Laws and contracts in international trade

 

 

When you are focused on the day-to-day operations of your business, the laws that underlie that business may not be front of mind. But, as you can probably appreciate, the legal aspect of international trade is not something you can afford to neglect.

Without delving too deep into the complex legal landscape, it is important to understand that laws governing international trade – and therefore, your rights and responsibilities as a participant in that trade – can vary from one jurisdiction to the next. The relative inexperience of many players in international trade today means sometimes the legal aspects of these activities don’t get the attention they deserve.

Different legal systems govern the transactions between international buyers and sellers around the world – and they can vary substantially. In fact, eight of Canada’s top ten trading partners have legal systems that differ significantly from our own.

 

Law (a national legal system) and jurisdiction and venue (the location of the court that would hear a legal case) are important aspects of the trading process that buyers and sellers should agree upon before engaging in international trade.

 

This is best done in a contract of sale that is agreed to in advance of the transaction.

It is very important that parties know which legal system will prevail in the event of a disagreement, and which party may be responsible for procuring legal representation in a foreign country.

 

Unfortunately, buyers and sellers often do not read and thoroughly understand the many terms and conditions in one another’s documentation and just assume the other party has accepted their terms if the order has been accepted. As a result, trading partners who rely on the terms and conditions in their purchase orders and purchase order acknowledgements may not be adequately protected in the case of a dispute.

The best way to protect yourself legally is to avoid ambiguity by issuing formal contracts of sale – or master sales agreements – with your international trading partners that include language around law, venue and jurisdiction.

 

Make sure you review your trade documentation to ensure you are adequately protected in the event of a dispute with your trading partners.

If this sounds a little intimidating – don’t despair. Not everyone can be a legal expert. Consult your organization’s legal representative – ask questions and make sure your interests are protected.

 

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