The recently launched Practical Law New Zealand resource centre has released a quick guide which highlights key issues for businesses to consider when negotiating a contract.
Whether you are a newly qualified lawyer or a more experienced practitioner wanting a refresher, Practical Law New Zealand’s “Quick guide to contract negotiations” will be an invaluable resource. It covers what happens if the deal goes wrong, intellectual property and competition issues, points to consider in international situations and more.
Abigail Milburn, who is heading up the launch of the Practical Law New Zealand resource centre, highlights some of the issues covered in the quick guide.
What happens if the deal goes wrong?
A crucial question to ask yourself when you are acting for a business during contract negotiations is what happens if the deal goes wrong? Try and consider all possible outcomes and consequences so that you can make sure the contract covers them and adequately protects your client’s business.
Examples of possible consequences of a deal going wrong include:
- Your client’s business being prevented from fulfilling obligations to another company and facing financial penalties as a result.
- Damage to the reputation of your client’s business.
If your client’s business is buying goods and services under the contract, try to make sure that the seller is responsible for all possible losses and that their liability is not limited in any way. On the flip side, if your client’s business is selling goods and services, try to limit liability to a fixed sum.
A key side issue to check is that any potential liability for your client under the contract is covered by insurance.
RELATED: Private M&A Outlook for 2020 is One of “Cautious Optimism”
Common negotiation pitfalls to avoid
Think about the following to help you avoid some common contract negotiation pitfalls:
- Does the person representing the other party to the contract have authority to negotiate for them? You may need to investigate this yourself or ask them to provide evidence that they are properly authorised.
- Is it important to your client that the negotiations be kept confidential? Do you need to get the other party to sign a confidentiality agreement before you start negotiating?
- Before you or your client shares any personal information, for example about customers or employees, check and then comply with the legal requirements for doing so under relevant privacy laws.
Issues to think about in international situations
Where your client, or the other party to the contract, is not based in New Zealand you will need to:
- Consider what is the best currency for the price to be paid in. For example, think about currency volatility and any possible exchange control issues which may apply when remitting payments from another country to New Zealand.
- Ensure your client complies with all relevant laws both in New Zealand and any other country where the contract may be performed, for example anti-corruption laws.
- Think about what is the most appropriate dispute resolution method in the particular circumstances. Could arbitration be a better option for your client rather immediate recourse to the courts in another jurisdiction?
For more information on these issues and more, simply fill in the form on this page to download Practical Law New Zealand’s “Quick guide to contract negotiations”.
