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Contracts in international trade

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2012/07/01
Location : USA, Allentown

International contracts usually present a challenge to international traders. This articles gives an overview on enforceability of cross-border agreements. International contracts are still considered to be a complex and mysterious subject for lawyers who do not have experience or training in cross-border transactions. This is even more concerning for business people, to whom the basic principles of contract law, and particularly cross-border contracts, are completely unknown.

In the case of contracts between companies from the same country (domestic contracts) the rules governing the agreement will usually be those provided by the national law of the parties and the local courts having jurisdiction in event of a dispute. The scenario changes when a contract is classified as ''international''. There are various elements that would define one as such, but the most common could be the fact that the contracting parties are in different countries. Cross-border contracts are fast becoming a common practice for most traders, yet very few of them are adequately protected.

Most lawyers tend to consider international contracts as local contracts (in line with their home jurisdiction) as most do not have the appropriate expertise to deal with them. The two main issues arising in relation to international contracts are those regarding the applicable law and jurisdiction. These arise due to the absence of an adequate legal framework for cross-border transactions. Conflict of laws or private international law (the latter usually named as such by civil law countries) are the set of rules that nations will constitute and build in order to protect its sovereignty but at the same time allowing interference of foreign rules into its own jurisdictions so that certain matters can be adequately dealt with in line with legal principles. In this case specifically, international trade and commerce between countries. Conflict of laws (private international law); valid choice of applicable law; hardship clauses; enforceability of a contract; valid choice of language; Convention on Contracts for the International Sale of Goods; are all examples of issues that one might face when negotiating these type of contracts.

Contracts may have no effect at all if the points above and/or other principles are ignored. An example would be the fact that certain local courts, depending on the country, might strike out the content of an entire contract simply because the choice of language isn''t properly defined or the official language isn''t provided in the body of the agreement. That''s why it is extremely important that businesses get the appropriate legal assistance when trading internationally. Expert lawyers should always be considered when your scope of work includes countries outside of your jurisdiction.

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