1. What are the major risks faced in international trade?

 Credit Risk,
  Intellectual Property Risk,
 Foreign Exchange Risk,
 Ethics Risks,
 Shipping Risks,
 Country and Political Risks

2. What are the different ways of accessing foreign markets?

 Joint Venture
 Licensing Agreement
 Exporting Directly
 Online Sales
 Purchasing Foreign Assets (Brownfield Investment)

3. What is the role of contracts in trade? What is the difference between a valid, void, void able,
unenforceable or illegal contract?

Ans. The contract ensures the buyer his rights in securing the goods and ensures the seller his rights in
collecting payment for those goods.

Void Contracts
Features of a void contract

 It's not legally enforceable.

 It imposes no obligations on the parties.
 It fails to create legal rights.
 It's against the law.
 Neither party shall receive compensation.

Voidable Contracts
Voidable contracts have the following features.

 One or both parties has the option to enforce it.

 A party that's been defrauded, coerced, or misled into signing the contract can object to its
validity.
 Either party has the option to revoke consent.
 Contracts entered using undue influence, fraud, misrepresentation, or coercion are voidable
contracts.
Valid Contract
Valid contracts have all the required elements and are legally enforceable in court. A valid contract
creates legal obligations between contractual parties. It gives a party cause to compel another party to
do or not do something.

Parties are legally responsible for performance in the contract. If one party commits breach of contract,
the other can take the case to court.

Unenforceable Contract
An unenforceable contract is a contract which cannot be enforced in a court of law. This could happen
because the terms of the contract are ambiguous, if one party has a voidable contract or if the Statute of
Limitations has expired

Illegal Contract
An illegal contract is a contract that was made for an illegal purpose and, consequently, violates the
law. Contracts are illegal if the performance or formation of the agreement will cause the parties to
engage in activity that is illegal

4. What is the significance of the Sale of Goods Act and explain how it protects a consumer?

Ans. The Sale of Goods Act applies to any contract where one person sells goods to another. From a
teapot to a car, the goods in question can be any kind of personal property. These contracts of purchase
and sale don’t have to be and often aren’t in writing. Most of the time they are verbal or implied from
the conduct of the buyer and seller. Contracts generally contain terms and conditions. These can either
be express, meaning that they’ve been discussed and agreed by the parties, or implied, meaning that
they are automatically inserted into the contract by operation of law.

How it protects a consumer

 The Act deems that many rights are part of a sale of goods contract, regardless of what the
parties have (or have not) agreed on. These are called “implied terms”. These terms cover the
quality of the goods sold and the seller’s right to sell the goods.
 The Sale of Goods Act gives consumers certain remedies if the seller breaches the rights given
under the Act. The Act talks of rights that are “conditions” and rights that are “warranties”

5. What is ‘caveat emptor”, Discuss any limitations on its application?

Doctrine of Caveat Emptor

The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act. It translates to “let the buyer
beware”. This means it lays the responsibility of their choice on the buyer themselves.
Limitations
 Fitness of Product for the Buyer’s Purpose
 Goods Purchased under Brand Name
 Goods sold by Description
 Goods of Merchantable Quality
 Sale by Sample
 Sale by Description and Sample
 Usage of Trade
 Fraud or Misrepresentation by the Seller

6. What are common methods of making or receiving payment in international trade and the
pros and cons of each.

Methods
 Cash-in-Advance
 Letters of Credit
 Documentary Collections
 Open Account

Cash in advance
Pros

 Payment before shipment

 Eliminates risk of non-payment

Cons

 May lose customers to competitors over payment terms

 No additional earnings through financing operations

Letters of credit
Pros

 Safely expand business internationally

 Highly customizable
 Seller receives money on fulfilling terms
 Works as a credit certificate for buyer
 Quick to execute for creditworthy parties
Cons

 Time-consuming formalities
 Possibility of misuse – fraud risk
 Currency risk
 Time bound
 Risk of default by issuing bank

Documentary Collection
Pros

 Bank assistance in obtaining payment

 The process is simple, fast, and less costly than LCs

Cons

 Banks’ role is limited, and they do not guarantee payment

 Banks do not verify the accuracy of the documents

Open Account
Pros

 Very low-risk option for your customer, since they receive the goods before paying for them.
 Offering open account terms will make you more competitive

Cons

 The biggest risk with open account is getting paid late, or not getting paid at all.
 If the customer doesn’t pay, you may also incur costs trying to collect on the debt in addition to
the loss.