Drafting Guidelines for International Business Contracts
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When drafting international contracts, it's crucial to follow best practices to reduce risks, avoid disputes, and ensure cross-border cooperation and enforceability. Here are some key considerations:
Prevailing Language
To avoid interpretation disputes and enforcement challenges across jurisdictions, it's essential to specify the contract language clearly and consistently. Explicitly designating the contract’s governing language is essential.
Use of Simple English
Employing clear, precise, and unambiguous language is vital to reduce the risk of misunderstanding or disputes. Avoid vague terms by defining key terms consistently across the contract.
Specification of Terms
Clearly define all important terms, responsibilities, rights, deliverables, timelines, and consequences for non-performance. Use defined terms and ensure consistent application throughout the contract to enhance clarity and enforceability.
E-Signature Validity
While specific guidance may vary, e-signature validity in international contracts generally depends on the laws of the governing jurisdiction. It is best practice to explicitly state the acceptance of electronic signatures in the contract to avoid future disputes. Consult local counsel to verify enforceability per jurisdiction.
Governing Law and Jurisdiction
Clearly specify which jurisdiction’s law governs the contract and which courts or forums have authority over disputes. This reduces the risk of parallel proceedings and forum shopping. Choose neutral venues and consider arbitration clauses for dispute resolution.
Non-Appearance Based Arbitration
Including arbitration clauses with clear procedural rules and specifying languages for arbitration ensures neutral, efficient dispute resolution without requiring physical appearances, which is common in international contexts.
Force Majeure Clauses
Customize force majeure provisions to the particular legal environment and potential risks relevant to the jurisdictions involved. These clauses should detail excusable delays or non-performance due to unforeseen events and be clear to avoid ambiguity or invalidity in different legal systems.
Hot-Button Provisions
Clauses such as indemnities, confidentiality, intellectual property rights, termination rights, and limitation of liability must be carefully tailored to local laws and customs because a globally standard clause may be unenforceable or cause friction in diverse jurisdictions such as those in Asia-Pacific.
Engaging local counsel early during drafting is strongly advised to ensure enforceability and appropriateness of clauses for the jurisdictions involved, particularly in regions like APAC where legal systems vary widely.
In some countries, e-signatures have specific requirements, such as Russia's simple and reinforced e-signatures. The American Arbitration Association offers a non-appearance based arbitration clause in their online clause builder. Using simple English in contracts helps ensure they are easily understandable.
What is considered "reasonable" can vary between countries, so it's important to specify terms. Hot-button provisions vary between jurisdictions and industries, but it's important to double check the other jurisdiction's treatment of disclaimer of warranty, limitation of liability, and non-compete clauses. The Governing Law and Jurisdiction should be stated in the contract to avoid having to go to a foreign country for disputes.
Certain common issues are often contested in international tech contracts, such as software licensing issues in Europe and Japan. These best practices lead to contracts that are more likely to be enforceable and less likely to result in disputes, facilitating cross-border cooperation.
In the context of international business, it is essential to clarify the jurisdiction's law that governs software licensing, such as in European and Japanese markets, to minimize disputes. In finance, when drafting international tech contracts, specifying the governing law and jurisdiction decreases the risk of having to litigate in a foreign country.
