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Drafting Business Contracts

Why do you need a good contract?

You need good contracts when doing business in any country. Of course, if you are dealing with the right people and nothing unforseen happens business can still be done with no paper work at all and on the shake of a hand. But it is risky. Things do go wrong. Unforseen events occur and there is no guidance as to how they should be dealt with. You and your customer may have different recollections of what was agreed. It is not by accident that written contracts go back nearly as far as writing itself or that lawyers refer to verbal contracts as 'not being worth the paper they're written on'. [In case you are wondering, this is thought to be a huge joke!]

Most countries have adopted their own 'style' for business contracts. A US contract, for example, reads rather strangely to an English reader. Most of the words seem understandable - though some seduce you by having a meaning different from that which you would expect - but the way the content is set out and the content itself is different from a contract drafted in England. The differences between, say, a Turkish contract and an English or American contract are even more stark.

One of the most obvious differences is the language itself. The contract will, almost certainly, be written in the local language, not in English. Indeed, we believe that contracts should always be written in the language of the country in which the courts that will have jurisdiction to deal with any dispute are located. Although it may be legally permissible to write contracts in another language, it often creates untold problems and uncertainty if the case does have to go to court. You will be reliant upon a translation, sometimes of very doubtful quality, and the judge will be struggling with a contract written in a style with which he is unfamiliar and in a language which he cannot understand without the assistance of an interpreter.

Differences in style go deeper. What information is included in the contract? What is put where in the contract? Some of these differences are simply questions of style but others are much more important. Words can carry different meanings and carry different weight depending upon where in the contract they appear. Some of the differences in formality or style may reflect requirements of local law (for example, a requirement to sign on all pages or to attach a photograph to the document) with the result that certain omissions may render the contract unenforceable.

So, for these reasons, the contract needs to be well written in the right style for your business agreement.

But the most important reason that the contract needs to be well written is that it needs to contain, set out clearly and in a way which both you and the other party understand:

  • all of the key features of the agreement that you have made

  • how you will deal with the unexpected

  • how you will deal with any dispute that arises between the parties

  • which legal system will apply to the contract

  • which courts will deal with any dispute

All of these are more complicated than they might at first appear. We often find that we do not understand the notes of the agreements that are provided to us by our clients. Usually, if we don't understand them then - on reflection - they don't either! Having your bullet point agreement checked by lawyers and then put into the appropriate form of contract is, of iteself, a very useful safety mechanism that makes disputes less likely by making sure that both parties know what they are agreeing to. Even the choice of legal system and courts may not be straight forward as there are national and international legal rules that may limit your freedom of choice in this very important area. Remember that when you choose your system of law you are also, indirectly, choosing the remedies that will be available to you if things go wrong. Can the court order the other party to perform the agreement and force him to do so or is your only remedy compensation? If you have a remedy of compensation, how is to be calculated? Different countris do this very differently, with the result that circumstances that would justify a large award in one place might give rise to little or no compensation in another.

Drafting these international contracts needs the skills of a lawyer familiar dealing with international transactions. Our members in the country in question will be pleased to discuss your requirements with you and help prepare any necessary contracts and other business documents.

Drafting business contracts for use in another country requires a detailed knowledge of local law, local customs, local taxes and local business methods as well as the same level of knowledge about the law and tax systems in your own country. We cannot stress enough that it is the interaction - and sometimes conflict - between the two systems that creates most of the potential problems and many of the best potential opportunities for saving you time, trouble and money. The savings and improvements in business performance can be huge!

Next steps

Please look at the Legal Guides, videos, MP3 seminars and other materials set out to the right of this page.

If you would like us to help you, please complete our Client Pack and send it back to us. We will then contact you to clarify your requirements and then introduce you to the person most appropriate to deal with your case.

If you do not find the information that you need, please send us an email explaining your problem and we will contact you.

© The International Law Partnership Ltd. Page last revised 5 Feb 2010.

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