Foolproof International Contract Drafting: 5 Key Checklists to Avoid Toxic Clauses

1. Introduction

With the advent of the global economy era, overseas expansion and cross-border transactions have become commonplace business activities for companies. In this international business environment, international contracts have grown far beyond simple transaction records to become critical legal instruments that protect corporate interests and ensure stable business operations against various legal and commercial risks that transcend national borders.

The process of finding common ground and documenting agreements between parties with different legal systems, languages, cultures, and commercial practices inherently requires complexity and expertise. Minor ambiguities or omissions can lead to unexpected disputes and substantial losses.

This article aims to systematically provide essential knowledge that corporate practitioners and legal personnel must understand when drafting and reviewing international contracts. Starting from a basic understanding of international contracts, we will comprehensively cover the standard structure of contracts, detailed drafting methods and considerations for major clauses, the impact of different legal systems on contracts, special considerations for major contract types, and practical strategies for dispute prevention throughout international contract practice.

2. Understanding International Contracts

To successfully conclude and perform international contracts, it is essential to first accurately understand their nature and characteristics. International contracts have unique legal characteristics that distinguish them from domestic contracts and are influenced by various legal systems and international norms.

2.1 Definition and Legal Nature of International Contracts

An international contract generally refers to any type of contract concluded between parties having their principal places of business (locations) in different countries. The important criterion here is not the parties’ ‘nationality’ but the ‘location of their places of business.’ This indicates that the contract has international elements, namely ‘foreign-related character,’ which inevitably raises questions about which country’s law to apply (governing law) and in which country’s courts to resolve disputes (jurisdiction).

Beyond simply being a contract between parties from geographically different countries, international contracts are inherently complex because they represent agreements between entities with different legal systems, languages, cultures, and commercial practices. Due to these characteristics, international contracts are more likely to be exposed to various unpredictable variables and risks compared to domestic contracts.

While the ‘place of business’ criterion may seem clear, it can leave room for interpretation in actual application. For example, for corporations, the legal domicile and the actual business operation headquarters may be in different countries, and for multinational companies operating branches or subsidiaries in multiple countries, determining which location to use as the basis for judging the international nature of the contract can be problematic.

2.2 Differences from Domestic Contracts

Domestic contracts are basically concluded between parties sharing the same language and culture within a single country’s legal system, so legal predictability is relatively high and dispute resolution procedures are relatively simple. In contrast, international contracts have the following major differences:

• Complexity of applicable laws: International contracts inevitably occur at the intersection of two or more legal systems, making the determination of which country’s law to apply for contract interpretation and performance (governing law) a crucial issue.

• Language and cultural differences: Differences in contract language selection, subtle differences in terminology meaning, negotiation styles, and expectations regarding contract performance can cause cultural differences, which may become sources of misunderstanding and disputes.

• Diversity of dispute resolution procedures and enforcement difficulties: International contract disputes can be resolved through various methods including international arbitration in addition to domestic litigation, and additional procedures for recognition and enforcement of foreign judgments or arbitral awards are required.

• Currency and exchange rate risks: In transactions between countries using different currencies, risks arise from exchange rate fluctuations, requiring risk management measures to be included in the contract.

• Political and economic instability: Changes in specific countries’ political situations, economic sanctions, and trade barriers can act as factors directly affecting contract performance.

2.3 International Law, Domestic Law, and Contracts

To understand the legal environment of international contracts, it is necessary to grasp how international law, domestic law, and contracts between parties interact.

• Relationship between international law and domestic law: International law is primarily a legal system governing legal relationships between states, while domestic law is a legal system governing legal relationships between individuals or legal entities within a country. In principle, these two legal systems are independent of each other, and for international law to have direct effect domestically, it must go through procedures established by each country’s constitution and laws.

• Principle of party autonomy and mandatory rules: International contracts can basically have their content freely determined by the parties according to the ‘principle of party autonomy.’ However, this contractual freedom is not unlimited and may be restricted by ‘mandatory rules’ of each country’s domestic law.

• Application of international uniform law: Internationally established uniform laws to enhance the uniformity and predictability of international commerce may affect international contracts. A representative example is the ‘UN Convention on Contracts for the International Sale of Goods (CISG)’.

3. Basic Structure of International Contracts

International contracts generally follow certain patterns in their content and format. Understanding this basic structure is essential for systematically drafting and reviewing contracts.

