Contract Negotiation Handbook E-Book

Damian Ward

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 393

Veröffentlichungsjahr: 2012

Beschreibung

A good commercial contract is both a springboard and a safety net -- it provides the opportunity to expand and grow your business, but also to protect it if things go wrong. In a tough commercial world, getting the best deal you can is paramount. The Contract Negotiation Handbook demystifies complex legal principles so that busy businesspeople can quickly and easily digest them. With clear, practical examples and case studies to help illustrate and explain different types of contracts and contractual situations, this comprehensive handbook will help you: * prepare for negotiations and identify contractual terms * make sure you have covered the 'springboard and the safety net' -- combining the appealing and less appealing aspects of contracts * identify the type of negotiator that your counter party is and how that affects your negotiations * develop an overview of contract law * devise a negotiation strategy * identify whether you are in a contractual dispute * prepare for and acquire the best result out of any contractual dispute.

Leseprobe

Contents

About the Author

Introduction

Part I: The Contractual Environment

Chapter 1: Springboard and Safety Net

Optimism is a Good Thing in a Negotiation

How the Contract will Give Your Business Bounce

Sometimes Even the Most Skilled of Highwire Artists Slip!

Working Out the Difference Between Springboard and Safety Net Terms

So What Does This Mean?

The Two Levels of the Safety Net

Two Sides of the Coin

Who can Enter into a Contract?

Being a Party to a Contract — what Does this Mean?

Chapter 2: Contracts — what are they?

Doing Deals — the Stuff of Life

The Contract Tree

What is a Contract?

Types of Contracts

Are all Contracts Equal?

What are the Elements of a Contract?

From Blurry to Precise — the Evolution of Contracts

Now I am in the Contract, when Do I have to Start Performing it?

But we didn’t have a Deal —I didn’t Agree to That!

That Document doesn’t Reflect what we Agreed —how do I Fix It?

I am not Happy — how do I Get Out?

The Contract is Terminated — what does this Mean?

I Know it’s not a Fair Contract but they Agreed to It!

What are Illegal Contracts?

Horses for Courses — Types of Contracts

The Majesty of Master Agreements

This is a Bad Deal — how do I Save Myself?

But they are Just Standard Terms!

The Hot Tips

Part II: Doing the Deal

Chapter 3: Preparing to do the Deal

Making a Deal

Know what you Want

Know what you don’t Want

Knowing what you will Do

What you Won’t Do

What do I Need to do to Perform the Contract?

Can they Do what they Say they Can?

What ‘form of Life’ is your Counterparty?

Chapter 4: Negotiating — doing the Deal

A Four-act Play?

Can I do a Deal? Drawing the Big Picture

The Recap

Locking them in Before we are Signed, Sealed and delivered — do I Need To?

More than Joining the Dots — Final Wording

Chapter 5: Terms of Contracts to Keep an Eye On

If it is in There, it is Important

Conditions Precedent Clause

Variation Clause

Entire Agreement Clause

Governing Law Clauses

Joint and Several Liability Clauses

Indemnities

Guarantees

Confidentiality

Warranties

Dispute Resolution Clauses

Waiver

Severability

Fundamental Terms Clause

Successors and Assigns

Variation Clause

Notices

Force Majeure

Exclusivity

Restraint of Trade or Competition

Exclusion of Warranties

Statement of no Infringement of Third Party Rights

Termination/Default

Liquidated Damages Clause

Further Assurance

GST

Other Clauses

Chapter 6: Traps for the Seller — Pitfalls in Negotiations

Misleading and Deceptive Conduct — what is it?

Misled by Silence?

Talking the Talk — the Art of Selling

Competitors

Identification Advertising

The Hangman’s Noose?

The Company and its People can be Liable

Chapter 7: The Telltale Signs of the Overseller — Buyer Beware

They Talk the Talk — where is the Walk?

The Talk and the Reality Don’t Match

I Believe what You Tell Me, but I Still want to See the Paperwork

Fast with the Mouth, Slow with the Pen

We don’t Provide Warranties — Company Policy

Dealing in Broad Brush Strokes — the Big Picture People

These are Our Standard Terms and Conditions

Chapter 8: The ‘red Zones’

The Hot Tips

Part III: The Relationship Ends

Chapter 9: In the Contract

Doing it the Easy Way

Know Your Product

Know who You are Dealing with

Scorched Earther or a Relationship Developer?

Communication

Tears on the Pillow: Without Prejudice — Secret but Effective

Options — Keeping the Balls in the Air

So When do I Tell them there is a Problem?

