Incoterms 2012 : codified mercantile custom or standard contract terms?
INCOTERMS® reflect the most dominant and consistent commercial customs and practices evident in international commerce. They are regularly updated to keep them in line with changing mercantile practice. However, over the years, several terms were added to represent practices which have not yet developed into mercantile usage or custom. In reaction to the latest revision of the INCOTERMS® rules, which has come into operation on 1 January 2011, one commentator concludes that INCOTERMS® now function as standard contract terms and no longer as mercantile custom or usage. This article addresses the legal nature of INCOTERMS® , with specific reference to the International Chamber of Commerce’s (“ICC”) revision methodology. In principle, INCOTERMS® function as contract terms. Whether they enjoy an autonomous existence apart from party agreement is a question that has not yet been answered conclusively. There is evidence that courts apply them as international trade usage or custom, especially in the context of article 9 of the United Nations Convention on Contracts for the International Sale of Goods (“CISG”). Scholars, however, disagree on whether INCOTERMS® in toto can function as international trade usage, especially when it comes to recently introduced rules. It is submitted that individual rules should not be evaluated in isolation, but that their legal nature should be determined with reference to the compilation as a whole. It is concluded that the more INCOTERMS® are used in a particular trade, they will become known and observed in that trade. In due course they will acquire the force of mercantile usage or custom which can apply independent of party agreement.