Fostering Agreements for Global Commerce: Suggestions for Drafting Contracts
In the dynamic world of business, crafting and negotiating international contracts requires careful consideration and attention to detail. Here are some key factors to keep in mind when drafting and negotiating such contracts.
The Importance of Clear Communication
Clear and simple language is crucial in international contracts. While English is commonly used, it's essential to confirm if local law requires a national language version or certified translation. Using straightforward and easily understandable English helps reduce ambiguity and facilitates interpretation by parties and courts/unions in different countries.
Precise Specification
To avoid misunderstandings, it's important to describe the goods, services, or obligations in detail. Technical specifications, deliverables, and quality standards should be included, especially for product or software contracts.
E-Signature Validity
Ensure that electronic signatures are valid and enforceable under applicable laws in the relevant jurisdictions. Many countries recognize e-signatures, but local requirements may vary and need to be addressed explicitly or supplemented by hard copies where required.
Governing Law and Jurisdiction
Clearly state which country’s laws govern the contract and where disputes will be resolved. This choice helps minimize legal uncertainty. Parties may select a neutral jurisdiction with a robust legal system familiar to international business.
Arbitration Clauses
Include arbitration clauses specifying that disputes will be settled by arbitration rather than litigation. This provides confidentiality, neutrality, and enforceability, and non-appearance or remote arbitration provisions can allow resolution without physical presence, useful in international contexts.
Force Majeure
Define force majeure events (e.g., political instability, natural disasters, pandemics) that excuse performance delays or failures and outline remedies such as extensions or contract termination. This provision is particularly important in international trade to manage unforeseen global risks.
Hot-Button Provisions
Address issues like compliance with trade sanctions, anti-bribery laws (e.g., US FCPA, UK Bribery Act), data protection regulations (GDPR, CCPA), intellectual property rights ownership, tariff adjustments, currency and payment terms to manage cross-border risks. For example, inclusion of a tariff adjustment clause can protect parties against increased costs from regulatory changes or tariffs.
Best Practices
Verify the legal capacity of foreign parties, include clear IP ownership and usage restrictions, and tailor contracts to local compliance requirements rather than relying solely on domestic templates.
The Template for Asset Sales
The template for Asset Sales can be a valuable tool in the era of globalization. It helps unlock value from underutilized assets and enables strategic realignments. This template is also useful for businesses seeking growth and diversification opportunities in foreign markets. An Agreement for Asset Sales from a US Company to a Foreign Entity is available as a template.
For more guidance on international contracts, consulting professionals familiar with cross-border transactions is highly recommended to mitigate risks and ensure enforceability.
In the realm of software licensing, it is imperative to include precise descriptions of deliverables and quality standards to avoid misunderstandings. Also, the financial aspect of these contracts should consider the enforceability of electronic signatures and governing laws that address issues such as tariff adjustments, currency, and payment terms.
