International Sales Contract
Which particularities should be considered for an international sales contract?
In the wake of globalization, not least in the case of the export-oriented German economy, international contracts are part of the everyday life of many small and medium-sized companies. When concluding such international contracts, it must be taken into account that some aspects are in need of regulation, which, in purely domestic circumstances play no or only a secondary role.
General Terms and Conditions
German courts frequently impose different or particular requirements on including General Terms and Conditions, where foreign contracting partners are concerned. When designing international contracts and especially international sales contracts using foreign law, it should also be taken account of the fact that, unlike German law, many foreign legal systems do not include General Terms and Conditions by mere reference.
The UN Convention on Contracts for the International Sale of Goods
The UN Convention on Contracts for the International Sale of Goods may apply to the international sales contract between a German and a foreign company. This may apply even where the foreign contracting partner is not a national of a State, which is a contracting party of the UN Convention on Contracts for the International Sale of Goods, such as when the contract falls under German law according to the rules of international private law or on the basis of the choice of law.
The circumstances of the particular case decide the law of which State is applied to a contract. Therefore, it is always recommended to make an explicit choice of law. Where appropriate, the law of a third "neutral" State may also be selected.
Place of Jurisdiction
The validity of the agreement on jurisdiction of a German court, for example, is assessed, also in the case of an international contract between a German company and a company with its registered office outside the EU, not according to the German Code of Civil Procedure, but rather according to Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (European Jurisdiction and Enforcement Regulation). Please also note that the European Jurisdiction and Enforcement Regulation imposes different conditions on the validity of the agreement than the Code of Civil Procedure, particularly if the choice of forum clause is contained in the General Terms and Conditions.
Instead of agreeing upon the jurisdiction of ordinary courts in an international sales contract, an agreement to arbitrate may also be made. There are several reasons for leaving the decision in legal cases to an arbitration tribunal instead of an ordinary court: arbitration procedure costs often less than a trial and concludes faster. Please be aware that litigation procedures can take even longer when a party appeals the verdict. Each party can in principle have an impact on the selection of the arbitrator and thus take into account his knowledge of the industry. Especially outside of Europe, the enforcement of arbitration awards is more easily arranged than obtaining judgment of a German court. Recognition and enforceability arise, apart from bilateral treaties, from the June 10, 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which most States have joined.
Important elements of an International Contract
Because these points frequently play a rather subordinate role in the case of "German domestic contracts," in the case of a contract with an international dimension particular attention should be placed
- on the manner in which General Terms and Conditions are included,
- on the question of the law applicable to the contract and possibly the exclusion of the application of the UN Convention on Contracts for the International Sale of Goods,
- on the manner of a choice of venue clause or, if applicable, an agreement to arbitrate.
Your Contact for International Sales Contracts
Your contact persons for designing, reviewing and possible enforcing of your claims under international sales contracts are Attorney Thomas Schwab (Certified Specialist for Commercial and Corporate Law) and Attorney Olga Stepanova. Please contact us by e-mail (firstname.lastname@example.org) or by phone (+49 69 / 76 75 77 80).
The two-page article deals with cross-border profit distribution among German corporations.