Key Clauses to Include in International Commercial Contracts in Germany

Some key clauses should be included when drafting international commercial contracts in Germany. These clauses allow specific guidance in aspects of the contract, provide a reliable legal framework, and address the parties’ particular needs. How these clauses should be drafted depends on the contract’s individual situation.

In Germany, the legal framework for international commercial contracts is primarily governed by the UN Convention on Contracts for the International Sale of Goods (CISG), which Germany has ratified. The CISG applies to contracts for the sale of goods between parties from different countries that have ratified the convention. In addition, German law provides a framework for international commercial agreements that do not fall under the scope of the CISG.

Some of the key clauses that are usually included in international commercial contracts in Germany are the following:

• Choice of law clause: This clause specifies which country’s laws will govern the contract. Germany has some restrictions regarding the choice of law in such clauses. The choice of law should be familiar to the contractual parties, and it should provide a clear framework for the contract to be conducted accordingly.
• Jurisdiction clause: The jurisdiction clause determines which court will preside over disputes that may arise under the contract. Once again, Germany has some limitations regarding the choice of court. Our experts at Schlun & Elseven Rechtsanwälte will advise you regarding essential considerations in such clauses.
• Arbitration clause: The arbitration clause is one of the most important to consider in a commercial contract. Such clauses allow for the use of arbitration to resolve disputes that may arise under the agreement, and arbitration is a popular alternative to litigation, particularly for international disputes. Our legal team are available to advise you regarding the choice of the arbitrator or arbitral institution.
• Payment terms: The payment terms clause outlines how and when payment will be made under the contract. Such clauses usually include essential information regarding the currency of payment, the payment schedule, and the penalties involved in late payments.
• Delivery terms: The delivery terms specify how the goods or services will be delivered under the contract. The delivery date and location and any penalties for late delivery are essential clauses under such terms.
• Intellectual property rights: The intellectual property clause provides guidance regarding the ownership and use of any intellectual property involved in the contract. Our lawyers provide specialist advice on all matters concerning intellectual property law in Germany.
• Confidentiality clauses: The confidentiality clause is one of the most consequential and must be assessed professionally. The confidentiality clause outlines what information needs to be kept secret, how such information can be used, and the protection measures in place to protect against breaches.

The above listed are just a selection of the critical clauses that parties should include in an international commercial contract. By consulting with our legal professionals, we can advise you on a more personal level and draft contracts specifically suited to your needs.

The arbitration clause is critical in such international commercial contracts. Arbitration allows contractual parties to resolve conflicts outside of court. By carefully considering the clause, our team can ensure that an appropriate neutral arbitrator or arbitration institution is chosen to resolve such matters. Arbitration is often preferred over litigating in a foreign court or jurisdiction. Our lawyers will advise you regarding suitable institutions.

Arbitration provides many benefits, including confidentiality and flexibility (regarding the choice of language in proceedings, the time frame and place of proceedings, the rules of evidence and much more) and the arbitrators may have extensive experience in this specific area of dispute.

Several risks are involved with the arbitration process, including limited judicial review, lack of precedent and difficulties in enforcing decisions. Consulting with professionals before reaching any agreement is essential. For example, the limited scope of judicial review of arbitration proceedings can lead to difficulties in cases where an arbitrator makes an erroneous decision or fails to consider critical evidence. The confidentiality of arbitration proceedings can make it difficult for third parties to assess the fairness of the proceedings and the outcome.

Such erroneous decisions can arise in cases where the parties have agreed to an inappropriate arbitrator. Arbitrators may have biases or a lack of experience in specific fields, and this can lead to them making incorrect judgements. Our thorough due diligence will carefully consider the qualifications and background of potential arbitrators before recommending them for selection.

Arbitration proceedings may not be recommendable in cases where the other contracting party is located in a jurisdiction that does not recognise or enforce arbitration awards. Your company may succeed in its case, but if the award enforcement is more complex than the dispute itself, it may not be worth it. Allow our lawyers to examine the arrangements; they will inform you of potential risks in this area.

Our team has the required legal experience to draft such clauses that are legally binding and enforceable that comply with applicable laws and regulations. We will also consider your company’s specific needs, characteristics and requirements when determining the location of the arbitration and arbitration rules.

