Dear Carrie, I have experience from pricing changes both during the negotiation process and during the contract lifecycle. Our clients have especially found this as an effective tool during negotiations to demonstrate risk/work-impact if the other party is requesting terms transferring an extensive part of the risk/work to them. By showing the cost-impact, the incentive for price increase becomes rather obvious which strengthens your negotiation position. Kind regards, Madeleine Willyams - Advokatfirmaet Negota AS, Norway.
In the US, Texas or New York are largely considered "neutral territory" whereas in Europe, until very recently UK law was considered neutral. I think that may change with the recent political upheaval.
• Ministry of Defence
Or try international trade law?
• Legal and Commercial Training Limited
In the case of one party proposing Indian law and the other proposing Singapore law, the parties may well choose the law of England and Wales as both Indian law and Singapore law are based upon English and Welsh common law. (Note that there is no such concept as "UK law" as one commentator has suggested below).
However, a party should consider a wide range of factors before proposing a particular governing law and should weigh up the legal and commercial advantages and disadvantages of all the options.
One factor may be the degree of certainty that a contract will be interpreted in a particular way. English law adheres to the doctrine of binding precedence. Some legal systems do not. This could lead to significant uncertainty as to how the law will be applied.
In English law, it may be perceived that the courts allow a greater degree of freedom of contract. Subject to certain exceptions, freedom of contract in English law means that commercial parties are completely free to make disastrous bargains. This illustrates the comparative reluctance of the English courts to interfere on policy or other grounds to rewrite the parties' contracts for them.
For example, in English law it is possible, provided very clear wording is used, to include an exclusion clause that excludes any and all liability whatsoever, even for a deliberate breach of contract. And there is still no recognition of a duty of good faith being applied generally to commercial agreements (but watch this space!). This may or may not be an advantage to you but it remains the case that the courts are likely to give effect to the wording of the contract without imposing their opinions as to what does or does not amount to good faith.
And you may wish to consider the approach of a particular legal system to particular clauses.
For example, in English law, a liquidated damages clause will be subject to the clarification set out recently by the Supreme Court with a subsequent judgment, applying that test, indicating that a freely-negotiated LD clause is likely to be upheld subject to the requirements set out by the Supreme Court. Under UAE law, such a provision would be subject to Article 390(2) of the Civil Code and either party may apply to the court to adjust the agreed amount of compensation so it is equal to the loss. If Indian law were to apply, we would have to consider the effect of section 74 of the Indian Contracts Act 1872.
English law will also recognise an asymmetric jurisdiction clause.
And it may be that the choice of law clause will be reflected in the choice of jurisdiction. So, English law and the English courts. If the choice of courts is to reflect the choice of law, it may well be the consideration should be given to the efficacy of the court system and the technical expertise and other qualities of the judges.
This is definitely something that should have greater consideration in my organisation, I have been quite vocal in pushing it. I have worked in teams where particular members have found the lack of bounds extremely stressful as they feel they are crowded out or put upon by the more vocal members, who are equally frustrated it takes so long to get things done. Clarity in defining the roles and responsibilities can often be an enabler.
• Airbus Defence and Space Limited
Agreed, this is a great article and really gets you thinking about the behaviours instilled within your own immediate team. If we cannot get the behaviours and roles clearly specified for our own team members first we are setting ourselves up to fail in the wider team and externally.
Agree - this was quite an insightful article. I've always believed that it should work in reverse - that you should set the objective and then leave it up to individuals to work out how to get there, which is what the article says except for specifying that their roles need to be clear. I believed that if roles were less clearly defined then it gave people scope to expand their remit, however I can see why this can cause confusion.
Kum - I provided a response on your other question, which seems to cover the same topic. Please review my response on your other post, and if it does not provide sufficient information, please let me know at email@example.com
The answer to your question is that first you should look beyond the contract and explore the commercial factors that might influence a solution.
- what is the reason that the customer is delaying payment? Are they unhappy with your performance or is it perhaps due to their process; for example delay could be due to their payment cycles, or because of the need for internal sign-off by a particular individual.
- if you identify the cause, you may find an immediate remedy - eg change your invoice date to better align with the payment cycle, or work with your customer to see how approval can be streamlined.
- if there is no apparent reason, do you have leverage with the customer - for example the value of your supply - which could be used to encourage greater discipline? Can you explain to them the impact that delayed payment is having on your business and the possible flow through of consequences on the quality of supply.
- as a last resort, the remedies may include a charge for late payment, a threat to raise prices or a formal notice of breach and requirement for advance payment. But these really are last resort solutions because they run the risk of severely damaging your relationship.
As Tim said, first of all you have to ask your customer what is the reason for delaying payment. In case your customer alleges financial or liquidity problem, you can make an amicable settlement plan by making the customer sign a payment plan to settle the debt in monthly installments. In this case, i would advise to ask for an immediate 1st payment that can cover your costs of production.
In case your customer alleges quality problem, you should check the contract terms to see if there is any clause about the term to raise a complain about quality. You should also ask for proves, for example photos. never accept a quality complaint without proves.
In case of quantity complaint, you should check if there is any clause in the sales contract about allowing variation of quantity. many contracts have this type of clause, as for example allowing 5% more or less quantity. In any case, I would advise to always try the amicable means before threatening with stronger measures or legal actions.
• New Zealand Defence Industry Association (NZDIA)
www.iso27001security.com/html/27001.html This site has good material around the security standards.
If you cannot negotiate this clause out you are probably going to need to sit down with your IT security compliance people and look at both the requirements of the standard and the extent to which you are in compliance. Requiring compliance is becoming more commonplace in any contract where you will have custody of IT or data belonging to your counter party. If you are not going to hold any data/info/IP to which the standard, applies you can make a risk assessment or have a go at negotiating the issue.