Business behavior differs among cultures. Some cultures focus on the importance of developing a contractual and social relationship. Uniform Commercial Code provide a solid foundation of drafting contract. Japan, Russia and China also have a particular regulation regarding contract drafting. Let's check it out.

1. International Contracting
Gatot Soemartono, Ph.D
Mariske Myeke Tampi, S.H., M.H.
INTERNATIONAL BUSINESS TRANSACTION

2. Stay informed!
 www.ita.doc.gov/td/tic – International Trade Administration
 www.lexmercatoria.org – modern lex mercatoria
 www.unidroit.org – sponsored conventions
 www.dti.gov.uk/access/unfair/part4.htm – United Kingdom Department of
Trade and Industry
 www.coe.int – Council of Europe

3. Key Terms
 Abus de droit
 Battle of forms
 Breach of confidentiality
 Contract of adhesion
 Convention on Contracts for the
International Sale of Goods (CISG)
 Culpa in contrahendo
 Customary international business law
 Doctrine of arrhes
 English Unifair Contract Terms Act of 1977
 European Union Directive on Unfair Terms
 Foreign Economy Contract Law of the People’s
Republic of China
 French Civil Code
 Genuiness of assent
 German Civil Code
 Hardship
 International Chamber of Commerce (ICC)
 UNIDROIT Principles of International Commercial
Contracts
 Uniform Commercial Code
 Written modification clause

4. INTERNATIONAL CONTRACT LAW
 Substantive law rules and principles
 Solid foundation for drafting a sales contract  Uniform Commercial Code
 General principles of contract law
 The law of the country of foreign contracting party
 Knowledge of other’s party culture
 Language differences
 Negotiating style
 Business behavior

6. Requirement of Contract
 Mutual Assent
Offer
Manifest an intent to enter into contract.
Acceptance
A positive and unequivocal expression of an offeree’s intent to enter into a
contract on the terms set out in the offer.
 Consideration
 Capacity
 Legality
 Form

7. Negotiating An International Contract
Before contract:
 Legal differences
 The nuances of language and culture
 The trust developed early in contractual relationship
“The story about Japanesse contracting that emerges is that law is largely irrelevant.
Instead, the business relationship is paramount and the Japanese favor unwritten, or very
brief agreement; do not regard themselves bound by letter of such agreements but rely
on the notion of changed circumstances to seek renegotiation; and in the case of
dispute, will seldom, if ever, allow the matter to proceed to court.”
After contract: reconcilement and restore harmonious relationship

8. Doing Business Internationally:
Contract characteristics in Japan
 “Contract” assumes not opposition of
parties, but cooperation
 Parties attach more importance to
establishing collaborative human
relationship than preparing highly
formal, legalistic written contract
 Contract provisions are written not to
be rigid, but flexible and changeable
 Parties prefer clauses that in case of
changed circumstances require the
parties to act in good faith to
renegotiate the term, rather than
including detailed clauses to cover
anticipated disputes
 Contracts generally are simple,
considering of view short clauses
 There is an implied understanding that
clauses are to be applied leniently in
the area of performance and non-
performance
 In case of dispute, the preferred means
of resolution is the giving of mutual
concessions and not litigation
 To conclude a negotiation often
means not to sign a written contract,
but to establish a personal and cordial
relationship

9. Principles of International Contract Law
 Tremendous similarities among the different legal system in how the law
supports commercial transactions.
 Most differences are a matter of style and not substance
 The growth of customary international business law
 Universal adoption of the international Chamber of Commerce’s standards
in the area of terms (Incoterms) and letter of credit (Uniform Customs and
Practises for Documentary Credits)
 The increased of publication and citation of international commercial
arbitration
 Development of an international commercial jurisprudence
 United Nations Convention on Contracts for the International Sale of Goods
 International Sales Law

10. Principles of Lex Mercatoria that can be used in
the interpretation of contracts
 Public International Law
 Uniform Laws
 General Principles of Contract Law
 Rules of International Organizations
 Custom and Usage
 Standard Form Contracts
 Arbitral Decision

11. Principles of Lex Mercatoria that can be
used in the interpretation of contracts:
 Public International Law: Vienna Convention on Treaties
 Uniform Laws: The Hague Rules (COGSA) and the Convention on Contracts
for the International Sale of Goods (CISG) are examples of succesul
attempts at uniform international law
 General Principles of Contract Law: The best examples or a general
principle f contract law found in most national legal system is pacta sunt
servanda or what is referred to in the common law as sanctity of contract
 Rules of International Organizations: Courts may look to nonbinding rules
published by such international organizations as the United Nations
Organizations as the United Nations Organization for European
Cooperation and Development (OECD) and the International Institute for
the Unification of Private Law (UNIDROIT)

12. Principles of Lex Mercatoria that can be
used in the interpretation of contracts:
 Custom and Usage: The clearest examples of custom and usage or
customary international law that has reached a level of almost universal
acceptance are the standard and rules published by the International
Chamber of Commerce in the area f trade terms (INCOTERMS) and letter of
credit (Uniform Customs and Practises for Documentary Credits, or UCP)
 Standard Form Contracts: the ICC publishes standard of model forms of
Distributionand Agency Agreements. They also publish a manual to be
used in the drafting of force majeure and hardship clauses
 Arbitral Decision: Although not widely reported, arbitral decisions provide
an outstanding resource for principles.

