Essential clauses every international business contract should have - Part 2

Any international contract seems reliable until a crisis hits. Late payments, currency fluctuation, or a partner suddenly pulling out of the deal can quickly put your company in a vulnerable position. The reason is weak or vague wording in the contract, especially in the sections on payments and termination. To protect your business, it’s important not just to set amounts and deadlines, but also to plan for currency shifts, banking fees, and potential exits. In this second part of the article, we explain how to clearly define payment obligations, manage currency risks, and structure transparent termination rules using precise language and solid logic. With practical examples, we’ll show how to write effective exit clauses and reduce financial damage.

Payment Terms & Currency Clause

This is a system of legal guarantees that defines in which currency, under what conditions, and with what responsibility settlements will be made.

Mistakes in this part of the contract can lead to frozen funds, losses due to currency fluctuations, and even unilateral termination of the deal.

What needs to be stated in the payment terms?

The contract must contain not only general conditions, but also protective mechanisms in case of instability. Mandatory components:

1. Amount and currency of settlement. The exact amount in a specific currency must be indicated. At the same time, it is important to agree on the base currency of the contract, taking into account the jurisdictions of both parties.
2. Payment method. Direct bank transfer, letter of credit, payment via a payment system, payment by a cryptocurrency or multi-currency settlement — each option has its own legal and technical specifics.
3. Payment deadlines. Specific dates or a period following an event (e.g., “within 10 business days from the date of signing the certificate”).

A common mistake: using vague wording such as “within a reasonable time” or “upon mutual agreement.” In the context of different legal systems, this is almost a guaranteed trigger for dispute.

How to define currency risks: whose responsibility is it?

If you don’t determine who bears the losses from currency fluctuations, it will be you. Therefore:

1. Fix the currency if there are risks of devaluation or inflation on one side.
2. Define an adjustment to the amount if payment is made in a different currency than the one stated in the contract (using the rate on a specific date or an average rate).
3. Define responsibility for costs: sending bank fees, receiving bank fees, and payment service providers. In the contract, you can state: “All fees of the sending and receiving banks shall be borne by Party A.”

Practical recommendations and model wording

The wording of the payment clause should be such that even in case of misunderstanding or conflict, it remains unambiguous. Example of correct wording: “All payments under this Agreement shall be made in EUR by bank transfer to the account specified by the Provider. Payment shall be effected within 15 calendar days from the date of the invoice. All bank charges shall be borne by the Customer. In case of currency restrictions or payment blockage, the parties shall agree on an alternative payment method within 10 working days.”

Do not copy payment terms from templates without adapting them to specific currencies, countries, and banks. Always indicate: 1) who pays the fees; 2) which date is considered the date of performance of the obligation (transfer date, receipt date, or notification date). Check consistency with clauses on applicable law, sanctions risks, and arbitration (for example, if the payment is delayed due to currency control, is it considered a breach or not?).

Termination & Breach Clause

Termination and breach provisions define the conditions under which a contract can be terminated, what actions are considered a breach, and what measures can be taken in response.

What does this clause regulate, and why is it important?

The termination and breach clause covers the following aspects:

1. Termination conditions: define under what circumstances the parties may terminate the contractual relationship.
2. Definition of breach: establishes what actions or inactions are considered a violation of the contract terms.
3. Legal remedies: describe possible consequences of a breach, including compensation, penalties, or other sanctions.

Clearly defining these conditions helps avoid uncertainty and potential disputes between the parties.

How to formulate the grounds for termination?

When drafting termination conditions, it is important to consider the following:

1. Material breaches: specify which exact breaches are sufficient to terminate the contract.
2. Force majeure events: determine how unforeseen events, such as natural disasters or political changes, affect the possibility of termination.
3. Notice procedure: establish the process and deadlines for notifying the other party of the intention to terminate the agreement.

Example wording: “This Agreement may be terminated by either party in the event of a material breach of contract by the other party, provided that a prior written notice is given at least 30 calendar days in advance.”

How to formulate the consequences of breach: penalties, compensation, refunds

To ensure legal protection in case of a breach, it is recommended to set specific penalties. Define fixed amounts or percentage rates for certain types of violations. You should also describe the process for claiming damages: explain how the compensation will be calculated and paid to the injured party. It is important to provide for the return of funds or goods — specify the conditions and deadlines for refunding advance payments or delivered items.

Example wording: “In the event of a breach of the terms of this Agreement, the breaching party shall pay the injured party a penalty in the amount of 10% of the total contract value, as well as compensate for all incurred losses.”

How to avoid conflicts with other contract provisions?

To ensure consistency between the termination and breach clause and other provisions of the contract, align it with the governing law clause. Define how disputes related to termination or breach will be resolved. Also, check for consistency with other clauses. Make sure that the termination terms do not contradict, for example, the force majeure or confidentiality clauses.

Example wording: “All disputes arising in connection with the termination of this Agreement shall be resolved by the provisions of the ‘Dispute Resolution’ section of this Agreement.”

How Key2Law can help?

The Key2Law team knows how to structure contract clauses in a way that truly protects your business, without leaving loopholes that can be misused. We can help you:

1. Draft and adapt payment clauses that account for currency risks, bank fees, and local regulations;
2. Include protection mechanisms against sanctions, account freezes, and force majeure situations;
3. Clearly define the termination process and consequences of breach, including penalties, compensation, and notification terms;
4. Check the compatibility of payment, jurisdiction, and arbitration clauses;
5. Support negotiations with your counterparty and justify every proposed change with clear reasoning.

Key2Law provides more than just documentation; we offer a well-thought-out structure for contractual relationships that works in any jurisdiction and under any conditions. Contact Key2Law today - we will help you create a contract that will serve as a reliable tool for protecting your rights in any situation.