3/8/2017 InternationalLaw&Contracts

InternationalTrade
Advertisement
Advertisement

InternationalLaw&Contracts
TheLegalDimensionofInternationalTrade

Lawscoveringtradebetweenbusinessesindifferentcountrieshaveexistedsincethelawmerchantwasbornin
themedievalperiod.Asbusinesshasgrownacrossnationalbordersandbusinessrelationshavedeepened,the
legaldimensionofbusinesshashadtofollowsuit.Allcommercialtransactionsacrossbordersexistwithinthe
frameworkofnationallegalsystems.

Lawexpandsintoalmostallaspectsofbusinessandcanconstrainbusinessactivities(i.e.applyingforplanning
permission)butalsoenablethem(i.e.applyingforpublicfunding)andactstoprotectworkersrights,consumer
protectionand,morerecently,dataprotection.

Lawcanbeclassifiedintotwocategories:

publiclaw,concerningrelationsbetweencitizensandthestate,and
civillaw,concerningrelationsbetweenindividualsorcompanies.

Governmentshaveslowlyrealizedtheirlimitationsforregulatinginternationaltransactions,notablyinthecase
ofecommercewhichhasfaroutpacedthedevelopmentoflawneededtocoverit.Globalizationhasledtoa
weakeningoftheallpowerfulstateaswellastheintroductionofanewbodyofinternationallaw.

Definition

Contractlaw:Anagreementmadebetweentwoormorepartieswhopromisetoperformortonotperform
specifiedacts,whichagreementcreatesforeachpartyalegaldutyandtherighttoseekaremedyforbreach
ofthatduty.Itfallsunderthecategoryofcivillaw(concerningrelationsbetweenindividualsorcompanies),
althoughthestatecourtsmayintervenetosettledisputebetweenconflictingparties.

Inadisputeoveracontractthepersonwhohassufferedloss(aplaintiff)maybringaclaimformoney
compensationdamagesorarangeofotherremediesagainstthedefendantgovernedbythelawofthe
countrywhocarriesoutperformanceofthecontract,unlessspecifiedinthecontract.

Theformationofacontract

Mainpointsthatneedtobeaddressed:

Agreement:whodecidesthatanargreementhasbeenreached(objective/subjectiveapproach)
Offerandacceptance:offerofinvitation,displayofgoods,advertisementsetcleadingtoacceptance
Certaintyandagreementmistakes
Considerationandform
Intentiontocreatelegalrelations:domesticandsocial,commercialagreements
Thirdpartyrights
Thecontentofacontract:creationandclassificationofcontractualterms,exclusionclauses

Theroleofnationalcontractlawinaglobaleconomy

Nationallawsofcontractcontinuetoregulatethevastmajorityofcontractsthataremade.Englishlawis
reluctanttoaccedetoattemptstocreateaEuropeanoraninternationallawofcontracts.Theexplanationfor
thisisthatBritainhasagreattradinghistory,thecommoditiesmarketshavehadtheircentresintheUKfor
manyyearsandmanycontractsforthesaleofcommoditiesaregovernedbyEnglishlaw.Thethreatto
nationalcontractlawintheshorttermisrelativelylowyetismuchhardertoquantifyinthelongrun(seethe
internationalisationofcontractlaw)

Theinternationalisationofcontractlaw

Therearetwowaysofproceeding:

Theproductionofnonbindingstatementsofprincipleormodelcontracts
Theattempttoimposemandatoryuniformrulesontheinternationalcommunity

AnotableexampleinthefirstcategoryisprovidedbytheInstitutefortheUnificationofPrivateLaw(Unidroit)
whichpublishedastatementofPrinciplesforInternationalCommercialContracts.Theseprinciplesare
containedin120artcileswhicharenotintendedtobeimposeduponthecommercialcommunityasmandatory
rules,whichistheirbiggestweaknesssincetheycanbeignoredoramendedbycontractingparties,butseekto
bringaboutharmonisationthroughpersuasion.

Asnonbindingprinciplestheyserveasguidelineswhichitishoped,willbeadoptedbycontractingparties
worldwideaswellasbynationallegislatorsintheaimofupdatingtheirinternationalcommercialcontracts.The
UnidroitcontractsaresimilartootherstandardformcontractssuchasINCOTERMSasetofstandardtrade
termssponsoredbytheInternationalChamberofCommerce.Nonbindingprinciplesremainanuncertain
methodofachievinguniformity.

Thisiswhymanyarguethattheinternationalcommunityisinneedofgreatermandatoryrules.Themost
notableexampleofaninternationalconventioninthesecondcategoryisprovidedbytheUnitedNations
ConventiononContractsfortheInternationalSaleofGoods(TheViennaConvention).Onceithasbeenratified
bythestate,theconventionappliestoallcontractsfallingwithinitsscope,coveringcontractsforthe
internationalsaleofgoods.

