lost, degraded or reduced during transport, the buyer must generally still pay the purchase price.

If the goods are faulty, the Buyer can demand that the fault be repaired, new goods be supplied or the price be reduced. The Buyer can also cancel the transaction and demand payment of damages. The Buyer shall, however, notify the Seller about the fault within a reasonable period of time. The sales agreement should also include terms related to complaints, at least the deadline for a complaint between the parties.

If transport of goods is part of the transaction, use delivery terms and conditions. They define, for example, at what point responsibility for transport of the goods is transferred from seller to buyer.

The starting point for concluding a contract is that both parties undertake to comply with it. If the contract is not observed, the consequence is a breach of contract.

A breach of contract occurs, for example, if the buyer does not pay the purchase price. In that case, the Seller can cancel the contract and claim damages and interest. You can also cancel a contract, if the buyer does not collect or accept delivery of the goods. If the Buyer has not notified you in such a case, you can also demand damages.

Similarly, if the Seller fails to supply the goods, as the Buyer you can cancel the contract and claim damages.

Failure to comply with the contract should nevertheless be accepted if the reason is force majeure (an unforeseeable and overwhelming barrier), such as natural disasters or a general strike. It must also be accepted if the terms are unreasonable for the other party.

A force majeure clause and a condition determining how the contractual parties must act if force majeure is invoked may be recorded in contracts. In the event of force majeure, it is therefore necessary to first consider what has been agreed on the matter in the contract. However, force majeure may be invoked in accordance with the general principles of contract law even if the contract does not mention this.

It is also not necessary to observe a contract if it is not binding. It may not be legally binding because of an error in the form of the contract or because it is contrary to the law. It may also be due to the fact that one Party does not have the right to express their will in legal matters.

In principle, the invalidity of a contract will enter into force by invoking it. The majority of the grounds for invalidity are such that invalidity can be rectified. Rectification may take place and the contract may become valid, for example, if the injured party later accepts the invalid contract. Invalidity may also be rectified if it is not invoked within a reasonable period of time. 

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