How to Localize B2B Contracts for the U.S. Market*
Whether your company is supplying software, SaaS, products, professional services, etc., to U.S. companies or otherwise contracting with U.S. consultants, sales reps, distributors or joint venture partners- localizing your approach to the U.S. business and legal environment will be critical to your success.
Let's take a look at 3 main issues to consider in your localization process:
1) Adjust all the Language
2) Align with the Business Psychology
3) Adapt to the Legal System
This article is for educational purposes only and is not a substitute for legal advice with respect to your specific situation.
1) Adjust all the Language
With regard to your company's website, pre-sales and sales literature, quotes, terms sheets, contract templates, etc., it is imperative to use American business/legal English (as opposed to British English) and to ensure the American English is written clearly and free from major or frequent typos. While Americans may be somewhat informal in conversation, business and legal documentation is expected to be clear and well written. Any lapse in such written documentation may cause the American counterpart to question the seriousness of your company and/or the quality of any contemplated deliverables.
George Bernard Shaw (the Irish playwright) once said, "the United States and the United Kingdom are two nations divided by a common language". It may be easy to feel complacent about the seemingly harmless differences in terminology between the countries, after all, it’s still English! However, when considering the legal implications of using British English in U.S. sales and legal documents, there are clear risks of not being understood by American prospects, communications being inefficient, and finally British English legal terms may create interpretation problems in U.S. courts in the event of a dispute.
2) Align with the Business Psychology
American companies will typically view any quote and/or contract proposal as just that- a mere "proposal." It is important to anticipate a fair amount of push back, on the commercial terms and other legal provisions. An American, on the procurement side, will typically want to be able to demonstrate internally at her/his company that price reductions and other important concessions were secured through her/his efforts. Thus, adjust your proposal accordingly in order to enter into any discussions/negotiations with a reasonably bargaining position which will enable the U.S. counterpart to make some key wins on your proposal (and try to secure reasonable tradeoffs for any such granted concession- e.g. lowering prices for a greater target commitment). Failure to have a buffer (i.e., room to adjust your pricing and other major legal terms (e.g. warranties, payment terms, limitations of liability, etc.,)) may result in your company only being able to close a deal beneath your defined bottom lines.
It is highly recommended to always use (or try your best to use) your company's own U.S. term sheets and contracts for U.S. deals. Failing to use your own contracts will generally result in a much higher risk profile for your company. You must be prepared to push back with reasonable argumentation when you hear U.S. counterpart claims such as, "we always use our own contract templates" or "using your templates will slow down the process." In all of these cases, emphasize the reasonableness of your contracts which have been developed for the U.S. market as well as the fact that you are the sales organization (if this is the case) and you must protect your business assets appropriately in all deals.
Further, it is important to bear in mind that litigation is more common in the U.S. and dispute resolution costs and damage awards are generally much higher than outside of the United States. This is not intended to deter you from doing business with U.S. counterparts but rather to consider in your pricing the reasonable increased risk levels as well as any other increased costs of doing U.S. business (e.g., U.S. insurance, logistics, legal fees, etc).
3) Adapt to the Legal System
This is a critical aspect of closing sound U.S. B2B deals. Simply put, the laws of any non-U.S. country may have zero bearing on the enforcement of a U.S. contract. Even if the laws of a foreign country are used (and most American companies will require the laws of a U.S. state in an international B2B deal), there are several situations where the U.S. counterparty may be able to institute a legal action in the United States anyway. As such, it is critical to understand and accommodate for the following issues (to name a few):
1) Exclusive Dispute Resolution Mechanism
Whenever there is an international contract, there is an issue of which country's laws will apply if there is any dispute, and where such dispute would be heard. As such, if you are going to use a non-U.S. jurisdiction, it will be critical that the U.S. party clearly accepts that no U.S. laws, venues or jurisdictions will apply. Further, you will have to ensure any judgment in such foreign jurisdiction will be enforceable against the assets of the U.S. company (or else a judgment in your favor is worthless).
2) Legal Fees, Venue, and Jury Trial
In the United States, attorneys' fees and the costs of litigating are generally not awarded to the winning party in a dispute. As such, such a provision for reimbursement of any legal fees must be added explicitly to the contract in order to have any legal effect. Failure to include such a clause may preclude your company from taking any legal action at all against the U.S. company in cases where the costs are prohibitively high.
Litigation in court as well as a jury trial will be presumed, under U.S. laws, unless the parties expressly exclude such implied laws in the contract.
3) Disclaimers of Implied Laws by Name
This is one of the biggest exposures I have seen when non-U.S. parties use a foreign contract template when doing U.S. business. In the U.S., it is not uncommon for various laws to be implied into contracts if such laws are not disclaimed by name and CONSPICUOUSLY (for instance, by using 'ALL CAPITAL LETTERS').
Thus, there are warranties of merchantability, fitness for a particular purpose, non-infringement, etc., that will likely be implied into the contract (especially a software, SaaS or product supply agreement) unless such clauses are disclaimed appropriately. There may also be the "United Nations Convention on the International Sale of Goods" that will become a part of the contract if not disclaimed.
4 ) Limitations of Liability
If your company desires to limit its liability to a U.S. counterparty (which is highly advisable), it will be crucial to state an aggregate limit to damages and to also identify the types of damages excluded (e.g. consequential, punitive, and indirect damages- to name a few).
5) Intellectual Property
If the deal may include the creation of intellectual property and your company needs to secure the ownership of such IP, it is important to include not only a statement to this effect, i.e. "any and all intellectual property arising in connection with this Agreement shall vest in the Supplier" but also to include unequivocal assignment language, i.e. "the Customer assigns, upon creation, all rights to any Intellectual Property created in connection with this Agreement, to the Supplier." Failure to include an explicit assignment (i.e., which essentially works like a property transfer) may result in the customer owning such intellectual property as such property was not effectively transferred.
6) Integration Clauses
Most U.S. contracts will include an integrations clause (or one will be implied into the contracts anyway) meaning the interpretation of the contract will be limited to what is actually written in the contract. In many other countries, extraneous evidence (such as emails) can be introduced into any dispute resolution proceeding. In the U.S., however, the rules of evidence are complex and typically exclude any such oral or written evidence outside of the contract as 'hearsay'. In light of this, the agreement must be complete on its own.
By using qualified U.S. legal counsel to localize your B2B legal documentation in terms of Language, Business Psychology, and Legal Considerations, you will be able to reap the rewards and mitigate the risks of doing U.S. business.
Feel free to reach out to me, gary@b2world.com if you would like any assistance.
Otherwise, if you would like guidance on negotiating with U.S. companies,
I can recommend my book "Low Stress High Profit Negotiations" available on Amazon.
Additionally, I can recommend my free downloadable book, "U.S. Business and Legal Guide 2021" which has been specifically written for non-U.S. companies.
All the best!
Gary Guttenberg, gary@b2world.com
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Gary Guttenberg, Attorney-At-Law, gary@b2world.com
*This article is for educational purposes only and should not be a substitute for legal advice regarding your specific situation.
