Business contracts under US law: what a European company should know before it signs

European executives often joke about the length of American contracts. Forty pages for a distribution deal that would take eight in Lyon or Turin. The length has a logic. In the civil law tradition a code fills the gaps in a contract with detailed default rules. In the United States, contract law is largely judge-made state law, and the parties are expected to write down what they want. What you do not write down, a court in the chosen state will decide for you.

Fifty contract laws and the clause that picks one

There is no federal contract code. Each state has its own contract law, built from court decisions and from statutes such as its version of the Uniform Commercial Code. Texas, New York, Delaware and California agree on the basics, but they differ on details that decide real disputes: how strictly a non-compete is enforced, whether the winner recovers legal fees, how long you have to sue.

That is why every serious US contract opens or closes with a governing law clause and a forum clause. Two states have gone further and written statutes that let commercial parties choose their law even without any other connection to the state:

For smaller contracts, choose the law of a state that has a real link to the deal, usually where your US company is based or where the work is done. For a Texas LLC selling in Texas, Texas law and a Texas venue are the natural choice, and we like them. Our page on legal certainty in the US explains why American courts are a safe place for a foreign business to do business.

When a contract binds you

Under American common law a contract needs an offer, an acceptance and consideration: each side must give or promise something of value. A promise to give something for nothing is generally not enforceable as a contract, which is why you will see recitals such as "for good and valuable consideration" in documents that look one-sided.

Most contracts need no particular form. An exchange of emails can bind your company, and so can a purchase order that the other side accepts by shipping. Some contracts must be in writing to be enforceable. The best known rule for European traders is in the Uniform Commercial Code: a contract for the sale of goods for a price of $500 or more is not enforceable unless there is a writing signed by the party against whom it is enforced. Texas enacted the same rule in section 2.201 of its Business and Commerce Code. Between merchants, a written confirmation that the recipient does not object to within 10 days can satisfy the requirement against the recipient.

Signatures can be electronic. The federal E-SIGN Act provides that a signature, contract or other record relating to a transaction in or affecting interstate or foreign commerce may not be denied legal effect, validity or enforceability solely because it is in electronic form. Ordinary commercial contracts are signed without a notary. Europeans used to the notary's central role in company and property matters will find the American notary public a much smaller figure, mostly witnessing signatures on documents that are to be recorded or filed.

Selling goods: the UCC and the Vienna Convention

If your contract is for goods rather than services, two sets of rules can apply, and Europeans are often surprised by the second.

Inside the US, Article 2 of the Uniform Commercial Code, as enacted by each state, governs the sale of goods. It covers formation, warranties, delivery, risk of loss and remedies, and it contains the famous "battle of the forms" rule for conflicting terms on purchase orders and confirmations.

Between a US company and a company in another country, the UN Convention on Contracts for the International Sale of Goods (CISG, the Vienna Convention) may apply automatically. The United States has been a party since January 1, 1988. Whether it applies to your deal depends on where the parties have their places of business:

A sale from a French parent to its own Texas subsidiary is therefore governed by the CISG unless the contract excludes it. A sale from an Irish or British company is not. The CISG is a balanced set of rules and many traders are happy with it. What matters is that you choose deliberately. If you want only Texas law to govern, say so expressly: "Texas law, excluding the United Nations Convention on Contracts for the International Sale of Goods". Do not rely on a bare reference to Texas law to keep the Convention out. Our page on sales and distribution in the US covers the commercial side of selling into the American market.

Seven clauses Europeans underestimate

Because US courts apply the words on the page, the boilerplate does real work. These are the clauses we tell clients to read twice:

1. Entire agreement. It confirms that the written contract replaces all earlier negotiations. Side letters and promises in emails will not count unless they are in the document.
2. Limitation of liability. A cap on damages and an exclusion of lost profits and consequential damages. Without one, your exposure is open-ended.
3. Indemnification. One party agrees to cover the other's losses and legal costs from third-party claims, for example product or intellectual property claims. Read who indemnifies whom, for what, and whether the duty to defend is included. Our page on product liability in the US explains why this clause matters for manufacturers.
4. Legal fees. The general American rule is that each side pays its own lawyers, win or lose. Contracts often change that with a prevailing party clause. Some states also shift fees by statute: in Texas, section 38.001 of the Civil Practice and Remedies Code lets a person recover reasonable attorney's fees from an individual or organization on a claim for an oral or written contract.
5. Jury waiver. Civil cases in the US can be tried before a jury. Many commercial parties prefer a judge or an arbitrator and waive the jury in the contract, in a clause that stands out clearly from the surrounding text.
6. Notices. Termination and claims often must be sent to a specific address in a specific way. Keep the address current when your US office moves.
7. Assignment and change of control. Can the other party transfer the contract to a buyer, or terminate if your group is sold? Groups that restructure often get caught here.

