International contracts : how to limit legal risks?

Going international requires careful preparation. It means setting up a real export strategy, choosing reliable partners and drawing up good sales contracts. This guide covers all the essential points to consider when drawing up your international sales contracts.

The international sales contract - what exactly is it?

An international sales contract is a contract between two parties whose place of business is in two different countries. One agrees to deliver to the other, who in return agrees to pay.

It can take the form of a written contract, a purchase order, a signed offer, an accepted pro forma invoice or an email. A sales contract can be written or verbal.

There are numerous advantages to having a written contract:

• It sets out precisely what is expected of the other party: a contract is not something to be just left on the shelf, but should rather serve as a guide with clear rules.
• It helps avoid surprises, misinterpretations and misunderstandings.
• It enables us to set things down on paper in a changing context: changes in interlocutors, company owners, economic conditions, constraints, difficulties, and so on.

Whereas in the case of a national contract, the law of the country in which the seller and buyer are established applies, in the case of an international contract, the two parties will have to agree and determine which country's law will be applied. If both parties have signed the Vienna Convention of 11 April 1980, they will be able to submit to the legal rules laid down therein.

This United Nations Convention on International Sales Contracts applies to contracts for the international sale of goods between private companies. Sales to private individuals, sales of services and certain categories of merchandise are not included. The aim of the convention is to facilitate international trade by establishing a uniform legal framework. It applies automatically where the two parties are established in different contracting states. It may also apply when the rules of private international law designate the law of a contracting state as the applicable law, or if two non-contracting states decide to refer explicitly to it. Finally, it can be excluded if both parties express this in their contract.

For further information, please refer to the text of the Convention itself.

What clauses should you include in your contract to limit legal risks?

Here is a non-exhaustive list of stipulations or clauses that you can include in your contract to protect yourself as much as possible:

• A contract title: purchase contract, international sale of goods, etc.
• The parties bound by the contract
• A preamble / recitals
• The purpose of the contract
• A detailed description of the goods for sale or services offered
• A detailed description of the services offered and the delivery of the goods
• Adaptations to and compliance with local regulations
• Price and currency
• A price revision clause: from the beginning of the agreement to the end of the contract, additional costs could be added
• Authorised payment methods
• Various costs (bank charges, exchange rate fluctuations, etc.)
• Payment schedule
• Reservation of title: clause whereby the seller retains ownership of the goods - even if they have already been delivered to the buyer - until a condition has been met (e.g. full payment of the goods by the buyer)
• A delivery or performance schedule: instead of specifying a day, use "by the end of..."
• Place of delivery or performance
• Conditions of carriage and transfer of risk: choosing your Incoterms®
• Reception arrangements: someone to open the door, permission to go into a specific area...
• Acceptance of goods/services
• Conformity of goods/services and guarantee of conformity
• Bank bonds in favour of the supplier
• Consequences of breach of contract or poor performance
• Causes of termination, penalties and consequences
• Limitation of liability
• Force majeure: give your own definition of "force majeure": unforeseeable event
• In case of difficulty: collaboration between the parties
• Intellectual property rights
• Confidentiality
• Non-competition
• The effective date of the agreement
• Applicable law
• Determining jurisdiction:
  •  Initial mediation or not
  • Court or arbitration

Given the complexity of the international regulatory context, do not hesitate to call on an expert to help you draw up your contracts.