Cross-border commercial contracts involving Texas law present both opportunities and challenges for law firms in Texas. As international lawyers in Texas know, global deals often choose Texas law as the governing law due to its predictable common-law framework and pro-business legal environment. However, drafting and enforcing such contracts requires careful attention to dispute resolution clauses, forum selection (to prevent forum shopping), and damages provisions.
Texas Law as a Governing Law in Global Deals
Texas has increasingly become an attractive choice of law and forum for international business agreements. The state’s legal infrastructure boasts specialised courts and arbitration-friendly statutes that give confidence to foreign investors and companies.
For example, Texas adopted the UNCITRAL Model Law on international arbitration and maintains its own Texas Arbitration Act, suggesting strong support for arbitration and predictable enforcement of agreements. The new Texas Business Court, launched in 2024, further enhances this environment by providing a specialize venue for complex commercial disputes with judges experience in business litigation. This dedicated court promises expedited, business-oriented handling of cases—including those stemming from cross-border deals.
Moreover, Texas’s prominence in industries like energy, technology, and healthcare attracts multinational parties to do business with Texas firms. It is not uncommon for contracts between Texas companies and overseas partners (especially in Latin America and beyond) to stipulate Texas law as the governing law. By choosing Texas law, parties gain the benefit of a well-developed commercial law doctrine and the freedom to contract, while Texas courts are known to uphold bargains struck between sophisticates parties.
For Texas law firms, this trend means staying versed in both local law nuances and international enforcement considerations. Many are doing so through membership in an international network of lawyers in Texas and abroad, ensuring they can handle cross-jurisdictional issues collaboratively.
Aligning Damages and Liability Standards
Different legal systems have varying rules on recoverable damages, so the contract should clarify these issues under the chosen Texas law. Texas contract law permits recovery of both direct damages (the value of the promised performance) and consequential damages that are foreseeable from a breach. In line with the classic rule from Hadley v. Baxendale, a breaching party is liable for losses that were contemplates as a probable result of breach at the time of contracting. For example, if a supplier fails to deliver a component and the buyer’s factory goes idle, the supplier may owe lost profits if those losses were foreseeable and within the contemplation of the parties. However, speculative or unforeseeable losses cannot be recover, and the non-breaching party must prove consequential damages with reasonable certainty. It’s also worth noting that Texas (like most U.S. jurisdictions) does not award punitive damages for a plain breach of contract. Damages are meant to compensate the injured party, not to punish the breacher, absent an independent tort or statutory claim for fraud, bad faith, etc.
When drafting cross-border agreements governed by Texas law, attorneys should ensure the contract’s remedies section is tailores to bridge any differences between Texas law and the other party’s home law. Often, the contract itself is use to harmonize expectations, by clearly defining the available remedies and any limitations. Consider using provisions such as:
Consequential Damage Waiver: As note, both parties can mutually waive claims for consequential or indirect losses (like lost revenue, lost profits, or downtime). This prevents unpredictable, potentially enormous damages claims. Texas law permits such waivers in commercial contracts, and they are especially advisable when dealing with parties from legal systems that might interpret damages more broadly.
Liability Caps: The contract may impose an upper limit on total damages (e.g. a cap equal to the contract value or a specify dollar amount). This provides business certainty – each party knows the worst-case financial exposure. Caps must be clearly stated and are generally enforceable in Texas for sophisticates transactions.
Liquidated Damages Clauses: For certain obligations, agree on a preset damages amount. This is useful when actual harm would be hard to measure in court. Make sure the number is a reasonable forecast of possible loss; if it’s exorbitant and punitive in nature, a Texas court could void it.
Mitigation and Other Remedies: Texas law imposes a duty to mitigate losses (the non-breaching party must take reasonable steps to reduce its damages). It can be helpful to reiterate this in the contract so foreign parties understand they cannot just let damages mount unchecked.
Collaboration Through International Legal Networks
Successfully handling cross-border contracts governed by Texas law often requires more than just knowledge of Texas statutes; it demands a global outlook and connectivity. Texas firms engage in international work benefit greatly from being part of an international lawyers network in Texas and beyond. Such collaboration provides ready access to foreign expertise, co-counsel relationships, and insights into other jurisdictions’ laws and enforcement practices.
For example, if a Texas-base company’s contract will be perform partly in another country, local counsel from that country (accessible via a leading lawyers network in Texas that connects worldwide) can advise on how a Texas choice-of-law clause or Texas court judgment would be treated there. This input is invaluable in drafting clauses that will hold up when scrutinised abroad.
One way Texas law firms enhance their cross-border capabilities is by joining Interlegal, an international law firm network in Texas. It is a formal alliance of independent firms across different countries. Interlegal, for instance, is a longstanding global consortium of independent business law firms (including U.S. firms) that enables members to tap into trusted lawyers across 50+ countries. By becoming part of a leading lawyers network in Texas like Interlegal, a firm gains a built-in team of overseas colleagues who can assist with foreign contract law nuances, translations, local regulatory compliance, and enforcement of Texas judgments or arbitral awards in foreign courts. This not only strengthens the service to clients but also helps smaller or mid-sized Texas firms compete internationally without opening offices abroad. In an era where clients expect seamless cross-border legal support, having an international network of lawyers in Texas to rely on is a strategic advantage.
Conclusion
Cross-border commercial contracts governed by Texas law are on the rise, reflecting Texas’s growing stature in the international business community. By staying abreast of drafting and enforcement trends, such as using arbitration clauses, preventing forum shopping with clear forum selection, and leveraging Texas’s permissive stance on contractual damages limitations, Texas attorneys can craft agreements that are both robust and globally effective.
Equally important is the ability to collaborate across borders. Through membership in an international lawyers network in Texas, law firms can confidently guide clients through the complexities of multi-jurisdictional deals, knowing they have reliable partners worldwide.
