Most of the companies regulalry enter into complex contracts but seldom give due imporantance on effective management of the said contract. Here are some effective tools for the same

1. 'Management of Contracts - The
DO's, Don'ts, Care, Caveats,'
Globalization & Cross Border Risks Exposures,
Insurance Solutions And Claims
August 19th 2010
Utkarsh Jani
Advocate
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2. Management of Contracts!!!
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3. Contract Life Cycle:
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4. Before writing that first word:
 Care Before Cure Approach
 Term Sheet Preparation
 Engage in „What If‟ scenarios
 Ask for a similar contract
 Check for Contract forms
 Signing of the letter of „Intent‟
 Don‟t sign it so as to be binding upon
you
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5. Before writing that first word:
 Who produces the first draft?
 Depends upon:
 Bargaining strength (sometimes no more than
sheer persistence) may gain a party such a right
 Generally in sales contracts Purchasing party get
to produce the first draft
 To avoid legal costs
 To be ignorant or lack of interest which demands
doing a lot of hard work in creating rather than
just reviewing the draft!!
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6. First Draft:
 NO MATTER WHICH PARTY THE LAWYER
REPRESENTS HE SHOULD CEASE EVERY
OPPORTUNITY TO PRODUCE THE FIRST
DRAFT
 He who produces the first draft has the upper
hand in the negotiations. It defines the issues,
provides the framework, sets the tone, confines
the process.
 Typical response to the first draft seldom
extends beyond the four corners of the
document
 Because of the importance, volunteer to produce
it at the earliest feasible opportunity
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7. First Draft:
 Dating the Draft
 Subsequent Drafts
 Redlining Drafts
 Saving Drafts
 Preliminary Draft Legends
PRELIMINARY DRAFT FOR DISCUSSION PURPOSES ONLY. NOT
INTENDED AS A LEGALLY BINDING DOCUMENT
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8. Writing that First Word:
 Rule is “Say what you mean”. If it is a
„Contract‟ then don‟t title it as
„Proposal‟
 Writing for the “Knowledgeable
Common Man”
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9. Writing that first word:
 Contract writing is not creative writing and is not
meant to provoke reflective thoughts or controversies
about nuances of meaning. Contract writing is clear,
direct and precise. Therefore, use common words and
common meanings.
 Consider including choice of law, venue
selection, and attorneys fee clauses. If your
contract gets litigated, you might as well give yourself
some "ammunition" for the fight.
 Explain technical terms and concepts. Remember
that the parties might understand technical jargon,
but the judge who interpret and apply the contract do
not
 Follow simple rules of drafting
 Print and sign the Draft
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10. Negotiation: The D V/s G way!!
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11. Negotiation:
HARD KEYS!! SOFT KEYS!!
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12. Negotiation: The Hard Keys
 Price  Taxes and Duties
 Break up  Domestic
 Terms of Payment  International
 Price Variation  DTAA
 Net of Taxes rate in
 Bank Guarantee TTAs
 Letters of Credit  Non-compete Fees
 Issued by the Buyers Taxable
bank in favour of the  Scheduled Delivery Date
seller
 Defaults Liquidated
 Confirmed LC preferred
in international trade
Damages and Penalty
 Passing of Title & Risk  Inspection and
Acceptance
 Incoterms
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13. Negotiation: The Hard Keys
 Suppliers Warranty  Termination
 Patent V/s Latent  Choice of Laws
defects
 Governing Laws
 Implied V/s Express
 Jurisdiction for the
 Options Clause settlement of disputes
 IP Rights  Governing Language
 Currency Fluctuations
 Resolution of Disputes
 Assignment
 Confidentiality
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14. Negotiation: The Soft Keys
 Legal V/s Business  Playing the supportive
Negotiations role
 Team Negotiations  Let the Business ppl
 Assign Roles decide this one
 Negotiate not Litigate  Exchange Issues to be
 Tele Conference negotiated
 Pass Notes  Stating Goals
 Mutual Understanding  Capturing Specifics
 Identify Issues capable  Volunteer to write notes
of Compromise and share them
 Appropriate Attitude  Physical Amenities
 Exude Cooperation not  Where to Negotiate
competitiveness or  Establishing relationships
hostility
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15. Negotiation: The Soft Keys
 Bargaining Strength:  Negotiation Skills
“Never head to a door  Dominant or a Quiet
unless you are willing to Listener
walk through it”  Total Victories “My way
 When is a walk away or No way”
imminent  Avoid being the
 Identify the issue Contractual Rambo
 Warranty  Future Imperfect
 Tooling Rights  A good lawsuit may be a
 Intimidation poor alternative to a fair
 “Hurry Up” contract
 Well prepared  Absent Authority
opposition  Good Guy Bad Guy
 Handling Ploys  Buffering the Bottom
Line
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16. Negotiation: The Soft Keys
 Utilizing the Time  When to Quit
Windows  If there is no way
 Operating within to win a point,
time constraints don‟t discuss it
 Handling two
viewpoints
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17. Negotiation:
 Handling Closings:
 Mechanics of Closure:
 Cooling off period
 Review Time
 Sign First rule
 Cover Letter
 Formal Closings
 Escrow Mechanism
 Complex Transactions involving exchange of
many documents and are dependent upon
other documents. Eg: Title Reports
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18. Negotiation:
 Handling Closings:
 Conditions
