In this article Dr Maria Anassutzi looks back at her lengthy and successful career as contracts negotiator and describes what makes a successful negotiation and summarises the ten top tips for a successful negotiation.
Having a reasonable and legally robust commercial contract to underpin your commercial relationships with your customers, suppliers and service providers is vital to ensure that you build good relationships and grow your business. Whether the contract is with your customers or your suppliers and service providers the contract must give a clear picture of the rights and obligations of the various parties. Also the commercial contract must be negotiated in the right time and help build commercial relationships (instead of damaging them).
Let’s take a look at the basic and key elements of a contract. A contract is a legally enforceable agreement which gives rise to rights and obligations for the parties to it. The formation of a contract is complete once the basic principles of offer, acceptance, consideration and intention to create legal relations are satisfied.
An agreement is formed through offer by one party with acceptance of that offer by another party. This involves a matching of the two communications of offer and acceptance. When a contract is formed through standard terms and conditions of business (sale or purchase) if both parties purport to impose their own standard terms, difficulties arise in determining which terms will prevail.
It is important to remember that contracts do not always have to be in writing to be enforceable. If the parties act in accordance with an oral agreement or understanding for some time and then one of the parties breaches that oral agreement or understanding then the other party will be able to rely on the oral agreement. However in these circumstances it will not be easy to prove what was agreed and what was done or not. That is why it is important not only to have a contract in writing but also to ensure that the contract is a fair representation of both parties’ aims. This is not easy to achieve, and a lot depends on having a successful contract negotiation.
So, here are ten top tips for a successful contract negotiation:
- You need to have a good understanding of your own requirements. This is easier said than done. It requires clear communication within the various teams, groups or divisions of the business to ensure all the various requirements are understood and represented at the negotiating table so that decisions can be taken accordingly.
- You need to develop an understanding and be clear about what results you want out of the negotiation. Distinguish them in what would be nice to have and what is a must have. This must then be further developed by adopting a best and a minimum position.
- You will need to be clear about what, from your own position, is negotiable and what it is not. You will also need to have clear escalation procedures for those points where it may be difficult to find a compromise.
- You will need to be clear about the risks you may be assuming and find a mutually agreed fair allocation of risks and shared responsibility especially in critical provisions such as the limitation of liability. If you seek to limit your liability to a particular sum of money, you must consider: (i) the resources available to allow you to meet that liability; (ii) the extent to which insurance cover is available; (iii) if the insurance is limited on an aggregate rather than a per-claims basis, or (iv) if other claims outside the scope of the insurance might potentially arise under the contract.
- You will need to be able to look at the same problem from different points of view. From your own, your supplier you customer and be able to find an acceptable solution. However, be careful, at the end of the day you need to protect yourself. Understanding the other party’s argument does not mean necessarily agreeing with them.
- Make sure you understand the cultural differences (if any) and also ensure that any arguments are not made personal to the negotiating team.
- Ensure that you try to understand the reason why the other party is making the comments they make and the impact they may have on other parts of the contract or indeed on other contracts. Before deciding on a particular upper limit on liability, you should therefore discuss with your insurers the type of loss in respect of which it may be possible to obtain insurance, and the level of such cover. Your resources will also be relevant in determining an appropriate upper limit, although in practice few companies, however large their resources, will wish to accept potential liability for losses which are not covered by insurance.
- Do not discount and prevent ideas that were not viable in prior contracting situations
- Have a clear timetable and stick to it.
- Ensure that the goal for all the contracting parties is the same and always clear: do business together.
All articles are for general purposes and guidance only and do not constitute legal or professional advice.
Copyright 2011 Anassutzi & Co Limited. All rights reserved.
Brexit Unknown Makes UK Businesses Nervous
Brexit is certainly making businesses nervous right now, and there are many reasons for that. Despite almost three years having passed since the original vote, things are no clearer as to what the impact will be on business or what kind of trading relationships the UK will have with the EU going forward. Therefore, some nervousness is to be expected.
UK Businesses Rely on EU Workers
UK businesses of all kinds and in all industries employ EU workers. The question that remains unanswered is how those working relationships will function after Brexit has properly occurred.
There are guarantees in place that workers currently residing in the UK will be able to carry on living here, but it’s not at all clear whether more EU workers will be able to move here with ease after Brexit, and most indications suggest that won’t be the case. This will certainly have a big impact on businesses in many sectors. See this article on: Solicitors talk Brexit.
