If your company does business internationally, you are undoubtedly aware of the challenges that brings to contracting. Contracts need to be reflective of the current commercial status, which is constantly fluctuating due to changes in the world, from changes in power to currency fluctuations, new international regulations, and rapidly shifting international laws. In this environment, even seemingly inconsequential, boilerplate contracting language, can create serious legal and contractual issues if it’s not addressed appropriately.
Therefore, it’s important for businesses to understand the challenges of global contracting and uncover solutions to overcome those challenges.
For starters, let’s look at some of the more common challenges that come with contracting on a global basis.
Challenge #1: Language. Typically, English is considered the “lingua franca” of contracts, with many contracts drafted in English, but that’s not always the case. In many countries, contracts must have a version in the local language in order to be considered valid. Further complicating matters is the fact that there are multiple dialects of language (for instance, Spanish is spoken differently in Mexico compared to Spain and South America) and English legal terms don’t always translate directly into foreign equivalents. Verb tenses or sentence structure, for example, can make a significant difference in the interpretation of the contract, creating challenges in the drafting of the contract.
Challenge #2: International Laws. Laws aren’t always the same across borders, and a clause that is perfectly legal or standard here in the U.S. might be problematic in another country. Contracts must be developed with consideration of the laws of both parties. Differences in tax laws and licensing rules can also affect how contracts are drafted.
Challenge #3: Currency. Currency fluctuations are an issue in any international transaction, and contracts must be developed with consideration of currency support, as well as issues related to international times and dates.
Challenge #4: Regional Control Issues. For businesses with foreign offices, or who work with employees overseas, contracts need to take a balanced approach between adhering to the corporate standards and regional practices. This is particularly relevant in employment contracts, which are bound by local standards that contradict corporate policy. When developing global contracts, enterprises must consider these important issues.
Challenge #5: Data Protection Standards. Standards for data collection, protection, and use vary by country, with the European Union having some of the strictest data laws in the world. Your contracts (and by extension, any systems on which your contracts are drafted and stored) must be developed in consideration of these rules for data and document protection.
These are just some of the challenges that can arise when developing global contracts. The good news is that many of them can be addressed using a contract management solution.
By using contract management software to draft, execute, store, and manage your contracts, you can alleviate or eliminate many of the issues inherent in global contracting.
Contract management itself is a complex practice, and when you involve foreign entities, it only becomes more so. However, by implementing a contract management system, you can alleviate many of the most common pitfalls and focus on more important issues and on developing solid business strategies, while steadily improving the bottom line.
To learn more about how you can grow your business on a global level using document comparison and document management tools, click here to schedule a demo of Exari Match.