Protecting your Business against Non-Compliance in Cross-Border Contracts | Cross Border Contract Disputes in India | Legal Remedies for Breach of Contract in India

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Introduction
International contracts are instruments vital in global commerce since they govern the interaction between businesses of different countries. Nevertheless, contractual breach, or failure to meet regulations and standards, results in conflict, loss, and negative publicity. For any foreign company conducting business with Indian firms, it becomes very necessary to thoroughly follow some of these compliance requirements as they will go a long way in protecting the company from undue risks. This blog shows some of the difficulties in cross-border contract issues and gives real advice on how to prevent them in your business.

Understanding the Compliance Landscape in India
India’s regulatory framework for contracts is governed by multiple laws, including:
1) Indian Contract Act, 1872: Documents procedures for compliance and sanctions as well as implications for noncompliance.
2) Foreign Exchange Management Act (FEMA), 1999: Regulates the international movements of money especially investment in Indian markets.
3) Goods and Services Tax (GST) Act: Affect contracts for the supply of goods or supply of services.
4) Sector-Specific Regulations: Such regulations depend on the industry, like Information Technology, drugs and chemicals, and manufacturing.
The laws also provide that failing to observe these laws makes contracts enforceable or attracts penalties.

Key Challenges in Ensuring Compliance
a. Diverse Regulatory Requirements:
• Being faced with different regulatory requirements across the global market. It should be understood that Indian sectors have different compliance level requirements, and this makes it difficult for foreign investment.

b. Ambiguity in Contract Terms:
• Ambiguous or partial terms raise the probability of arguing over what the companies must do in compliance with the terms, and under what circumstances.

c. Jurisdictional Conflicts:
• The sort of issues that may cause disputes include the type of laws to be applied in the non-compliance cases and the proper courts to approach the cases.

d. Ethnocentrism and Language Differences:
• Most of the time, misunderstanding because of cultural differences or lack of clear communication can result in inadvertent out-of-compliance.

Strategies to Safeguard Against Non-Compliance
a. Prepare Assertive and Specific Contracts
A robust contract minimizes ambiguity and ensures clarity in:
i. Performance obligations.
ii. Annual compliance issues for a particular region or country and more specifically, conflict resolution procedures about the proposed policy.
Pro Tip: For legal consulting services hire lawyers for compliance with Indian laws when signing contracts.

b. Due Diligence Should Be Conducted before entering into a cross-border agreement, assess the partner’s
i. Regulatory track record.
ii. Financial stability.
iii. Compliance history.

c. Monitor Regulatory Changes:
The regulatory policies of India change often. Understand changes regarding enforceability of your contract, or duties and responsibilities in the contract.

d. Construction of agreement for review of compliance:
Include provisions that provide for specific compliance assessments from time to time to check on compliance with contract and regulatory provisions.

e. Leverage Technology
Use compliance management tools and work within the time frames of your company for filing or submitting forms and documents.

Legal Remedies for Non-Compliance
If non-compliance arises, Indian law offers several remedies:
a. Damages
i. Compensatory Damages: To compensate for real damages occasioned by the failure to meet the provisions of the statute or regulation.
ii. Liquidated Damages: Non-performance penalties that have been agreed at the start of the contract.

b. Specific Performance:
The Specific Relief Act 1963 provides that the courts may order the breaching party to perform his contractual obligations or issue an injunction to not do an act.

c. Termination and Restitution:
If the damage is extremely costly and unbearable then the only remedy available to the aggrieved party is to repudiate the contract and claim for damages using common law for benefits gained by the breaching party.

d. Arbitration and Mediation:
Only take the legal battle to arbitration or mediation for they are more efficient and cheaper than the legal process. The Arbitration and Conciliation Act, of 1996 provides for enforceable awards in India and awards can be enforced under the New York Convention.

Conclusion
Breach of contracts in international contracts can be a challenge although there are things in compliance management. The business can safeguard its interest by preparing fair and proper legal agreements, investigating, and making sure that it complies with the latest regulations.
When dealing with such issues it is important to work together with legal advisors who can comprehend the legal framework in India to ensure that you avoid any legal pitfalls that would cost you your investment.
Authored by; Adv. Anant Sharma

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