3.1 Components of Standard International Contracts

• Contract title: A concise title indicating the nature and content of the contract. For example, titles like “International Sales Agreement,” “Software License Agreement,” or “Distribution Agreement” specify the type of contract.

• Party information: A section that clearly identifies the parties concluding the contract. It includes each party’s accurate legal name, address of principal place of business, and for corporations, the law of incorporation.

• Contract execution date and effective date: The date when the contract was concluded is specified at the beginning of the contract or near the signature section. Separately, the effective date when the contract actually takes effect can be specified.

• Preamble: A section that briefly explains the background and purpose of contract conclusion, the circumstances that led the parties to the contract, and key facts forming the basis of the contract before entering the main body of the contract.

• Definitions clause: A section that clearly defines terms used repeatedly throughout the contract or terms used with special meanings. This plays a very important role in eliminating ambiguity in contract content and preventing disputes that may arise from interpretation.

• Main provisions: The section containing the core content of the contract, detailing the specific rights and obligations of the parties and major conditions of the contract.

• General provisions: A section that collects standardized clauses related to contract interpretation, management, validity, and dispute resolution. For example, governing law, jurisdiction, force majeure, entire agreement, severability, notice, assignment, contract amendment, and non-waiver clauses belong here.

• Closing statements and signatures: Conventional statements confirming the formal conclusion of the contract, along with formal signatures or seals of persons authorized to conclude contracts on behalf of each party.

• Attachments: Separate documents containing specific information such as detailed technical specifications, price lists, drawings, or business plans that supplement the content of the main contract.

4. Detailed Drafting Methods for Key Clauses

Each clause in an international contract plays an important role in specifying the rights and obligations between parties and managing potential risks. The key clauses explained below may vary in content and importance depending on the nature and purpose of the contract, but they are sections that must be carefully reviewed and drafted in most international contracts.

4.1 Governing Law and Jurisdiction

One of the most fundamental and important clauses in international contracts is the governing law clause and jurisdiction clause. These two clauses serve as standards for determining which country’s law and through which procedures to resolve legal issues related to the contract.

• Governing law: The governing law clause designates the law of a specific country to be applied to all legal issues related to the contract, including contract formation, validity, interpretation, performance, and remedies for breach. Since international contracts are concluded between parties from countries with different legal systems, failure to clearly determine which country’s law will be used as the standard for interpreting contracts and judging disputes can cause extreme confusion and unpredictability.

Criteria to consider when selecting governing law include neutrality, development and predictability of the legal system, compatibility with contract content, and connection with dispute resolution institutions.

• Jurisdiction/dispute resolution: A clause that determines whether to resolve disputes related to the contract through litigation in which country’s courts or whether to use alternative dispute resolution procedures such as arbitration or mediation.

Advantages of arbitration include the ability to resolve disputes in a neutral third-party location, party participation in arbitrator selection, procedural flexibility and speed, confidentiality principle of hearings and awards, and ease of international enforcement under the New York Convention.

4.2 Payment Terms

Payment terms are one of the most core commercial conditions in international contracts, clearly stipulating in what currency, through what methods and procedures, and by when payment for goods or services will be made.

• Transaction currency: The currency to be used for payment must be clearly designated. When designating currency, it should be specifically stated as “US Dollar” to prevent confusion.

• Payment methods: Various payment methods exist, and each method differs in terms of creditworthiness between parties, transaction safety, and cost burden.

A letter of credit is a document in which the importer’s bank promises to pay the exporter if certain conditions are met. Collection is a method where the exporter presents relevant documents to the importer through a bank after shipping goods and collects payment. Remittance is a method where the importer directly transfers payment to the exporter’s bank account.

• Payment timing: The specific time when payment should be made must be clearly stipulated. For example, it should be specifically stated as “within 30 days from the date of shipment” or “within 15 days after completion of goods inspection.”

4.3 Subject Matter of Contract: Scope and Specifications

Clearly and specifically describing the scope and specifications of the subject matter of the contract—goods, services, technology, etc.—is the most basic yet important matter for setting standards for contract performance and preventing future disputes.

• For sales contracts: Product specifications, quality standards, quantity, condition, etc., must be described in detail. Quality determination methods may include sales by sample, sales by specific standards, or sales by internationally recognized specifications.