Disputes: courts, arbitration and enforcement in Europe

For a European company the most important question is often not where you sue but where you will collect. A US court judgment against a European counterparty, or a European judgment against your US customer, is not automatically enforceable across the Atlantic. The 2019 Hague Judgments Convention entered into force for the European Union on September 1, 2023 and for the United Kingdom on July 1, 2025. The United States signed it in March 2022 but has not ratified it, so it does not apply between the US and Europe today.

Arbitration awards travel much better. The New York Convention on the recognition and enforcement of foreign arbitral awards has 172 parties, including the United States since 1970 and every Western European country, the UK, Ireland, Switzerland and Norway among them. In the US, the Federal Arbitration Act makes a written arbitration clause in a contract involving commerce valid, irrevocable and enforceable, subject to the ordinary grounds for revoking any contract.

Our rule of thumb: for a cross-border contract where you may need to enforce against assets in Europe, an arbitration clause with a recognised institution and a seat in a convention country is usually the better choice. For a purely domestic contract between your US company and a US customer, a state court in your home state is often faster and cheaper.

How long you have to sue

Statutes of limitation are state law and they are short by some European standards. In Texas, the residual rule in section 16.051 of the Civil Practice and Remedies Code gives four years from the day the claim accrues for any action without a specific period, and section 16.004 gives four years for claims on a debt, for fraud and for breach of fiduciary duty. For the sale of goods, the UCC sets four years in section 2-725, which the parties can shorten to not less than one year in the original agreement but cannot extend. Other states use different periods, so check the governing law you chose.

A practical consequence: if a US customer stops paying, do not let the file sit while you negotiate for years. Diarise the limitation date when the first invoice goes unpaid.

Employment contracts and non-competes

American offer letters are usually far shorter than a European employment contract, because there is no national labour code or collective agreement to incorporate. The details that matter, such as termination, bonus rules, confidentiality and ownership of work product, should still be in writing. Our page on the employment contract for a US company without a US presence covers how a foreign company employs its first American staff.

Non-compete clauses are a state matter again. The Federal Trade Commission's 2024 rule that would have banned most non-competes never took effect: a federal district court stopped its enforcement on August 20, 2024, the FTC moved to dismiss its appeal on September 5, 2025, and the FTC states that the rule is not in effect and not enforceable. What remains is state law, and it varies widely:

• Texas enforces a non-compete if it is ancillary to or part of an otherwise enforceable agreement and contains reasonable limitations as to time, geographical area and scope of activity that do not impose a greater restraint than necessary to protect goodwill or other business interests (Business and Commerce Code section 15.50). Physicians are subject to extra conditions.
• California voids every contract that restrains anyone from engaging in a lawful profession, trade or business, to that extent, and the statute is to be read broadly to void non-competes in employment, however narrowly tailored (Business and Professions Code section 16600).

Confidentiality and non-solicitation clauses, and the protection of trade secrets, are generally easier to enforce than a pure non-compete. Our page on protecting intellectual property explains the alternatives.

Sign as the company, not as yourself

The limited liability of your US company only protects you if the company is the party. We still see European owners sign leases and supplier contracts in their own name, or with a signature block that leaves it unclear who is bound. Use the full legal name of the entity, add its state of formation, and sign with your title: "Example Holdings LLC, a Texas limited liability company, by Jane Smith, Manager". Make sure your operating agreement or board resolution gives you authority to sign. Our pages on the LLC operating agreement and on keeping the LLC's liability shield intact go into the details.

Watch for personal guarantees. Landlords, banks and some suppliers ask the owner of a new company to guarantee its obligations. That may be the price of doing business, but it should be a decision, not something hidden in clause 27.

Before you sign: a short checklist

• Is the party named correctly, with legal name, entity type and state, on both sides?
• Which state's law governs, and is the CISG excluded or included on purpose?
• Where are disputes decided: which courts, or which arbitration rules and seat?
• Is there a cap on liability, and does it exclude lost profits and consequential damages?
• Who indemnifies whom, and is there insurance behind it?
• What happens to fees if there is a dispute?
• How can the contract be terminated, with what notice, sent to which address?
• Does anything require your personal guarantee?
• Are all promises from the negotiation actually in the document?

A contract that answers these questions protects your company in any American court. For larger or unusual contracts, have the attorneys on the firm's team or your own US counsel review it before signature; it costs far less than the dispute it prevents.