CCNP International Contracts 3 — Questions and Answers
Question 1: A force majeure clause in an international contract typically requires which of the following for a party to be excused from performance?
- The event was unforeseeable, beyond the party's control, and unavoidable (Correct answer)
- Any event that increases the cost of performance by more than 10%
- A government declaration of emergency in the seller's country
- Written notice within 30 days of contract signing
Correct answer: The event was unforeseeable, beyond the party's control, and unavoidable
Force majeure requires proof that the event was unforeseeable, beyond the affected party's control, and could not have been avoided or overcome.
Question 2: Which of the following best describes 'sovereign immunity' as a concern in international contract negotiations?
- A government entity may claim immunity from suit in foreign courts (Correct answer)
- Foreign companies are immune from US antitrust laws
- Diplomatic personnel cannot be named in contracts
- State-owned enterprises enjoy tax immunity on contract payments
Correct answer: A government entity may claim immunity from suit in foreign courts
Sovereign immunity allows a state or state entity to claim protection from foreign court jurisdiction, making collection of judgments difficult.
Question 3: In a contract between a US buyer and a German seller, the CISG would apply automatically unless:
- Both parties expressly exclude it in the contract (Correct answer)
- The contract value exceeds $1 million
- The goods are classified as consumer goods
- The contract is governed by New York law
Correct answer: Both parties expressly exclude it in the contract
The CISG applies automatically between parties in contracting states but can be excluded by the parties' express agreement.
Question 4: An anti-bribery clause in an international commercial contract is primarily included to ensure compliance with:
- The US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act (Correct answer)
- OECD Model Tax Convention requirements
- International Chamber of Commerce arbitration rules
- WTO trade facilitation obligations
Correct answer: The US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act
Anti-bribery clauses reflect compliance obligations under the FCPA and UK Bribery Act, which impose liability on companies for corrupt payments to foreign officials.
Question 5: When negotiating payment terms in an international contract, a 'documentary letter of credit' primarily benefits the:
- Seller, by ensuring payment upon presentation of compliant documents (Correct answer)
- Buyer, by guaranteeing product quality before payment is released
- Carrier, by securing freight charges independently
- Insurer, by capping the seller's insurance obligation
Correct answer: Seller, by ensuring payment upon presentation of compliant documents
A documentary letter of credit protects the seller by guaranteeing bank payment once compliant shipping documents are presented.
Question 6: Under ICC Incoterms 2020, which term requires the seller to clear goods for export AND import, paying all duties at the destination?
- DDP (Delivered Duty Paid) (Correct answer)
- DAP (Delivered at Place)
- CIP (Carriage and Insurance Paid)
- FCA (Free Carrier)
Correct answer: DDP (Delivered Duty Paid)
DDP places maximum obligation on the seller, including export and import clearance and all duties at the named destination.
Question 7: A 'most-favored-nation' (MFN) clause in a bilateral commercial contract means that:
- The party will receive terms no less favorable than those given to any other contracting party (Correct answer)
- The foreign government guarantees preferential tax treatment
- The contract is automatically renewed on the same terms each year
- Dispute resolution is handled by an international tribunal
Correct answer: The party will receive terms no less favorable than those given to any other contracting party
An MFN clause contractually guarantees that a party will receive at least the same favorable terms extended to any third party.
CCNP International Contracts 3
A force majeure clause in an international contract typically requires which of the following for a party to be excused from performance?