Outside consultant: Contract language for international clients

  • Updated: December 29, 2013 - 1:12 PM

Question

I have a lead generation business for HR software providers and I recently expanded my customer base internationally. Is there any specific language I should include in my contracts for international clients that I don’t have for U.S. clients?

Dave Rietsema, HR Payroll Systems, www.hrpayrollsystems.net

 

Answer

There are indeed a few specific clauses that you should add in a contract with a foreign customer. First, when entering into an international contract, the parties face certain risks that they would not encounter in a domestic contract — for example political risk, currency risk and legal risk.

Let’s focus on the latter. One thing that you may want to avoid is for your contract to be subject to foreign law in case of a dispute, and for you to be subject to the jurisdiction of foreign courts, in particular because the outcome of a dispute may be uncertain. In order to manage that risk, you should include in your contract two clauses, namely a choice of law clause and a forum selection clause.

With a choice of law clause, you indicate which law governs your contract and will be applied in case of a dispute — ideally Minnesota law. The forum selection clause determines which courts will have jurisdiction in case of a dispute. Be aware that the foreign party will want to avoid the legal risk as well. Choosing an alternative dispute resolution method may also be a satisfactory solution for both parties.

Second, considering your activity, it is likely that personal data will be transferred from your customer to you or another party located in the U.S. If so, and if your customer is located in the European Union, it is critical to comply with the 1995 E.U. Directive on Data Protection. It prohibits transfer of personal data to a non-E.U. country, which does not meet the “adequacy” standard that the Directive sets. To facilitate the compliance process, the U.S. Department of Commerce and the E.U. have set up the U.S.-E.U. Safe Harbor Program. If you decide to join, you must self-certify annually in writing that you agree to adhere to the program’s requirements.

This is only general advice. Please consult with an ­attorney for more specific ­recommendations.

About the author: Dr. Romain M. Lorentz, Participating Adjunct Professor, Dept. of Ethics and Business Law, Opus College of Business, University of St. Thomas

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