• For service contracts: Service scope, performance standards and deliverables, performance schedule and milestones, etc., must be clearly described.

• For technology transfer contracts: The definition and scope of transferred technology must be specifically identified and clearly limited.

• Inspection conditions: Procedures for inspecting whether delivered goods or service deliverables conform to specifications and quality standards specified in the contract are stipulated.

4.4 Contract Term and Termination

Contract term clauses specify when the contract’s validity begins and until when it continues, while termination clauses stipulate conditions and procedures for terminating the contractual relationship when specific circumstances arise.

• Contract term: The effective date when the contract’s validity begins and the termination date when the contract ends must be clearly stipulated.

• Renewal: Conditions and procedures for extending the contract after the contract term expires can be stipulated.

• Contract termination/cancellation grounds: Clauses that grant one or both parties the right to terminate the contract during the contract term when specific circumstances arise. Common termination/cancellation grounds include mutual agreement between parties, contract breach, occurrence of specific circumstances, continuation of force majeure situations, and unilateral termination for convenience.

• Termination procedures: Procedures to be followed when seeking to terminate the contract are specified.

• Effects of termination: Legal effects that occur when the contract is terminated and obligations that parties must perform are stipulated.

4.5 Confidentiality Clauses

In the process of concluding and performing international contracts, parties may gain access to various confidential information of the other party, including sensitive technical information, management information, customer information, and financial information. Confidentiality clauses play an essential role in preventing such information from being inappropriately disclosed or used for purposes other than the contract, thereby protecting each party’s trade secrets and competitiveness.

• Definition of confidential information: What information corresponds to ‘confidential information’ subject to confidentiality obligations must be specifically and clearly defined.

• Confidentiality obligations: The party receiving confidential information must not disclose or leak it to third parties without prior written consent from the disclosing party and may use such information only for the purposes of this contract.

• Exceptions to confidentiality obligations: Information that was already public at the time of receipt or that the receiving party legitimately knew, information disclosed without fault of the receiving party, etc., are not subject to confidentiality obligations.

• Confidentiality period: When the confidentiality obligation continues must be specified.

• Return or destruction of confidential information: When the contract is terminated or cancelled, the receiving party must return all confidential information held to the disclosing party or destroy it and certify such fact in writing.

4.6 Intellectual Property Clauses

Intellectual property rights such as technology, brands, and creative works are core assets of modern companies, and clearly stipulating intellectual property-related matters in international contracts is very important.

• Existing intellectual property rights: It is clarified that ownership of patents, trademarks, copyrights, trade secrets, and other intellectual property rights already held by each party before contract conclusion continues to belong to that party.

• Intellectual property rights arising during contract performance: Ownership of inventions, designs, works, know-how, and other intellectual property rights newly developed or created in the process of performing the contract must be clearly stipulated.

• License grant: When one party permits the other party to use intellectual property rights it holds, the conditions of such license must be specifically specified.

• Liability and warranties for infringement: Non-infringement warranties and indemnification clauses are stipulated.

• Trademark and brand usage guidelines: When using the other party’s trademarks, logos, and other brand assets, guidelines regarding usage methods, standards, and quality control are specified.

4.7 Force Majeure Clauses

Force majeure clauses stipulate content that exempts or reduces liability when one or both contract parties become unable to perform their contractual obligations or performance is delayed due to events that were unpredictable at the time of contract conclusion and beyond the reasonable control of the parties.

• Definition of force majeure events: Natural disasters, wars, government regulations or orders, pandemic outbreaks, nationwide strikes, major supply chain disruptions, fires, explosions, and serious accidents may be included.

• Notice obligation: A party affected by force majeure events that impact contract performance must notify the other party in writing as quickly as possible of the occurrence of such events, expected impact, and duration.

• Effects of force majeure: Exemption from liability for delayed performance, extension of contract performance period, and occurrence of contract termination rights can be stipulated.

• Limitations of exemption due to force majeure events: Force majeure clauses are often stipulated as generally not applicable to monetary payment obligations.

4.8 Limitation of Liability and Indemnification

Limitation of liability clauses and indemnification clauses in international contracts play an important role in managing risks and enhancing predictability by setting in advance the scope of legal liability that parties must bear when contract breaches or specific events occur.

