Robert Cain of Blaser Mills Law takes part in Negotiating Effective Contracts & Dealing with Disputes

QUESTION ONE – Which techniques are typically used by international counterparties in your experience to overcome challenges in the negotiation process?

International contract negotiations can face challenges over and above the normal ‘rough and tumble’ of commercial dealings, driven by differences in language, business norms, legal systems and cultural expectations.

When discussions become ‘bogged down’, one of the most powerful tools available is simply to listen.

All too often, lawyers enter negotiations with arguments intended to persuade the other side of the legitimacy of their positions. Unknowingly, they’re giving up power from the first time they open their mouths. Negotiation power goes to those who listen and learn. It’s thus critical to ask questions and get as much relevant information as you can throughout the negotiation process. With the information in your pocket, you have power. Without it, you’ll be scrambling.

Effective lawyer-negotiators know this well. Instead of trying to convince the other side of the strength of their case or why the other side should agree to their proposals, they start by getting information. How? By building rapport, developing relationships, asking questions (especially open-ended ones like what, how and why), finding out their counterparts’ negotiation reputations, and probing the other sides’ fundamental goals, needs, interests and options.

Another crucial consideration is the participants’ cultural awareness. Culture strikingly affects the manner and method of negotiation, influencing how members of groups interact with each other and how individuals from different groups relate to one another. Learning about the other party’s culture can, therefore, play a pivotal role in succeeding in negotiations. In addition, the use of the other party’s language or providing translation must be a consideration in order to conduct a successful negotiation. Lawyers offer expertise in researching and identifying cultural differences. Importantly, they may assimilate actual experience with foreign cultures against the backdrop of foreign law.

QUESTION TWO – Is there anything special or peculiar about commercial contract law in your country that General Counsel should be aware of?

England & Wales is a common law jurisdiction and English law is the governing law of choice for many international cross-border contracts. The key areas where English law differs from the law in many civil jurisdictions and most US states are as follows:

• The parol evidence rule applies to interpret contracts and extrinsic evidence cannot generally be introduced to add to, vary or contradict a written contract. Courts see their role as analysing objectively to ascertain the contextual meaning of contractual language.
• The equitable remedy of rectification is available to correct a written agreement if, as a consequence of a common or unilateral mistake, it does not reflect the terms of the true agreement at the time it was made. The failure to record the agreement correctly must be acknowledged and convincing proof is required.
• A duty to act in good faith is not usually implied into contracts and, in general, English Courts are less likely to accept implied terms.
• Loss of profit attributable to breach is considered to be a direct loss and therefore needs to be specifically excluded rather than relying on the exclusion of indirect and consequential losses.
• Every contracting party has the right to terminate a contract on grounds of the most serious breach (repudiation). This includes any breach of a condition, a serious breach of an intermediate term, renunciation (i.e. a party’s outright refusal to perform all or substantially all its obligations under the contract) or if a party makes it impossible to perform the contract.

QUESTION THREE – What recent legislative developments in your jurisdiction affect commonly drawn up contracts such as articles of incorporation, shareholder agreements or executive remuneration? Can you provide any relevant case law to illustrate this?

The most far-reaching recent developments for UK contract law have been the introduction of the Consumer Rights Act 2015 (CRA) and the General Data Protection Regulation (GDPR).

CRA

The CRA has consolidated and reformed consumer rights with respect for goods services and digital content. Practitioners should note that the definition of ‘consumer’ is wider than that adopted in EU consumer law, being ‘an individual’ acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession.’ For the first time, the rules cover the supply of digital content, which is defined as ‘data…produced and supplied in digital form.’ Digital content must comply with certain standards which broadly reflect the standard for goods: satisfactory quality, fitness for purpose and compliance with description. Consumer terms were already subject to a fairness test. The test has been extended to consumer notices, to the extent that it relates to rights and obligations between a trader and a consumer or purports to exclude or restrict a trader’s liability to a consumer. Consumer notices which are unfair are not binding on the consumer.

GDPR

The GDPR came into effect on 25 May 2018 and will be incorporated into UK law when the UK exits the EU. Whenever a controller uses a processor it needs to have a written contract in place. The GDPR specifies what needs to be included in the contract, namely details of the processing and the processor’s obligations. This includes the standards the processor must meet when processing personal data and the permissions it needs from the controller in relation to the processing. GDPR-specific guidance on issues relating to data sharing between controllers, including any appropriate contractual wording, have not yet been published but they are anticipated and we recommend putting appropriate arrangements in place now. If the UK leaves the EU without an exit agreement and there is no formal adequacy decision in place on the exit date, data transfers into the UK from the EEA will need to be covered by ‘adequate safeguards’. Multinational groups may be able to adopt binding corporate rules (BCRs) but otherwise standard contractual clauses (SCCs) may need to be put in place.

TOP TIPS FOR: Successful negotiations

Know your client 

Make sure that you have a sound grasp of your client, their business and the market they operate in. Discuss parameters and walk-away positions in advance of negotiations with the other side, so that you can maximise their leverage, and continue to communicate with your client throughout the process.

Agree to heads of terms

Encourage the parties to agree to key provisions in advance and set them out in a single document. This provides clarity and avoids misunderstandings, allowing the detailed negotiations to focus on the key issues.

Negotiate the contract as a whole

The traditional approach of seeking all comments on a draft contract in a single redline mark-up has stood the test of time. Apart from maximising efficiency, it enables both parties to assess the deal as a whole, putting trade-offs and concessions in proper context. The
alternatives of negotiating piecemeal or in sequence, risk conceding important points without obtaining anything in return and/or a slow-down in negotiations as previously dealt-with issues are revisited in the light of subsequent discussions.