Avoiding Uncertainty in the Event of a Contract Dispute | International Contracts
The preparation of any contract which is intended to govern the future trading relationship of parties based in different countries and legal jurisdictions, and potentially, differing legal systems requires highly developed and knowledgeable legal skills.
As a matter of course, should any form of dispute (including contract disputes) arise, the likelihood is that each party would be anxious to ensure that the jurisdiction for the court overseeing the dispute and the law to be applied will be that most advantageous to them.
Should the contract fail to provide for these potential issues, it may become necessary to apply the rules of private international law, which could lead to uncertainty, considerable delays and substantial costs.
Accordingly, a prudently drafted contract will contain clauses providing for the applicable jurisdiction and choice of law to be applied in the event of dispute. Having specifically agreed to their inclusion, it would be extremely difficult for any party to subsequently argue against the adoption of the provisions of such agreed clauses.
The need to precisely cover these two issues is relevant in virtually every contract involving a foreign element. The nature of such contracts is endless and may involve, for example, contracts involving:
- trading in every day commodities such as food and cars,
- the provision of resources such as gas, electricity and oil,
- property and finance investment,
- employment,
- sporting and musical events,
- the granting of rights involving intellectual property.
Stuart Southall of KANGS comments generally.
Choice of Law Clauses
Choice of law clauses also known as ‘governing law clauses,’ may take many different forms but, by way of example, may be expressed along the following lines:
This Agreement and any dispute, disagreement or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed by the laws of England and Wales.
The choice of law will generally be that observed by courts in the jurisdiction chosen.
Jurisdiction
In the event of a dispute, identifying the court in which it will be heard should, where a properly drawn contract is in place, be as straight forward as referring to the jurisdiction clause in the contract.
In the absence of such a clause, the potential risk of disputes between the parties is enormous. When a clause is being negotiated, there are many potential traps for the unprepared.
The jurisdiction of a court is generally that governed by geographical limits rather than national boundaries. For example:
- a clause providing for jurisdiction of courts of the USA will be of little value given that each state has its own jurisdiction.
- the clause set out above providing for jurisdiction in England and Wales is clear enough. However, if the clause had stated ‘United Kingdom,’ it may well be found to be unenforceable for uncertainty as, whilst England and Wales share the same court system, Scotland, although part of the United Kingdom, maintains its own system.
Differing National Remedies for Breach of Contract
Clearly, numerous jurisdictions around the globe will be operating in substantially different economic, cultural and religious circumstances. Attitudes towards what constitutes a breach of contract and remedies offered by the courts, should a breach be established, may be significantly different to those recognised under English law.
Such potentially far ranging and differing circumstances emphasise how essential it is for all contracts to precisely dictate the procedure to be followed for dispute resolution. In the likelihood that Arbitration procedures are covered in the contract, such clauses will demand their own detailed consideration.
How Can We Assist?
The team at KANGS provides a great depth of experience involving all aspects of contract and commercial disputes.
We are regularly consulted by clients whose foreign trading activities have encountered disruptions by actual or potential breaches of contract. In such cases, we pursue immediate restraint or enforcement action through the courts on their behalf, or where the issue of proceedings is necessary to seek damages or other redress.
Furthermore, clients sometimes encounter difficulties fulfilling their own contractual requirements and seek guidance and advice as to their obligations. This could be in the manner in which they should proceed to resolve the issue or mitigate their position as far as is possible.
Whatever your difficulty our Team would be delighted to assist you, simply contact us using the details below:
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.
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