A16: TFA and SEC | Negotiating contracts and FinTech Laws and Regulations (5 Sep 2018) - Week 1

Negotiating Contracts
Kullarat Phongsathaporn
5 September 2018

© 2016 Baker & McKenzie Ltd.
About Lecturer
2
Kullarat Phongsathaporn
Kullarat is a partner in the Financial Services Practice Group at Baker &
McKenzie Ltd. She is recognized for her expertise in banking and finance,
securities, derivatives and structured finance, FinTech, e-payment, venture
capital, exchange control, and AML/CTF. She leads the FinTech team at
Bangkok office, serves on the Firm’s Asia Pacific FinTech cluster, and acts as
one of the global Firm’s Innovation Ambassadors.
As a FinTech specialist lawyer, Kullarat’s experience in FinTech includes e-
payment, digital banking, online consumer finance, online money remittance,
blockchain-based platform, cryptocurrencies, ICO, e-KYC, P2P lending,
crowdfunding, roboadvisor, etc.
Education and professional associations:
• Harvard University (LLM, Fulbright Scholar, 2012)
• Chulalongkorn University (LLB, 1st class honors, Gold Medal, 2008)
• Admitted to the Thai Bar Association in 2009 and admitted to the Law Society
of Thailand in 2010

Topics
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1. Contracts
a. General principles of contracts
b. Important contracts for business
2. Negotiating Contracts
a. Negotiating Styles
i. positional bargaining
ii. principled negotiation and PIOC techniques
b. Identify yours and their BATNA
c. Key elements in effective planning for a negotiation
d. Deadlock breaking strategies

1.1 General principles of contracts
5
Formation of contract
Meeting of the minds (offer + acceptance)
Definite details for important issues of such contract (e.g. price, which item,
scope of service)
Intention to create legal relationship
Contracts

6
Validity of Contract
Contracts may be invalid (void / voidable) for various reasons:
1. Incapacity
Contracts
• minor (under 20 years)
- voidable unless prior consent by parent(s).
• incompetent person (unsound mind + court order)
- voidable unless prior consent by guardian.
• quasi-incompetent person (certain characteristics + court
order) - voidable unless prior consent by curator.
• unsound mind
- void if contract entered into at a time when one party was
actually of unsound mind, and the other party had knowledge
of such unsoundness.
Individuals

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1. Incapacity (cont’d)
2. Objective of the contract
expressly prohibited by law
impossible
contrary to public order or good morals
void
Contracts
• By registration - outside scope of objectives registered (e.g.
MOA of companies)
• By specific law - outside scope of objectives specified in the
law
• Other limitations – bankruptcy law
Juristic persons
I authority

8
3. Form prescribed by law (if any) void or unenforceable, e.g.
a. sale and purchase of real estate - written agreement and registration with
officer (ทำเป็นหนังสือและจดทะเบียนต่อพนักงำนเจ้ำหน้ำที่) void
b. lease agreement of real estate - written evidence signed by the liable
party (หลักฐำนเป็นหนังสือลงลำยมือชื่อฝ่ำยที่ต้องรับผิด) unenforcable
c. lease agreement of real estate with a term more than 3 years - written
agreement and registration with officer (ทำเป็นหนังสือและจดทะเบียนต่อพนักงำนเจ้ำหน้ำที่)
enforceable only for 3 years
4. Other causes
a. mistake (สำคัญผิด) (fundamental void, not-fundamental voidable)
b. duress (ข่มขู่) voidable
c. fraud (กลฉ้อฉล) voidable
Contracts

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Breach of contract - If one party breaches a contract
1. compulsory performance (unless not possible).
2. have an act done by a third person at the breaching party’s expense.
3. a judgment being substituted for a declaration of intention by the debtor.
4. removal of what has been done at the expense of the breaching party.
5. terminate contract.
6. damages.
Contracts

