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Conducting business overseas is an exciting way to expand your business operations. As always, when it comes to business, there are a number of risks you’ll need to be aware of.
If you’re operating in more than one jurisdiction, it can be difficult to get your contractual agreements to align in a way that protects your interests. This is because you need to ensure that your contract is compliant with each country’s laws.
Keep reading to learn more about how your international contract can protect your business.
International Contracts
An international contract is essentially a legal agreement that operates in more than one country.
Don’t let the term ‘international’ throw you off!
An international contract will still have the same elements as an ordinary contract, including:
- Capacity
- Intent
- Offer and acceptance
- Consideration
Furthermore, international contracts cannot be based on anything that is unlawful, either in New Zealand or elsewhere. This is likely to automatically make the entire agreement void.
Having an international contract is necessary when the parties to the agreement don’t live in the same country. It would be unfair and somewhat counter-productive to have a contract that can only apply to one party. Therefore, an international contract should be written in a way that takes into account the relevant regulations and ensures they can be enforced by both parties, regardless of the location.
International Commercial Contracts
International commercial contracts are for business transactions that are conducted over more than one jurisdiction.
Let’s say you have a business that is based in New Zealand, however, the manufacturer for your business’s goods is based in Canada.
The agreement between both you and your manufacturer should be designed in a way that makes it enforceable by both parties. This way, the two businesses can be assured their rights are being adequately protected.
| Example Aria runs her clothing business from Auckland, New Zealand. The factory she gets her clothes made and shipped from is in New Zealand. The contract between the two parties covers New Zealand product quality laws as well as a number of other things. This way, both parties are on the same page regarding expectations and the contract can be enforced by either of them. |
Governing Law and Jurisdiction In International Contracts
One of the most important things you will need to work out is the jurisdiction and the respective governing law of the contract.
Governing law refers to the question of which country’s laws will apply to the contract itself. As a New Zealand business, your ideal position would be to have New Zealand law as the governing law. Jurisdiction, on the other hand, refers to which country’s laws apply during the dispute resolution process. So, if something goes wrong with your contract, where will the contract be enforced?
Again, your ideal position would be to have New Zealand jurisdiction apply to your contract. If this is the case, make sure this is clear in the agreement itself.
International Arbitration In Commercial Contracts
Most good contracts have a clause for resolving disputes. International commercial contracts are no different. The parties need to make provisions in case there is a dispute that cannot be resolved between the two of them.
The wise thing to do here is allow a third party to hear the matter. This is where international arbitrations clauses come in handy. It’s better to pre-determine where the matter will be heard, by who, in what language and by how many people before signing anything official.
It can be confusing to get all this sorted, but don’t stress – our legal experts are happy to help!
Free Trade Clauses In International Agreements
Another thing international contracts need to look out for is free trade agreements. No matter the relationship between you and the other party to the contract, your business operations will be impacted by any free trade regulations that can apply.
For example, New Zealand is a member of CPTPP which has a number of member states. Therefore, if you’re in business with someone in the Philippines, it is likely that CPTPP will apply and the agreement should result in being able to conduct business more easily.
It can help to have the guidance of a legal professional when going through these matters, so you can be sure you’re taking all the right steps!
How Do I Keep My Business Protected?
If you want to keep your business protected while operating outside of New Zealand, then it’s a good idea to have a legal expert draft an internationally enforceable contract for you.
Our International Contract Review Package includes getting our New Zealand-qualified lawyers to take a look at your contracts while keeping New Zealand law in mind. Our experts are happy to review your contracts and let you know about any key legal issues or unfavourable clauses. That way, you can conduct business overseas while still being protected!
Key Takeaways
If you’re thinking about or currently engaging in business outside of New Zealand, it’s important to make sure your contracts are working for you. To summarise what we’ve discussed:
- International contracts are legal agreements that extend across more than one country
- If you engaging in business outside of New Zealand, you will likely need an international commercial contract
- These contracts require you to closely asses matters such as jurisdiction and governing law
- It’s also important to take into consideration international arbitration and any free trade agreements that might impact your business
- Our legal experts at Sprintlaw can review your international contracts and provide guidance on what might work best for you
If you would like a consultation on international contracts, you can reach us at 0800 002 184 or [email protected] for a free, no-obligations chat.
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