Negotiations of a contract concluded with a foreign business partner - what should you remember about?

Running a business focused on cooperation with a foreign contractor is often associated with the need to negotiate its terms.

The scope of the negotiations depends, of course, on the type of indicated cooperation. Other issues will be subject to negotiation in the case of a sole proprietor who is to provide services to a foreign company, and other issues in the case of contracts concluded between a Polish entrepreneur (also a company) and a foreign entity.

Below you will find some useful information on how to negotiate contracts concluded with a foreign business partner.

While negotiating with a foreign business partner, it is worth remembering about such issues as:

• Signing a confidentiality agreement (so called NDA) protecting the interests of both parties and securing the confidentiality of information provided in the course of negotiations. This information can and often does include details about the businesses of either or both parties that are valuable to them and that the parties wish to protect from revealing.
• Identifying which issues to be agreed are most important to us and making them clear to the other party. Be prepared for negotiations. If you are able to make concessions on certain points, note them. Perhaps they will help you gain acceptance for the issues that are most important to you.
• Taking into account the possessed negotiating power. During pending business talks, the negotiating power of the entrepreneurs who conduct them varies. In such a situation, negotiating the content of the concluded contract by the party with weaker negotiating power may be difficult, although in many cases – when the parties are interested in cooperation with a specific entity, e.g. due to the known and reputable quality of services or products provided, the contractor is able to make significant concessions. Regardless of the circumstances of a given case, it is worth being aware of your negotiating power when talking to a foreign contractor. It facilitates effective conversations.
• Remembering the importance of cultural differences in international negotiations. They can be very essential for the success of the ongoing cooperation conversations.
• Paying attention to the jurisdiction of the court and the law that will govern the contract. These issues are usually not addressed in oral or e-mail negotiations, while provisions regarding the jurisdiction of the court and the law applicable to the contract are included in the draft contract with the foreign contractor presented for signature or comments. They are most often found at the end of this type of contract and very often are easily omitted, although they are one of the most important for the entire contract. They answer the questions of where a potential dispute between the parties will take place (if any), and what law will apply to assess the content of a given contract and its effects. The contract can be simple or extensive – the law applicable to a given contract will supplement what is not expressly stated in the contract. The party stronger in negotiations is usually able to push through provisions on jurisdiction and applicable law that are favorable.
• Defining clear rules on which the contract can be terminated. One of the first issues worth paying attention to when concluding a contract with a foreign contractor is to determine how long the contract is to bind us, how we can terminate it and what consequences will occur.
• Confirmation of the arrangements made in writing, preferably in the form of an appropriate contract. Negotiations with a foreign business partner may be conducted orally, by e-mail or in another manner agreed between the parties. It is important that what has been agreed between the parties is then confirmed in the content of the relevant contract or at least in the form of a summary specified in the content of the e-mails exchanged between the parties. Relevant supporting documents that may help to establish what the parties have agreed on are also: order documents, invoices, receipts, etc.
• Verify that the proposed content reflects what the parties have agreed and negotiated. And finally, of course, the prepared contract should be read and checked in terms of whether what had been agreed was actually included in the text of the contract.

The progress of negotiations with a foreign partner will depend on many factors. A monopolist on a given market will negotiate differently than an entity that competes on the quality, price and other aspects of the services or products offered. Some international contracts will be negotiated faster, other negotiations will last even for many months. Ultimately, much depends on whether the parties simply want to cooperate and whether they are able to work out the rules on which this cooperation is going to take place.

Joanna Lubecka
attorney