Reading time: 4 minutes

Do you wish to engage in business with an overseas company? In any case, you should formalise the business deal through a contract. If you are a business owner, this might be as simple as providing business terms and conditions which your clients and suppliers must accept. Additionally, you may wish to exercise your rights under the contract when a dispute arises. Therefore, it is crucial to address dispute resolution methods and identify which country’s law will apply. This article will outline how you should approach a contract dispute where the other party is overseas.

Guide to Protecting Your Brand

Your business’ brand represents your values, identity and reputation. Learn how to create a successful brand and protect it.

Download Now

Identify the Governing Law

When the contract dispute arises, you will likely already be bound to the terms of the contract. In this case, you should refer back to the contract’s governing law as a starting point for resolving the dispute. If the other party is based overseas, there are two possibilities:

  • the governing law could fall under the state or commonwealth of Australia; or
  • the governing law falls under the state or national laws of an overseas country.

Most contracts will expressly state the relevant legal jurisdiction towards the end of the contract. Therefore, identifying the governing law should be pretty straightforward. Additionally, for countries that function as a federation of states (for example, the USA), the contract will likely specify further which State law will apply.

If you are an Australian business owner providing the other party with your business contract, the governing law will likely fall under the Commonwealth of Australia. However, if the overseas party provides you with their business terms and conditions, the laws of their country will likely govern the contract.

To be clear, once you identify the governing law, there is no simple way to change which law applies to the contract. In addition, generally, contracts do not allow one party to make changes to the contract unilaterally. Therefore, you should not assume that you can alter the jurisdiction governing the contract unless both parties agree.

Consider the Degree of Inconvenience

If your contract states that a law other than Australia’s will apply, you must resolve the dispute with the other party under the relevant jurisdiction. However, you could argue that an Australian court hears the dispute if neither party physically operates in the country whose body of law applies to the contract. Courts will likely recognise that during a contract dispute, both parties will benefit from involving the fewest number of jurisdictions.

There are specific circumstances where a party can argue that the relevant clause – involving the governing law – does not apply.

Is There a Legitimate Disadvantage?

When a contract forces you to bring an action in another country, you could argue that this creates a legitimate disadvantage for your company.

In some circumstances, resolving your dispute in an overseas jurisdiction may mean you cannot enforce certain rights that only exist under Australian law. However, you should know that uncertainty alone is not an adequate reason to change the contract’s jurisdiction.

Dealing With a Foreign Jurisdiction

To help you understand how international courts interact, we will use the example of US courts.

As of 2020, the US and Australia have no agreements that will enforce judgments under the Foreign Judgments Act 1991. However, there are some requirements parties will need to satisfy to enforce a judgement in an Australian Court, including demonstrating:

  • that the US decision is final and conclusive;
  • there are identical parties to the proceedings, and
  • the claim is for a calculable sum or a fixed debt;

This example demonstrates that Australian courts will allow the law of a foreign court to apply. Similarly, parties to a dispute can also argue that an Australian court addresses a foreign judgement. 

Key Takeaways

Before entering into a contract, you must understand the governing law that applies to your contract so that you know how to resolve potential disputes. Additionally, you should avoid overlooking the clause outlining the governing law. This is because in some cases, the laws of another country may not recognise the same rights as Australian law. 

If you would like some advice on dealing with a dispute with an overseas business, our experienced dispute resolution lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

Can I change the governing law that applies to my contract? 

Once you identify the governing law, there is no simple way to change the governing law that applies to the contract. Generally, contracts do not allow one party to change the contract unless both parties agree unilaterally.

What jurisdiction applies to my contract?

Australian law will likely govern the contract if you are an Australian business providing another party with your business contract. However, if an overseas business provides you with their business contract, the laws of their country will likely apply. 

Webinars

Cyber Security Breaches: Your Business’ Legal Responsibilities

Thursday 25 August | 11:00 - 11:45am

Online
Learn how to manage cyber risks for your business and how to respond to an attack. Register today for our free webinar.
Register Now

Ending Employment: Understanding your Obligations as an Employer

Thursday 8 September | 11:00 - 11:45am

Online
If you are ending a team member’s employment, you must understand your legal obligations. Register today for our free webinar.
Register Now

Tips on Structuring Your Entity for Growth

Tuesday 13 September | 10:00 - 10:45am

Online
Choosing the best structure for your business is crucial for growth. Understand your options. Register for our free webinar today.
Register Now

Protecting Your E-Commerce or Retail Brand

Wednesday 14 September | 11:00 - 11:45am

Online
Learn how to protect your e-commerce or Retail brand. Register for our free webinar today.
Register Now

Australia’s Global Talent Visa: How To Make Your EOI Stand Out

Thursday 22 September | 12:00 - 12:45pm

Online
Applying for a Global Talent Visa? Learn how to make your application a winner. Register today for our free webinar.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Ling Hsu
Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards