Risks of Online Contracts with Suppliers Without On-Site Verification

The use of electronic technologies in business is becoming increasingly popular. Concluding a sales contract online saves significant time and money, especially if your counterparty is located in another part of the world. However, this approach carries numerous risks.

Working “blindly,” instead of enticing prospects and revenue growth, you can run into serious problems. And it doesn’t matter what customs regime your transaction falls under. Without preliminary on-site verification, difficulties are possible both when exporting and importing any product. Therefore, it is necessary to have at least a general idea of the types of risks and the consequences they can lead to.

Common Risks of Online Transactions

It is extremely difficult to describe all the “pitfalls” associated with concluding contracts online within the framework of one short article. Therefore, we will consider only those risks that, according to TrekTender specialists, are the most common.

• Lack of preliminary verification of the partner: Not knowing your counterparty and working remotely, “on trust,” an entrepreneur risks being deceived. There are many scammers abroad. Recently, under the conditions of sanctions, this issue has become very acute. Now, no serious company enters into supply contracts without checking its partner for reliability.

• The characteristics and quality of the goods do not correspond to those specified in the electronic contract: This is quite possible, for example, when the supplier decided to “dump” a defective product on you or indicated deliberately false information in the advertising brochure. Disputes often arise regarding the declared product items, weight, number of storage locations, assortment, packaging, labeling, and other indicators.

• The risk of non-fulfillment of the terms of the contract for the supply of paid goods or the right of ownership to it: A situation where your supplier has already received an advance payment and now, for some reason, is delaying the delivery or transfer of the necessary documentation.

• The absence of a written agreement on the possibility of concluding transactions in electronic form may be the reason for substituting the concept of “subject of the transaction.” However, often the delivery is a one-time event, made, for example, as an experiment to assess the buyer’s reaction to a new foreign product. In this case, companies do not complicate their work by concluding any preliminary agreements. Such operations do not contradict the law, but require strict on-site verification, since one of the parties to the transaction essentially buys a “pig in a poke”!

• The absence of the right to an electronic signature of the person concluding the transaction may subsequently lead to various negative consequences, especially if the delivery of goods is made on the basis of an advance payment.

• Incorrectly drawn up sales contract: Internal product codes and electronic document forms in different countries may differ significantly, as well as the state language in which they are filled out. Working over the Internet, you can order something completely different from what you need, choose the wrong configuration, payment terms, delivery terms, etc. On-site verification will help you take all these factors into account and avoid disappointment from a bad deal.

• In the process of concluding an electronic contract with a foreign supplier, misunderstandings, discrepancies, or misinterpretations of the provisions of the transaction may arise. In this case, a preliminary on-site check will help determine the concepts and compliance with the legislation of both countries.

• Under the conditions of international sanctions, another problem has arisen. When drawing up an electronic contract, it is necessary to know whether the subject of the upcoming transaction is “under restrictions.” Is the counterparty itself subject to sanctions? Has the government of this country introduced any special requirements of its own in connection with known events? Often this information can only be found out by conducting a preliminary check.

In conclusion, only due diligence and on-site verification of all the terms of the online contract can guarantee your protection from losses or even disappointment. TrekTender employees will verify the reasonableness of the transaction, clarify its legality, details, consequences, and other aspects, as well as inform you about all possible risks. We are able to provide reliable protection of your rights and interests.