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Business in an International Legal Environment
With the internet becoming increasingly powerful and
popular, international business is bound to do so as
well. It has become more and more important for
businesses to conduct global commerce. As this trend
continues to rise and the world grows smaller, many
issues arise regarding the legalities of international
business. I will attempt to condense these issues into
this brief memo.
Many advantages and disadvantages exist in
international sales and trade. A few advantages are
quite obvious. Expanding the company’s market in
order to increase overall revenue and dominate the
market share are the most apparent. In addition,
international business also unites the world in a way.
It is important to merge international economies in
order to become more global.
Disadvantages are a little less obvious and a little
more plentiful. Three major problems include different
legal systems, long distances, and insurance
considerations. Also, since the two parties neither
know or understand each other well, there exists some
amount of uneasiness between the buyer and the seller.
This latter problem has been somewhat resolved with the
onset of the letter of credit financing device. The
letter of credit is basically an assurance by the
buyer’s bank that the seller will get his/her money.
In order for the seller to receive his money, he must
provide some proof that the goods had been delivered.
Other disadvantages include the price that is paid for
goods distributed to another country. This is settled
with international sales contracts. Trade terms are
used to settle differences in distance and insurance
problems. They are sometimes used to divide
responsibility between two countries doing business.
In 1980 the United Nations Convention on Contracts for
the International Sale of Goods (CISG) added some amount
of uniformity to international sales. Under the CISG,
contracts between countries are governed. This attempts to
provide certainty regarding frauds, timeliness, risk
of loss, and revocability of offers. One huge
disadvantage to international business is the issue
of disputes. When a dispute arises between two
countries, the issue can be tied up in litigation for
much longer than a dispute within our own country.
This issue is usually avoided because of agreements
adopted by many countries that perform international
trade.
When assessing advantages and disadvantages of
international business, it can appear that the bad
outweigh the good. However, many of the disadvantages
have been laid to rest due to agreements between
countries. Therefore, it is far more beneficial for a
large company to conduct international business than
perform business within it’s own country.