ICPO, LOI, SPA, NCNDA e IMFPA explicados

Why the acronyms exist

In commodity chats you will see a stack of acronyms: ICPO, LOI, SPA, NCNDA, IMFPA, FCO, POP and more. They describe documents that have become common in some parts of the trade. Their use varies by region, product and company, and the same abbreviation can cover documents of very different content. The sections below give a general picture. They are not templates.

ICPO: irrevocable corporate purchase order

A buyer's statement that it intends to buy a stated product, in a stated quantity, at a stated price and terms. The word irrevocable is a claim made by the sender, but what it means legally depends on its wording and on the law that applies. Sellers often ask for one to see that a buyer is serious. In practice many ICPOs are sent to many sellers at once, so they show interest, not a committed purchase.

LOI: letter of intent

A letter in which one party states its intention to enter into a deal on the terms outlined. It may be binding in parts, such as confidentiality, and non-binding in others. Read the wording to see which parts, if any, create obligations.

FCO and the sales offer

A full corporate offer, or FCO, is a seller's detailed offer: product, specification, quantity, price, delivery, payment terms and validity. Because it is a basis for a contract, a clear FCO saves time. Many chats use the phrase for offers of widely varying seriousness, so ask who signs it and what backs it.

SPA: sales and purchase agreement

The contract of sale. It sets out parties, product and specification, quantity and tolerance, price and currency, Incoterm and place, shipment period, payment terms and documents, inspection and testing, claims, governing law and a way to resolve disputes. Large trades often use a standard form of the trade association for that product, adapted to the deal. A lawyer or an experienced trade adviser should check the draft.

NCNDA: non-circumvention and non-disclosure agreement

An agreement in which parties promise not to go around each other, for example by dealing directly with an introduced contact, and not to disclose confidential information. It is used to protect introducers, who bring parties together and fear being cut out. Its limits are practical: courts differ in how they treat such clauses, and an NCNDA does not make a doubtful deal real. Be wary of requests to sign one before any information has been exchanged, especially a request that covers many unnamed parties across a long chain.

IMFPA: irrevocable master fee protection agreement

A document used in some parts of the trade to record the fee that intermediaries will receive if a deal closes, and to direct the payment. Terms vary, and its value depends on whether all the parties in the chain, including the actual seller and buyer, have agreed to it. A document signed only between brokers does not bind a seller who never saw it. Ask who signs and what the paying party has agreed to.

Other documents you may see

• POP, proof of product: documents showing that the seller has the goods. See the safety articles for how to verify them.
• POF, proof of funds: documents showing that the buyer has the money. Verify with the bank.
• Proforma invoice: the seller's invoice in advance of the sale, often used to open a letter of credit.
• Mandate: written authority from an owner to offer goods, covered in a separate article.

A sensible order

Documents that ask for a large commitment before the real parties are known are usually the wrong step. The sales contract is the document that matters. Others support it or protect an introducer's fee.

• Identify the real parties and check them.
• Exchange specification, offer and price in writing.
• Agree and sign the sales contract after review.
• Arrange payment security as the contract says.
• Inspect, ship and document.

Getting help

Ask a lawyer who knows international sales to review any agreement you plan to sign, and check the wording of every clause, including governing law and the way disputes are resolved. The glossary in the Learner's corner explains many of the other terms you will meet.

Preguntas frecuentes

Is an ICPO a binding purchase order?

It depends on the wording and the applicable law. In practice an ICPO usually shows interest and may not oblige the sender to buy.

Do I need an NCNDA to introduce two parties?

Not always. It is a tool some introducers use, and an introduction agreement or a fee agreement with the parties may be more effective. See the article on commission agreements.

What makes a sales contract enforceable?

Clear terms, authorised signatures and a governing law and dispute procedure. A lawyer can advise on the contract for your jurisdictions.

What is the difference between an LOI and an SPA?

An LOI states an intention and may be partly binding. An SPA is the contract of sale, with detailed terms for both parties.