Global business means global contracts. Each of the parties are resident or domiciled in different countries. As laws and legal language differs from country to country contracts need to reflect language that accommodates and clarifies provisions that might not be familiar in that foreign jurisdiction. In addition, the cost of litigating in a foreign jurisdiction can exceed all expectations and thus is difficult to quantify.
The choice of law can be dictated by the contract itself, yet the choice of law can also be different than the place chosen for resolution of the dispute. Thus, a foreign court could be in the position of, for example, an English court interpreting U.S. law. In this example, parties before an English court are permitted to present experts to assist the court in interpreting U.S. law. This can become a battle of the experts.
Where a standard form is used, which is meant to provide a uniform interpretation providing some certainty, however, foreign courts are not necessarily familiar with such universal interpretation and may alter the operation and effect of the underlying agreement.
Contracts provide certainty in business. Such potential alteration eliminates this certainty and creates risk that is difficult to quantify. With regard to specific provisions, U.S. courts generally takes a broad view and interpretation of contract provisions and are willing to imply provisions, for example, good faith. Yet courts in other jurisdictions are not willing to imply what is not spelled out by specific language. Interpretations also varying with regard to specific legal concepts. “Gross negligence” is a well-recognized legal concept in U.S. law, however, in England for example, there is no concept of gross negligence, rather this concept is replaced by a notion of serious error or conduct falling significantly short of expectations.
Whenever possible, check with a lawyer in the foreign jurisdiction to ensure the differences are fully understood and clarified wherever possible. If possible carefully draft provisions keeping in mind a foreign court may be interpreting the terms should a dispute arise.
Technology advancements have provided the means for businesses to grow their products, services and consumer base, both nationally and globally. Using electronic communications to form contracts, whether by website purchases or by e-mail correspondence, businesses must have confidence in the validity and enforceability of those contracts and whether they can be evidenced in court proceedings. Much of the business’ confidence, or lack thereof, is derived from electronic and digital signatures. While the legislation in the U.S. is clear and tested in court, international legislation is untested or, depending on the country, doesn’t exist.
U.S. Legislation. In the U.S., there are two primary pieces of legislation that govern digitally-created contracts, namely: the E-Sign Act and the UETA, or the Uniform Electronic Transactions Act. The E-Sign Act is a piece of Federal legislation that prevents electronically-created documents and contracts from being held out of evidence simply because they were created digitally or electronically. The UETA has served to provide a singular law amongst the States to prevent confusion in this area. It has been adopted by 47 states, though the remaining three states do recognize electronic signatures.
Not only are UETA electronic signatures allowed and recognized by law, but have proven to be even stronger evidence in court than a written signature. In order to meet the guidelines set forth in UETA, most companies employ e-signature and electronic contracting software and the services of vendors. Choosing a specific e-signing vendor will depend on the type of business and the types of transactions. Now that some of these products and services have been tested by the judicial system, determining which is best suited to a particular business or transaction can be complex and confusing.
Global Legislation. While most of the first-world nations have adopted legislation to deal with this matter, emerging markets may not have. Beyond that, the vast majority of legislation adopted globally has yet to be tested in court. This does create problems when commerce is reaching out to new places. Some countries with legislation include: Canada, Australia, New Zealand, the United Kingdom, the European Union and South Africa. These countries’ laws are extremely similar to the legislation in the U.S. but because of different nomenclature and being untested, there is some confidence to be built.
If your business uses electronic or digital signatures, would like to start or is looking for help in determining the efficacy in international transactions, please don’t hesitate to contact us in this matter.