What are the risks of using a contract without a governing language clause?

1 What is a governing language clause?

A governing language clause is a provision in a contract that states which language will be the official and binding language of the contract. It also states that any translations or versions of the contract in other languages are for convenience only and have no legal effect. A governing language clause helps to avoid ambiguity, confusion, and misinterpretation of the contract terms and conditions, especially when dealing with vendors from different legal and cultural backgrounds.

2 Why is a governing language clause important?

A governing language clause is essential to prevent costly and time-consuming disputes and litigation over the meaning and validity of the contract. Without such a clause, you may be at risk of the vendor arguing that the contract is invalid or unenforceable because it is not in their native language or the language of their country. They could also claim inconsistencies or contradictions between the original contract and the translated version, or challenge the interpretation or application of the contract terms and conditions based on language nuances. Additionally, they could use the language barrier as an excuse to delay or avoid fulfilling their obligations.

3 How to choose a governing language for your contract?

When selecting a governing language for your contract, there are several factors to consider, such as the language proficiency and preference of both parties, the language of the country where the contract will be performed or enforced, the language of the industry or sector that the contract relates to, and the language of the applicable laws and regulations. It is ideal to choose a language that both parties are comfortable with and that reflects the nature and scope of the contract. Additionally, you should consult a legal expert or a professional translator to guarantee that the chosen language is suitable and precise for the contract.

4 How to draft a governing language clause?

A governing language clause should be unambiguous, succinct, and in agreement with the remainder of the contract. It should specify the name of the governing language, its influence on the interpretation and enforcement of the contract, and the standing of any translations or versions of the contract in other languages. Additionally, it should also set out who is responsible for providing translations or versions of the contract in other languages, as well as who will bear the cost. An example of a straightforward governing language clause is: This contract is composed and executed in English, which is its governing language. All translations or versions of this contract in other languages are for convenience only and are not legally binding. In case of any discrepancy or inconsistency between the English version and any other version, the English version shall be authoritative.

5 How to manage vendor contracts with different languages?

Managing vendor contracts with different languages can be challenging, but not impossible. To ensure success, it is important to review and understand the contract terms and conditions in the governing language before signing it. If you have any questions or doubts, seek clarification or advice from the vendor or a legal expert. Additionally, it is essential to communicate regularly and effectively with the vendor in the governing language or a mutually agreed language. Use clear and simple language and avoid jargon or slang. Confirm the understanding and expectations of both parties in writing. Furthermore, monitor and document the vendor's performance and compliance with the contract in the governing language. If you notice any issues or problems, address them promptly and professionally. Keep a record of any changes or amendments to the contract in the governing language. Finally, respect and appreciate the vendor's culture and language. Be sensitive and respectful of the vendor's customs and practices. Learn some basic phrases or words in the vendor's language to build rapport and trust.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?