Inside the SPA: the clauses that decide the deal

Every step before the SPA is preparation. The SPA is the deal. It is the one document an arbitrator would read if something went wrong, and everything the parties actually owe each other lives in its clauses. A buyer who skims it is trusting the seller to have written it fairly. A buyer who reads it, with a lawyer, is doing the single most valuable hour of work in the whole transaction.

• Product and specification, with tolerance. Not just ICUMSA 45, but the colour, polarisation and moisture, and the tolerance band around each, so a marginal result is accepted or rejected by a rule rather than an argument.
• Quantity, with the permitted variation, often a plus or minus percentage, and who declares the operational tolerance.
• Delivery: the Incoterm, the named port, and the laycan or shipment window.
• Inspection: which agency, what scope, whose result is binding, and who pays.
• Payment: the instrument, the bank, the documents required and the presentation terms under UCP 600.
• Guarantees: the performance bond, its amount and its trigger.
• Default and remedies: what happens if either side fails, and what it costs them.
• Force majeure, and the governing law and dispute forum that decide where and how a disagreement is settled.

The clauses that prevent disputes are the dull ones about tolerance. A specification without a tolerance band invites an argument the day an inspection returns 46 IU instead of 45. A quantity without a permitted variation invites an argument when a vessel loads 24,900 tonnes against a 25,000 tonne contract. Good contracts settle these edge cases in advance, in writing, so that nobody has to negotiate under pressure with cargo already on the water.

The SPA is binding from signature. There is no informal stage after it, and whatever it says is what you are owed and what you owe. That is why the buyer's legal and compliance teams should review the full document, not a summary, before anyone signs. It is also why a seller who resists letting your lawyer read the whole contract is not a seller you should be signing with.