Contract defenses may seem like a dry, legal principle unless you’re an SME doing business abroad. In international transactions, weak contract enforcement is a common risk, and some barriers may be misrepresented as legal requirements to limit your operations or even deny you payment. Even mundane terms in a contract such as choice of law may become so important that they are the difference between a profit and an expensive lawsuit. Understanding exactly what it is that you’re agreeing to in a contract is the first step to successfully leveraging contract defenses in your favor.
Importance of contract defenses
Many people think of contracts as taking something from someone. The reality is that contract defenses are designed to protect the parties to an agreement. If you’re entering into a contract with an SME in Mongolia or a state agency in Kazakhstan, you need to understand the terms, consequences and risks of the agreement. This can save you time, money and heartache when something goes wrong.
Developing contract defenses
Most SMEs don’t have expensive litigation budgets or many assets to seize in the event of contract breech. Instead, SMEs need to rely on practical strategies to protect their venture. That’s where contract defenses may help. Expert legal advice is essential for providing the background necessary to structure a workable business agreement. When in doubt, contact an experienced attorney for guidance regarding contract defenses.
How contract defenses can help
Depending on how contract terms are written, contract defenses can help regulate communication, clarify the consequences of late payments, clarify enforcement of contract terms and safeguard business plans. Additionally, failing to clearly define contract hurdles can leave you vulnerable if market conditions change or if the parties to an agreement cannot resolve a dispute. Top quality legal advice can help you understand the contract terms before you sign.
Common contract defenses
Differing power dynamics, experience levels and business strategies can create problems when executing contracts at scale. This is especially true for SMEs that may operate in under-explored markets. Some of the contractual defenses you may want to consider include: When applied correctly, these protections can help shore up your business operations. But improperly crafted contractual defenses may lead to costly delays, penalties or make scalability impossible.
Why contract enforcement is challenging
Even when contract protections are effectively applied, enforcement across international boundaries is not guaranteed. Challenges can include: These challenges don’t mean that contract defenses are ineffective. However, it does speak to the importance of understanding the legal system in the international markets where your business operates.
Internationalization and the green transition
In any market, achieving sustainability goals is more complex than limiting carbon footprint. SMEs also need to reduce waste, consider environmental impact and assess long-term strategies that can minimize the negative consequences of business activity. As such, having an attorney who understands your business plan, contract terms and industry is critical to the success of the green transition.
When SMEs go above and beyond to create defensible markets, they enjoy numerous benefits. In addition to protecting intellectual property and improving cash flow, defensible business practices create opportunities for partners, higher margins and reduce the potential for costly litigation.
Final thoughts
Which contract defenses are right for your SME largely depends on the scope of the agreement. Seeking constructive legal advice for contract enforcement saves you time and money. Contact a business attorney today for advice on strategic contract development.
Takeaways
Internationalization can take your business to new heights. But when your SME is out of its element, poor contract terms and enforcement may bring your business model to a grinding halt. Understanding the terms of the agreement, focusing on contract defenses and conducting business with integrity may help you avoid setbacks.
For more information on contract law, you can visit Wikipedia’s Contract Law page.