Sale contracts with the Incoterm DAP

In view of several cases managed by our law firm in which the use of the international commercial term DAP (Delivered At Place) has been of special relevance, in this article we will try to shed light on its origin and application.

As a global business organization, the International Chamber of Commerce (ICC) intends to provide the necessary practical tools to activate and simplify world trade through the use of standard terms that allow defining the rights and obligations assumed by of the parties to a sales contract, including those referring to the transportation of the goods from origin to destination. Incoterms or International Commercial Terms affect some relevant aspects of the commercial relation (sales contract) between seller and buyer, but they do not delimit the entire contents of said contract.

European and Spanish courts, to a greater extent the Spanish mercantile courts specialized in transport law, have been aware of the reality of the Incoterms and this is reflected in many resolutions. An example of this is the Judgment of the Court of Justice (EU) C-87/2010 of June 9, 2011, when it states: “In order to check whether the place of delivery is determined ‘according to the contract’, the national jurisdictional body that has knowledge of the matter must take into account all the terms and all the relevant clauses of said contract that clearly designate said place, including the terms and clauses generally recognized and enshrined by international commercial uses, such as Incoterms elaborated by the International Chamber of Commerce.”

DAP is one of the last terms incorporated in the publication “Incoterms 2010” issued by the ICC and, together with the term DAT, it replaces the previous DAF, DEQ, DDU and DES in order to adjust adequately to the current logistic reality. Consequently, as of 1st of January of 2011, date of entry into force of the aforementioned publication, the ICC reduced the Incoterms in use to eleven.

When the parties of a sales contract arrange the inclusion of the term DAP, they essentially agree, among other rights and obligations, that the seller-exporter will comply with its obligations by making available the cargo to the buyer-importer ready for unloading in the used means of transport  at the destination agreed in the contract; the buyer shall therefore be responsible for all expenses associated with the unloading of the merchandise from the means of transport used until destination, as well as for its clearance for importation. Since the seller will assume the organization and materialization of the transport to the place of destination agreed in the contract, he should make sure that this concrete place is duly specified in the sales contract since he runs with the risks of the cargo up to that point. Therefore, buying under DAP conditions will imply a lower risk for the buyer.

The DAP Incoterm is a multimodal term, which means that it can be used regardless of the means of transport used; therefore, its use is justified whether the goods are transported by road, sea, rail or air.

The knowledge and proper use of the terms of international trade is an indispensable part in international sales contracts and increasingly in those of national scope, since their national use has been extended for the benefit of transactions. It is a reality that has been gaining strength since the entry into force of the “Incoterms 2010”.

In short, receiving adequate advice at the time of closing and drafting sale contracts in relation to the Incoterms that best suit the needs of the parties, as well as in relation to the other relevant aspects to be agreed, is essential to protect the position of our clients and achieve the good end of any commercial transaction.