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Breach, Remedies, and Defenses

Remedies in International Law

The remedies available to a business under international law mirror many of the remedies available under domestic law. For example, for the international sales of goods, remedies include payment, monetary damages, specific performance, interest payable, suspension of performance, and the right to avoid or set aside the contract.

The law has historically been divided into two systems: common and civil. Common-law systems are based on case law, while civil-law systems are based on statutes and codified law. Different countries apply their laws somewhat differently. The United States, as well as other former British colonies, received legal traditions from the English common law. These traditions include the use of an impartial judge to resolve conflicts and the use of juries. The majority of the world's population is governed by civil law, a type of law determined by statutes or codes.

Businesses entering contracts with foreign companies must consider some issues not common in domestic contracts. For example, if one party to a contract is in New York and the other party is in China, a contract should include a choice of law provision, the part of the contract that explains which state's or country's laws govern the transaction—in this case, it might state that if the contract is breached, then Chinese law will apply. Another important provision in a contract is a forum selection clause, which spells out where jurisdiction lies in the case of a lawsuit. This provision often includes a forum selection clause identifying the specific court that will have jurisdiction should a lawsuit arise. An international contract should also have a force majeure clause, in which the parties stipulate certain eventualities, including storms, earthquakes, and other “acts of God” that could possibly excuse a party from liability if the party didn't perform. These are all important items to consider because the laws of states and countries vary and provide different remedies to the nonbreaching party. The United Nations Convention on Contracts for the International Sale of Goods (CISG) is a treaty that aims to make international sales more uniform. It has been adopted by 89 countries. It applies to sales of commercial goods automatically when contracts are formed between two parties located in countries that are part of the treaty.

Another option for parties in an international agreement to consider is to include an arbitration provision in the contract. In such cases, the parties agree to resolve disputes through a neutral arbiter rather than a judge; in international arbitration, this is usually a panel of three. This method can make resolving agreements less complicated and often faster than going through the courts.