1.2 Important contracts for business
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General contract template
Introduction
1. Title of contract
2. Date and place
3. Parties
Content
1. Specific terms and conditions
a) object of the contract
b) consideration
c) representation and warranty
d) term of contract
e) other covenants
Contracts

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2. General terms and conditions (Boilerplate)
a) Amendment and waiver
b) Assignment
c) Confidentiality
d) Severability
e) Entire agreement
f) Headings
g) Notices
h) Applicable law
i) Settlement of dispute
Signing
Contracts

12
Loan Agreement
1. Loan amounts
2. Receipt of loan proceeds
3. Interest rate (fixed / float, non-FI cannot charge more than 15% p.a.)
4. Payment of interests and repayment of loans (when, how much,
how)
5. Events of default (e.g. non-payment, misrepresentation)
6. Security (e.g. mortgage/pledge) or guarantee
7. Term
Contracts

13
Lease Agreement
1. Specific building unit to be leased
2. Rent (how much) and payment terms (how and when)
3. What includes in the lease (lease only, electricity/water bills,
furniture/appliances)
4. Who pay taxes and fees
5. Obligations of lessor (ผู้ให้เช่ำ) and lessee (ผู้เช่ำ)
6. Sub-lease (เช่ำช่วง)
7. Term of lease and renewal
Contracts

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Service Agreement
Key terms
o Scope, specifications and service levels
o Delivery of the service (start/completion/key date)
o Price and payment (how to pay (one payment/installments/completion of specific
milestones), method of payment (check, wire transfer, credit card)
General terms
o Intellectual property rights
o Warranty (obtain all licenses required)
o Limitation of liability
o Terms and terminations
o Confidentiality
o Notices
Contracts

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Confidentiality Agreement/ non-disclosure agreement (NDA)
Definition of Confidential Information
For example: "Confidential Information" means all business or technical
information of Disclosing Party, whether it is received, accessed or viewed by Receiving
Party in writing, visually, electronically or orally. Confidential Information shall include,
without limitation, technical information, marketing and business plans, databases,
specifications, formulations, tooling, techniques, inventions, discoveries, know-how and
trade secrets.
"Confidential Information" also includes all such business or technical information of
any third party that is in the possession of Disclosing Party.
Any information disclosed by the Disclosing Party will be considered Confidential
Information only if such information (a) is conspicuously designated as "Confidential" or
"Proprietary" or would reasonably be regarded as being of a confidential nature, or (b) if
provided orally or visually, is identified as confidential at the time of disclosure, or would
reasonably be regarded as being of a confidential nature.
Contracts

16
Exclusions from Confidential Information
For example: Receiving Party's obligations under this Agreement do not extend to
information that is:
(a) publicly known at the time of disclosure or subsequently becomes publicly known
through no fault of the Receiving Party;
(b) discovered or created by the Receiving Party before disclosure by Disclosing Party:
(c) learned by the Receiving Party through legitimate means other than from the
Disclosing Party or Disclosing Party's representatives; or
(d) is disclosed by Receiving Party with Disclosing Party's prior written approval.
Contracts

17
(continued)
Obligations of Receiving Party
Generally states that the Receiving Party must hold and maintain the information in
confidence and limit its use.
Time Periods
Genarally states that the obligations of this agreement shall be continuing until the
Confidential Information disclosed to the Receiving party is no longer confidential or until
Disclosing Party sends Receiving Party written notice releasing Receiving Party from this
agreement.
Contracts

18
Terms and Conditions/ Privacy Policy
Terms and Conditions/ Terms of Use/Terms of Service
o A set of rules and guidelines that a user must agree to in order to use a website
or a mobile app. It can also be merely a disclaimer.
o is not required by law.
Privacy Policy
o A statement that discloses the ways in which a website operator gathers, uses,
discloses, and maintains a user’s data.
o is required if there is collection of personal data from the users.
The legal effect of an acceptance in entering into an agreement made via electronic
means is recognized under Electronic Transaction Act B.E. 2544(2001).
Under the Draft Personal Data Protection Bill, the definition of "personal data" is
defined broadly as any data relating to an individual that can identify that individual,
whether directly or indirectly.
Contracts

