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Harry Trott

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Things to Know While Signing a Contract With An International Client

Drafting an international contract requires diligence. Here are a few points to look into while drafting the contract

How much time does your attorney spend drafting each of the contracts you sign with clients? Like it is with most businesses, it is very likely that you have a standard template that gets tweaked each time you bring in a new client to your business. This can be a risky proposition simply because no two clients are alike - and the same clause often gets interpreted in different ways by different clients. This is especially true for international contracts where the tone and wordings in the contract may not always get translated properly.

One of the popular illustrations of this is the ‘Act of God' clause that is often included in contracts involving western nations. The clause is used to indicate natural disasters like floods and earthquakes that are outside the control of either party. What happens if this clause gets challenged in a country that is predominantly atheist? More importantly, a number of disasters like earthquakes and floods have recently been attributed to human-initiated events. Would the violating party still get indemnified given that human-triggered activities don't fall under the purview of ‘Act of God'?

Drafting an international contract thus requires a great deal of diligence. Here are a few points that one must look into while drafting the contract.

Understand cultural context

Quite understandably, most international contracts get drafted in English or a language that is common to both the parties. Regardless of the language used, it is important to understand the cultural context of the terms being used in your contract. Similar to the ‘act of God' clause mentioned earlier in this article, many terms that are commonly used in American contracts may be foreign to a partner from a different country. It is important to make sure both parties understand the terms and phrases used in the contract to make sure that there is no miscommunication.

Identifying the jurisdiction

One frequent point of contention while signing international contracts is identifying the jurisdiction. It is reasonable for both parties to expect the contract to be held in their domestic jurisdiction. But as a general rule, contracts need to be signed in the jurisdiction where the service shall be executed. However, the jurisdiction of the contract is also determined by the power play between the seller and the buyer. A large business that is seeking service from a small service provider may want the contracts to be signed in the jurisdiction of their choice. In either case, make sure you understand the laws of the state and country where the contract is being signed as this can determine the validity of the clauses being agreed to.

Hire a local lawyer

While you may feel the need to go to your trusted lawyer while drafting the most important clauses in the contract, it is also a good idea to hire a second lawyer who specializes in the jurisdiction that the contract will be applicable in. This will enable your business to identify missed clauses that are deemed important in the specific jurisdiction. More importantly, a local lawyer can advise you on clauses that may not be enforceable in these foreign courts. A good example of this is the ‘non-compete' clause that is unenforceable in many countries across the world, including Chile, India, Russia, Mexico and Vietnam. Some countries are also known to impose a penalty for including such restrictive covenants in contracts. Be sure of what you are signing up for while choosing to sign your contract in a foreign jurisdiction.

International contracts can be overwhelming. But hiring a lawyer who is knowledgeable in the jurisdiction can make life easy for your business and is possibly the most important thing you must do while signing a contract with a foreign partner.

More Stories By Harry Trott

Harry Trott is an IT consultant from Perth, WA. He is currently working on a long term project in Bangalore, India. Harry has over 7 years of work experience on cloud and networking based projects. He is also working on a SaaS based startup which is currently in stealth mode.