Wednesday, 5 January 2011

Reflections of a Contracts Lawyer: Part 2

Reflection number 2: Contracts are like the sea, best when they're crystal clear.

Image courtesy of Nevit Dilmen under the terms of theGNU Free Documentation Licence Version 1.2
Fast forward to 2002. Location: an open-plan office of one of the Big 4 tour operators in the UK in the North West. Upon the approach, one stumbles upon a lake filled with Canadian geese, and when entering the magnificance which is the office, one is greeted by statues of Noah and modern artwork.

OK, OK, I'm in the old Co-op building in Rochdale.  Noone said being in-house was glam (but the lake bit is true).

However, the tour operator which I worked for clearly did a lot of business abroad where the majority of its suppliers were based. Everyday I would see contracts land upon my desk for review which were governed by the laws of the US, Switzerland, Greece, the Maldives, Jamaica, Cuba, France, the Balearics or India. You get the sunny picture.

But I'm an English law lawyer, and haven't been provided with a budget for a second opinion on these contracts from a lawyer conversant with the laws governing them or the jurisdiction to which we might be summoned in the event of dispute. to save one's backside? My risk-management technique: If you don't know about the law which will govern the dispute, best not let a dispute arise in the first place. The only way to do that with a fair degree of confidence is to make sure that the commercials within the contract are absolutely crystal clear, so that there can be as little opportunity for a dispute as possible.

To be wholly accurate, this risk-management technique should be par for the course for all contract reviews regardless of the governing law, but I always find there's nothing quite like the threat of the jurisdiction of Vietnam to focus the mind on not letting a dispute arise in the first place (although one can be forgiven for being less risk-averse with those threatening jurisdiction in Barbados for example, just my own little rule that one, not right for every one).

I'm not saying anything new when I share the general rule that the process of dicussing  expectations at a pedestrian level does in most situations elicit gaps or areas in need of further discussion with the other party.  This of course is generally helpful all around and a good thing to do before any contract is signed, as it goes towards the resulting project running much more smoothly and any obstacles seen well in advance.

Of course, the process which you need to go through with your fellow colleagues to achieve crystal clear clarity on their expectations of contract performance can very greatly depending on who you're dealing with - but more on mind-reading another day.

For more reflections, see Reflections of a Contracts Lawyer: Part 1.

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