KEY ISSUES IN DRAFTING INTERNATIONAL CONTRACTS - ONGUR&PARTNERS

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KEY ISSUES IN DRAFTING INTERNATIONAL CONTRACTS


 

1. Introduction

With the globalism; similar with the many realms of social and economic life, the field of law also has experienced important changes. Especially as the social and economic relations crossed borders; legal relationships have also crossed national borders and have begun to gain a global nature. In parallel with these developments, the nature of the contracts aiming to regulate international legal relationships has also changed. Accordingly, being the problems about negotiations, enforcement of contracts and dispute resolution in the first place, many multidimensional problems have been introduced to the field of contract law. 1

 

As an inevitable result of this, it has become possible to mention about a “law of contracts” processing accordingly with global principles and rules instead of a “law of contracts” dominated and regulated by the sovereign states. 2

 

Wıthin this framework; especially long and costly processes of dispute resolution have pushed actors carrying out international business to take precautions about the potential disputes and as a result drafting international contracts has become an area of expertise by gaining importance because of above-presented developments. 3

 

In the context of this importance; in this study key issues and some fundamental principles regarding to drafting international contracts will be held. While evaluating this subject, firstly a conceptual framework will be established and following to that key issues in the drafting process will be presented.

 

2. Conceptual Framework

 

Before evaluating the details of the subject, it would be useful to present the definitions of some concepts in order to establish a conceptual framework for this study. In this context, within this study; the term “contract” refers to the legal transactions which originate from consentaneous declataration of will of parties and creates obligations for one or more of the parties. 4 Similarly the term “international contract” refers to the contracts which are established by parties from different states and/or which creates trans-national obligations and/or which have significant relationships with parties from different states. 5

 

Herein as a limitation of this study it should be stated that this study aims to hold only some of the fundamental issues regarding to the establishment of international contracts without an effort to present an exhaustive list.

 

3. Key Issues

 

First of all, similar with the regime foreseen by many national systems, for the establishment of international contracts, it is very important to determine the consentaneous declarations of will of the parties. That is to say, similar with the Turkish law6, consentaneous declarations of will are constitutive elements for international contracts.7 However, it is not as easy as in national law to determine about the declarations of will of the parties which reside in different countries, subject to different legal systems and have different cultures and to reflect these declarations to the contracts in full. 8

 

To get to the key issues of overcoming these difficulties, it should be stated firstly that the complete and definite inscription of the rights and obligations of the parties is of greater importance than in national contracts. Because as noted above covering up the deficiencies of the international contracts after the establishment or interpretation of them by a court/arbitral body requires great amount of time and sources.

 

In this perspective, it is very important to properly define the basic terms of the contract like the description of contractual goods/services, method and date of delivery/execution, price, payment method and date in a manner to prevent any doubt. Any deficiency in these basic terms may both create difficulties in execution of the contract and in resolving possible conflicts. Even more, deficiencies in the basic terms of the contract can affect the validity of the contract. Because in many legal systems contracts missing basic terms are deemed invalid. 9

 

In addition to the basic terms, determination and inscription of the non-basic points would also be useful. These non-basic points wouldn’t affect the validity of the contract yet bear the utmost importance for executing the deeds enshrined in the contract and preventing disputes. If we are to provide a non-exhaustive list, it is possible to state that provisions about contract date, costs and charges, packaging arrangements, transportation and delivery of goods, insurance, inspection, warranties and amendment of the contract and notices constitute the non-basic points of the contracts. 10

 

It is possible to complete these points by interpretative methods based on the default/complementary rules foreseen in the national legal systems or international regulations but it should not be overlooked that there are different ways of finding default/complementary legal rules and completing the missing elements of the contract through interpretation which may be subject to disputes. 11 In short, it would be beneficial to determine the non-basic terms of the contracts in a detailed way to leave no room for interpretation for preventing possible disputes arising from interpretation differences.

