Internazionale

INTERNATIONAL TRADE - Think twice before beginning trading negotiations.

Written by Avv. Salvatore Frattallone. Posted in Commercio internazionale

About art. 1.7 Unidroit Principles (2010)
> Good faith and fair dealing <

(1) Each party must act in accordance with good faith and fair dealing in international trade.
(2) The parties may not exclude or limit this duty.

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Before entering into a binding agreement, a potential purchaser and a potential seller have to show interest in something and keep confidential any information received during negotiations. Infact, when business negotiations take place, it is quite usual that parties sign an informal document, called Preliminary, after prolonged, and often tough, negotiations. But always relevant negotiations open by sending email, memo and letter-writing, interviewing and telephoning, letter of intent, and so on.
The progress of commercial negotiations (including projects, proposals, strategies, understandings, commitments, agreements, contracts and the whole exchange of information between parties, including but not limited to communications to facilitate pending negotiations) have always to involve in an open, honest and fair dealing business.
Engaging in private dealings with someone for purchasing/partnering involves duties and responsibilities, since the beginning of the trading relationship, requires good faith and fair dealing.
Good faith and fair dealing are a fundamental idea underlying the Principles of Unidroit, because each party must act in accordance with good faith and fair dealing, even without of special provisions in the Principles the parties’ behaviour throughout the life of the contract, including the negotiation process, must conform to these rules. After all, a typical example of behaviour contrary to the principle of good faith and fair dealing is what in some legal systems is known as “abuse of rights”: thus, a default event occurs when there's a party’s malicious behaviour which occurs for instance when a party exercises a right merely to damage the other party or for a purpose other than the one for which it had been granted, or when the exercise of a right is disproportionate to the originally intended result.
Moreover, good faith and fair dealing must be construed in the light of the special conditions of international trade, so that standards of business practice may indeed vary considerably from one trade sector to another.
The mandatory nature of the rules in question implies that the parties must have the duty of acting in accordance with good faith and fair dealing, with the primary purpose of preventing misconduct and avoiding any deceptive information and behaviour from which they could derive undue advantage: for this reason, the parties may not contractually exclude or limit it. On the other hand, obviously, nothing prevents parties from providing in their agreement for a more stringent duty behaviour, more virtuous than is currently provided.
It’s essential to know the the rules of the game, whereby the owner - even if of a small or medium-sized enterprise - is required to know, to understand and apply good practices in the field of international contractual relations, to maintain competitiveness and, at the same time, avoid negative consequences to business, without incurring any non-contractua liability.
The presence of the principle of good faith and fair dealing, puzzling for those who do not know international business law, may have direct and indirect negative effects on the success of your trade.
So you have to think twice before beginning negotiations that need to be followed by specialized law firm.

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