Whether you’re new to global business or a veteran professional, the importance of getting a contract right can’t be overemphasized. A solid contract can help avoid disputes and possible litigation, both of which are especially risky and costly when selling internationally. When negotiating an international business contract, be sure to:
- Identify the parties to the contract. If affiliated companies, agents or representatives are involved, the contract should include them as well.
- Specify the law that governs the contract. The business laws of a foreign market will always differ in at least a few ways, which can lead to disagreements over what a clause in a contract means. To reduce the likelihood of a dispute, the contract should specify which country’s laws will govern the agreement.
- Draft a comprehensive contract. It must include all the essential terms that the parties have agreed on, since leaving one out may lead to disputes.
- Draft all parts of the contract so that it is clearly written and readily understood by all parties. Ambiguous language in a contract invites disagreements and litigation.
Basic contract clauses and terms
To avoid misunderstandings when developing an international business contract, it’s important to understand basic contract clauses and terms.
There are certain basic elements that all international contracts should include. For example, contracts should include statements regarding the language and legal system that governs the contract, as this will be crucial if the contract ever needs to be disputed.
Elements to address in an international contract