The vast majority of cases I work on are a lot like the material we read in law school. My Torts professor told us on more than one occasion that “there are real people behind every one of these cases.” My cases are no different.
She also told us that they were in these casebooks because some lawyer goofed.” Or words to that effect, anyway. I took both thoughts to heart, and they have guided my immersion in the profession ever since.*
Last year, when I posted “Five Essential Things All Business Owners (and Their Lawyers!) Should Know Before Signing Global Contracts“, I had those real people– and preventing lawyerly goof-ups– in mind. But lately, I’ve realized that some elaboration is necessary. Why those five things matter ought to be apparent. But some nuance is necessary, so I offer a five-part series that elaborates on each point, more for than benefit of lawyers than for the business owners who want to venture abroad.
Those five things, in turn…
- Designate an agent for service in the United States.
- Include a choice of venue.
- Choose a governing law.
- Determine the operative language.
- Secure a guarantee of judgment debt.
If you choose not to decide, you still have made a choice.
— Neal Peart, 1979
To elaborate on Point Three…
Choose a governing law.
If you don’t designate what body of law governs your dispute, you leave everything up to the default setting of the court hearing the case. I wrote last week about the need to choose a venue, but choosing a governing body of law is just as critical. Its necessity ought to be obvious, but this important factor is frequently omitted, perhaps by design, perhaps by simple forgetfulness. Just get it in there, because certainty about unfriendly law is better than uncertainty about ostensibly friendly law. Like the choice of a venue, this is a classic Conflict of Laws issue, and courts hate to wade into those questions if they don’t have to. This might be the single most esoteric and arbitrary– yet wide-ranging and impactful– field of law, SO TAKE IT OFF THE TABLE. Make a decision about what law applies. But think about a few things as you do…
- Be certain the selected law has sufficient applicability to the facts & parties involved. If you’re in California state court to adjudicate a dispute between an California plaintiff and an Illinois defendant, there’s probably not a good reason to choose Texas law, unless Texas is the nexus of the contract. Likewise, choosing Chinese law to govern a dispute adjudicated by a U.S. court borders on silliness (see Dan Harris’ thoughts on this issue, in tandem with silly choice of court clauses).
- The Convention on the International Sale of Goods (CISG) is the default setting for international trade contracts. Specifically disclaim the CISG if you don’t want it applied.
- Don’t assume the CISG is bad just because you aren’t familiar with it. Especially if you’ve chosen a foreign venue, the CISG could just be the most beneficial law for your client’s situation. Take an hour to bone up on the thing– I guarantee that the offshore party’s counsel knows it.
- To parallel my suggestion last week, don’t just assume that the other (foreign) party’s hometown law is bad. The foreign country’s law may align more closely with your client’s needs, and choosing it may go a long way to preventing a breach altogether.
- Above all, for crying out loud, make the venue and governing law correspond to the language! It’s highly impractical to expect a Minnesota court to adjudicate a Swedish-language contract under German law. Ponder that for just a moment– such an expectation insults Minnesota because you don’t like Minnesota law or the language of Shakespeare, it insults Sweden because you don’t believe in its courts or law, and it insults Germany because you can’t be bothered to adjudicate there in its language.
There is no one-size-fits-all approach to designing a solid agreement– every contract is different, even if the same parties are signing the latest agreement in a decades-long relationship.
* I learned Torts from Nancy Levit. It was my best grade that very first semester, which isn’t saying much, but I definitely learned a bunch from her. The learning continued after I graduated, with two books she co-wrote with Doug Linder (my ConLaw professor, two semesters worth). I highly recommend The Happy Lawyer and The Good Lawyer.