Entering into commercial relations with a foreign contractor involves risk. What is the risk in foreign trade and how to increase the security of such transactions?
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The risk and practical difficulties associated with establishing cooperation with a foreign contractor are influenced by many factors. To name just a couple of them:
As a result, very often international transactions are accompanied by a much lower degree of trust than commercial cooperation carried out in domestic trade.
1. Make sure to either put agreements into writing or formalize them in some other way that is relevant to the contract. This will help ensure that you’re able to pursue future claims without any interruptions.
Concluding a contract in writing allows you to avoid a number of doubts and risks associated with entering into a commercial transaction with a foreign contractor. In the contract, we can regulate all potential flashpoints for a given cooperation. If in a particular case a detailed contract with a foreign contractor is not concluded, it is worth remembering that the parties’ mutual obligations should be secured, for example, by exchanging e-mails, in which there will be a clear acceptance of the most important points of a given cooperation.
2. Offer your business partner your own content of the contract – whenever possible.
If it is possible in a given commercial relationship, it is worth presenting your own content of the proposed contract. In this way, you will have control over what will be included in it, and any comments or points that require negotiation are reported by the contractor. Having your own content of the contract creates also the positive image of a professional in the eyes of a future business partner.
3. If we receive a contract ready to be signed from the contractor – read it and negotiate its terms whenever it is possible.
A practice that should definitely be discouraged in international trade is entering into commercial relations on terms that are not known to the entrepreneur. This will always be the case when we do not read the contracts presented to us or do not decide to negotiate the terms of future cooperation, hoping that it will somehow work out. We can deal with a similar situation when the contract presented by a foreign contractor is drawn up in a language unknown to us and we resign from making the necessary translation that would allow us to understand what we are actually agreeing on. Agreements should be read before signing, and commercial cooperation should be started on terms that the entrepreneur understands and consciously accepts.
The need to negotiate and agree on the terms of cooperation often discourages entrepreneurs from concluding contracts in writing. Entrepreneurs are also afraid that excessive attention to formal issues will discourage the contractor from entering into a commercial relationship that they care about. All these circumstances are undoubtedly worth balancing, and in a particular case, choosing the best possible way to secure the arrangements that are important for the entrepreneur, which will allow them to finalize the transaction. It doesn’t always have to be an extensive written agreement.
Joanna Lubecka
attorney
However, when there is a dispute in the court, the basic practical difficulty leads to answering the question - where will such a dispute take place. In the contractor country or abroad? Can it be secured somehow?
One of the most important points that needs to be clarified in a B2B contract concluded with a foreign contractor are the terms of payment of the agreed remuneration. Payment after delivery of the subject of the contract or prepayment? And if so, what should be its amount? Which solution to choose? Read below.
Regardless of the form in which the agreement with a foreign partner is concluded, it is important that the parties agree on the most crucial elements of the contract. Incorporating these clauses will enable the parties to execute the contract in a transparent manner, without any ambiguity or uncertainties.
When force majeure events occur in international trade contracts, significant problems may arise in the process of its performance. However, including appropriate clauses in the contract that address such issues can help to manage the situation in a controlled and orderly manner.
As it is for the pandemic the world is slowly returning to normality, and there is much less talking about coronavirus cases, many entrepreneurs still feel the severe effects caused by the pandemic, including: disruptions in supply chains, lack of availability of materials or lack of components.
Case study. Check what Adam forgot when negotiating a contract with a foreign contractor
Although the indicated issues should be clearly regulated in each contract on the basis of which the guarantee is granted, in the case of foreign deliveries they are particularly important.
Below you will find some useful information on how to negotiate contracts concluded with a foreign business partner.
The purpose of the NDA is to secure the confidential nature of information that is provided to the other party in connection with the commencement of negotiations, determining the terms of possible cooperation between the parties, the concluded contract, cooperation or employment.
The standard practice is to start reading each document from the beginning. In the case of B2B contracts concluded with a foreign contractor, it is worth reversing this order.