Confidentiality clauses are particularly valuable in contracts that involve proprietary information and trade secrets. Agreements concerning joint ventures, software development and licensing arrangements, and NDAs benefit greatly from secure confidentiality agreements.

Confidentiality clauses need to be precise and unambiguous and clearly define what constitutes confidential information. Both parties must understand their obligations fully and agree to take reasonable steps to prevent unauthorised access or disclosure of the relevant information. Such clauses should state who should have access to that data.

The terms of the clause should outline any obligations involved with the termination of the contract, including what should be done with that information/data and whether parties will remain bound to confidentiality. Similarly, they should outline the remedies available for breaches of contract, including injunctive relief, damages, and indemnification. Parties can also agree to the method of dispute resolution, including arbitration.

At Schlun & Elseven Rechtsanwälte, our lawyers will advise you regarding the steps your company can take to protect such confidential information reasonably (including using password-protected files, limiting electronic transmission, and means of restricting physical access to the data). Our firm provides ongoing support to clients concerning confidentiality issues, including reviewing and updating the confidentiality clause as needed and advising on best practices for protecting confidential information.

In the cases of breaches, our lawyers will advise you regarding how to notify the other party in cases where a violation has been discovered. We will also outline exceptions that can apply in such cases, where disclosures may be required under German law. If the other party has breached the agreement, our lawyers will advise you regarding the next steps necessary to enforce the clause.

In some situations, the legal remedies may not be appropriate as further legal action could damage a working relationship between the parties. In cases where the breach was unintentional and the damage was minor, other solutions may be more appropriate than litigation or arbitration.

In general, whether or not to enforce legal proceedings for a breach of a confidentiality clause will depend on the specific circumstances and the goals of the party involved. It’s essential to weigh the costs and benefits of legal action and the potential impact on the business relationship before making a decision.

Our lawyers provide our clients with expert legal support in negotiating, drafting, and enforcing payment and delivery terms in international commercial contracts. By consulting with our team, our lawyers will advise you regarding the appropriate payment terms that should be included in their contracts based on the nature of the transaction, the parties involved, and the applicable laws and regulations. Each contract should be approached carefully, and parties should consider many factors before agreeing to them.

Our lawyers advise clients on crucial details, such as delivery dates, methods, and payment schedules. Working with our team ensures that the terms are clear, precise, and enforceable under German law. When negotiating with the other parties, we will act on your behalf, and your interests will be central to our concerns. We will break down the proposals and allow our clients to fully understand the implications of the proposed terms. From there, we will advise them whether the terms are favourable or whether they should be renegotiated.

Carefully drafting dispute resolution terms is critical as it ensures that clients are aware of whether arbitration is available, alongside litigation, as means of resolving complex legal disputes.

Several clauses should also be considered when drafting international commercial contracts. Our lawyers will advise you regarding their applicability to your situation.

Firstly, force majeure clauses need to be evaluated and assessed. The events of recent years, such as pandemics and wars, alongside their impacts, have strongly demonstrated the value to be found in such force majeure clauses.

Force majeure clauses provide for the suspension or termination of the contract in the event of unforeseeable and uncontrollable circumstances. They may specify the exact conditions when the clauses can be invoked and provide parties with safe legal recourse in the event of such disruptions. Our lawyers will advise you about the legal implications of such clauses and how they may be interpreted under German law.

Termination clauses should specify the circumstances under which the parties can terminate the contract and how much notice needs to be given before terminating. Our lawyers advise clients about such clauses, focusing on the nature of the transaction, the parties involved, and how they may be interpreted under German law. We will help you monitor developments and assess whether a potential breach of contract or law changes may give rise to a reason to trigger the termination clause.

Parties must also consider liability clauses as they can limit the liability of one or both parties in the event of a breach or other dispute. Our attorneys advise clients on the appropriate limitation of liability clauses that should be included in their contracts based on the nature of the transaction, the parties involved, and the applicable laws and regulations under German law.

Our team will consider our client’s insurance coverage to ensure that they have appropriate protection against potential liabilities that may arise under the contract. Liability clauses can specify a maximum amount of damages, provide guidance regarding remedies, and even exclude certain types of damages altogether.