Chapter 10: What Happens if the Contract is Breached?

Consequences for a Breach of Contract

But I can’t Perform the Contract Anymore — it’s not Possible

If I Breach the Contract are the Consequences the Same as if the Other Party Breaches?

Chapter 11: All Good Things Come to an End — Termination of Contracts

The Term Ends by Time Passing

Termination of the Contract by a Party Under its Terms

Termination at Law

Chapter 12: Things Ended Badly — How You Know You are in a Dispute

Asserting a Dispute

Two Views of the World When Only One will do — the Genesis of a Dispute

Maintaining the Secrecy of Your Communications

What Lawyers Look for

Chapter 13: Making Peace Early

Generally Test the Waters

If I Talk to Them I can Fix it — Straightforward Negotiation

Chapter 14: Getting Help to Fix the Problem — but the Warring Parties Decide

Everyone Needs a Little Help Sometimes

What is a Mediation?

Why Undertake a Mediation?

Who Pays?

What are the Formal Rules of the Game?

Preparation for the Mediation

The Mediation Itself

Can we Settle After the Mediation?

Strategic Considerations

Chapter 15: Getting Help to Fix the Problem — Someone Else Decides

The Position of Last Resort

What You Need to Decide Before You Decide!

Where will the Fight be Held?

Court

Arbitration

Tribunals

Chapter 16: Preparing for Battle — Getting Ready for the Hearing

Chapter 17: Preparing the Case for Hearing

Stage 1: Starting the Dispute — Statement of Claim

Stage 2: Defence

Stage 3: Cross or Counter Claim

Evidence

Stage 4: Discovery

Stage 5: Telling the Tale — Affidavits and Statements

Stage 6: Hearing or Trial

Stage 7: Appeals

Stage 8: Settlement in the Process — is it Possible?

The Hot Tips

Chapter 18: In Summing Up

Appendix: The Cheat Sheet

Glossary

Index

First published in 2007 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Offices also in Melbourne

© Damian Ward 2007

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Ward, Damian

Contract negotiation handbook: getting the most out of commercial deals.

Includes index.

ISBN 9780731407200

1. Negotiation in business. 2. Contracts. I. Title.

658.723

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Cover image © Photodisc, Inc.

Wiley bicentennial logo: Richard J Pacifico

Disclaimer

The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based upon the information in this publication.

For Caroline, Miles and Toby

About the author

Damian Ward is a partner in Home Wilkinson Lowry, an Australia-wide commercial law firm. He is an experienced commercial lawyer with a broad-based practice in contract law, property, defamation, trade practices and intellectual property. Damian has published many articles in these areas of law and has a monthly column in MIS magazine called ‘Legally Binding’.

Throughout his career, Damian has assisted countless clients to resolve disputes arising from contracts.

He can be contacted at <[email protected]>.

Introduction

This book will help you get the most out of your commercial deals and contracts.

The commercial world can be a cold, hard place. There are hundreds of thousands of intelligent, hungry and astute people doing deals every day in Australia. Very few of them are suckers. Most know their business and what they want to get out of it on every level — profit, growth and expansion.

When you are in such a competitive environment it is critical that you are prepared. This book will help you prepare for contract negotiations and to do the best possible deal you can.

As a lawyer who has been involved in negotiating many commercial contracts over the years, I have seen a kaleidoscope of behaviour from the incredibly astute to the widely speculative.

Some of those who have negotiated best are those without any ‘formal’ education. Their insight, intuition and ability to manage the other parties has been educative to watch. At the other end of the spectrum have been those who have MBA or doctoral qualifications but proceeded through the deal with clumsiness and a lack of smarts. This reinforced a maxim I was given by a client when I was a junior lawyer: What you know is important, but whether you win or lose today depends on how you use it.

I have also assisted clients with my fair share of disputes over the years. What has ultimately compelled me to write this book is seeing too many people fall into traps that are easily avoided — concentrating on the sexier or more cosmetically important parts of the deal to the detriment of the ‘stuff drafted by the lawyers for the lawyers’, as one client once told me.

If some of the lessons in this book had been employed at the outset, millions of dollars could have been saved and been better spent on business expansion and improving the bottom line rather than on lawyers in disputes neither party wanted to have.

In a slightly melancholy way, I suppose the other theme of this book is never to openly trust in the negotiation and performance of contracts. My view of contracts is that they are essentially a competition where both parties are seeking to obtain the maximum advantage for themselves. While there may not be winners and losers as there are in a sporting contest, often one party comes off second best. A contract negotiation is not a place for a group hug or to blindly rely on the word of your counterparties.

