Management Of Contracts The D Os, Donts

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Most of the companies regulalry enter into complex contracts but seldom give due imporantance on effective management of the said contract. Here are some effective tools for the same

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Management Of Contracts The D Os, Donts

  1. 1. Management of Contracts - TheDOs, Donts, Care, Caveats, Globalization & Cross Border Risks Exposures, Insurance Solutions And Claims August 19th 2010 Utkarsh Jani Advocate JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  2. 2. Management of Contracts!!! JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  3. 3. Contract Life Cycle: JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  4. 4. Before writing that first word: Care Before Cure Approach Term Sheet Preparation Engage in „What If‟ scenarios Ask for a similar contract Check for Contract forms Signing of the letter of „Intent‟  Don‟t sign it so as to be binding upon you JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  5. 5. Before writing that first word: Who produces the first draft? Depends upon:  Bargaining strength (sometimes no more than sheer persistence) may gain a party such a right  Generally in sales contracts Purchasing party get to produce the first draft  To avoid legal costs  To be ignorant or lack of interest which demands doing a lot of hard work in creating rather than just reviewing the draft!! JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  6. 6. First Draft: NO MATTER WHICH PARTY THE LAWYER REPRESENTS HE SHOULD CEASE EVERY OPPORTUNITY TO PRODUCE THE FIRST DRAFT  He who produces the first draft has the upper hand in the negotiations. It defines the issues, provides the framework, sets the tone, confines the process.  Typical response to the first draft seldom extends beyond the four corners of the document  Because of the importance, volunteer to produce it at the earliest feasible opportunity JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  7. 7. First Draft: Dating the Draft Subsequent Drafts Redlining Drafts Saving Drafts Preliminary Draft LegendsPRELIMINARY DRAFT FOR DISCUSSION PURPOSES ONLY. NOT INTENDED AS A LEGALLY BINDING DOCUMENT JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  8. 8. Writing that First Word: Rule is “Say what you mean”. If it is a „Contract‟ then don‟t title it as „Proposal‟ Writing for the “Knowledgeable Common Man” JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  9. 9. Writing that first word: Contract writing is not creative writing and is not meant to provoke reflective thoughts or controversies about nuances of meaning. Contract writing is clear, direct and precise. Therefore, use common words and common meanings. Consider including choice of law, venue selection, and attorneys fee clauses. If your contract gets litigated, you might as well give yourself some "ammunition" for the fight. Explain technical terms and concepts. Remember that the parties might understand technical jargon, but the judge who interpret and apply the contract do not Follow simple rules of drafting Print and sign the Draft JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  10. 10. Negotiation: The D V/s G way!! JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  11. 11. Negotiation: HARD KEYS!! SOFT KEYS!! JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  12. 12. Negotiation: The Hard Keys Price  Taxes and Duties  Break up  Domestic Terms of Payment  International Price Variation  DTAA  Net of Taxes rate in Bank Guarantee TTAs Letters of Credit  Non-compete Fees  Issued by the Buyers Taxable bank in favour of the  Scheduled Delivery Date seller  Defaults Liquidated  Confirmed LC preferred in international trade Damages and Penalty Passing of Title & Risk  Inspection and Acceptance  Incoterms JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  13. 13. Negotiation: The Hard Keys Suppliers Warranty  Termination  Patent V/s Latent  Choice of Laws defects  Governing Laws  Implied V/s Express  Jurisdiction for the Options Clause settlement of disputes IP Rights  Governing Language Currency Fluctuations Resolution of Disputes Assignment Confidentiality JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  14. 14. Negotiation: The Soft Keys Legal V/s Business  Playing the supportive Negotiations role Team Negotiations  Let the Business ppl  Assign Roles decide this one  Negotiate not Litigate  Exchange Issues to be Tele Conference negotiated  Pass Notes  Stating Goals  Mutual Understanding  Capturing Specifics Identify Issues capable  Volunteer to write notes of Compromise and share them Appropriate Attitude  Physical Amenities  Exude Cooperation not  Where to Negotiate competitiveness or  Establishing relationships hostility JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  15. 15. Negotiation: The Soft Keys Bargaining Strength:  Negotiation Skills “Never head to a door  Dominant or a Quiet unless you are willing to Listener walk through it”  Total Victories “My way When is a walk away or No way” imminent  Avoid being the  Identify the issue Contractual Rambo  Warranty  Future Imperfect  Tooling Rights  A good lawsuit may be a Intimidation poor alternative to a fair  “Hurry Up” contract  Well prepared  Absent Authority opposition  Good Guy Bad Guy Handling Ploys  Buffering the Bottom Line JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  16. 16. Negotiation: The Soft Keys Utilizing the Time  When to Quit Windows  If there is no way  Operating within to win a point, time constraints don‟t discuss it  Handling two viewpoints JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  17. 17. Negotiation: Handling Closings:  Mechanics of Closure:  Cooling off period  Review Time  Sign First rule  Cover Letter  Formal Closings  Escrow Mechanism  Complex Transactions involving exchange of many documents and are dependent upon other documents. Eg: Title Reports JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  18. 