Due to globalism; as with many realms of social and economic life, the field of law has also gone through important changes. In particular, as the social and economic relations crossed national borders; legal relationships have also become increasingly international. Parallel to these developments, the nature of the contracts aiming to regulate international legal relationships has also changed. As a result, many multidimensional issues came to the fore with respect to contract law, including the negotiation of contracts, the enforcement of contracts and dispute resolution. Inevitably, the “law of contracts” governed by the regulations of sovereign states has given way to a set of rules governed by global principles.
Wıthin this framework; especially long and costly dispute resolution processes have pushed international business actors to take precautions about potential disputes, and drafting international contracts has become an area of expertise due to the complexity of cross-border commercial relationships3
This note considers some of the key issues and fundamental principles with respect to drafting international contracts. Following a brief presentation of the conceptual framework, it examines some of the key issues that need to be considered when drafting international contracts.
- Conceptual Framework
Before examining the key issues, it would be useful to present the definitions of some concepts within the framework of this study. To begin with, the term “contract” refers to the legal transactions which originate from the consentaneous declaration of the will of the parties and which create 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 create trans-national obligations and/or which involve significant relationships with parties from different states. 5
As a limitation of this study, it should be stated that it aims to examine only some of the fundamental issues regarding the establishment of international contracts without an exhaustive analysis.
- Key Issues
First of all, it is very important for the establishment of international contracts to determine the consentaneous declarations of the will of the parties. Under Turkish law6, as with most jurisdictions, consentaneous declarations of will are constitutive elements of international contracts.7 However, in international contracts, it is not as easy as in national law to determine the declarations of the will of the parties and to reflect these declarations to the contracts in full. 8 since the parties reside in different countries, are subject to different legal systems and have different cultures.
A second key issue is that the complete and definite inscription of the rights and obligations of the parties is of greater importance than in national contracts. This is because, unlike domestic contracts, it requires more time and effort to interpret the provisions of international contracts by courts or arbitral tribunals under the applicable laws, where there are deficiencies in the drafting of the underlying contracts’.
In this perspective, it is very important to properly define the basic terms of the contract such as the description of contractual goods/services, method and date of delivery/execution, price, payment method, and date in a manner to prevent any doubts. Any deficiency in these basic terms may both create difficulties in the execution of the contract and in resolving possible conflicts. Furthermore, deficiencies in the basic terms of the contract can affect the validity of the contract. This is because in many legal systems, contracts missing basic terms are deemed invalid. 9
Determination and inscription of the non-essential points in international contracts may also prove significant in the event of a dispute. The non-essential provisions in a contract such as contract date, costs and charges, packaging arrangements, transportation and delivery of goods, insurance, inspection, warranties and amendment of the contract and notices10, would not affect the validity of the contract, yet can bear the utmost importance for executing the deeds enshrined in the contract and preventing disputes.
It is possible to complete these provisions 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 an interpretation which may be subject to disputes. 11 In short, it would be beneficial to determine the non-essential terms of the contracts in a detailed way to leave no room for interpretation and prevent potential disputes that may arise from interpretation differences.
Another factor bearing importance in the drafting of international contracts is the consideration of legal, cultural and linguistic differences. This is 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. Even in the commencement of negotiations, the parties are bound not only with their own law, but also with the law of the states the other parties are subject to, as well as 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 keep in mind that these determinations must comply with all the legal systems involved. It follows that evaluations about the 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
Linguistic differences may also lead to disputes over the interpretation of contracts. The potential discrepancies between versions of contracts in different languages and translations make it mandatory to conduct a comprehensive control in the drafting process. When doing this, it should be checked whether the meaning of the contract has changed as a result of translation and parties should particularly pay attention to the meaning of abbreviations and terms in the language of other parties. 15
In addition to the above, one of the most important issues that should be considered when drafting international contracts is dispute resolution. This is because, unlike legal relationships entered into by parties from the same state, remedies to be applied in international legal relationships may be uncertain unless clarified at the outset. Therefore, authorized courts/bodies and preferred remedies in the event of a dispute must be determined in advance and made clear in the contract.16
It is clear that a contract that does not have the ability to be enforced does not provide adequate assurance to the parties. Therefore, the enforcement provisions that will be triggered in the event of a contract violation must also be considered during drafting. 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 is advisable to take necessary measures both for compulsory execution and for negotiations directed to execution. 17
Changes in legal relationships and the increasing international nature of these relations inevitably affected contract law as well. As a result of these changes, there are new problems waiting to be solved in contract law which makes contract law a very interesting field to study. 18
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 to outline some principles and guidelines, some of which have been presented above.20 Contracts drafted in accordance with these principles can both increase the effectiveness of international legal relationships and prevent the loss of time and resources.
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.
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.