In Finance, what are Terms of Delivery?

Terms of delivery are the provisions found in a purchase agreement transport contract that relate to the process of delivering goods and services to a buyer. These terms identify the responsibilities of both the seller and the buyer as they related to the delivery process. In many nations, the terms of delivery are regulated by specific laws that are intended to protect the interests of both parties in the sale, as well as ensure there is relatively little room for any type of misunderstanding about the responsibilities of each party.

Often, the terms of delivery are included as a clause within a sales or purchase contract. There are several key factors related to the shipment and receipt of the purchased products that are addressed specifically within the terms. One has to do with the means of delivery that will be utilized. In some contracts, this focusES on a broad identification, such as specifying that the products will be shipped overland, via a common carrier. Some terms of delivery will be more specific on this point, identifying the specific trucking firm that will pick up the products, any trucking companies that will be interlined with the shipper to manage the delivery efficiently, and any charges that are associated with the general process of the delivery.

Along with identifying the means whereby the products are shipped, it is not unusual for the terms of delivery to also include a specific delivery date. Depending on local law and the terms of general contract between the buyer and seller, this delivery date may be firm, with some provisions for rendering compensation to the buyer if the shipment does not arrive in time. When this is the case, the terms of delivery will often identify specific actions that could occur, but are outside the control of the seller or the shipper, such as natural disasters, transportation strikes, and other events that could slow the transportation process in general. The terms often identify at what point in the shipment process that the seller relinquishes responsibility for the items, and the buyer assumes responsibility for the delivery, a term that is becomes very important should a loss of merchandise occur.

Terms of delivery are also likely to include information about the location where the products are to be delivered. In some cases, the contract will also include a time range on the delivery date. This provides the buyer with some idea of what time of day to expect the delivery. For example, the terms may state that the delivery will take place sometime between noon and 5:00 p.m. by local time. Thus, the buyer knows that he or she can plan to handle other matters prior to noon with no worries of missing the delivery, and arrange the afternoon so that it is possible to break away from other tasks in order to accept the delivery.

Transportation laws govern the terms of delivery that apply to national as well as international delivery situations. Within a country, regulations drafted at the national and local level are used to formulate working delivery terms. On an international scale, delivery procedures that are known as international commercial terms, or Incoterms. Incoterms are drafted by the International Chamber of Commerce, an organization that includes hundreds of thousands of businesses located in over 130 countries around the world.