How to do business safely

The risks of costs and unforseen disputes can arise following business pratice

Marcello Mantelli
Avvocato in Milan and Turin

The international contract has free content and can protect the company’s business with foreign countries.

Italian companies too often operate with foreign partners through incomplete and wrong international contracts or even contracts that do not have any written agreements that protect their commercial interests.

The approach of many companies towards the international contract is made up of business practices stratified over time, obsolete and not verified or verified by self-declared experts without any specific legal expertise. Sometimes models of contracts taken on the web from uncertain sources are used and they are unsuitable to regulate the operation, or, in any case, they are not tailored to the business.

Thus, there is a high risk to incur into unforeseen economic conflicts.

For example, for requests for payment of sums by way of indemnity, originating from a foreign distributor under the foreign law applicable to the commercial relationship, or due to a large indemnity due to an “historical” agent based in France, in the context of an agency relationship that has come to an end. Thus, the outlay will be much higher than that set forth by the Italian law. 

These situations seem to not give rise to a judicial litigation, but they are reasons for unforeseen costs for the company. Everything happens in a context of negotiation uncertainty: the entrepreneur, if not well legally aided, does not know to what extent it is appropriate, from the juridical and economical point of view, to go in making concessions to the other party. 

How to prevent these risks?

The correct approach is to use the international contract as an operational tool to implement both the marketing strategy and the commercial objectives, with the final aim of exporting the products and promoting their brands abroad, with all the precautions for business in the greatest possible safety. 

The companies can freely determine the content of the international contract but still within certain limits (for example the use of mandatory rules). The objectives can be pursued both with the protection of the fundamental critical points of the operation and with the regulation of the principal points of interests. 

For example, in the international sale, the most frequent points of clash are the risks of  loss of or damage to the goods until they have been delivered, the possible contestations about their conformity, the risk of non-payment or the wrong choice of dispute resolution method. Considering that a supranational tribunal and unique norms in the world do not exist, the previsions of the contract – if they are tailored to the specific commercial operation and according to the best international contractual practice – must provide for the choice expressed by the applicable law, which will integrate those points of the commercial agreement not regulated by the parties.

All should be done without forgetting a thoughtful choice of the dispute resolution method. 

#internationalcontracts #businesslaw #internationaltrade #businesspratices

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