 

Another factor bearing importance in the drafting of international contracts is the consideration of cultural differences. Because the legal system and culture in which parties operate may seriously affect their perceptions about drafting, executing and interpreting the contracts.12

 

The first issue that must be considered in this context is the differences in the legal systems of the parties. Because, even with the beginning to the negotiations, the parties are beginning to be tied not only with their own law but also with the law of states which the other parties are subject and even with the international regulations if any. 13 Therefore, when the parties to the contract declare their will and determine their rights and obligations, they must also consider that these determinations comply with the legal systems listed above. In this scope; evaluations about compliance of contracts with the different legal systems require not only a simple analysis of black-letter of law but also a detailed analysis including case law and customary law. 14

 

In the context of cultural differences; another issue that may lead to disputes over the interpretation of the contract is discrepancies between languages and translations which makes it mandatory to conduct a comprehensive control in the drafting process. In this control, it should be checked whether the meaning of the contract has changed as a result of the translation and parties especially should be sure about the meaning of the abbreviations and terms in the language of the other parties. 15

 

In addition to these points, one of the important issues that should be emphasized about drafting international contracts is the issue of resolving disputes. Because, unlike legal relationships established by parties from the same state, remedies to be applied in international legal relationships may be uncertain. In this perspective, authorized courts/bodies and preferred remedies in case of a dispute should be clarified in the contract.16

 

Again in the same perspective; while the contracts are being drafted, the enforcement provisions that will come to the agenda in caseof a contradiction to the contract must also be considered. Since it can be stated that a contract that does not have the ability to be enforced in the event of contradiction does not provide adequate assurance to the parties. In this context, the conditions of proof and form requirements that may differ from one country to another should be examined and the contract should be customized to comply with these enforcement regulations. In this regard, it would be possible for states parties to take necessary measures both for compulsory execution and for negotiations directed to execution. 17

 

4. Conclusion

 

The effects of the change in legal relationships and the increasing international nature of these relations inevitably affected the contract law as well. As a result of these changes, it should be stated that there are new problems waiting to be solved in contract law which made contract law a very convenient field to study. 18

 

In this framework, although it is difficult to make precise determinations of all legal relationships and contracts due to the dynamic nature of international legal relationships19; it is still possible outline some principles and guidelines, some of which presented above.20 It should be stated that the contracts prepared in the framework of these principles will both increase the effectiveness in the legal relationships and prevent the loss of time and resources.


 

 

 

 

BIBLIOGRAPHY

Eren F, Borçlar Hukuku (Genel Hükümler) (13th edn, Beta Basım Yayım Dağıtım 2011)

Fontaine MF De Ly, Drafting International Contracts (Transnational Publishers 2006)

International Institute for the Unification of Private Law (UNIDROIT), Principles of International Commercial Contracts (2016)

Shippey K, A Short Course In International Contracts (2nd edn, World Trade Press 2003)

Sono K, 'The Rise Of Anational Contract Law In The Age Of Globalization' (2001) 75 Tulane Law Review

Şanlı C, Uluslararası Ticari Akitlerin Hazırlanması Ve Uyuşmazlıkların Çözüm Yolları (4th edn, Beta 2011)

Turkish Code of Obligations (Law No. 6098 of January 11, 2011)

1 Karla C Shippey, A Short Course in International Contracts (2.Baskı, World Trade Press 2003) p 6.

2 Kazuaki Sono, 'The Rise of Anational Contract Law in the Age of Globalization' (2001) 75 Tulane Law Review 1185, 1189.

3 Shippey (n 1) p 6.

4 Fikret Eren, Borçlar Hukuku (Genel Hükümler) (13.Baskı, Beta Basım Yayım Dağıtım 2011) p 199.

5 International Institute for the Unification of Private Law (UNIDROIT), Principles of International Commercial Contracts (2016) Preamble.

6 Turkish Code of Obligations (Law No. 6098 of January 11, 2011) art 1.

7 UNIDROIT (n 5) art 3.1 (2).

Eren (n 5) p 205.

8 Cemal Şanlı, Uluslararası Ticari Akitlerin Hazırlanması ve Uyuşmazlıkların Çözüm Yolları (4.Baskı, Beta 2011) p iii.

9 Shippey (n 1) p 22.

10 ibid p 60-76.

11 ibid p 13.

12 ibid p 7.

13 ibid p 19.

14 ibid

15 ibid p 15.

16 ibid p 21.

17 ibid p 20.

18 Marcel Fontaine and Filip De Ly, Drafting International Contracts (Transnational Publishers 2006) p xvii, 621.

19 ibid p 625.

20 UNIDROIT (n 5) Preamble.