10 Lessons for Fashion Brands Hoping to Develop Strong International Contracts
9 February 2016
Author: Alison Larson
Picture this scenario: you have just secured that much-coveted international partner and are ready to do business together. Contract negotiations begin, your partner is flummoxed by your terms, and promptly pulls out of the relationship.
This story sadly, is not fiction. All too often, prospective international partners are breaking ties with brands once the messy process of negotiation starts to unfold.
Here are 10 tips to help avoid disappointment and frustration on both sides:
1. Keep it simple
Avoid unnecessary jargon when you’re writing up your contract. This is particularly pertinent if the contract is to be read by people who speak a different language from your own. Your contract will need to be translated and the more wordy you make it, the higher the potential for mistranslation.
2. Know who’s boss
Always keep in mind which party has more to gain from the deal. If you are a relatively unknown brand pitching to a strong international retailer, then you are the underdog and your terms should reflect this.
3. Keep yourself protected
It is often the case that the terms of your contract will not prove legally binding in your partner’s home country. Be sure to have your contract reviewed by local lawyers to ensure that you aren’t making yourself vulnerable to having your terms breached.
4. Be explicit
Eradicate all ambiguities from your contract by providing sufficient explanation. For example, if you refer to 'marketing costs,' explain what comes under this umbrella within the contract. Terms such as 'best efforts' or 'reasonable efforts' are particularly prone to misinterpretation and should be given due explanation.
5. Think ahead
When setting milestones that must be hit before your contract is automatically renewed, focus on the penultimate year of the term of your contract, rather than the last year. Consider that goods will need to go into production months in advance of your contract being renewed.
6. Don’t get lost in translation
Request that all reports and legal documents be translated into your language. If it seems that one of these documents will most likely be of no use to you in the future, then ask for a summary to be provided alongside the original document rather than a fully translated copy.
7. Be realistic
Refrain from including requests for unnecessary reports that realistically, you won’t have enough time or manpower to analyse. Focus on the reports that will actually help you and your partner to move forward.
8. Avoid quality disputes
Explain how you plan to deal with export quality issues so you don't end up with out of control return shipping costs. Include a clause in your contract that states that product price includes a 1-2% allowance for damaged product. Anything over this percentage can be credited if adequately documented and photographed. You should also include an option to accept returns in the case of a serious quality problem.
9. Be wary of third party contracts
Clearly state that your approval must be sought before your partner enters into any third party contracts. If this situation does arise, ensure that the terms of the third party are consistent with those of your partner.
10. Stay flexible
In terms of detailing processes that are subject to potential change, use addenda to cover your back. Changes to management or technology over time may come to affect the way business is handled. When referring to these processes, include the clause, 'as may change from time to time' so as to signal the need for flexibility.
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If you need guidance in developing your fashion brand overseas or are struggling with your current international business, please contact Alison G. Larson (alarson@worldblazer.com) of WorldBlazer Consulting LLC http://www.worldblazer.com to schedule a free consultation.
Alison G Larson has 25+ years of experience in launching and developing fashion businesses in over 40 markets around the world. She works with apparel, accessory and other fashion-related companies looking to expand or more fully develop their brands or businesses in overseas markets.
Image from Romano Botta