Signing a contract with a company abroad

Imagine a small manufacturer that receives its first large order from a company in another country. The buyer sends its own contract, written under its home law, in a language the manufacturer reads only partly. The price is attractive and the buyer wants to move quickly. Signing feels like a leap forward for the business. But if something goes wrong, such as a late payment or a dispute about quality, where would the manufacturer turn, and under whose rules?

Contracts with companies abroad raise the same questions as any contract, plus several more. The extra questions are mostly about which rules apply and how you would enforce your rights if you had to.

Which law, and which forum?

A governing law clause says which country's or state's law will be used to interpret the contract. A jurisdiction or dispute resolution clause says where and how disagreements will be decided: in which courts, or through arbitration, a private process where a neutral arbitrator makes a decision instead of a court.

These clauses are often left until last and accepted without discussion. They deserve more attention. Litigating abroad, in an unfamiliar system and possibly another language, can be expensive and slow. On the other hand, winning a judgment at home may not help if it cannot be enforced where the other company and its assets are located. Whether a judgment or arbitration award from one country can be enforced in another depends on the countries involved.

Before you sign, ask where you would go if things went wrong, and whether a decision there would actually help you.

Know who you are dealing with

• Check that the company exists and is in good standing, using the official business register in its country where possible.
• Make sure the contract names the correct legal entity, not a brand name or a related company.
• Confirm that the person signing has authority to bind the company. Rules on who can sign vary by country and company type.
• For significant deals, consider whether you need security, such as a deposit, a parent company standing behind the obligations, or a letter of credit, which is a bank's promise to pay if certain conditions are met.

Money, delivery and risk

International contracts need to be precise about practical matters that might be taken for granted at home.

• Currency: which currency is the price in, and who bears the risk if exchange rates move?
• Payment: when and how is payment made, and what happens if it is late?
• Taxes and duties: who is responsible for import duties, sales taxes or withholding taxes, which are taxes deducted at source from certain cross-border payments?
• Delivery: where does responsibility for goods pass from seller to buyer, and who arranges and insures transport? Many businesses use standard international trade terms to describe this, but they must be used precisely.
• Permits: are any import or export licences, certifications or approvals needed?

Language and translation

If the contract exists in more than one language, say which version prevails if they differ. Make sure you understand every clause in the language that counts. A translation prepared by the other side may not be reliable for your purposes.

Signing formalities

Some countries require certain contracts to be signed in a particular way, such as in front of a notary, with a company seal, or with additional certification for use abroad. Electronic signatures are widely accepted, but not for every type of document everywhere. Check the requirements in both countries before signing, especially for contracts involving property, companies or official registrations.

Data and other regulation

If personal information will be shared across borders, data protection rules in one or both countries may apply and may restrict transfers. Some industries and products also face sanctions, export controls or sector-specific rules. These are worth checking early, because they can affect whether the deal is possible at all.

A practical checklist

1. Read the governing law and dispute clauses first, and decide whether you can accept them.
2. Verify the other company and the signer's authority.
3. Make the commercial terms precise: currency, payment, delivery, taxes and risk.
4. Understand every clause in the governing language.
5. Check signing formalities and any regulatory issues in both countries.

Getting the contract checked

Cross-border contracts often need input from someone who understands how the chosen law and the other country's rules will interact. ArieFirm's international contract review looks at an agreement with a foreign company before you commit, with attention to the clauses that matter most when the parties are in different countries.