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Fundamentals of English Contract Documents: Explaining the Contractual Knowledge You Should Know

General Corporate

Fundamentals of English Contract Documents: Explaining the Contractual Knowledge You Should Know

When considering international expansion in business, the creation of contracts in English becomes an essential element. It is common to have questions about the differences between English-language contracts and Japanese-language contracts, as well as about common expressions used within them.

This article aims to provide international legal practitioners with a clear explanation of the fundamental knowledge and points of caution related to English-language contracts. It also touches upon the governing law in international contracts, which will be useful in grasping the critical points of contract conclusion.

Indispensable English Contracts in International Business

Man signing a contract

Contracts in international transactions are primarily drafted in English. These contracts are used to establish trade and cooperative relationships across different countries and legal jurisdictions, providing a legal framework for international business. When dealing with overseas companies, it is essential to have clear and consistent English contracts that take into account cultural differences and legal backgrounds.

Therefore, it is personalityistic for these contracts to employ precise and specialized English expressions aimed at accommodating the laws and business practices of different countries.

The main content of these contracts includes clearly stated terms and conditions of international commercial transactions and responsibilities, serving to protect the rights and obligations of the parties involved. Furthermore, in the event of disputes arising from contract breaches or differences in interpretation, the provisions of the contract serve as a basis for facilitating smooth resolution.

These contracts are crucial as they smooth out business relationships and provide a foundation for transactions to be conducted on terms that are agreeable to both parties.

Differences Between Common Domestic Contracts and English Contracts

Women reviewing a contract

There are significant differences between contracts commonly used within Japan and those written in English, including the language used, expressions, and the content that should be included.

Domestic contracts commonly used in Japan are concise and tailored to the Japanese legal system and culture.

On the other hand, English contracts have a complex structure due to the need to consider different legal environments and cultures, and creating and interpreting them requires meticulous attention.

Furthermore, there are differences in the wording, content, and approaches to dispute resolution between domestic and international contracts. For more detailed information on international contracts, please refer to the following article.

Related Article: The Growing Need for International Contracts in Cross-Border Transactions: Differences Between International and Domestic Contracts[ja]

There are various types of English contracts, but here are some examples:

Type of English ContractContent
Sales AgreementA contract that sets out the terms and conditions of the sale of products or services, including detailed provisions on price, quantity, and delivery.
Distribution AgreementA contract that defines the terms, rights, and obligations when entrusting the sale of products or services to a distributor, including the distributor’s territory, sales authority, and compensation.
Franchise AgreementA contract between a franchising company and its franchisees, including the right to use trademarks, support details, and fees.
Technology Transfer AgreementA contract concerning the transfer of technology or patent rights, defining the terms of intellectual property rights usage between the provider and the recipient company.
Termination AgreementA document that outlines the agreement on the termination or cancellation of a contract, including procedures for the release of both parties’ rights and obligations.
Joint Venture AgreementA contract that sets out the terms, authority, and risk-sharing for two or more companies starting a new business together.

These are just a few examples of English contracts, and it’s important to understand that the content and structure of a contract can vary depending on its purpose and specific circumstances. Using the appropriate contract for the situation is essential for facilitating smooth transactions and ensuring legal validity.

Key Points in Drafting English Contracts

Men confirming details

When drafting English contracts, it is important to consider the following points:

  • Understand that the language used is not ordinary English, but legal English.
  • Develop skills in interpreting English text and in writing English compositions.
  • Become familiar with the unique patterns found in English contracts.

English contracts often contain vocabulary that is different from general English, so it is essential to understand these personalityistics and have the ability to interpret them appropriately according to the case at hand.

Understanding Legal English

In English-language contracts, specialized legal terminology is used. It is crucial to pay attention to the strict expressions required and the importance of subtle nuances. For instance, terms such as “shall” (should) and “hereby” (by this) frequently appear to clarify contractual conditions and obligations. Possessing knowledge of legal English that allows for accurate interpretation is essential due to the nature of legal documents.

Acquire Skills in English Interpretation and Composition

When handling English-language contracts, not only is the skill of interpretation important, but so is the skill of composition. The responsible party must accurately understand the terms and obligations incorporated in the contract and, at the same time, convey their company’s intentions and negotiate using appropriate expressions.

