With the increase in international trade comes the increase in conflicts arising out of contracts between international trading parties. When one party considers the other party’s actions to be a breach of the contract, courts will look to the express terms of the contract as well as the applicable law to make a decision about the dispute. That’s why it is so important to consider how courts will interpret international contracts while the contract is still being drafted, and before it is signed.
You’ve undoubtedly heard of the idiom “the devil is in the details.” When it comes to contracts, the devil is in the boilerplate language. In a contract, the boilerplate language is the standard language that you usually find at the end of every contract. There you’ll find clauses, among others, relating to governing language, governing law, forum and dispute resolution. But when dealing with international contracts, using standard boilerplate language can have undesired consequences.
Governing Language
It’s common for contracts between a Brazilian company and an American company to be negotiated in the English language and not in Portuguese, which is Brazil’s national language. However, when it comes to enforcing international contracts in Brazil, Brazilian courts require that the contract be translated into Portuguese.
Even if the contract states that the English version of the contract will prevail, the English version will still need to be translated into Portuguese by a sworn translator. It is that officially translated English version of the contract that the Brazilian courts will use to resolve the dispute.
Governing Law and Forum Selection
It’s common for parties to include governing law and forum selection clauses that are more favorable to the party that drafts the contract. In an international contract, for example, an American company may draft the clause to state that the governing law will be the law of the State of Florida and the forum for disputes will be the City of Miami.
Parties are free to choose the governing law and forum in international contracts. Depending on the parties and issues involved, a particular forum or governing law may be more favorable to one or more of the parties. No matter what law and forum are chosen, the parties must know that this decision is their decision to make.
Arbitration
Contracting parties frequently include arbitration clauses to create an alternative method of dispute resolution. In Brazil, the arbitration of a dispute can often be handled much faster and with less expense than a court battle, particularly in the case of international contracts.
When drafting an arbitration clause, it is important to keep in mind some of the following: how many arbitrators will there be; who will be the arbitrator(s); who will pay for the arbitration; what language will the arbitration be conducted in; will the arbitration award be final; where will the arbitration be held?
Boilerplate Language in International Contracts
There are many similarities and differences between Brazilian and American contract law and how it is applied. However, it is important that the apparent similarities do not cause the contracting parties to overlook important details in the contract’s boilerplate language.
