When it comes to drafting a commercial contract between parties from different jurisdictions, it is common for the contract to include a clause that incorporates foreign law. This incorporation of foreign law can have a significant impact on the contract`s effectiveness and enforceability.
Firstly, the incorporation of foreign law means that the parties are subject to the laws of a different country. This can make it more difficult to understand their rights and obligations under the contract. It is essential to work with a lawyer who is familiar with the foreign law to ensure that the terms of the contract are accurately translated and comply with the applicable laws.
Secondly, the incorporation of foreign law can affect the enforceability of the contract. If there is a dispute between the parties that requires litigation, the court will need to interpret and apply the foreign law, which may be different from the laws of the court`s jurisdiction. This can lead to uncertainty and delay in the resolution of the dispute.
To mitigate the potential risks of incorporating foreign law into a commercial contract, it is crucial to ensure that the contract includes a clear choice of law clause. This clause specifies which law applies to the contract and provides certainty to the parties. Additionally, it is advisable to include an arbitration clause in the contract, which allows the parties to resolve any disputes in a neutral forum and avoid the risk of litigating in an unfamiliar country.
In conclusion, the incorporation of foreign law in a commercial contract can have a significant impact on the contract`s effectiveness and enforceability. It is essential to work with experienced lawyers to ensure that the foreign law is accurately translated and incorporated into the contract, and to include clear choice of law and arbitration clauses to mitigate potential risks.