In my experience trust is directly related to leverage — he or she with most leverage can be the most trusting. However, there are not that many contracts that I’ve seen where the leverage is so one-sided as to give the more powerful or stronger party the right to be complacent.

Bearing in mind the general parallel of competition will help. Just as the person marking you in football or on the other side of the tennis court net is a competitor, so is your counterparty in a negotiation.

It is important not to mistake or merge competition with enmity. The best contractual negotiations, and ironically the best contracts as far as performance are concerned, tend to be between parties who negotiate hard for the strongest deal for themselves and both sides mutually recognise this. It develops a sense of respect. That respect in turn is the basis for performance of the contract.

This book is targeted at all people who negotiate contracts, from a junior procurement officer or small businessperson to a senior corporate executive.

From my observation, people at all levels in the commercial hierarchy can fall into similar types of traps and create problems for themselves and their businesses that could be avoided by more focus and preparation.

It is critical that what they want and need out of the deal is clearly known.

This book is in essentially three parts. They are:

The contractual environment — a user-friendly précis of the law and the legal elements of a contract. I have placed an emphasis here on removing the jargon and unnecessary verbosity lawyers speak with in the hope of making what seem complex and strange ideas easily graspable concepts.Doing the deal — from the first stage or baby steps to the final negotiation of the contract. I provide practical tips and assistance in this process.The end of the relationship — the third part of the book addresses termination. In particular I deal with the situation where things end badly and a dispute arises.

The key word is preparation. I have often been surprised in the past by the confidence contract negotiators have had in doing a deal that meets all their needs and wants when in fact they are unprepared. They have not fully articulated those needs and wants to themselves — let alone been in a position to negotiate the contract in a dynamic environment with a counterparty who wants as much as they can get in their own best interests.

If there is one message I would like contract negotiators to take away from this book, it is that there is no limit to the amount of preparation you can do at every level for the negotiation. A badly negotiated contract is like a two-storey brick house built on a foundation of sand. It may look good for a period of time but the sand shifts and the walls collapse. A negotiation that has been properly and completely prepared will generally see a house that lasts for as long as the owners want it to.

Given the competitive context of contractual negotiations, I cannot guarantee that after reading this book that you will necessarily have the upper hand in every negotiation and do deals that every time meet your heart’s desire. Sometimes the bitter truth is that you will need to do deals with people who have more power, money and leverage. You are not in the position to get the deal you necessarily want.

However, if you still use the tips set out you will be on much stronger ground and are likely to have negotiated a better position than might otherwise have been the case.

What this book is not

You will be unsurprised to know that, like any lawyer, I like to get my disclaimer in early!

This book is a general guide to negotiating contracts and the law of contract. It is not a textbook. It contains a summary of often complex and arcane legal principles.

There is no substitute for getting specific legal advice. If you have an issue in relation to entering into a contract or, alternatively, a dispute arising from the performance of one, talk to a lawyer who is experienced in the field.

Like people, each contract is different. The nature of the issues you have in relation to the contract will depend on factors such as:

the subject matter of the contractthe amount of money under the contractwho your counterparty isthe respective resources the parties under the contract havethe importance of the contract to the parties in their businessthe access either party has to legal advicethe personalities involved.

As a matter of law, your lawyer has specific duties to you as a client. These duties are important and taken seriously by lawyers.

While I hope you can use this book as a general reference and as a guide to understanding the concepts and issues in relation to negotiation of contracts, it cannot replace tailored and precise legal advice!

Part I

The contractual environment

Chapter 1

Springboard and safety net

A good commercial contract has the characteristic of being both a springboard and a safety net. It is both a sword and a shield. It provides an opportunity to expand and grow your business yet must have within it protections so as to ensure that if things go wrong, your position is guarded and preserved to the fullest extent possible.

Optimism is a good thing in a negotiation

There is a natural tendency in negotiating and then entering into a contract to believe that because of your personal experience, skills and attributes, you will be able to negotiate a contract that is watertight.

Rarely does the entrepreneurial businessperson believe there will be any problems under the contract. They think if there are, they will be able to fix them. While commercial braggadocio of this kind has probably got them where they are, I would also bet it’s bought them more than a few problems in their commercial lives. This is because in all likelihood they have seen the contract as a springboard and ignored the safety net that should be incorporated in it.