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What to include in a terms and conditions
Key provisions:
Guideline for using the website/mobile app
Intellectual property clause - informs users that you are the owner of
contents in the website/mobile app and that the content is protected by
intellectual property laws.
Termination clause - informs users that abusive accounts will be
terminated and banned from using the service.
Limit Liability - informs users that the owner can’t be held responsible for
any errors in the content presented, or for the information provided being
accurate, complete, or suitable for any purpose.
Contracts

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What to include in a terms and conditions (continued)
Links To Other Web Sites clause - informs users that you are not
responsible for any third party websites linked to on the website/moblie app.
The users are responsible for reading and agreeing (or disagreeing) with
the Terms and Conditions or Privacy Policies of these third parties.
Content clause - informs users that they own the rights to the content they
have created and usually mentions that users must give you (the owner of
the website) a license so that you can share this content on your website
and to make it available to other users.
Limit What Users Can Do clause - inform users that by agreeing to use
your service, they’re also agreeing to not do certain things. You can specify
list of prohibited activities so as to cover most negative uses.
Contracts

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What to include in a privacy policy
Basic requirements
o What information you collect from users.
o What will you do with the collected personal information.
o With whom you share the collected personal information, i.e. with third-
parties.
Sample provisions
o Introduction.
o Scope of privacy policy.
o Types of personal data to be collected.
o How the data being used. (how, how the information being protected,
where the data being stored and transmitted to etc.)
Contracts

© 2016 Baker & McKenzie Ltd. 23
1. Negotiating Styles
positional bargaining
principled negotiation and PIOC techniques
2. Identify Yours and Their BATNA
3. Key Elements in Effective Planning For a Negotiation
4. Deadlock Breaking Strategies
Negotiation Strategies

Negotiating Styles
A. Positional Bargaining (competitive)
Positional bargaining is defined as two endpoints and a continuum in
between.
Pertain to the three criteria:
Does positional bargaining produce a wise agreement if
agreement is possible?
Is positional bargaining efficient?
Does positional bargaining improve (or at least not damage) the
relationship between the parties?

Negotiating Styles
B. Principled Negotiation (interest-based) and PIOC Techniques
Try principled negotiation instead, using the PIOC method.
"PIOC" refers to the four major elements of principled
negotiation
1. separate “People” from “Problem”
2. focus on Interests, not positions
3. create Options for mutual gain
4. insist to use objective Criteria

Identifying Yours and Their BATNA
The concept of BATNA: "Best Alternative To A Negotiated
Agreement“
What BATNA is ?
BATNA is a term coined by Roger Fisher and William Ury in their 1981
bestseller, Getting to Yes: Negotiating Without Giving In.
It is the best you can do without your counterparty, or your "walk away
point."
Your BATNA "is the only standard which can protect you both from
accepting terms that are too unfavorable and from rejecting terms it
would be in your interest to accept.”
Easy example: Used car purchase
Having a good BATNA increases your negotiating power.

Determining Your BATNA
Fisher and Ury outline a simple process for determining your
BATNA:
1. develop a list of actions you might conceivably take if no
agreement is reached;
2. improve some of the more promising ideas and convert them
into practical options; and
3. select, tentatively, the one option that seems best.
BATNA and the Other Side
1. you should also consider the alternatives available to the other side.
The more you can learn about their options, the better prepared you
will be for negotiation.
2. develop more realistic view of what the outcomes may be and what
offers are reasonable

Key Elements in Effective Planning for a Negotiation
Define your interests
Define issues (usually are hidden ones, in addition to conspicuous
ones)
Assemble issues and define the bargaining mix. A larger bargaining
mix takes longer to negotiate, but opens up more opportunities for
collaborative solutions.
Consult with your team and constituencies
Analyze the other party
Prioritize interests and issues (your own and those of the other side)
Set goals, target points, resistance points (understand and identify
your own limits)
Identify your BATNAs, possibly develop more and/or better ones
Develop starting points and supporting arguments (do your homework
- research and organize information)

