Impacts of Negotiation of International Contracts

If we are working with international contracts, we might face some additional issues and risks that are not present in domestic contracts. Negotiating global contracts entails paying some consideration to the global contracts as required in the domestic contract. If the party’s court will govern any disagreement in an international contract, then negotiating is the routine for the parties. But, most of the time, parties make English the governing law to compromise. The arrangement for jurisdiction is evaluative because of several reasons:

Legal processes

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Enforcement of judgments

Litigation expenses

Sometimes preferred administrative law or governing law is not accepted. In that situation, it is obligatory to have a second plan. International business transaction contract law can be significant because if variations in:

Legal heritage



For anticipating better how provisions of the other party’s contract can be interpreted, the parties should choose a governing law that is acceptable to each other. For example, domestic contracts are administrated by the Uniform Commercial Code (UCC) in the majority of the U.S states, while agreements direct global contracts for the worldwide Sale of Goods. Normally more than one party is involved in the international contracts, and each party must be identified, and its obligations sketched out to minimize any risks.

The international contract contains a dispute resolution section.

This section should be explaining the rights and remedies for the parties involved in the international contract.

The arbitration clause is a clause that specifies the resolutions for the dispute, so this clause should be included.

Without creating the material breach (materially breaking the contract), how to terminates. Its step should be included.

A force majeure should be included, allowing the party to be released from its responsibility of an international business transaction contract if the situation goes out of control like a natural calamity.

Shipping and payment terms should be included.

The language in which the arbitration is conducted should be included.

A section that covers the requirement to agree with applicable law should be included.

Types of International Contracts

Some examples of international contracts are:

International Distribution Agreements

Intellectual Property Licenses

Letters of Credit

Franchise Agreements

Joint Venture Deals

Global Sales representative Agreements

Development Contracts

Supply Agreements

Investment Agreements

International agency contract

International services contract

International strategic alliance contracts

International franchise contract

International manufacturing contract

Applicable Law
There is a higher degree of risk and instabilities in international contracts’ operations compared to domestic contracts. In a domestic contract, both the involved parties are from the same country. The following reasons justify this:

Difficulties while collecting the information from the other involved party

Difficulties in drafting and fulfillment of the international contracts

Difficulties in commercial practices in each country

Cultural differences regarding the negotiation in both the countries

Because of these reasons, international contracts and especially international sale contracts must have an applicable law. Companies should be aware of applicable law while drafting international contracts. Applicable law establishes which law, court, tribunal, and jurisdiction should negotiate within the case of breaches of the contract. Both the parties can select the law which they wish to administer the contract between them, but it should not be contrary to the public policies of the place where the contract is signed. If the parties cannot select the applicable law or the law is contrary to the public policies, then the court that listens to the case will decide the applicable law for their contract. Most countries give this flexibility to the court to select the most appropriate lawyer for their contract. Applicable law includes detailed information on how the contract should be regulated and interpreted legally; this law is important mostly when:

If the residence of the involved parties is in a different country.

The goods of each party are in their country.

If the commercial transaction is subject to legalization from other parties’ countries.

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