What is the global contract definition? A global (or international) contract refers to a legally binding agreement between two or more parties based in different countries that obligates these two parties to perform or not perform certain actions. A global contract is usually related to pricing and generally stipulates that a supplier must charge an identical price to customers around the globe for the delivery of services and parts. As the market continues to expand worldwide, this type of agreement is becoming more popular, thanks to the benefits derived from one set price across the globe.

Generally, international contracts are written in a formal and legally concise way. Most companies create written contracts in order to make the terms of an agreement thoroughly clear, and will seek legal counsel when determining the terms of important contracts and clauses.

What Kind of Contracts Are Used in an International Business Context?

Global contracts cover all components of international trade. The most common types of global contracts are:

  • Global manufacturing contracts.
  • Global sale contracts.
  • Global supply contracts.
  • Global distribution contracts.
  • Global franchise contracts.
  • Global services contracts.
  • Global strategic alliance contracts.
  • Global sales representative contracts.
  • Global agency contracts.
  • Global joint contracts.

Successful Global Contract Managing

To effectively manage an international contract, be sure to complete the necessary steps with thorough attention to detail.

  1. Carefully examine the nature of the business and the foundation for the contract. Understand the relationship between the parties and the proposed exchange for which the contract will be used. Meet with the appropriate delegates of the parties in order to determine what duties are applicable between parties. In addition, this is an opportunity to thoroughly consider the real and potential effects on the company's current partnerships and commitments.
  2. Utilizing the best representatives of your company, determine the steps that must be performed in order to meet the needs of any contract review and authorize policies and procedures. For example, does the contract need to be reviewed by senior management or a board of directors? What needs to happen in order to follow through with review and consideration?
  3. Once you understand the extent of the proposed business relationships, keep track of any records and documents needed to report the new relationship. Continue exploring the items associated with the contract in order to assist with the drafting process. Attend to any particular inquiries that the company must respond in order for the contract to be drafted.
  4. If an agreement requires many stages and authorities, appoint a schedule for drafting, evaluation, consideration, reconsideration, and conclusion of all necessary items and actions.
  5. Understand the basic terms of each agreement. If necessary, create a term definition sheet or letter of comprehension to ensure that the appropriate time and effort is spent on each phase of contract planning. If you are not associated with the contract development yourself, make sure to give such documents to the appropriate parties so they may respond to inquiries themselves.
  6. Once relative data has been collected and a preliminary settlement has been developed regarding the basic contract terms, prepare the initial draft of each necessary contract and associated documents. If a different party is responsible for drafting, evaluate the initial draft, review and negotiate changes, and ensure that revised drafts are distributed among all affected parties. Delays can affect the relationship between parties to the contract and risk the desired business opportunities, so it's important to make the drafting and amendment process a top priority.
  7. Once terms have been agreed upon, plan the end of the exchange. Make sure that your company adheres to all pre-closing meetings and closing agendas. Prepare any resources that may be very time consuming.
  8. Once all agreements to the completion of the proposed contract have been signed, manage the contract completion and ensure all contracts and documents are exchanged and any necessary contractual elements (such as a cash payment) are completed.
  9. Ensure that document archives are in order and that duplicates are sent to every applicable party. At this time, make sure that all documents have been reviewed, should any questions arise later.
  10. When dealing with long-term contracts, establish a plan for reviewing the performance of each party under the contract terms. Mark any dates that may require follow-up actions, such as deadlines.

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