Contracts with a foreign contractor: 5 critical points

Currency and payment rules

Many entrepreneurs fall into the currency rate trap. If your contract does not specify which rate applies during conversion (e.g., the average NBP rate from the invoice date), you can lose even 3-4% of your margin on one large order. Always clarify the settlement date and the method of informing about payments within the company.

In our practice, we saw a case where an IT company lost 4,200 PLN just because the contract lacked a provision about bank commissions on the intermediary's side. Always indicate that the amount on the invoice must be received in full. Let's get down to business: the contract must clearly indicate who covers the costs of international SWIFT-type transfers.

Always indicate that the amount on the invoice must be received in full.

Governing law for disputes

This is the most important point. If you do not write in the contract that the governing law is Polish law, in case of a dispute, you may be forced to hire a law firm in the contractor's country. The cost of a lawyer in Germany or France starts at about 250 euros per hour of work, which is a huge burden for a small company.

We secure your next step by suggesting including a provision about the court of jurisdiction for your registered office. If the contractor does not agree, propose an arbitration court in a neutral place. This allows you to avoid years of hearings in courts whose procedures you do not know. We tell it like it is – it is better to spend time on negotiations now than on costly lawsuits in a foreign city.

Precise scope of deliveries or services

Ambiguities in the description of work are the main reason for underpayments. We often encounter contracts that end with one general sentence like 'commercial cooperation'. At Development Consulate, we advise attaching a detailed technical specification as an integral part of the contract, which allows for avoiding guesses during goods or service reception.

If you deliver goods, specify exactly the moment risk passes to the buyer. Is it the moment of loading at your warehouse, or delivery to the client's ramp? Precision here saves thousands of zlotys in transit damage. We saw a situation where 87 pieces of goods destroyed in transit generated a dispute lasting 7 months, because the contract lacked one simple attachment.

Precision here saves thousands of zlotys in transit damage.

Termination terms and liquidated damages

Everyone wants cooperation to go well, but you must have an emergency exit. The contract must include a termination clause with a reasonable period, for example, 30 days. Without this, you can be tied to a contract that stops being profitable after changes in raw material prices or energy costs.

Liquidated damages should be symmetrical. If you pay a penalty for delay, the contractor should pay it for lack of payment on time. Be careful, however, that penalty amounts do not exceed 10-15% of the total contract value. Excessively high penalties can be challenged in court as grossly inflated, which will only prolong the whole case.

Force majeure – what if the world stops?

The pandemic taught us that the world changes from day to day. Force majeure provisions must contain a specific list of events that release you from the obligation to perform the contract without financial consequences. Do not use general formulas; list strikes, natural disasters, or significant supply chain disruptions.

If your industry depends on raw material availability from imports, add a clause about the possibility of price renegotiation if costs jump by more than 20% in a month. This is a fair solution that protects both sides from bankruptcy. In case of questions, you can schedule a consultation during which we will review your current contract template. Receive a quote in 24h via our online form.