Great Ideas: Contract confusion

Written by PROFIT-Xtra

A contract, put simply, is an agreement between two parties. But drawing one up and agreeing on it can be deceptively straightforward. When you’re conducting international business, the likelihood of contractual misunderstandings jumps dramatically, according to Export Development Canada, which recently published Canadian Exporting for Dummies. Here are a few typical problem spots to watch out for.

  • Different legal regimes. Perhaps in your new market, it’s legal for the buyer to terminate a contract without notice within 15 days of signing. But in your domestic market, once you sign on the dotted line, you’re in it for the long haul. If you aren’t aware of these kinds of legal issues, you could find yourself disputing a contract that is, in fact, perfectly legal in the foreign market.
  • Different business standards. In a specific industry in a foreign market, it may be standard for a contract to state that the seller is responsible for all warranties and guarantees, even after the sale is over. But in your experience, they are the buyer’s responsibility after the goods are sold. Avoid surprises by researching contract laws in the foreign market.
  • Not fully understanding the contract’s terms. This type of misunderstanding can arise out of a language barrier or a careless or too-quick read of the contract. Get your lawyer or your intermediary to help you make sure you don’t miss anything.
  • Poorly drawn up contract. Don’t trust a customer who claims they’ll handle the contract and all you have to do is sign—no matter how exciting the sale might seem! An incomplete contract can leave holes a mile wide that the buyer can jump through later on.
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