What to know about international breach of contract in commercial law

On Behalf of | Jun 16, 2023 | Commercial Disputes

When doing business outside of the United States, it is important to have a contract in place that protects you and your company against disputes, fraud and resulting damages. These contracts are essential for any international commercial activities and should spell out the responsibilities of each party, the required timeline and the repercussions of a breach of contract. If one party violates the contract, it can be a complex issue to resolve and can result in serious financial implications for both sides. 

What is international commercial law?

International commercial laws are those rules that oversee the transactions between businesses from different countries. Business that is conducted internationally has a major impact on economic development globally so contracts must be crafted with great care to protect both parties. International contracts can be difficult to work with due to language barriers, geography and international laws and governments. The United Nations Convention on Contracts for the International Sale of Goods (CISG) has had the most success in unifying commercial law on an international level, but that does not leave commercial contracts error-free.

What are examples of international commercial contracts?

Regardless of what your business is and how it operates, it is important to have a contract in place to protect your interests that spells out the expectations of both parties. It is essential that both parties understand the verbiage and the content of the contract before signing, as well as the consequences of breaching the contract. Some examples of international commercial contracts include but are not limited to:

  • Distribution contracts
  • Sales contracts
  • Investment agreements
  • Franchise and supply agreements
  • Letters of credit
  • Intellectual property licenses

What actions can result in breach of an international contract?

Like domestic contracts, the most common breaches in international commercial contracts are for non-performance, damages or violation of contract. Any time one party does not meet the obligations spelled out under the contract, it constitutes a breach. If the breach results in damages or expenses for the non-breaching party, the basic rule is that the breaching party pay damages.

Commercial contracts can be complex and require special consideration by legal counsel or an expert in international law. Settling a breach can be lengthy and can require precise documentation and evidence of the breach.