{"id":4347,"date":"2016-04-04T10:47:27","date_gmt":"2016-04-04T15:47:27","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/business-contracts-forms\/how-can-an-international-contract-be-illegal.html"},"modified":"2024-06-06T01:00:09","modified_gmt":"2024-06-06T06:00:09","slug":"how-can-an-international-contract-be-illegal","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/business-contracts-forms\/how-can-an-international-contract-be-illegal.html","title":{"rendered":"How Can an International Contract Be Illegal?"},"content":{"rendered":"\n
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How Can an International Contract Be Illegal?<\/h1>\n
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\n By Lisa Burden, J.D.<\/a> | Legally reviewed by Susan Mills Richmond, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

International business creates great opportunities for entrepreneurs and small businesses. International trade also presents complex legal challenges<\/a>. After all, by their very nature, cross-border business deals involve at least two jurisdictions. Each has its own legal systems, rules, and regulations.<\/p>\r\n

Contracts<\/a> guide these international transactions. Whether it’s a corporation involved in government contracts, national security, procurement, subcontracting, or international trade<\/a>, a tech startup outsourcing software development, or entrepreneurs hiring overseas subcontractors, binding agreements are important.<\/p>\r\n

Organizations doing business in foreign countries should be aware that it’s easy for agreements to run afoul of business law and business practices in foreign countries.<\/p>\r\n

An Example of an Illegal International Contract<\/h2>\r\n

Let’s assume that two individuals, Gus and Marshall, enter into a contract to sell hemp, perhaps as a health care product. This contract is perfectly legal in countries that allow providers to cultivate, solicit, and sell hemp. But the contract would be illegal if Gus took delivery of the hemp in a country that forbids the product.<\/p>\r\n

Illegality of performance can cause the cancellation of a contract. If a contract for the sale of goods originating in Ireland requires that the shipment include a NAFTA certificate of origin, the entire contract might be illegal. Certainly, that contract clause is illegal and void. The goods are Irish and cannot legally receive a NAFTA certificate of origin.<\/p>\r\n

In another example, consider a situation where a U.S. corporation agrees to practices that are illegal under U.S. law. The practices might be legal in the other jurisdiction. But the U.S. corporation could face regulatory action at home from local governments and federal governments.<\/p>\r\n

Intervening Illegality<\/h2>\r\n

Intervening illegality can also affect a contract’s validity. Some contracts are legal when made. But a later law might outlaw performance or the subject matter. Sometimes, the illegal provisions can be omitted from the contract. This allows performance to go forward.<\/p>\r\n

If the contract can’t be completed without keeping the illegal part, the parties will be released from the deal. If that happens, you should check with your attorney to ensure your obligations under the agreement are finished. You don’t want to unintentionally breach the contract<\/a> unintentionally.<\/p>\r\n

Is Your International Contract Enforceable?<\/h2>\r\n

One important business concern for international contracts is what happens if there is a disagreement. Before drafting or entering into a foreign contract, knowing if your contract is legally enforceable<\/a> is important.<\/p>\r\n

An arbitration clause<\/a> is recommended. Arbitration is an effective form of dispute resolution for issues like intellectual property disputes. But this depends on whether adequate enforcement actions can be effectively implemented.<\/p>\r\n

Courts will not enforce any contract<\/a> that is illegal. An illegal contract involves either:<\/p>\r\n