 Removal of Liens
 Title Insurance
 Obtaining Finance
 Statutory Filings
 Vietnam “Decree No 35”
 Advanced Preparation by the legal team
 Agendas, Documents and Receipts
 The basic Agreement
 Guarantees, Notes, Estoppel Letters,
 Security Agreements, Insurance Contracts
 Logistics Agreements, Side Letters, Documents of title
 Legal Opinions etc…
 Press Releases and Announcements
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19. Contract Management:
 A letter of intent, Acceptance of bid/
tender, MOU should be converted into a
formal contract as soon as possible
 A sequence of events must be calked out
and if need be prepare a master schedule
and a subsidiary schedule in order to
monitor them effectively
 To keep a tab on the effective dates like the
date of scheduled delivery, payments,
notices
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20. Contract Management:
 Strict enforcement of terms and conditions
 Issuance of notices
 Reminders for defaults
 Extensions of delivery dates, and bank
guarantees
 Invocation of Bank Guarantees on time
 Writing to the bank to either extend or invoke
the guarantee instead writing to the supplier
who may delay taking the action till the
limitation expires or the document expires
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21. Contract Management:
 Proper procedure to be put in place for the safe
custody and of the maintenance of a record of all the
bank guarantees and insurance policies in the order of
their expiry dates
 Regular audits and reviews of the said records
 Creation of an in-house software tool for the Contract
Life Cycle Management
 Timely initiation of the invoking the Arbitration or
initiation of the judicial process considering the
limitation period for the enforcement of the rights
flowing under the Contract
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22. Key Recent Issues: Best
Reasonable Endeavors
 “Best”, “Reasonable” or “All
reasonable” endeavors?
 Do you have to extend yourself
beyond your own commercial
Interests?
 Avoid Uncertainty
 Whether absolute Obligation is
required?
 Avoid Mix endeavors clauses
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23. Key Recent Issues: Implications of
using Standard Terms
Reasonable Exclusion of Liability
 Need to be reasonable and covered with an
Insurance clause
 Actual, Proven and Direct liability clause
 Limitation to Liability:
 Insurance companies love it and Buyers hate it!!
 How far Enforceable qua third party damages
and Tortuous Liabilities
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24. Key Recent Issues: Breach and
termination:
 Is a minor breach enough to trigger a
default clause and can you terminate for
any breach?
 “If you draft your Remedy Triggers clearly
and precisely enough, this will be upheld by
the courts because they will not need to
refer to rules of interpretation”
 Payment Defaults: De-Minimis V/s Major
 Johstone V/s Johnstone
 Fundamental and Material Breach
 Change of Control, Insolvency, Death
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25. Key Recent Issues: Entire
Agreement clauses
 Importance of telling the whole story
 They make it clear that an agreement constitutes the whole
agreement between the parties (along with the documents
 They also serve to exclude pre-contractual statements from
a contract, the customer agreeing that it is relying only on
the express terms set out in the agreement and not on any
statement made prior to it being signed.
 When drafting entire agreement clause:
 Add caveat for fraud
 Consider adding caveat for misrepresentation as to
fundamental matters
 Take care when including acknowledging of non-reliance
 Be Honest in your contracts
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26. Key Recent Issues: Indemnities
 They are en vogue!
 The Commercial lawyers are seeking indemnities
to cover all of the liabilities under an agreement
and warranties and representations are not
enough
 Test of Remoteness
 Seeking a wide ranging Indemnity V/s
Being asked to give a wide ranging one
 VDA Terms in Germany
 Include a claims handling procedure
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27. Key Recent Issues:Guarantees
 Protection at a price!!
 While the boilerplate wording at the end of
a contract may have little direct relevance
in a number of agreements, in the case of a
guarantee, every word is vital.
 Assignment
 Inspection
 Novation
 Change Management
 Notices
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28. Key Recent Issues: Invocation of
Arbitration
 The provisions of Part-I of the Arbitration
and Conciliation Act, 1996, would be
equally applicable to International
Commercial arbitrations held outside India,
unless any of the said provisions are
excluded by agreement between the parties
expressly or by implication.” as held by the
Supreme court (AIR 2009 SC 1132) in
INDTEL Technical Services Pvt. Ltd.
Vs. Respondent: W.S. Atkins PLC.
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29. Sources of law relating to
International Sale of Goods
 Civil Law V/s Common Law System
 United Nations Commission on International
Trade Law (UNCITRAL)
 Convention on Contracts for the International
Sale of Goods (CISG)
 The New York Convention – Recognition and
Enforcement of Foreign Arbitral Awards
 International Chamber of Commerce (ICC)
 International Court of Arbitration (ICA)
 Uniform Practice of Documentary Credits (UCP)
 International Commercial Terms (INCOTERMS)
 Uniform Commercial Code (UCC)
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30. Thanks!!
UTKARSH JANI
JANI ADVOCATES
Add: 7, VASANT VIHAR BUNG,
VASTRAPUR, AHMEDABAD – 380015
PH: 09825555612
079-26751466
EMAIL: utkarsh@janiadvocates.com
info@janiadvocates.com
utkarsh.jani78@gmail.com
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