How to Translate Contracts? Explanation of Points to Note During Translation and Methods to Improve Accuracy!

1. Main Types of Contracts That Require Translation

There are actually many types of contracts for which companies require translation. For example, the following types of contracts can be mentioned.

1.1 Agency Agreements and Distributor Agreements

This is a contract concluded with local agents or distributors when selling your company's products or services overseas. It includes core business matters such as sales areas, sales methods, commissions, and the presence or absence of exclusivity rights.

1.2 Software License Agreements

This contract defines the terms and scope of software use, prohibited actions, license fees, and more. It is essential when IT companies and software development firms expand overseas.

1.3 License Agreements and Usage Permission Agreements

This is a contract for allowing other companies to use intellectual property such as patents, trademarks, and copyrights. The scope of use, duration, and methods of royalty payment are specified in detail.

1.4 Intellectual Property Rights Agreements

This contract pertains to the transfer, sharing, or joint development of intellectual property such as patent rights, trademark rights, and copyrights. It is frequently used in situations involving technical partnerships and collaborative research and development.

1.5 Outsourcing Agreements and Work Contracts

This is a contract used when outsourcing part of the work to an external company or individual. The contract clearly specifies the scope of work, deadlines, compensation, and responsibilities.

1.6 M&A (Mergers and Acquisitions) Related Agreements

These are contracts related to corporate mergers, acquisitions, and business transfers. They include a wide range of details such as transaction terms, the transfer of assets and liabilities, and the treatment of employees.

1.7 Employment Contract

This is a contract for employing employees, which stipulates working conditions, salary, benefits, and termination conditions. It is necessary, for example, when hiring locally at overseas offices.

1.8 Confidentiality and Non-Disclosure Agreement

This is a contract concluded when sharing confidential information with business partners or subcontractors. It stipulates the handling of information and the response in case of leakage.

Be Careful When Translating Non-Disclosure Agreements! Explaining the Necessary Knowledge, Translation Methods, and Points to Note When Requesting!

These contracts are all important documents directly related to business activities. The contexts for translation are diverse, and no mistranslation of any contract is permissible. Misunderstandings or differences in interpretation of contract contents can lead to major troubles or losses, thus requiring specialized knowledge and high translation skills. By improving the quality of translation, it is possible to ensure the reliability of the company and the security of international transactions.

2. Differences Between Contracts in Japan and Other Countries

When translating contracts, it is necessary to have a deep understanding of the differences in legal systems and cultures between Japan and other countries (especially Western countries).

2.1 Cultural Differences

Japanese contracts tend to place strong emphasis on the trust relationship between the parties and social customs, often using deliberately ambiguous expressions or abstract phrasing rather than documenting everything clearly. This stems from Japan's unique cultural background, which avoids strong expressions or unilateral provisions out of consideration for the other party's position and to prevent conflict.

On the other hand, in Europe and the United States, it is emphasized to clearly document all contract terms and eliminate ambiguity. This is based on the assumption that "the other party may not keep their promises," known as the doctrine of inherent distrust, and the underlying idea is to prevent future troubles by specifying details thoroughly.

2.2 Formal Differences

Japanese contracts tend to be limited to the minimum necessary content, often omitting matters considered obvious between the parties or clear according to social customs, resulting in generally short and concise documents. In contrast, Western contracts are very lengthy and comprehensive, as they are detailed to cover all possible risks and scenarios.

Another characteristic is the use of concrete and clear expressions to avoid ambiguity and leave no room for interpretation. In this way, when drafting or translating contracts, it is important not only to replace the language but also to fully understand the underlying cultural and risk management differences, and to adjust the content according to the customs and purposes of the other country.

3. Methods of Translating Contracts

There are mainly the following two methods for translating contracts.

3.1 Using Machine Translation Tools In-House

In recent years, high-performance machine translation services such as Google Translate and DeepL have become widely available, making it easy for anyone to carry out translation tasks. The biggest advantages of this method are significantly reducing costs and being able to translate large volumes of documents in a short time. It is especially convenient when used as reference materials or rough drafts within the company.

However, in documents with a high level of specialization and requiring legal accuracy, such as contracts, the limitations of machine translation become apparent. Misinterpretations of technical terms and literal translations that ignore context are likely to occur, which can lead to misunderstandings of the content and legal risks. Additionally, when translation work is completed entirely in-house, final quality checks and legal reviews tend to be insufficient. Therefore, careful handling is required for the translation of important contracts.

3.2 Outsourcing to Translation Companies

Specialized translation companies utilize machine translation tools to improve operational efficiency, but ultimately, professional translators who are well-versed in industry knowledge and legal expertise carefully review the content. This ensures not only a simple language substitution but also a high-quality translation that accurately reflects the unique expressions and legal nuances of contracts.

Many translation companies have a strict verification system involving multiple experts, such as double checks and legal checks, ensuring highly reliable deliverables. However, this method tends to be more costly and have longer turnaround times compared to in-house translation. Nevertheless, when the content of a contract directly relates to inter-company transactions and legal responsibilities, it is safest to request a reliable translation by professionals, even if it incurs some additional cost and time.

4. Points to Note When Proceeding with Contract Translation

This section explains the points to be careful about when translating contracts, item by item.

・Be cautious of mistranslations and accuracy when using machine translation tools
Contracts are important documents with legal effect, requiring precise terminology and expressions. While machine translation tools are convenient, they often fail to accurately capture the nuances of context and specialized terms, leading to mistranslations and unnatural expressions. Especially for strict documents like contracts, even minor mistranslations can cause major problems, so relying solely on machine translation is risky.

・Free tools like Google Translate are not suitable
Free translation tools such as Google Translate are convenient for everyday conversation and simple sentences, but they are not appropriate for highly specialized documents like contracts. Free tools struggle to accurately translate technical terms and legal expressions, and there is also a risk of information leakage from a confidentiality standpoint. For contract translation, a more reliable method should be chosen.

・Be Careful When Selecting a Translation Company
When outsourcing contract translation, selecting the right translation company is extremely important. It is necessary to carefully choose from multiple perspectives, such as whether they have industry expertise, their past performance and reliability, whether they have a quality control system like double-checking in place, and whether they can meet deadlines. If these factors are insufficient, there may be issues with the quality of the translation or the delivery schedule.

・Clarify the Purpose, Background, and Cultural Differences of the Translation
When translating contracts, it is necessary not only to replace words but also to clarify the purpose and background of the translation and consider the cultural and business practice differences of the counterpart country. For example, the same expression may have different legal implications depending on the country, so it is important to fully convey the intent and background of the contract to the translator.

・Possess Expertise in International Trade and Legal Matters
Contract translation requires not only language skills but also knowledge of international trade and the laws of each country. Legal terminology and contract practices vary by country, so without specialized knowledge, mistranslations or inappropriate expressions may occur, increasing legal risks. Translators and translation companies are expected to have expertise in legal affairs and international trade.