Any United Kingdom exporter seeking to enter the United States market by selling directly to its American customers will likely face a challenging legal dilemma – does the exporter's Terms and Conditions provide sufficient protection in litigation-happy America?
Tremendous advances in technology, communications, and logistics have made it possible for small companies and web-based entrepreneurs from the United Kingdom (“exporters”) to compete in the U.S. market without ever having to establish a bricks-and-mortar presence.
In my practice, I frequently review contracts (including website Terms and Conditions) on behalf of U.K. exporters that want to enter the American market and ensure that their contracts provide appropriate protections. It's been my experience that most U.K. exporter's existing contracts are typically sound and usually only require minimal tweaking. A comprehensive redrafting of the contract has seldom been necessary. However, I consistently add a handful of contract provisions that are frequently omitted from a typical U.K. contract, but are essential in American contracts.
From my perspective and experience, there are five crucial reasons to “Americanize” a U.K. contract:
- To ensure clarity the terms and conditions that will be established by the contractual relationship.
- To expedite collection measures and provide leverage.
- To deter overly-litigious claimants and avoid situations which could quickly escalate into expensive legal battles.
- If litigation becomes necessary, to increase your ability to recover interest, collection costs and attorney fees.
- To protect the company's competitive advantages and avoid legal landmines.
AMERICANIZING A U.K. CONTRACT - COMMON CONTRACT PROVISIONS
These most common contract provisions that I add during my review of a contract for a U.K. exporter are:
- Pre-suit mediation.
I highly recommend inclusion of this practical provision in all contracts to require the parties to mediate a dispute before a lawsuit can ever be filed. Since many disputes can be resolved during a mediation conference, it makes tremendous sense to attempt this process before people dig in their heels and incur substantial litigation expenses.
- Choice of law.
Does your contract specify what law governs the agreement? If not, your adversary in a dispute may argue that the contract is governed by the law of an unfriendly jurisdiction. Most people (including U.K. exporters) prefer to play on their home field – especially if litigation ever becomes a reality.
- Interest to accrue on past due accounts.
Without an appropriate contractual provision, you won't be able to collect interest on a past due account.
- Termination of the agreement.
Does the contract include a provision that terminates the business relationship in a manner that won't damage your company?
- Collection costs (including attorney's fees) in the event of a dispute.
Without an appropriate contractual provision, you won't have a sound basis for demanding collection costs, including attorney's fees. In addition, an attorney's fees provision often serves as a deterrent to reckless would-be litigants.
- Confidentiality and non-compete provisions.
Does your contract contain appropriate protections for sensitive confidential information? Have you structured a contract provisions that prevents a current business partner from competing against you in the future?
- Intellectual property rights.
What provisions are in place to protect your intellectual property rights?
- Branding issues.
It's easy to overlook this one. Does your contract specify who owns your brands and who is authorized to use your brands in the United States?
For U.K. exporters that are considering the appointment of an American agent or distributor, it's also important to clarify the nature of the relationship to (i) define the scope of the relationship and (ii) ensure that an employer-employee relationship is not created.
I recently revised a U.K. company's standard Terms and Conditions. The company's American sales were steadily rising and now represented an important source of revenue. The company had not yet established a presence in the United States, but was contemplating the appointment of an American distributor and had already held some serious discussions with several prospects. Before formalizing the business relationship with the prospective distributor, the U.K. company requested a review of their standard Terms and Conditions and my recommended revisions.
The company's existing Terms and Conditions had been primarily drafted for the U.K. and EU markets. After review the Terms and Conditions, I made several observations. First, the original drafter of the Terms and Conditions had done a solid job and minimal revisions were necessary. Second, the existing Terms and Conditions made the company vulnerable in two basic ways which were easily addressed. One, the contractual provisions did not expedite payment and collections of past due accounts. Two, the contractual provisions did not minimize the U.K. company's exposure to U.S. lawsuits.
After reviewing the document and discussing options with the client, we added revisions that substantially reduced the company's exposure. The entire review and revision process required less than five hours of attorney time.
A FINAL WORD
For U.K. exporters, the United States market is more accessible than ever. There are ever-expanding opportunities for web-based U.K. exporters to sell directly to American customers. But these opportunities are not without potential peril. Fortunately, the potential peril can be minimized. Have your company's contract Terms and Conditions been “Americanized?”