13. ---
“Common Law sources are to be found in the usage,
habits and manners, and customs of the people. The
common law of the country will be modified, and
extended by analogy, construction, and custom, so as
to embrace new relations, springing up from time to
time, from an amelioration or change of society”
---
Justice Turley, 1842 in Jacob v. State, grassroots metamorphosis

14. Selected Contract Provisions of the
Russian Civil Code
Article 429. Preliminary Contract
Under a preliminary contract the parties shall be obliged to conclude in future a
contract concerning the transfer of property, fulfillment of work, or rendering of
services (principal contract) on the conditions provided for by the preliminary
contract.
The preliminary contract shall be concluded in the form established for the
principal contract has not been established, then in written form. The failure to
comply with the rules concerning the form of the preliminary contract shall entail its
being void.
A preliminary contract must contain conditions enabling the establishment of the
subject, and also the other material conditions, of the principal contract.
A preliminary contract shall specify the period in which the parties are obliged to
conclude the principal contract. If such period has not been determined in the
preliminary contract, the principal contract shall be subject to conclusion within a
year from the moment of concluding preliminary contract.

15. Selected Contract Provisions of the
Russian Civil Code
Article 451. Change and Dissolution of Contract in Connection with Material
Change of Circumstances
A material change of circumstances from which the parties proceeded when
concluding a contract shall be aground for the change or dissolution thereof
unless provided otherwise by the contract or it arises from the essence thereof.
A change of circumstances shall be deemed o be material when they have
changed such that if the parties could reasonably foresee this the contract
would not have been concluded on significantly differing conditions.
If the parties have not reached agreement concerning bringing the contract
into conformity with the materially changed circumstances or the dissolution
thereof, the contract may be dissolved, and on the grounds provided by point
4 of the present Article, changed by a court at the request of the interested
party when the following conditions are present:

16. Selected Contract Provisions of the
Russian Civil Code
(1) At the moment of concluding the contract the parties proceeded from the fact
that such a change of circumstances would not occur;
(2) The change of circumstances has been caused by reasons which the interested
party could not overcome after they arose with that degree f concern and
care which are required of him by the character of the contract and the
conditions of turnover;
(3) The performance of the contract without a change of its conditions would so
violate the correlation of property interests of the parties which correspond to
the contract and entail for the interested party such damage it would be
deprived to a significant degree of that which it had the right to count on when
concluding the contract;
(4) It does not arise from the customs of business turnover or the essence of the
contract that the risk of the change of circumstances is norne by the interested
party.

17. Selected Contract Provisions of the
Russian Civil Code
In the event of the dissolution of a contract as a consequence of a material
change of circumstances the court at the demand of any of the parties shall
determine the consequences of the dissolution of the contract by proceeding
from the need for a just distribution between the parties of the expenses
incurred by them in connection with the performance of this contract.
The change of contract in connection with a material change of
circumstances shall be permitted by decision of a court in exceptional
instances when dissolution of the contract is contrary to social interests or
entails damage for the parties which significantly exceeds the expenditure
needed to perform the contract on the conditions changed by the court.

18. China’s Foreign Economic Contract Law
The Foreign Economic Contract Law indicates that the written contract should
display a high degree of certainty of terms. Article 12 states that contracts should
contain the following provisions:
• Title, name, nationality, and place of business of the parties
• The date and place of its signing
• The contract type, along with the category and scope of contractual objectives
• Objectives regarding technology terms, quality, standard, spacifications, and
quantity
• The time limit on, place of, and method of performance
• Conditions on price, amount, and method of payment
• Terms and conditions for assignment
• Compensation and liabilities for breach
• Methods of settlement
• Language of contract
Article 37, although not mandating alternative dispute resolution,
encourages the mediation and then arbitration of any disputes.

19. Main Sources
 Dimatteo, Larry A. The Law of International Business Transactions.
2003. Ohio: Thomson – South Western
 Poole, Jill. Textbook on Contract Law. 9th edition. 2008. New York:
Oxford