Sample Settlement Agreement in International Dispute

Outline of the case

Our client, Company M, was informed from a Japanese counterparty that a product imported from a European company was found to be defective and that the Japanese counterparty would cease doing business with the company in the event of similar defects in the future. The president of Company M required European company to confirm in writing that any similar defects in the future would be the responsibility of the European company.

Kuribayashi Sogo Law Office’s Services

Our firm was contacted by the president of Company M. We drafted a letter of confirmation to be submitted by the European company (confirming its responsibility and confirming that it would accept liability in the event of an accident) and sent it to the president. The president of Company M discussed with the counterparty based on the written confirmation prepared by our firm, and succeeded in getting the counterparty to sign the confirmation.

Explanation

Although the case had not yet reached the point of concrete compensation for damages, by signing the letter of confirmation, the client was able to confirm that the European company would bear all responsibility for any similar problems that might arise in the future, and the transaction could proceed smoothly thereafter. In cases where transactions are based solely on Purchase Orders, as in this case, a basic agreement may not have been prepared even if the transaction amount is large, and even if a basic agreement has been prepared, it may not have been written in a way that adequately addresses the issue at hand. Therefore, even during the course of a transaction, if there are unclear points in the terms of the contract, it is considered beneficial to clarify them in writing for the smooth execution of subsequent transactions. Company M is a client of Kuribayashi Sogo Law Office, so we handled the consultation fee for this case (including the fee for drafting the agreement in English) within the scope of our advisory fee.

Preparation of Memorandum and Side Letter

In the event that the terms of a contract are not clear in an international transaction, a memorandum or side letter is prepared to clarify unclear terms of the contract or to modify the terms of a previous contract. We often prepare memorandums and side letters in English at the request of our clients. In cases such as this case, where the overseas counterparty’s response was inadequate, it is beneficial to have a broad agreement that includes future responses.

Sample Agreement

Pelagic Fishery Company, Inc. (hereafter referred as “Party A”) and Japan Fishing Machine Manufacturing Co., Ltd. (hereafter referred as “Party B”) agree with regard to the dispute accrued (“Dispute”) relating to the sales and purchase agreement between Party A and Party B dated on January 15, 2020 (hereafter referred as the “Agreement”) as follows:

Article 1
Party B acknowledges that Party B shall pay $7,000 to Party A as the consideration for the settlement of the Dispute and Party B shall pay this money by wire transfer to the bank account designated by Party A. Furthermore, the transfer commission shall be the responsibility of Party B.

The bank account for money transfer is as follow:
Bank Name:
Type of the account:
Account No.:
Account Name:
SWIFT Code:

Article 2
Party B shall manufacture and supply the product so that the product will conform to the specifications and industry standard quality. Party B shall warrant that product shall be free from all defects, including but not limited to those in design, development, materials, manufacture and/or indication. Party B shall also warrant merchantability of products in the market of USA, fitness for the ordinary purposes for which such products are used.

Article 3
In case the claims for the defects of the products be asserted against Party A, and should such claims be attributed to products, then Party B shall immediately reimburse the amount actually paid by Party A for such products and buy back any and all stocks owned by Party A at the original purchase price.

Article 4
Party A and Party B acknowledge that there are no any debts and/or credits between Party A and Party B other than those stipulated in this Agreement.