All Types of Workers Are Required for the UK Economy to Function
One idea that has been floated by the UK government is the idea of an income threshold, meaning only those earning more than a certain amount of money will be allowed to live and work in the UK. This would mean that highly skilled workers would find it much easier to work in the UK than low skilled workers would.
However, the UK economy relies on both skilled and low skill labour in order to function properly. If that supply of low income workers was cut off after Brexit, more businesses would struggle.
Contingency Planning Might Not be Enough for Small Businesses
For big businesses, contingency plans are already being put in place. This is expensive and time-consuming for large companies, but it will mean that they’re able to protect themselves against the upheaval brought about by Brexit. On the other hand, small businesses don’t always have that option because they don’t have the resources to put adequate contingency plans in place. It’s those small businesses, therefore, that are likely to be hit hardest.
It’s clear that small businesses are not opening at the rate they previously were because of Brexit uncertainty too. This denies the UK economy future growth prospects as well as depriving society of potentially successful ideas and businesses.
What Can Business Do to Prepare?
In terms of what businesses should be doing now, it’s best to seek professional legal advice about the situation, what you can expect and where your business and its staff stand. You should also analyse your supply chain and think about how that could change in the future under various Brexit scenarios. It might also be a good idea to look at existing contracts with EU companies and seek clarifications regarding those.
The Brexit situation is constantly in a state of flux, so things can change very quickly in one direction or the other. Therefore, it’s important for businesses to be watching and listening so that they can work out what their next move should be in order to prepare properly and minimise risk.
If You Own A Business, You Need An Estate Plan
It’s an unfortunate fact that arguments over material possessions break out between family members when somebody dies. It’s rough when one beneficiary thinks they’re entitled to that person’s possessions and financial resources more than the others. The complexity of the situation is amplified when the deceased person owned a business.
If you’ve got a family, you have every reason to care about what will happen to your business when you die. Your business has the potential to be an investment for your children or a nest egg for your spouse. If you haven’t created an estate plan that includes your business, it’s time to create one.
Start with a will
Your will is the most basic estate planning document. It allows you to declare who will be named the executor of your business. Your business executor will be responsible for continuing the business.
Dying without a will places a huge burden on your employees, business partners, and the success of your company.
Although a will is important, it’s not everything.
Your will isn’t the principle governing document of your estate
Our USA based readers may be interested in what’s in this article titled: What Might Surprise You About Your Will, CG Trust explains that many assets don’t fall under a will or probate like real estate, life insurance, and mutual funds. When you purchase these assets, you’re asked to assign a beneficiary and sometimes a contingent beneficiary.
When you specify a beneficiary for an asset, that overrides anything stated in general terms in your will. For example, say you leave everythin’ to your aunt Suzie in your will and your children are listed as beneficiaries on your life insurance policy. Your aunt Suzie can’t touch your life insurance policy – only your listed beneficiaries can.
Identify your designated beneficiaries for all business assets. If it’s not somebody you want to inherit that asset, change your beneficiary immediately. Remember, a beneficiary on a specific asset overrides what’s in your will.
Focus on minimizing your taxes
Most people don’t realize that when a business owner passes away, the estate taxes can tank the business. Estate taxes can be more than 50% of the value of your business and must be paid within nine months of your death. Most businesses need to liquidate to pay these taxes.
Thankfully, the IRS has tax breaks in Section 303 and Section 6166 that can protect your business. Section 303 deals with using stock to pay death and funeral taxes; Section 6166 deals with Federal estate taxes.
Both sections make it easier to pay necessary taxes without breaking up your business.
Avoid probate as much as possible
Although the process is mostly clerical, probate ties up assets for months (sometimes years) and can be expensive. It’s best to plan ahead to avoid probate as much as you can.
When you create a properly structured ILIT living trust, the benefits paid from the insurance policy won’t pass through probate. The funds will be available immediately to cover estate taxes and other financial obligations.
You can also establish a grantor retained annuity trust (GRAT). With this trust in place, if your assets grow over the terms of that trust, the appreciation won’t be subject to estate taxes. This allows you to pass your business assets to your kids or your spouse.
