Contract Translation: Everything You Need

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Contract Translation: Everything You Need To Know

As our world globalizes, contract translation has become an increasing need for businesses that engage in cross-border transactions. Transactions can be as small as signing a contract with a distributor in a foreign market or as large as making an acquisition of an international entity. Having a plan in place to handle this requirement is key to keeping transactions quick and costs low.

What is a contract?

A contract is a document that establishes and governs a relationship between two or more parties which includes legal obligations to perform certain acts. Contracts can be put in place between two individuals, an individual and a business, two businesses, etc.

The elements that establish a legally binding contract are an offer, acceptance, considerations, mutuality of obligations, competency and capacity, and in some instances a written instrument.

What is contract translation?

Contract translation is the action of translating a contract to a different language to be used between two parties that speak different languages. Given legal contracts in English are often vague and full of loopholes, it is especially important to make sure a translated contract has no vagueness or ambiguity in the foreign language.

Why do businesses translate contracts?

Businesses translate contracts for a multitude of reasons and the list continues to grow. Employment contracts and employee handbooks can be translated to be used with their own workforce (i.e. translating legal contracts to Spanish for US Spanish speakers). Sales contracts can be translated to be used with international customers. Privacy Policies and Terms of Service agreements can be translated to be used with international users online. The list is long and continues to grow as our world gets more connected.

What is the benefit in translating your contracts?

While contract translation can appear to be expensive, there can also be tremendous cost savings associated with it. Businesses often opt to use their own ‘paper’ in a transaction since they are familiar with the terms and will avoid needing a lawyer to review its entirety. This is a big cost savings and is why so many businesses have ‘template banks’ to pull from when entering into a transaction. The same benefits are true with translating contracts. If a business routinely transacts with parties that speaks other languages, there may be substantial savings by translating the contract templates into foreign languages. This creates a similar scenario where businesses are familiar with the legal terms and will minimize legal fees in contract review.

On the flip side, if a business does not proactively translate their templates, they will likely need to hire foreign counsel for each transaction to help them understand the language issues, legal issues, and jurisdiction specific issues for each transaction. This can be very costly.

What are the challenges in translating contracts?

There are many challenges associated with translating contracts into different languages for use with international parties.

Firstly, language is not objective and often there are not equivalent words across languages. When coupled with the law, this can create challenges for lawyers to properly translate clauses word for word.

Secondly, countries have different legal systems. For example, France’s legal system is Civil Law and the United States’ legal system is Common Law. Without going into detail in their differences, this can cause situations where clauses in contracts will not be applicable in a different legal system and, if translated without consideration, can make a business appear unthoughtful by including them in their translated contract.

Thirdly, subject matter expertise is more important than ever. The law is complex and requires a subject matter expert (often a contract lawyer) to handle translations. When you couple this with industry, for example the pharmaceutical industry, you run into a situation where you need a very specific expert on both legal terms and scientific and technical terms. This can create big challenges for anyone translating a contract.

(The list continues, and we are happy to discuss further if you want to contact us at hello@contractscounsel.com!)

What should I keep in mind when selecting a lawyer to translate contracts?

As stated above, there are many challenges associated with translating legal contracts. It is important to find a partner that deeply understands these challenges and is well equipped to fulfil your objectives. The key things you need to look for is industry expertise, native language and jurisdiction, and legal practice expertise.

If you have any questions, please feel free to write us at hello@contractscounsel.com!

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