Companies that plan to operate a business in another country must be familiar with the business laws of that country. The company should have their contracts reviewed by their attorney or legal department as well as the attorney or legal department for the country where they plan to do business. Contracts can fall through at the last minute do to items in the contract that one country will not agree to. In order to prevent countries from re-working their business contracts, they should contact the person in charge of the contract overseas to make sure they are in accordance with everything that needs to be included in the contract so there are no surprises. They should also send drafts to the other country to make sure that both parties are in agreement with the terms of the contracts and to make sure that the company that wants to do business there is in compliance with all of their laws and regulations, also to make sure that they have all of the permits needed to conduct business.
The management team can do a combination of these things to minimize the risk of the contract falling through or having to be rewritten. Waiting for a contract to be rewritten can slow production and slow the process of timeline that the company wanted to begin doing business in the host country. This can result in a loss of finances as well as profits for the company. This could also affect other contracts or deals that they had with other companies or sub-contractors who was doing business with the company. When a U.S. based lawyer drafts a contract, it does not necessarily follow that the law will be enforceable in a foreign country. If there is a breach of contract or a dispute with an overseas business, the dispute may be resolved in the foreign country, so it is important to have a lawyer there who can review the contract before it is finalized. “If there is a dispute with a foreign company, it is important to have the outsourcing contract specify that the dispute will be litigated in the United States, and will apply to the U.S., rather than foreign law.
Specification of quality standards and services to be provided by a foreign associate are integral components of a successful outsourcing contract. Acceptable standards of quality and performance may be different overseas from those in the U.S., so specific standards should be clear.” (Becker, 2007). This is an important part of a contract that should not be overlooked. It a dispute arises, in needs to indicate where the resolution of the dispute will take place. If companies ignore this, they could be subjecting themselves to have the terms of their contract litigated overseas with a country in which they know little or nothing about their laws and regulations.
Companies must be aware of the international as well as the national laws regarding conducting business globally. Knowing the laws can assist the management in making vital decisions that can impact the structure of their business. This will also assist the management in making decisions about which country to do business in depending on their more favorable laws. The management should always do the majority of the research on a country before entering into a contract. They also need to know the laws regarding employee rights, as well as the benefits that a company has to offer an employee. This will benefit the company and eliminate some of the risk associated with the contract being voided.
Becker, D. L. (2007). Laws Apply When Using Overseas Companies. Retrieved from http://www.nchc.com.
Outsourcing-Law.com. (2012). United Kingdom General Contract Law Principles (England and Wales). Retrieved from http://www.outsourcing-law.com.