Trade terms, also called price terms or delivery terms, are an important component of a unit price in international trade, standing for specific obligations of the buyer and the seller. Every commercial transaction is based upon a sales contract, and the trade terms used in the contract have the important function of naming the exact point at which the ownership of merchandise is transferred from the seller to the buyer. The trade terms also define the responsibilities and expenses of both the seller and the buyer. The use of the trade terms greatly simplifies the contract negotiation, and thus save time and cost.