TheUKwillnodoubtratifythisconventioninthenearfutureandmajortradingnationsincludingU.S.A.,
France,GermanyandChinaarealreadysignatories.

http://www.internationaltrade.co.uk/articles_print.php?CID=&SCID=&AID=30 1/3
3/8/2017 InternationalLaw&Contracts
Argumentstosupporttheseconventions

byensuringcommonstandardsindifferentnations,theypromoteinternationaltradedevelopment
contractingpartieshavegreaterconfidencewhendealingwithaforeignparty
suchuniformitymayresultinlowercostssince:1.thetimespentdecidingwhichlawshouldgovernthe
transactionisreduced.2.therewillbenoneedtospendtimeandmoneyattemptingtodiscovertherelevant
rulesprevailinginanotherjurisdiction.

Criticismoftheseconventions

uniformityiscontinuouslyhinderedsincenationalcourtsfrequentlyadoptdivergentapproaches(eitherliteral
orpurposive)totheirinterpretation
conventionslackclarityandcertaintysincetheyaredraftedintheformofmulticulturalpromisesaimingto
securemaximumagreements
thecommercialworldisconstantlyalteringandthelawmustadapttothemarketschangingneedsifitseeks
toefficientlyfacilitatetrade
aninternationalcodewhichisdifficulttoamendisunlikelytomeetthedemandsoftraders

Culturalfactorsininternationalcontracts

Negotiationofinternationalcontractsusuallyinvolvesuseofaforeignlanguage(foratleastoneoftheparties).

Commonproblems(linguistic):

Translatingtechnicalterms
TheCISGonlyexistsinsixlanguages(Arabic,Chinese,English,French,RussianandSpanish)unofficial
translationsmustbemadeforthosewhoneedthem
Interpretationoftermscandifferfromcountrytocountryevenforspeakersofthesamelanguage
Thecontractslegalobligationscanbemisunderstoodandinterpreteddifferentlybythetwopartieswhichcan
resultinadisputetobesettledincourt
Commonproblems(cultural)
Theroleofthecontractcanbevieweddifferentlyindifferentcultures
Relationalcontractingisrootedingrouporientedsocietieswherepersonaltiesbuiltontrustmattermorethan
writtendocumentsandwheretheprefferedmodeofsettlingdisputesisoutofcourt
Armslengthcontractinginwhichtheagreementisparamountisthenorminindividualisticsocietieswherethe
preferedmodeofsettlingdisputesisthroughlitigation

Contractualdisputes

Inthebasictransactionofbuying/sellinggoods,atleastoneofthecontractingfirmswillfinditsrights
governedbyforeignlaw,addingtothelegalriskinanumberofways.

1.Thedistanceandunfamiliarityofthelawandtheculturalenvironment
2.Thedangerofwhatcontractlawintheforeignjurisdictionstipulates
3.Thepossibilityofgoingthroughthecourtsintheforeigncountry
4.Theproblemsfacedofgettingaforeigncourtjudgementenforcedinthefirmsowncountry

Contractsbetweenfirmsbasedindifferentcountriesmayspecifyachoiceoflawtogoverntheircontracts,this
willalsodictatetheforuminwhichdisputedwillbeheld.

Litigationcanresultinextremelycostlydamagepaymentswhichthemselvesleadtoahighercostofliability
insurance.Additionallyitbringsundesiredbadpublicitytoafirm,especiallyinhighprofilecases.

Alternativedisputeresolutions

Outofcourtsettlementbytheparties
Mediation:theintroductionofathirdpartyinanattempttosettledifferences
Arbitration:thesubmissionofadisputetoanamedpersonororganizationinaccordancewiththeagreement

EUregulationsoncontracts

FormembersoftheEUtheRomeConventionprovidesifthepartieshavenotmadeaclearchoiceoflawthen
thecontractwillbegovernedbythelawofthecountrywhocarriesoutperformanceofthecontract.

InconsumercontractstheBrusselsConventiongivestheconsumertherighttosueinlocalcourts.N.B.This
willhaveprofoundeffectsforonlinetraderswhomaybeliabletobesuedinanyEUstatetheirproductsare
tradedin.

EnforcementofjudgementsarerecognizedautomaticallyintheEUsinceallstatesaremembersoftheCISG.

Noteforonlinetraders

Anonlinetradersellsgoodstoconsumersinmanycountriesfromonewebsite.Thegrowthofecommercehas
greatlyexpandedconsumerdealsacrossborders,changingthestandardbusinesstobusinesstransactions.It
isthereforecrucialfortheonlinetradertobefamiliarwithrelevantnationllawandalsofacethepossibilitythat
heisliabletobesuedinallcountrieswherehiswebsiteisaccessedandgoodsarepurchased.longchamp
soldes,raybanpascher,louisvuittonborse,tnrequinpascher,nikeairmaxtnpascher,scarpenike

In2000,adirectiveinElectronicCommercerecognizedtheneedforprotectionofconsumerrights.Partofthe
solutioninvolvedcomingupwithalternativewaystosettledisputes.AnoteworthyexampleisthecaseofDell
ComputersintheU.S.whohavedevisedasystemwherebytheconsumerhastoredresstoalocalofficein
caseofcomplaint.

Advertise|ContactUs|Sitemap|ConditionsofUse

http://www.internationaltrade.co.uk/articles_print.php?CID=&SCID=&AID=30 2/3
3/8/2017 InternationalLaw&Contracts

Websitedeveloped&deliveredbyMizu

http://www.internationaltrade.co.uk/articles_print.php?CID=&SCID=&AID=30 3/3