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What is International Commercial Law?

By Donn Saylor
Updated May 16, 2024
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International commercial law is a set of rules overseeing the sales made between businesses when more than one country is involved in the transaction. A branch of international law, this field has a major impact on the economic development of the world, specifically on the assimilation of world markets. The United Nations Convention on Contracts for the International Sale of Goods is the code of rules and conduct by which international commercial law operates.

The law dictates the importance of an international commercial contract, in which those taking part in the transaction agree to certain guidelines about joining the foreign market. Among these guidelines are agreements to export directly, to utilize a foreign representative to sell and distribute, to join forces with a foreign-owned company, and to identify someone to franchise the business in the foreign country. Points such as these ensure that both the buyer and seller know what to expect from the transaction and that each party is aware of their obligations under international business law.

The tenets of international commercial law make several more provisions with which transacting businesses must comply. Both parties enter into a contract of carriage of goods, which stipulates how the goods being sold will be transported from the seller to the buyer. It is not uncommon for goods to be damaged or missing. In these instances, rules are in place to guarantee each party's responsibility and liability under the law.

In cases of lost or damaged goods, international commercial law dictates that the parties involved may sue the responsible party. The term "responsible party" will differ from contract to contract. In some instances, it may be the buyer; in others, the seller; and in still others, it may be the company who was hired to transport the goods. There is a type of international commercial law contract called a "free on board" (FOB) sale, in which whatever party is named as the shipper on the bill of lading has the right to sue the carrier company.

Depending on the terms of the contract and the nature of the goods being sold, most parties entering into an international law agreement will purchase some type of insurance as a protective measure. Losses can usually be recouped by ensuring this precaution is taken before the transportation of goods. The law states that insurance must only indemnify those products that are outlined in the bill of lading and other shipping paperwork.

International commercial law marries principles from the business world with basic international diplomacy. By covering the finer points of topics like ethically entering the foreign market, shipping goods, and guaranteeing the right to sue, the law lays the groundwork for a greater economic understanding. Establishing rules of fair trade and ethical business dealings are the big-picture intent of international commercial law.

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