In any contractual arrangement, it is important to establish clearly the rights and obligations of each party. If these terms are absent or ambiguous, the parties will probably not be able to perform the contract without first modifying the terms. Moreover, enforcement will be unpredictable, because a court will have to imply terms based on what the court believes would have been the intent of the parties.

Differences in Business Practices

For contracts made between parties within the same country, missing or indefinite terms may be filled in by local laws or practices. The rationale is that the parties likely intended to follow the local laws and practices with which they were familiar. If the parties are from different countries, their intentions cannot be so easily implied because they herald from different legal systems and no doubt utilize dissimilar business practices. For this reason, it is essential for your international contract to spell out in definite terms the rights and obligations of each party.

International Laws

In recognition of the difficulties that parties face in contracting across country boundaries, the international community has begun to adopt systems of laws and rules to be applied instead of local laws in transactions between parties located in different countries. The intent behind adopting uniform, international laws is to ensure that all parties to a cross-border transaction are subject to the same set of rules, regardless of whether the laws of their home countries are dissimilar. If parties to an international sales contract are nationals of countries that have acceded to an international treaty or pact, such as the United Nations Convention on the International Sale of Goods (CISG), they may rely on international law to determine at least some of their rights and obligations.

In general, it is unwise to rely on the law, even international law, for implied contractual terms. The application of international laws to the interpretation of a contract can lead to unexpected and even unfavorable results. Thus, if an international contract of sale fails to provide a delivery time and the buyer sues for breach when the seller fails to deliver within one month, the contract may be deemed invalid under the local law of the buyer's country because of the absence of an essential term. But if a court applies international law, it may imply a reasonable delivery time of two months in accordance with the practice of the industry and therefore may enforce the contract.

Preciseness and Predictability

To avoid an unfavorable and uncertain result, it is best to define your rights and obligations in a written contract when you are dealing across country borders. Hopefully your contract terms will be sufficiently explicit that both parties will understand what they are supposed to do and what they are entitled to receive. In the event of a breach, there is a greater chance that a court will enforce explicit terms (unless the provisions are unconscionable), and thus the parties can more closely predict the outcome.