In international business relationships, arbitration clauses and general terms and conditions supplement contracts and ensure smoother processing and the avoidance of legal conflicts. Companies that conclude contracts with foreign partners should therefore familiarise themselves with the specific requirements and legal framework conditions relating to these elements.
Arbitration clause: An important component of international contracts
Arbitration clauses offer the possibility of resolving any legal disputes outside of the state courts. This clause must be expressly agreed upon by the contracting parties, ideally before the contract is concluded, in order to avoid subsequent legal disputes.
In the event of a dispute, an arbitration tribunal is established, which often offers a faster and more specialised solution than regular courts. An arbitration tribunal can be set up on an ad hoc basis, with the contracting parties having a say in the selection of arbitrators. Another option is to choose an arbitration institution, such as the International Court of Arbitration of the International Chamber of Commerce (ICC).
Arbitration awards can be enforced in almost all countries, which is not always the case with state judgments. In addition, the selected arbitrators are usually experts and have the necessary legal, technical and language skills.
Terms of payment: a critical clause in international trade
It is also important to specify the terms of payment in international contracts, as buyers and sellers often have different interests. While sellers prefer to be paid early and ideally in advance, buyers usually want to delay payment for as long as possible. In international export, there are various options for regulating these conflicting interests. Documentary delivery and payment instruments*, such as bills of lading, consignment notes, loading certificates, documentary collections, documents against payment, documentary letters of credit or insurance and storage documents, provide greater legal certainty.
In addition, a bank guarantee can be included in the contract to reduce the risk of default. In this case, the bank acts as guarantor, either directly or indirectly, depending on the requirements of the contracting parties.
General Terms and Conditions: Validity in international contracts
General Terms and Conditions (GTC) are pre-formulated contractual terms that companies include in their contracts. In Germany, a clear reference to the company’s own GTC is sufficient between companies. In order for these to also be valid in an international context, it is crucial to clarify which law applies to the inclusion of the GTC. In the case of cross-border contracts, international law usually applies, e.g. the UN Convention on Contracts for the International Sale of Goods, in which case a mere reference to the GTC is not sufficient. In this case, the general terms and conditions must be sent to the contractual partner in the same way as the contract is concluded. A reference to the general terms and conditions on a company’s own website is therefore only legally effective if the contract is also concluded digitally.
In many countries, the terms and conditions must be explicitly communicated to the contractual partner in order to be legally applicable. Alternatively, the essential provisions of the terms and conditions can also be integrated directly into the contract.
Model contracts and arbitration clauses for guidance
Given the complexity of international contracts, model contracts and clauses offer valuable guidance. One proven example is Incoterms® 2020, published by the ICC. These internationally recognised delivery terms can be integrated into contracts, providing a standardised basis for the rights and obligations of the contracting parties.
Many arbitration institutions, such as the German Institution of Arbitration (DIS) or the Swiss Chamber of Commerce (SCAI), provide model arbitration clauses. These can assist companies in formulating their own clauses.
By carefully drafting arbitration clauses and considering any special features when incorporating general terms and conditions, companies can ensure that their international business relationships are successful and conflict-free from a legal perspective.
*Note: We offer training courses tailored to your specific needs on documentary delivery and payment instruments.
Source: GTAI (in German)