• Limitation of liability: A clause that limits the scope of damage compensation liability to a certain extent when one party breaches contractual obligations or causes damage to the other party for other reasons. Methods of setting maximum damage compensation amounts or excluding specific types of damages can be used.

• Indemnification: A clause where one party agrees to protect beneficiaries from all losses, damages, liabilities, costs, etc., that the other party or its officers, employees, agents, etc., may suffer due to specific reasons and to compensate or defend against them.

4.9 Warranty and Disclaimer Clauses

Warranty clauses contain content where one party promises and guarantees a certain level regarding the quality, performance, condition, etc., of products or services that are the subject matter of the contract.

• Express warranties: Content where sellers or service providers specifically promise or confirm specific quality, performance, condition, functions, etc., of products or services through contracts, product manuals, advertisements, or oral statements.

• Implied warranties: Warranties naturally recognized by law even if not explicitly stipulated in the contract.

• Warranty disclaimers: Clauses used when sellers or service providers wish to limit the scope of specific express warranties or exclude or limit the application of all or part of implied warranties recognized by law.

• Warranty period and remedies: The period during which warranties apply must be specified, and specific remedies that buyers or service beneficiaries can receive when defects occur or warranty conditions are not met during the warranty period must be stipulated.

5. General Provisions

At the end of international contracts, several standardized clauses are typically included under titles such as “General Provisions” or “Miscellaneous Provisions.” These clauses are often considered standard content and may be overlooked without careful attention, but they can actually have significant impact on contract interpretation, validity, and overall legal relationships between parties, so careful review is absolutely necessary.

5.1 Entire Agreement Clause

The entire agreement clause specifies that the currently concluded written contract includes all agreements and understandings made between the parties regarding the relevant transaction and replaces and invalidates all oral or written statements, promises, negotiation content, memoranda of understanding, letters of intent, etc., that existed before the conclusion of this contract.

The main purpose of this clause is to finally limit the scope of contract content to the finalized written contract, thereby preventing various discussions or tentative agreements that occurred during the contract conclusion process from causing confusion in subsequent contract interpretation or becoming grounds for disputes.

5.2 Severability Clause

The severability clause stipulates that even if specific clauses or parts of the contract are found to be invalid, illegal, or unenforceable by competent courts or other authoritative interpretation bodies for any reason, the remaining clauses excluding such parts continue to maintain full effect and remain valid.

The purpose of this clause is to prevent the risk of the entire contract becoming invalid at once due to legal defects found in part of the contract and to maintain the essential purpose of the contract intended by the parties as much as possible.

5.3 Notice Clause

The notice clause is a clause that details by what methods and procedures all official notices made between parties regarding the contract should be made to be considered valid.

Generally, notice clauses include notice methods, notice recipients, when notice effects occur, and language. Although notice clauses are often one of the general provisions that can be easily overlooked, the timing, method, and receipt of notices can become very important issues when legal disputes arise.

5.4 Non-Waiver Clause

The non-waiver clause specifies that even if one contract party does not immediately exercise rights or strictly demand performance regarding the other party’s breach of contract conditions or failure to perform obligations, such fact itself should not be considered as waiving rights regarding such breach or rights regarding similar or different breaches that may occur in the future.

In other words, it is intended to prevent temporary tolerance or acquiescence from being interpreted as permanent waiver of rights.

5.5 Assignment Clause

The assignment clause stipulates whether contract parties can assign all or part of their rights or obligations under the contract to third parties and, if possible, under what conditions it is possible.

Generally, in international contracts, since trust relationships between contract parties and the other party’s performance capability are considered important, it is often prohibited for either party to arbitrarily assign contractual rights or obligations to third parties without the other party’s prior written consent.

5.6 Contract Amendment/Modification Clause

The contract amendment or modification clause stipulates procedures and requirements for changing or modifying the content of a contract once validly concluded.

Generally, this clause is stipulated as “Any amendment or modification to this contract shall be effective only by written agreement signed by duly authorized representatives of both parties.”

5.7 Contract Language Clause

Since international contracts are often concluded between parties from countries using different languages, contracts may be written in more than one language. In such cases, the contract language clause serves to designate which language version of the contract becomes the legally binding original.

If a contract is written in multiple languages without designating the original, when translation inconsistencies or subtle meaning differences occur between language versions, it becomes unclear which version should be used as the standard for interpreting contract content, which can become a source of serious disputes.

