Travis & DeBlase PLLC | May 2026 | International Business
For international companies entering the American market, one of the earliest and most important adjustments is understanding how contracts work in the United States. While the basic concept of a binding agreement is universal, the American legal system—and New York law in particular—has distinctive features that can surprise business executives accustomed to civil law systems, the common law of other English-speaking countries, or commercial codes that differ meaningfully from the Uniform Commercial Code.
This article covers the foundational principles of U.S. contract law that international businesses should understand before entering into commercial agreements with American counterparties.
The United States Does Not Have a Single Contract Law
The first thing international companies must understand is that contract law in the United States is primarily a matter of state law, not federal law. Each of the fifty states has its own body of contract law, developed through centuries of court decisions and, in the case of contracts for the sale of goods, through each state’s adoption of the Uniform Commercial Code. While the core principles are broadly similar across states, there are meaningful differences in areas such as the enforceability of non-compete agreements, the interpretation of ambiguous contract terms, and the availability of specific remedies.
This is why the choice-of-law and forum-selection clauses in a contract matter so much. A contract governed by New York law and subject to the jurisdiction of New York courts will be interpreted differently in some respects than the same contract governed by California or Texas law. For international companies, specifying New York as the governing law is common because New York has a well-developed commercial law jurisprudence and its courts are experienced in handling complex business disputes. New York General Obligations Law Section 5-1401 allows parties to choose New York law to govern contracts worth $250,000 or more, even if the transaction has no other connection to the state.
The Requirement of Consideration
One of the most distinctive features of American contract law is the requirement of consideration. A promise is generally not enforceable unless it is supported by consideration—something of value exchanged by both parties. This means that a gratuitous promise, no matter how clearly expressed, is typically not binding. For companies from civil law jurisdictions where a formal written commitment (such as a deed or notarized document) is sufficient to create an obligation, this can be a significant adjustment.
In practice, consideration is rarely a problem in commercial contracts because both sides are exchanging something of value—goods, services, money, or promises to perform. But it can become an issue in contract modifications. Under the common law (which governs service contracts), a modification to an existing contract must be supported by new consideration from both parties to be enforceable. The UCC takes a different approach for contracts involving the sale of goods, allowing modifications made in good faith without new consideration. International companies should be aware of this distinction when negotiating amendments to existing agreements.
The Statute of Frauds
American law requires certain types of contracts to be in writing to be enforceable. This requirement, known as the Statute of Frauds, applies to contracts that by their terms cannot be performed within one year, contracts for the sale of goods worth $500 or more (under the UCC), contracts for the sale or transfer of an interest in real property, and guarantees or suretyship agreements. New York’s version of the Statute of Frauds is codified in General Obligations Law Section 5-701.
For international businesses, the practical lesson is straightforward: put all significant commercial agreements in writing. While oral contracts are technically enforceable in many circumstances, relying on them is risky, and proving their terms in court is difficult and expensive. A well-drafted written contract eliminates ambiguity and provides a clear evidentiary record if a dispute arises.
The Parol Evidence Rule
When a contract is reduced to a final written document, American courts generally will not consider prior or contemporaneous oral statements or writings that contradict or add to the written terms. This is known as the parol evidence rule, and it gives significant weight to the four corners of the written contract. If a written agreement contains an integration clause—a provision stating that the document represents the entire agreement between the parties and supersedes all prior negotiations—courts will enforce that clause and exclude extrinsic evidence of different or additional terms.
This principle has important practical implications for international companies. Representations made during negotiations, even if relied upon by one party, are generally not enforceable if they are not included in the final written agreement. Companies should ensure that every material term, condition, and representation they consider important is reflected in the written contract before signing.
Breach and Remedies
When a party breaches a contract in the United States, the non-breaching party’s primary remedy is money damages—specifically, expectation damages designed to put the non-breaching party in the position it would have been in had the contract been fully performed. This may include direct damages (the value of the performance not received), consequential damages (foreseeable losses caused by the breach), and, in limited circumstances, incidental damages.
Punitive damages are generally not available in contract cases in New York, which is a significant difference from some international legal systems where penalties for breach may be built into the contract or imposed by law. American courts will enforce liquidated damages clauses—predetermined amounts payable upon breach—so long as the amount is a reasonable estimate of anticipated harm and actual damages would be difficult to calculate. Clauses that function as penalties rather than genuine pre-estimates of loss are unenforceable.
Specific performance—a court order requiring the breaching party to perform the contract—is available only when money damages are inadequate, typically in cases involving unique property or goods. International companies accustomed to civil law systems where specific performance is a routine remedy should be aware that American courts treat it as an extraordinary remedy.
Dispute Resolution: Litigation vs. Arbitration
International companies should give careful thought to the dispute resolution mechanism specified in their contracts. Litigation in New York state courts or federal courts provides access to a well-developed body of commercial law, but it also means public proceedings, potentially lengthy discovery, and the possibility of a jury trial. Many international businesses prefer arbitration—particularly under the rules of the International Chamber of Commerce, the American Arbitration Association, or JAMS—because arbitration offers confidentiality, procedural flexibility, and easier enforcement of awards across borders under the New York Convention.
The choice between litigation and arbitration involves trade-offs that depend on the nature of the contract, the parties involved, and the jurisdictions where enforcement may be needed. For contracts with international counterparties, arbitration is often the better choice because of the relative ease of enforcing arbitral awards in foreign jurisdictions compared to foreign court judgments.
Key Takeaways for International Companies
American contract law rewards precision, documentation, and advance planning. The written contract is the primary source of the parties’ rights and obligations, and American courts will enforce its terms as written. International companies entering the U.S. market should invest in having their contracts reviewed by experienced U.S. counsel who understand both the legal requirements and the commercial realities of operating in New York.
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If you have questions about the issues discussed in this article, the attorneys at Travis & DeBlase PLLC are here to help. We represent businesses, contractors, and international companies in litigation and transactional matters throughout New York.
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