This handbook is a guide to preparing international commercial contracts. It is intended to support the use of Model Contracts for small firms: Legal guidance for doing international business, prepared by ITC’s Pro Bono Committee on International Commercial Model Contracts for Small and Medium-sized Enterprises.
This book can also be read independently, as it:
- gives practical, detailed guidance on how to draft a contract;
- examines the merits of commonly used contract clauses;
- discusses key legal aspects of conducting business internationally; and
- provides insight into the (legal) dynamics of international trade.
Chapter 1 is a short introduction of what a ‘contract’ is, how agreements are reflected in writing, and how contracts are interpreted in a cross-border context. It identifies different styles of contracting and explains how contracts are typically structured. The chapter also explores two contract types used in the precontractual stage of a transaction – non-disclosure agreements and letters of intent (or Memorandum of Understanding). Finally, the chapter touches upon legal tech, explaining how businesses can benefit from automated contract creation and contract lifecycle management. It is particularly useful for non-lawyers.
Chapter 2 focuses on the ITC Model Contracts. Both lawyers and non-lawyers get a better understanding of when and how the Model Contracts should be used most efficiently with a discussion of common negotiation parameters. This chapter also discusses how the contracts can be tailored to fit a specific business need. This is key for non-lawyers and helps lawyers and law students to better understand the main types of commercial contracts used in international trade.
Chapter 3 outlines general principles of clear and precise contract drafting. This covers basic skills, discussing techniques that may improve the readability of a contract or accelerate negotiations. The chapter also explains how vague terms such as reasonable, best efforts and reasonable endeavours can be used and gives best practice on using definitions and defined terms. Using these techniques should make a contract less ambiguous, more consistent and less old-fashioned. Although mostly aimed at lawyers, non-lawyers will also appreciate the practical insights.
Chapter 4 concentrates on the scope and merits of the clauses reused across the ITC Model Contracts, sometimes with little or no variation in wording. The clauses include a change of circumstances affecting the contractual relationship, events of force majeure, confidentiality of information exchanged, warranties regarding the quality of supplied goods or services, appropriate limitation of the parties’ exposure to any liability under the contract, dispute resolution mechanisms, and boilerplate clauses. These subjects are important but some are usually not negotiated. The chapter provides relevant proposals for compromises.
Chapter 5 examines the legal frameworks and principles underlying the ITC Model Contracts. For non-lawyers, it is an introduction into a myriad of legal aspects of contracts. It shows that contractual parameters are largely universal (also in an international setting). With reference to the UNIDROIT Principles on International Commercial Contracts (UNIDROIT Principles), it introduces fundamental concepts of contract law. The chapter examines international sales related to the most successful convention, the United Nations Convention on Contracts for the International Sale of Goods, contractual devices for delivery of goods (INCOTERMS) and the international options for payment, such as documentary collection and letters of credit. The final two sections give an insight into intellectual property law and competition law – legal subjects of increasing importance for small and medium-sized enterprises.