6. Understanding Different Legal Systems: Common Law vs. Civil Law

International contracts are inevitably influenced by different legal systems, and among them, common law and civil law form the two largest legal families globally. While Korea belongs to the civil law system, contracts governed by common law or contracts with parties from common law countries are frequent in international transactions, so understanding the major differences in contract law between these two legal systems is very important.

6.1 Major Differences in Contract Law Principles

Common law and civil law show differences in various aspects including sources of law, contract formation requirements, contract performance principles, and remedies.

• Differences in sources of law: Common law is primarily an unwritten law system where law has been formed and developed through case law. The principle of stare decisis, where judgments made by judges have binding force on similar cases, plays an important role. Civil law is a written law system that uses codes enacted by parliament as the main source of law.

• Contract formation requirements: In common law, for a valid contract to be formed, four requirements must generally be met: offer, acceptance, consideration, and the parties’ intention to form a legal binding relationship. Among these, ‘consideration’ is a concept unique to common law. In civil law, contracts are generally formed merely by the agreement of intentions between parties, and separate requirements such as ‘consideration’ are not required.

• Principle of good faith: Common law has traditionally been passive in imposing good faith obligations during the contract negotiation stage and has tended not to explicitly require comprehensive good faith principles even during the contract performance stage. In civil law, the principle of good faith acts as an important legal principle throughout the entire contractual relationship, including contract conclusion, performance, and interpretation.

• Detail of contracts: In common law, since law is primarily specified through case law, contract parties tend to stipulate all possible anticipated situations and conditions in contracts very thoroughly and explicitly. In civil law, since general principles and regulations regarding contracts are already detailed in civil codes, contracts can focus on supplementing the content of codes or establishing special agreement matters, making them relatively concise compared to common law contracts.

• Damages and remedies: In common law, the primary remedy for contract breach is monetary damages. Specific performance is recognized only restrictively in exceptional cases where monetary compensation alone cannot provide adequate relief. In civil law, the right to claim specific performance tends to be recognized relatively broadly when contracts are breached.

6.2 Impact on Contract Drafting and Interpretation

The differences between common law and civil law examined above also directly affect the drafting style and interpretation methods of international contracts.

• Contract drafting style: Common law-governed contracts tend to stipulate all possible anticipated scenarios and corresponding rights and obligations relationships very thoroughly and explicitly in contracts because law is primarily specified through case law and there is a perception that general provisions covering all situations, such as codes, are lacking. Civil law-governed contracts can focus on establishing special agreement matters between parties or content different from legal provisions, premised on general principles and detailed regulations regarding contracts already established in civil and commercial codes.

• Contract interpretation methods: In common law, when interpreting contracts, there is a tendency to principally emphasize the objective meaning of the contract language itself. Courts are passive in considering external evidence beyond what is specified in the contract. In civil law, when interpreting contracts, there is a tendency to explore not only contract language but also what the true intentions of the parties were at the time of contract conclusion.

7. Key Considerations for Major Types of International Contracts

International contracts can be classified into various types according to their purpose and content, and each type has key clauses and legal issues that must be particularly importantly addressed.

7.1 International Sales Contracts

International sales contracts are contracts where parties with principal places of business in different countries agree to transfer ownership of goods and pay consideration therefor, representing the most basic and frequently occurring type of contract in international transactions.

• Major clauses: Must include product specifications, quantity, price and payment terms, delivery terms, transfer of ownership, shipping conditions, insurance, inspection, and warranty for defects.

Particularly regarding delivery terms, it is common to specify which condition among Incoterms, the standard trade terms established by the ICC, will be used. Incoterms serve the important function of determining when and where the ‘risk’ for goods transfers from seller to buyer.

• Review of CISG applicability: CISG is a uniform law regarding international sales contracts and is principally automatically applied to sales contracts between parties with places of business in contracting states. CISG Article 38 stipulates the buyer’s obligation to examine goods, and Article 39 stipulates the obligation to notify the seller within a reasonable time upon discovering non-conformity of goods.

7.2 International Distribution/Agency Agreements

International distribution/agency agreements are contracts where suppliers designate local distributors or agents to perform sales and marketing activities for their products in specific regions.