18. Negotiation: Handling Closings:  Conditions  Removal of Liens  Title Insurance  Obtaining Finance  Statutory Filings  Vietnam “Decree No 35”  Advanced Preparation by the legal team  Agendas, Documents and Receipts  The basic Agreement  Guarantees, Notes, Estoppel Letters,  Security Agreements, Insurance Contracts  Logistics Agreements, Side Letters, Documents of title  Legal Opinions etc…  Press Releases and Announcements JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  19. 19. Contract Management: A letter of intent, Acceptance of bid/ tender, MOU should be converted into a formal contract as soon as possible A sequence of events must be calked out and if need be prepare a master schedule and a subsidiary schedule in order to monitor them effectively To keep a tab on the effective dates like the date of scheduled delivery, payments, notices JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  20. 20. Contract Management: Strict enforcement of terms and conditions  Issuance of notices  Reminders for defaults  Extensions of delivery dates, and bank guarantees  Invocation of Bank Guarantees on time  Writing to the bank to either extend or invoke the guarantee instead writing to the supplier who may delay taking the action till the limitation expires or the document expires JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  21. 21. Contract Management: Proper procedure to be put in place for the safe custody and of the maintenance of a record of all the bank guarantees and insurance policies in the order of their expiry dates Regular audits and reviews of the said records Creation of an in-house software tool for the Contract Life Cycle Management Timely initiation of the invoking the Arbitration or initiation of the judicial process considering the limitation period for the enforcement of the rights flowing under the Contract JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  22. 22. Key Recent Issues: BestReasonable Endeavors “Best”, “Reasonable” or “All reasonable” endeavors? Do you have to extend yourself beyond your own commercial Interests? Avoid Uncertainty Whether absolute Obligation is required? Avoid Mix endeavors clauses JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  23. 23. Key Recent Issues: Implications ofusing Standard TermsReasonable Exclusion of Liability Need to be reasonable and covered with an Insurance clause Actual, Proven and Direct liability clause Limitation to Liability:  Insurance companies love it and Buyers hate it!!  How far Enforceable qua third party damages and Tortuous Liabilities JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  24. 24. Key Recent Issues: Breach andtermination: Is a minor breach enough to trigger a default clause and can you terminate for any breach? “If you draft your Remedy Triggers clearly and precisely enough, this will be upheld by the courts because they will not need to refer to rules of interpretation” Payment Defaults: De-Minimis V/s Major  Johstone V/s Johnstone Fundamental and Material Breach Change of Control, Insolvency, Death JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  25. 25. Key Recent Issues: EntireAgreement clauses Importance of telling the whole story They make it clear that an agreement constitutes the whole agreement between the parties (along with the documents They also serve to exclude pre-contractual statements from a contract, the customer agreeing that it is relying only on the express terms set out in the agreement and not on any statement made prior to it being signed. When drafting entire agreement clause:  Add caveat for fraud  Consider adding caveat for misrepresentation as to fundamental matters  Take care when including acknowledging of non-reliance  Be Honest in your contracts JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  26. 26. Key Recent Issues: Indemnities They are en vogue!  The Commercial lawyers are seeking indemnities to cover all of the liabilities under an agreement and warranties and representations are not enough  Test of Remoteness Seeking a wide ranging Indemnity V/s Being asked to give a wide ranging one  VDA Terms in Germany Include a claims handling procedure JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  27. 27. Key Recent Issues:Guarantees Protection at a price!! While the boilerplate wording at the end of a contract may have little direct relevance in a number of agreements, in the case of a guarantee, every word is vital.  Assignment  Inspection  Novation  Change Management  Notices JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  28. 28. Key Recent Issues: Invocation ofArbitration The provisions of Part-I of the Arbitration and Conciliation Act, 1996, would be equally applicable to International Commercial arbitrations held outside India, unless any of the said provisions are excluded by agreement between the parties expressly or by implication.” as held by the Supreme court (AIR 2009 SC 1132) in INDTEL Technical Services Pvt. Ltd. Vs. Respondent: W.S. Atkins PLC. JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  29. 29. Sources of law relating toInternational Sale of Goods Civil Law V/s Common Law System United Nations Commission on International Trade Law (UNCITRAL)  Convention on Contracts for the International Sale of Goods (CISG)  The New York Convention – Recognition and Enforcement of Foreign Arbitral Awards  International Chamber of Commerce (ICC)  International Court of Arbitration (ICA)  Uniform Practice of Documentary Credits (UCP)  International Commercial Terms (INCOTERMS)  Uniform Commercial Code (UCC) JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS
  30. 30. Thanks!! UTKARSH JANI JANI ADVOCATES Add: 7, VASANT VIHAR BUNG, VASTRAPUR, AHMEDABAD – 380015 PH: 09825555612 079-26751466 EMAIL: utkarsh@janiadvocates.com info@janiadvocates.com utkarsh.jani78@gmail.com JANI ADVOCATES LAWYERS AND CORPORATE CONSULTANTS

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