CCNP International Contracts 4 — Questions and Answers
Question 1: In international contract drafting, a 'deemed acceptance' provision means that:
- Silence or inaction by one party after a set period constitutes acceptance of modified terms (Correct answer)
- The buyer accepts goods automatically upon shipment
- Electronic signatures are legally equivalent to handwritten signatures
- A counter-offer is treated as acceptance of the original offer
Correct answer: Silence or inaction by one party after a set period constitutes acceptance of modified terms
A deemed acceptance clause converts a party's silence or failure to object within a specified timeframe into legal acceptance of proposed changes.
Question 2: Which of the following is the PRIMARY advantage of including a 'stabilization clause' in a long-term international contract with a foreign government?
- It protects the investor against adverse changes in the host country's laws (Correct answer)
- It fixes the exchange rate for the duration of the contract
- It guarantees the government will not expropriate the investor's assets
- It caps the royalty payments owed to the government
Correct answer: It protects the investor against adverse changes in the host country's laws
A stabilization clause freezes the legal and regulatory framework applicable to the contract, protecting investors from subsequent adverse law changes.
Question 3: The principle of 'lex mercatoria' in international commercial contracts refers to:
- A body of transnational trade customs and principles not tied to any single national legal system (Correct answer)
- The law of the country where the contract is signed
- Mandatory application of WTO rules to private contracts
- The requirement to use ICC arbitration for all commercial disputes
Correct answer: A body of transnational trade customs and principles not tied to any single national legal system
Lex mercatoria is a set of international trade usages, principles, and customs that can govern commercial contracts independently of national law.
Question 4: A US company discovers that its overseas distributor contract contains a provision that is unenforceable under local law. The most effective preventive measure would have been to:
- Conduct a legal review of the contract under the applicable local jurisdiction's law before signing (Correct answer)
- Use only English-language contracts with all foreign partners
- Include a US governing law clause in all distributor agreements
- Require international arbitration for all distributor disputes
Correct answer: Conduct a legal review of the contract under the applicable local jurisdiction's law before signing
Pre-signing local law review identifies provisions that violate mandatory local rules before they become problematic.
Question 5: Under the CISG, if a buyer sends an acceptance that includes additional terms not in the seller's offer, this response generally constitutes:
- A rejection and counter-offer, unless the modifications are immaterial (Correct answer)
- An acceptance, because the CISG applies the mirror image rule strictly
- A conditional acceptance that binds the seller if not objected to within 14 days
- Void communication with no legal effect
Correct answer: A rejection and counter-offer, unless the modifications are immaterial
CISG Article 19 treats a reply with modifications as a rejection and counter-offer, unless the additions are immaterial and the offeror does not object.
Question 6: In international negotiations, 'integrative bargaining' differs from 'distributive bargaining' in that it:
- Seeks to expand the value available to both parties rather than dividing a fixed resource (Correct answer)
- Focuses on maximizing one party's share of a fixed contract value
- Relies on aggressive positional tactics to gain concessions
- Is only used in multi-party consortium negotiations
Correct answer: Seeks to expand the value available to both parties rather than dividing a fixed resource
Integrative bargaining identifies shared interests and creates value for both parties, while distributive bargaining treats negotiation as a zero-sum division.
Question 7: A 'back-to-back contract' structure in international trade is typically used when:
- A middleman mirrors the terms of the main contract in a sub-contract with a supplier (Correct answer)
- Two parties swap obligations under separate contracts simultaneously
- The same goods are sold under two different Incoterms in one transaction
- A letter of credit is confirmed by two banks in different countries
Correct answer: A middleman mirrors the terms of the main contract in a sub-contract with a supplier
Back-to-back contracts allow an intermediary to replicate the main contract terms with its supplier, ensuring risk and obligations flow through consistently.
CCNP International Contracts 4
In international contract drafting, a 'deemed acceptance' provision means that: