contractual disputes in international businesses

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Contractual Disputesin International Businesses

Ana Caroline Melo

Jamille PinheiroSophie Ge



What is a contractualdispute?

A contract dispute occurs when any partyin a contract has a disagreementregarding any of the contract terms or

denitions. In order for a contract to bevalid, there must be a "meeting of theminds." This means that all parties needto have a solid understanding of every

contract term, and must be in mutualagreement as to the terms.



Why do contractualdisputes arise?



4

isputes are li!ely to arise over

• #ontractual terms$

• %icense agreements$

• In the area of tort, in which the rm either

alleges wrongdoing or is the defendant in

a negligence or product liability claim$



Contract Law

Contract law is the body of law thatgoverns contract enforcement when

one party feels the other has violated

the agreement



actors contri!utin"to contractual disputes

• Ambiguity of contractual terms due to language&translation.

'hilst many international companies are able and willing to

communicate in (nglish, it is unli!ely that they will be )uent,

particularly in relation to complicated technical or legal language.

• #urrency )uctuations. 'hat currency is to be used* 'hat

e+change rate will apply and how and when will it be calculated

i.e. who will bear the ris! of )uctuations in currency-* ow should

payment be made* oes the contract ta!e account of any

administrative delays in processing international payments*

• amage of goods during shipment. 'hat route will the goods

ta!e* 'hat documents will be re/uired for them to be delivered*

'ho will bear the ris! if the goods are damaged in transit* 'ho

will be responsible for obtaining import&e+port licences and

clearing customs*



International Le"alSystems

Common Law

• 0ased on a country1s legal history tradition-, cases

that have come before the courts in the past

precedent- and the ways in which laws are appliedin specic situations custom-$

• 2le+ibly interpreted by 3udges as it applies to the

uni/ue circumstances of each case$

• (ach new interpretation sets a precedent that may

be followed in future cases. %aws may be altered,

claried or amended to deal with new situations$

• #ontracts tend to be very detailed with all

contingencies spelled out$

4



International Le"alSystems

Ci#il Law

• 0ased on a very detailed set of written laws and codes$

• 5ystem tends to be very adversarial than a common

law system, since the 3udges rely on detailed legal

codes$

• %ess )e+ibility, 3udges only have the power to apply

the law$

• 5horter and less specic because many issues are

covered by civil code$

$heocratic law

• 0ased on religious teachings$

6



Which country%s lawsapply?

The 7nited 8ations #onvention on #ontracts for

the International 5ale of 9oods #I59- is a set of

rules governing certain aspects of the ma!ingand performance of commercial contracts

between sellers and buyers who have their

places of business in di:erent nations. Although

the #I59 aims to decrease cross;border legal

ris!s only 4 nations have ratied the

convention.

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Dispute &esolution• Traditional court;based litigation$

• Two main =esolutions

Ar!itration ; the third person assisting in the

resolution of the dispute is able to impose a binding

decision on the parties. They can determine the

procedure of the arbitration, its location, the applicable

law, the language in which the arbitration will be

conducted, the method of appointment of the

arbitrator$

Conciliation ; the third person1s role is limited to

ma!ing a non;binding recommendation

>?



Ad#anta"es andDisad#anta"es?



Liti"ation

• #ostly and time consuming$

•

@ay bring unwanted publicity if the case is ahigh;prole one

Ar!itration

• @ost countries will recognie and enforce arbitralawards without any further proceedings being

re/uired$

• 8either party has the Bhome advantageC$

• @ore nal than court 3udgements which are

sub3ect to appeal

Conciliation'

• 8on;binding, therefore parties can refuse$



Concerns a!out

contractual disputes inan international

conte(t



Contractual Disputes in international !usinesses

; 2irst of all, we need to understand the

causes for contractual disputes...

Why contractual disputes in

international !usinesses are insertedin a pro!lematic conte(t?



Most common causes o) contractual disputes

• uring the process of contractestablishment



Most common causes o) contractual disputes

• After the contract establishment

Disa"reement a!out

e(it mana"ement *Maude+



Contractual Disputesin International Business

• 1sta!ilishin" a contract withinternational 2rms !ecome hardersince besides to deal with factors asmentioned before, companies need todeal with

Di3erentCultures

Di3erent

Mores

Di3erent lawsand

re"ulations

Impactin" on contractinterpretation

*Wooldrid e+ ,-.,'



Contractual Disputesin International Business

• Thus, le"al ris4s also accompany theopportunities and benets present in

international businesses$

• In view of this, companies should to beable to manage such legal ris!s in order toprevent critical situations such as going tocourt.

*Wooldrid e+



Measures to minimise

ris4s in si"n contractwith )orei"n companies



&is4s?• @yriad of uni/ue statues and

regulations of na unfamiliar legalsystem governing the contract

• %ac! of enforceable contract processcontrols

• 7se of non;stardand language, terms

and conditions and cost and e:ort• 0reach of contract



Conse5uence



Statistics

• DEF of companies across allsectors G?F of (uropean, D>F

Asia;Hacic, DEF 8orth American-have faced disputes

• %arge companies are more li!ely to

face disputes G4F + ><F-



Statistics

• 0reach of contracts as cause ofdispute G>F developed mar!ets,

D6F non;0ric rapid growthmar!ets, DF 0ric nations-

• @ore than G?F of overseas

companies e+pect to have issuesover IH in 0ric and non;0ric rapid;growth mar!ets



Conse5uence o)

the conse5uence#ontractual disputes are

Time;consuming

(+pensive 7npleasant

=elationship;brea!er

Impactant on supply chain

Impactant on achievement of value formoney



China

• @ar!et oriented

• 8umerous restrictions

• @assive bureaucracy

• Jariation of H=# regulations

•#ost higher than e+pected



China• 'TK membership and growing pressure

from foreign investors for greatertransparncy and rule of law

•Increase of recogniation of overseasarbitration awards and rulings

• @any 3udges are susceptible to pressurefrom local interest groups andgoverment

6 t



6ow to

minimise?• 8eutral choice of law clause global, stableand preferably similar to the company1s one-

• =eliable, neutral and cost eLcent dispute

resolution process –o you want to hold a meeting between the

commercial parties rst*

–'ill mediation be optional or mandatory*

–'ill you re/uire na e+pert to determineanyissues that are more techical*

–Arbitration M %itigation where, what language,which rules

6 t



6ow to

minimise?• #atch all for anti bribery andforeign corruption laws

safeguard against breach-• Alternative ispute =esolution

A=- solve without going toclassic courtroom setting

• All contract !nowledge



%et1s play agameN

contractual disputes in international businesses

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