In addition to specialized terms and legal expressions, effective communication will facilitate the smooth progression of the contract.

Familiarize Yourself with the Unique Patterns of English-Language Contracts

English-language contracts have unique patterns, and certain phrases are commonly used. Familiarity with these can help you understand the meaning behind similar wording and expressions.

For example, it is important to grasp the consistency and standard structure of a contract, such as indicating the parties involved as “Party A” and “Party B.” Being able to quickly interpret contracts will allow you to proceed with your work efficiently.

Negotiating with English Contracts


When negotiating towards the conclusion of a contract, the following points should be considered:

  • Understanding the differences in contract philosophy between Europe, the United States, and Japan
  • Becoming familiar with the unique flow of international contracts aimed at conclusion

There are clear differences in the approach to contracts between overseas countries and Japan. Not only these differences, but also the variations in business customs and laws of each country must be recognized.

Understanding the Differences in Contract Philosophy Between Overseas and Japan

Overseas and Japan have different approaches and values when it comes to contracts.

For example, contracts in the West are typically detailed and specific, with written terms being strictly adhered to legally. In contrast, in Japan, trust and oral agreements can also influence contracts.

Understanding these cultural and legal differences and aligning expectations with the other party leads to smooth negotiations.

Understanding the Practices of International Contracts Aimed at Conclusion

There is a specific flow to concluding international contracts, and it is necessary to understand this flow.

In a typical international contract, a Non-Disclosure Agreement (NDA) is first signed to ensure the confidentiality of information. This is followed by the creation of minutes, where the agreed-upon matters between the parties are documented.

As a stage leading to the final contract, it is also important to deepen your understanding of the Letter of Intent (LOI).

An LOI is a document that outlines the basic terms of agreement for the purpose of confirming intentions among parties prior to business transactions or contract conclusion. It is created when key terms are agreed upon during negotiations and is useful before reaching the final contract.

By understanding these steps and preparing documents at the appropriate stages, you can smoothly advance through the negotiation and contract conclusion process.

The Significance of Governing Law and Dispute Resolution in English Contracts

People in a meeting

In English contracts, Governing Law and Dispute Resolution are of paramount importance.

Governing LawSpecifies which country’s or jurisdiction’s laws apply to the formation and performance of the contract.
Dispute ResolutionDefines the specific procedures, choices, and locations for resolving disputes that arise from the contract.

Clarifying the Governing Law provides the contracting parties with a legal framework, making it clear which laws the contract terms and obligations are based on. This helps ensure consistency in the contract and prevents legal disputes.

Common methods of Dispute Resolution include Arbitration and Litigation. Arbitration is generally a swift and neutral method of resolving disputes, which takes place at an arbitration institution designated in the contract.

By stipulating Governing Law and Dispute Resolution procedures in the contract, both parties can reduce risks and establish a foundation for smooth business transactions.

Reference: Japan Commercial Arbitration Association[ja]

Summary: Understanding the Unique Expressions and Flow of English Contracts

Man in suit

English contracts play a crucial role in international agreements, and it is essential for those responsible to understand their personalityistics and how to handle them. The differences between domestic contracts and those used in international contexts are not limited to the language used; they also include expressions and content that reflect a thorough consideration of different legal environments and cultures.

Furthermore, determining the governing law is one of the important clauses in a contract.

When drafting contracts for transactions with foreign entities, we recommend consulting with attorneys who are well-versed not only in Japanese domestic law but also in foreign laws and business customs.

Guidance on Measures by Our Firm

Monolith Law Office is a legal practice with extensive experience in IT, particularly in both the internet and legal aspects. In recent years, global business has been expanding increasingly, and the need for legal checks by specialists is growing more than ever. Our firm provides solutions related to international legal affairs.

Areas of practice at Monolith Law Office: International Legal Affairs & Overseas Business[ja]

Managing Attorney: Toki Kawase

The Editor in Chief: Managing Attorney: Toki Kawase

An expert in IT-related legal affairs in Japan who established MONOLITH LAW OFFICE and serves as its managing attorney. Formerly an IT engineer, he has been involved in the management of IT companies. Served as legal counsel to more than 100 companies, ranging from top-tier organizations to seed-stage Startups.

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