Deadlock Breaking Strategies
“The deadlock has occurred because a substantive, procedural or
emotional interest of either one or both of the parties has not been
satisfied. To break the deadlock first identify what has caused it…
In short, to break an impasse it is necessary to generate some change.”
Negotiation Theory and Techniques by Nadja Spegel, Bernadette Rogers & Ross Buckley Longman –
Butterworths 1998

If the deadlock is “substance” they suggest trying to change:
• the assumptions the parties are relying on
• the information that is available
• the issues
• the views of the costs
• the time available
• the order of dealing with the issues
• trade offs with past decisions
• take a break to allow further advice to be obtained
• look for new ways to reach resolution
• can the terms or conditions be modified not just the
price?
Substance

If the deadlock is “emotional” they suggest trying to change:
• the negotiators
• mode of negotiation
• speed of discussions
• physical environment
• style of the negotiation
• emphasise joint concerns
• put a difficult issue to one side
• the way you are using your voice
• take a break to allow parties to talk to significant others
• are the negotiations being used to continue a
relationship with the other side?
Emotional

If the deadlock is “process issues” they suggest trying to change:
• find another process
• is it a fishing expedition rather than a genuine
attempt at settlement
• start again
• is there a perception of unfairness?
• talk about the different processes available
• appoint a mediator
• move from positional-based dto interest-based
Process issues

Scenario: You are a newly-established tech startup company.You are
preparing to provide a job offer for a web content writer position. The
target candidate is a high talent, with mid- experience in the market.
New graduate is also acceptable as you know you may not be
competitive with salaries.
The vision of the firm is “innovative, nouveau, grow together”
You are now to negotiate the contract.
Negotiation Time!
Contracts

Key issue to be negotiated and factors to be considered
Jop description: Clear scope of employment and responsibilities.
What is the title of the employee’s job?
What are the employee’s responsibilities?
Can the employee’s responsibilities be modified, decreased, or increased?
Where is the place of employment? Can the employee work remotely?
Is the employee allowed to be involved in other activities (e.g. a directorship on the
Board, involvement in community activities)?
Compensation
Base salary: Consider the startup company’s capital, candidate’s qualification,
prior experience or special skills, and standard salary rate in the market. Does the
base salary increase each year of the contract? Under what circumstances can the
employee’s base salary be reduced?
Bonus potential: Startups do not typically offer cash bonuses unless they are
generating substantial revenues. What quarterly or annual bonus is available? Is
the bonus guaranteed, dependent on achievement of milestones, or wholly
discretionary with the Board of Directors?
Contracts
Negotiation Time!

Key issue to be negotiated and factors to be considered
Stock Options (if any): Rights granted to employees to buy company’s shares at an
agreed price. The amount of options, exercise price and period are due to many
variables, e.g. company stage, company valuation, employee experience, employee’s
salary. Are the shares obtained upon exercise of an option subject to repurchase on
termination of employment?
Benefits, both direct benefit and benefit implications: The company health, life,
disability and dental insurance coverage. **It is benificial to also mention future
marketability that the employee will gain through connections and learning during
working in the company’s friendly-work environment.
Vacation and Personal Emergency Time Off: How much vacation per year is the
employee entitled to? Does unused vacation continue to accrue for the benefit of the
employee/carry over to subsequent years/payable on termination of employment?
Term and Termination: How long is the employment term? What are the grounds on
which the company can terminate the employee?
Confidentiality: Make clear that the employee must hold and maintain the information
or trade secret of the startup business received during the employment in confidence.
Negotiation Time!
Contracts

A16: TFA and SEC | Negotiating contracts and FinTech Laws and Regulations (5 Sep 2018) - Week 1

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A16: TFA and SEC | Negotiating contracts and FinTech Laws and Regulations (5 Sep 2018) - Week 1