• Major clauses: Must include status of distributor/agent, sales territory, products handled, minimum purchase/sales obligations, pricing policy and margins, marketing and advertising obligations, inventory burden, intellectual property license, non-compete and non-solicitation clauses, contract term and termination conditions, and product liability.

Granting exclusive sales rights provides a stable business foundation in the relevant market but may risk being considered anti-competitive behavior that unduly restricts market competition, potentially violating the relevant country’s antitrust laws.

• Attention to each country’s distributor protection laws: Some countries have special laws to protect their domestic distributors or agents. Such laws may require suppliers to have just cause when terminating contracts, stipulate termination notice periods, or mandate payment of certain compensation to agents after contract termination.

7.3 Technology Transfer and License Agreements

Technology transfer and license agreements are contracts where holders of intellectual property rights such as patents, know-how, trademarks, and copyrights grant others the right to use or practice such technology and receive consideration therefor.

• Major clauses: Must include definition and scope of transferred technology/licensed technology, license type, implementation territory and period, royalties, technical support and training, ownership and usage rights of improved technology, confidentiality obligations, warranties and indemnification, and post-contract termination handling.

For technology transfer contracts, know-how should not merely be given implementation rights but must actually be transferred to the licensee. This means that document delivery alone is insufficient, and substantial transfer measures such as education and technical guidance that enable actual understanding and utilization of the technology must be accompanied.

8. Key Considerations When Drafting and Reviewing International Contracts

Successful drafting and review of international contracts requires clear communication, prediction of potential risks, and strategic negotiation capabilities beyond simply listing legal knowledge.

8.1 Clarity, Specificity, and Avoiding Ambiguity

Since international contracts document agreements between parties with different languages, cultures, and legal backgrounds, their content must above all be clear and specific, and drafted to eliminate any possibility of interpretive misunderstanding.

• Harmonizing simple language use with accurate legal terminology: While contracts are legal documents, they also contain business agreements, so it is preferable to use plain language that ordinary people can easily understand when possible.

• Specific specification of rights and obligations: What each party must do and what they can receive must be clearly and specifically described without ambiguity.

• Avoiding ambiguity and equivocal expressions: Equivocal expressions where one word or sentence can be interpreted in multiple ways or ambiguous sentences with unclear meanings should be avoided.

• Strategic use of ‘definitions’ clauses: Terms used repeatedly throughout the contract or having key meanings should have their meanings clearly stipulated in ‘definitions’ clauses, which is very effective in enhancing the clarity of the entire contract.

8.2 Common Mistakes and Dispute Prevention Strategies

Various mistakes can occur in international contract processes, which often lead to serious disputes. It is important to recognize these common mistakes in advance and prepare prevention strategies.

• Including three elements in contracts for dispute prevention: To prevent disputes, contracts must clearly include contract term and amount, contract cancellation methods, and dispute resolution methods.

• Errors in party identification: Concluding contracts without accurately confirming the legal entities of contract parties can cause serious problems.

• Omission of key clauses: Key clauses that must be essentially addressed in international contracts, such as governing law, jurisdiction, force majeure, limitation of liability, confidentiality, and intellectual property rights, are sometimes omitted.

• Inclusion of unfair contract terms: Unfair contract terms containing content significantly disadvantageous to one party can themselves become sources of disputes.

• Mistakes related to CISG application: CISG can be automatically applied to sales contracts between contracting states, and concluding contracts without accurately understanding whether CISG applies and its content can result in unexpected disadvantages.

8.3 Due Diligence on Counterparties

The ‘due diligence’ process of thoroughly investigating and evaluating the legal existence, financial condition, business history, market reputation, and contract performance capability of counterparties before concluding international contracts is an essential prerequisite for successful international transactions.

Prior investigation of importers and use of trade insurance and letters of credit should be considered essential. Such prior investigation contributes to preventing uncollected receivables or disputes due to counterparties’ business difficulties.

Due diligence in international contracts must comprehensively assess legal, financial, operational, and reputational risks beyond simply confirming the counterparty’s payment capability.

8.4 Negotiation Strategies for Securing Favorable Terms

Since international contracts include various conditions where the interests of parties may be sharply opposed, effective negotiation strategies for securing favorable contract terms are essential.

