Several companies in today’s economy create commercial relationships with other organizations, providers, manufacturers, or small businesses to participate in the global market. However, international agreements come with bigger responsibilities and challenges regarding legal actions, especially if disputes arise for different reasons.
The characteristics of international contracts require a better understanding of the possible issues that may arise and how to avoid them to reduce time and resource loss. In this context, if you are an entrepreneur interested in creating international connections for your business, acquiring more information on this matter is indispensable.
Therefore, in this article, we will explain everything you need to know about commercial litigation for international contracts, from common disputes to how to avoid and solve legal issues. We encourage you to keep reading the content we prepared for you to have the needed tools to increase the success of your commercial endeavors.
Common disputes in international contracts
International contracts can end in legal confrontations for a variety of reasons; however, some of them frequently arise during a commercial relationship. From misunderstandings to conflicts and property infringement, here are some of the most common disputes that occur due to international contracts.
1.- Contract breaches
All the parties involved in an international contract must comply with their stipulated obligations; however, when one fails to perform their duties, there are serious consequences, including legal disputes.
These contract breaches can occur in various contexts, from service deals to franchise agreements, and they are classified depending on their characteristics and non-compliance level. Minor or partial breaches, for example, occur when one party does not fulfill part of the contract.
On the other hand, when the party fails to perform a substantial part of the agreement, it is known as a material breach. In these cases, some involved parties tend to seek the termination of the contract or compensation through arbitration or commercial litigation.
Anticipatory breaches can also occur, which consist of an indication from one of the parties before the due date that the contractual duties will not be performed. A fundamental breach, however, is a more severe form where one party fails to fulfill an essential agreement term, making it impossible for the other party to carry out their own responsibilities. In both cases, the breach undermines the purpose of the contract, potentially leading to termination or legal action.
2.- Interpretation of contract terms
Variation in language and cultural or legal context affects the interpretation of contract terms for international agreements, resulting in disputes that put at risk the commercial relationship between parties.
Misunderstandings in the contracts may arise from language barriers, where the parties may not fully understand technical vocabulary or legal terms. These situations are especially common when contracts are redacted and reviewed without specialized help such as interpreters, professional translators, or attorneys with experience in international contracts.
3.- Jurisdictional and choice of law issues
Additionally to the interpretation of legal terms and usage of ambiguous language, the legal jurisdiction in which the international contract will be enforced and the choice of law is essential to avoid disputes between the associates.
Disagreements may emerge if contracts fail to define these aspects, as jurisdiction determines the court or legal authority responsible for resolving disputes, while the choice of law specifies which country’s legal framework will govern the interpretation and enforcement of the contracts. This conflict can result in parallel litigation, —where disputes are handled simultaneously in different jurisdictions— , increasing complexity and costs.
In these cases, alternative dispute resolution methods can be included in international contracts to prevent the challenges of litigating in foreign courts.
4.- Intellectual Property Disputes
International contracts often involve intellectual property (IP) considerations, especially in sectors like technology, manufacturing, or creative industries. Other common disputes arise if one party claims infringement of patents, trademarks, or copyrights by another, or when there is a conflict over ownership of IP created during the course of the agreement.
Consequently, it is important to carefully draft and define the ownership and usage of rights and adherence to international IP standards on the contracts to avoid disputes over intellectual property, which can result in significant financial and reputational harm.
How to avoid litigation for international contracts
To minimize the risk of disputes and commercial litigation Miami, businesses can take several steps when drafting and managing international agreements, such as the following:
1.- Choose a commercial litigation attorney with experience
Working with franchise, trademark, or patent attorneys miami who are experienced in international law and knowledgeable about the specific industry ensures contracts are legally sound and enforceable. These professionals will be key to minimizing possible disagreements by developing a multi-step dispute resolution process to provide a clear path for negotiations.
2.- Leverage arbitration and mediation
Besides collaborating with specialized attorneys, including arbitration clauses in contracts also allows disputes to be resolved in a private, neutral setting with binding outcomes. Additionally, mediation facilitates constructive discussions between parties, helping them reach mutually beneficial agreements without resorting to adversarial processes.
3.- Draft clear and comprehensive contracts
As we mentioned before, ambiguities in contract language are a common source of disputes, making it essential to ensure clarity, define ambiguous terms, and rely on professional translation services for international agreements.
Furthermore, specifying governing law, jurisdiction, and dispute resolution mechanisms within the contract strengthens its framework, minimizing the likelihood of disagreements.
4.- Use standardized international trade practices
Lastly, employing internationally recognized trade terms and practices clarifies responsibilities related to shipping, insurance, customs clearance, and more. This also allows an alignment with established standards to promote transparency and reduce misunderstandings.
As highlighted in the previous sections, adopting these proactive measures allows businesses to build stronger international partnerships while minimizing the risks of costly legal disputes.
We encourage you to carefully consider these aspects before entering into international contracts for your business. If you found this article helpful, feel free to share it on social media and stay connected for more updates.
