In this day and age of Internet business and globalization, more and more business is being done cross border or even across an ocean. More importantly, a lot of this business is being conducted by smaller businesses that are looking further afield in the shrinking of the global market. This can be quite exciting and can provide huge opportunities for homegrown businesses, but it is also full of potential pitfalls.
Contracts do not need to be in writing, but there is increased certainty and security if they are set out in written form. The same applies to entities you are doing business with internationally, but the problem arises when conflicts develop and you are not in the same jurisdiction.
What law applies to the dispute, and how do you go about enforcing the remedy you might receive in the case of a broken contract?
Take a recent example: a young entrepreneur was contracted with a company in Philippines to manufacture a fashion item. All correspondence was completed over the Internet. The overseas manufacturer provided some prototypes and then required a $5,000 deposit in order to commence production of the items. On good faith, the business person supplied the deposit, then never heard from the company again. The cost of hiring representation in the specific country would far outweigh the recovery of the deposit.
How do you protect yourself? Find out as much about the business you are contracting. Getting references, and hiring a local lawyer goes a long way toward avoiding unscrupulous businesses taking deposits and never returning calls. All international transactions should be in writing but, unfortunately, due to the nature of international trade, you should be prepared to risk the deposit or be prepared to pursue the remedy in the alternate jurisdiction. With opportunities come risks.
Jeffrey D. Cowan, B.A., B.Comm, LL.B., M.B.A., is the principal of Cowan & Taylor, Barristers & Solicitors which practises in the areas of business and real-estate law. Cowan appears in Your Money every other week.
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