International Contracts Through Treaties

inbatv Articles, India, International

International contracts are basically formal understandings and obligations of two or more countries towards each other. The purpose of this contract is to establish relationship between two or more countries regarding trade and other business and through it to enlarge the clients. Contracts at International level are usually form and govern by treaties. At International level, treaty is a legally binding agreement between two or more countries whether it is called as convention, protocol, pact, an accord etc. There are few basic points which are needed to be followed while framing a contract at International level also i.e., offer, proposal, acceptance, promise, agreement, lawful consideration, contract. So, while framing treaties countries follow all such procedures and then negotiate with each other on its subject matter. International contract includes:-

  • International sale deed
  • International supply agreement.
  • International services agreement
  • International franchise agreement
  • International distribution agreement
  • International agency agreement
  • International manufacturing agreements, etc.

CONTRACT DRAFTING AT INTERNATIONAL LEVEL

  • While drafting the contract, the state usually write the obligations and matters in black and white which is defined in a formal written document.
  • The agreement legally governs relations between states and hence it becomes ‘the law of the parties’.
  •  After negotiation, the contract is ratified and signed by representatives of the governments involved.
  • In case of any dispute among parties, a third party is appointed to take decision who has not taken part in contract’s negotiation. 
  • Unless it is otherwise directed, its amendment is binding only on the states that amended it. 

APPLICABILITY OF CONTRACT AT INTERNATIONAL LEVEL

International Contracts are mainly governed by International Contract Act. If we talk about governance of International Contract through treaty, it is governed and regulated by Contract of International Sale of Goods (CISG). It is a multilateral international treaty which forms standardized laws throughout the world in respect of International sale of goods.  It is most widely used treaty regarding Contract rules. This treaty was adopted in 1980, in Vienna. It is thereby also called Vienna Convention. It was drafted by UNCITRAL (International Institute for the Unification of Private Law). It is being signed by 76 countries by August 2010 including China, Russia, and Japan. CISG usually conveys in traditional approach of contract between the parties. It does not talk about validity of contract or consideration or whether or not the contract is subject of any kind of distortion, fraud, undue influence, etc.

For dealing with specific aspects of long term Contract, The “Unidroit Principles of International Commercial Contracts” was adopted in 1994 and were subsequently amended in the years 2004 and 2010 by UNIDROIT and is not only restricted to sale deed only and also covers other areas also.

The forming case on this topic is Albeko Schuhmaschinen AG v. The    Kamborian Shoe Machine Co. Ltd– The defendant, a shoe making company offered a Swiss company i.e., plaintiff to become his agent for the sale and distribution of certain shoe making machinery. As defendant never received an acceptance but according to Swiss company they posted acceptance. According to English law posting constitutes an offer but according to Swiss law, it is needed that letter of acceptance get received by the offeror. Thereby court held that this case is based on putative proper law and as the acceptance was not received by the offeror, thereby it does not constitute contract.

IN CASE OF OMISSION

In case of any kind of omission regarding choice of international law or is void or ineffective, then either the international or national rules on conflict of law is effective or substantive law of the forum is effective there.

  • According to Rome Convention, in the absence of choice, the contract should be governed by the law of the country.
  • Recently on 2015, the Hague Conference on Private International law calculated the adoption of Principles on Choice of law in International Commercial contracts.
  • The Rome I Regulation (initially Rome Convention) additionally provides special rules regarding protection of weaker contracting parties.

CONCLUSION

International contract helps to have volume of transactions and exchanges among different nations and it also helps to build up relations but there by it is needed to have clarification about the law which is to be followed while following forming a contract internationally. Thereby it is required to frame new rules or provisions regarding governance of the contract at International level.

By:

Shreya Banerjee

BBA LLB (4th Year)

Banasthali Vidyapith