More than ever, Australian businesses are connecting and interacting with businesses all over the world. If you are signing a contract with a business located overseas, you may be signing an international contract. Before you sign any contract, you should review it. Additionally, a lawyer can help you to identify and manage the legal risks to which you may be exposed.
This article will discuss the particular considerations to take into account when signing an international contract. There are different situations where your business might sign an international contract. There are also a handful of laws that differ from country to country. Before signing an international contract, you should note how the governing law and dispute resolution clauses may affect the interpretation of your contract.
Situations Where You Might Sign an International Contract
There are several situations where you might sign an international contract. The following instances highlight some common examples of when you might do so:
- when buying or selling goods;
- when engaging a manufacturer to manufacture products;
- if you are an employee signing an employment contract with a business based overseas;
- if you are a business hiring an overseas employee; or
- when licensing intellectual property to a business overseas, or, conversely, when receiving an intellectual property licence from an overseas business.
In these examples, you might be the party giving the contract to another party sign, or you might be the recipient of the contract.
If you are the party giving the contract, make sure you engage a lawyer to review the contract before sending it. Doing so can mean that the contract is signed quickly, without lengthy, tedious negotiations, and the business relationship can begin.
If you are the party receiving a contract, you too should have the contract reviewed before you sign it. Your lawyer can help to negotiate any dealbreakers or any clauses which may put your business in a bad position if left unchecked.
Laws Affecting International Contracts
There are several laws or legal issues which will affect international contracts.
Free Trade Agreements
Australia is a party to free trade agreements (FTA) with other countries and regions. FTAs can have an impact on the importing and exporting laws and can affect the tax payable in contracts. One of these agreements is the China-Australia Free Trade Agreement. This FTA gives Australia access to the restrictive Chinese market via tariff (tax) reductions and removals. Practically speaking, free trade agreements mean that Australian businesses can enter into contracts with overseas parties.
Where there is a free trade agreement in place between two countries, you (when signing an international contract) can access the benefits of the agreement. If you are an Australian business selling goods overseas, you may be able to get your goods certified. Therefore, when it arrives in the other country’s ports, the tax payable on the goods is at the appropriate rate under the FTA.
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If you are a business engaging overseas employees, you will need to be aware of the employment entitlements owed to those employees. Employment laws and entitlements differ from country to country. The Fair Work Act (FW Act) will apply to certain overseas employees. This includes those who are based overseas but are employed by an Australian business. Also, if your Australian business employs someone overseas, both the FW Act and local employment laws will apply.
Consumer Protection Laws
In Australia, the Australian Consumer Law protects consumers. If you are selling goods or services overseas, there may be consumer protection laws in your customer’s country which you may need to comply with.
Intellectual Property
Whether you are buying or selling, establishing intellectual property ownership is key. The lines can get blurry because international property laws differ from country to country. If you expect to receive the intellectual property rights to what you are purchasing, this will need to be clear in the contract. Also, the intellectual property clauses and definitions will need to take into consideration intellectual property laws in the other country.
Governing Law and Dispute Resolution
Governing Law
The governing law clause in a contract is particularly important when the parties are from two different countries. It will set out which country’s laws apply to the contract, and against which laws each clause will be interpreted. Ideally, you will want the governing law to be something that you (or your legal team) are familiar and comfortable with.
Dispute Resolution
When reviewing an international contract, lawyers will always look to see how, and where, disputes will be resolved. If a dispute arises that needs to be determined by a court outside of Australia, the dispute may be more expensive and more difficult to resolve. Ideally, a person familiar with the governing law should resolve the dispute. This is beneficial to speed up the process of resolving the dispute, and also to ensure that the final decision is binding and enforceable.
Additionally, the contract should specify the method of dispute resolution, such as mediation or arbitration. Arbitration may be chosen in international contracts because there are several international forums and rules of international arbitration. Choosing an international arbitrator may be a comfortable choice for the parties, as they know that any dispute will be dealt with by a non-biased, third-party arbitrator.
Key Takeaways
International contracts cover more than just contract law. If you need assistance in drafting a contract with an overseas party, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.
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