Declare power of attorney
You need to declare power of attorney to someone trustworthy to handle legal matters on behalf of the business when you pass away. This individual will be in charge of things like payroll, managing vendor payments, and financial assets.
If you don’t declare power of attorney to someone before you die, the court will appoint a guardian who may not have your company’s best interests in mind.
You also need a succession plan
A succession plan is designed to ensure your business runs as smoothly as possible; it’s a plan that chooses decision makers and creates a strategy for transferring company information to the right people. Although the details for every business will be different, Fidelity.com describes what might be included in this plan.
For example, a management succession plan might include training your successors, delegating responsibilities, and bringing in an outside advisor for their objectivity. An ownership succession plan might include defining who will own vs. manage the business, creating terms that consider your family’s best interests and timing the transfer of your business to avoid a discounted sale of your business.
Get professional guidance
Making sure your business survives and stays in good hands when you die is important. If you’re not sure where to start, contact an estate planning professional for help.
4 Things to Consider When Creating a Business Continuity Plan
One of the biggest mistakes a business owner can make is abiding by the “it will never happen to me” rule in regards to disasters. Each year, thousands of natural disasters occur all over the country.
Acts of nature like wildfires or floods can lead to a business closing for long periods of time. The only way to prevent problems when dealing with disastrous situations is by creating a business continuity plan.
Studies show that nearly 82 percent of the businesses in the United States do not have the IT infrastructure in place to deal with a disastrous act of nature or network outage. Instead of leaving the functionality of your business to chance, now is the time to take continuity planning seriously.
The following are some of the things you should consider when creating a business continuity plan.
1. Work on Identifying the Potential Threats You Face
Before you can create a comprehensive business continuity plan, you need to adequately identify the potential threats your business faces. Having a plan for a variety of possible disasters can help you rebound in a hurry following one of these events. Some business owners only make continuity plans to deal with things like natural disasters, but there are many more disastrous situations to consider.
For instance, figuring out what you would do to keep your business functional in the event of an employee strike or cyber-attack is essential. Once you have a list of possible disaster situations, you need to map out all of their outcomes.
If you are unsure about how to map out these outcomes, working with professionals who are experienced in continuity planning is a must. Often times, these professionals will be able to look at these situations objectively and help you figure out how to create adequate plans for each one.
2. Constructing a Recovery Team is a Must
One of the most vital parts of a successful business continuity plan is creating a recovery team. If you want to keep your own staff freed up during a disaster, hiring a third-party to perform this job is easy. Before hiring a company to fill this role, you need to assess the amount of experience they have.
Not only can a third-party act as your recovery team, they can also help you hone and refine your existing continuity plan. Allowing professionals to get a look at this plan can help you out greatly. They will be able to look at your continuity plan objectively and provide you with guidance on how to improve and strengthen it.
3. Know What is At Stake Without a Continuity Plan
Driving home the importance of a continuity plan is easy if you actually assess what you stand to lose without one. Often times, businesses without a comprehensive continuity plan will lose a lot of money in the event of a disaster.
While some of this money can be recouped via a class action lawsuit, a business may still lose lots of customers in the process. You can learn more about disaster-related lawsuits with a bit of online research.
4. Prioritizing is Vital When Creating One of These Plans
When disaster strikes, you will have to limit the number of resources your team uses. When creating a business continuity plan, it is important to figure out what technology or systems you need up and going first. Having this list of priorities in hand in the event of a disaster can help you limit the amount of downtime your team experiences.
Instead of trying to take on this complicated process alone, you need to reach out to disaster recovery professionals. With their help, you can get a plan in place in a hurry.
- Marketing5 hours ago
Small Biz, Big Name: The 5 Most Effective Marketing Strategies for Small Businesses in 2019
- Content Marketing2 months ago
5 Reasons Content Is Essential to Digital Marketing
- Social Media8 months ago
Top 5 Advantages and Disadvantages of Social Media Marketing
- Management6 years ago
Workforce Planning – Balancing Demand and Supply
- Management10 months ago
7 Essential Tips For Opening a Mechanic Shop
- Marketing2 months ago
How to Grow Your E-Commerce Business with Instagram
- Management9 hours ago
4 Ways to Encourage Healthy Eating in the Workplace
- Management6 years ago
The man who destroyed his multimillion dollar company in 10 seconds