Managing Failure Risks in International Transactions

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By Lesley Gao & Susan Wu. December 7, 2013.

On December 5, Prof. Teresa Rodríguez de las Heras Ballell from Commercial Law University Carlos III of Madrid was invited to give us a public speech about legal advices for securing compliance of contracts in uniform law mainly in international transactions for our SHUFE Law students. As we know, the economic crisis has a terrible influence on the investments in different areas. The risky caused by the economic environment in the international transactions has increased these years. When parties go together to negotiate the clauses of their contracts, they need to consider those risks and has to manage those risks. How to use the legal advices to minimize the risks becomes a very important and meaningful problem.

Prof. Teresa shared her own opinions about the legal advices of reducing the risks of the international contracts. She mentioned that when drafting a contract, we should not only consider the risks within the contract but also the risks of other aspects. What can we lawyers do in advance is to consider the core element of the draft of a contract which is called trust. Prof. Teresa said that trust can divided into three kinds. One is pacific trust that exists between two familiar parties. One is the systemic trust ensured by the legal systems of a country. The third kind is the trust brings by a third party usually called the gate keepers such as the commercial agencies. The compliance of a contract needs the trust of different kinds. After Prof. Teresa told us the importance of the trust, she gave us three legal advices to secure the compliance of a contract. Firstly, we should reduce the uncertainty on the parties’ behaviors by using the letters of credit or find a gate keeper. Secondly, we should draft clauses of discouraging breach of contract such as penalties and speeding relief measures. At last, we should ensure the fulfillment of the parties’ interests and economic value of failed transaction. All those can not leave the insurance of the legal system. So the most important thing is to create a sound and predictable legal framework.

At the end of the speech, Prof. Teresa concluded that in order to reduce the risks of the international contracts, we must create the trust between the two parties. The most efficient way to create trust is to create a stable and universal legal framework. Prof. Teresa finished her speech, but the revelations left by her speech will never fade away.

Published：2013-12-07 Hit：606