• Setting clear goals and determining priorities: Before entering contract negotiations, clear goals that the company seeks to achieve through this contract must be set, and among various conditions to be put on the negotiation table, core matters that must be achieved and subsidiary matters that can be conceded depending on circumstances must be distinguished to determine priorities.

• Understanding and utilizing BATNA: For successful negotiation, one must clearly know what the ‘Best Alternative to a Negotiated Agreement’ would be if this negotiation fails.

• Understanding counterparties: Successful negotiation begins with accurately grasping the counterparty’s needs and interests.

• Securing information and presenting logical grounds: Objective data, market analysis materials, legal grounds, etc., regarding conditions to be negotiated must be sufficiently prepared to support one’s arguments.

• Clear documentation of agreed matters: All important matters orally agreed upon during the negotiation process must be immediately organized into clear and specific language, reflected in contract drafts, and thoroughly confirmed to be included in final contracts without omission.

9. Importance of Legal Experts in International Contracts

International contracts are a field where legal expert assistance is essentially required due to their complexity and potential risks. Unlike simple domestic transactions, in international contract environments where different legal systems, languages, cultures, and commercial practices intersect, the possibility of facing unexpected legal problems is high.

9.1 Necessity and Timing of Legal Review

Receiving review and advice from legal experts before concluding international contracts, and preferably from the early stages of contract term negotiations, cannot be overemphasized. Particularly, international contracts written in English are mostly based on common law systems and have considerable differences in structure, terminology used, and legal effects from Korean contracts, which belong to the civil law system.

Legal experts go beyond simple language translation to comprehensively analyze and evaluate the legal meaning and effects of each contract clause, potential risk factors, and domestic and foreign laws and international norms that may apply to the relevant contract, presenting measures to maximally protect the client’s interests.

Many SMEs or startups tend to omit or neglect expert review due to the burden of legal consultation costs. However, unfair contracts or omission of essential content can cause legal disputes, and expert help is essential to draft contracts without missing necessary clauses.

The cost required for initially having legal experts thoroughly review contracts and prevent potential risks in advance can be much less than the long-term tangible and intangible losses such as enormous litigation costs, valuable time consumption, loss of business opportunities, and corporate reputation damage that must be borne when disputes actually occur later.

10. Conclusion

International contracts are both cornerstones for global business success and double-edged swords containing various legal risks. As examined in depth in this article, to effectively draft and manage international contracts, a deep understanding of the essential characteristics of international contracts, standard contract structures, detailed content and legal meanings of key clauses, and differences between different legal systems must be preceded.

International contracts function as active legal tools for predicting and controlling various uncertainties and risks that may arise across borders, beyond simply being documents recording agreements between parties. Therefore, each clause of contracts must be clear and specific and carefully drafted to minimize interpretive disputes due to ambiguity.

Particularly, governing law and dispute resolution clauses, payment terms, scope and specifications of contract subject matter, contract term and termination, confidentiality, intellectual property rights, force majeure, limitation of liability and indemnification, and various general provisions may vary in importance and content depending on the nature of contracts and parties’ needs, so special attention must be paid to reviewing and negotiating them.

Additionally, since unique considerations and legal issues exist for each major contract type such as international sales, distribution/agency, and technology transfer, it is important to approach contracts based on professional knowledge and experience in the relevant field. Thorough due diligence on counterparties, establishing effective negotiation strategies, and above all, timely advice and review from legal experts experienced in international contracts are essential conditions for successful international contracts.

Ultimately, well-drafted international contracts clarify rights and obligations between parties to build mutual trust, prevent potential disputes in advance, and provide legal foundations for reasonable and efficient resolution even if disputes occur. This will make key contributions to preventing companies from being exposed to unnecessary legal risks and achieving sustainable growth through stable global business expansion.

Therefore, all entities concluding international contracts are expected to familiarize themselves with the principles and considerations presented in this article and apply them in practice, thereby strengthening competitiveness in the international arena and achieving successful results.

K&P Law Firm has recently accumulated rich experience in various international contract conclusion and review tasks. We have particularly successfully performed contract drafting and negotiation support for various types of international contracts including international sales contracts, technology transfer contracts, and international distribution/agency agreements with companies in the Incheon Songdo area, and have achieved substantial results in international arbitration and dispute resolution. Clients highly value what experience we actually possess in international contract practice, and we provide professional and practical legal services that meet these expectations.