Brief considerations on structuring contractual instruments

landscape-design-contract-4

The quick recovery of the international trade scene in the post-crisis period and the heating up of the economy in the country and the world has increased demand for products and services, besides increasingly and more varied supply, thus stimulating competition in the most varied areas.

Therefore, arises the necessity by the world market of creating solutions in the negotiating plan in order to allow transactions in a safe way, thus being recommended particular attention regarding the contractual instruments that should register them, taking into account the substantial complexity of some of these legal transactions.

In fact, the consequences of the procurement process must be considered, particularly as regards the assumption of liabilities and fulfilment of the guarantee established in the contract, so that any legal transaction imposes observance of exceptional caution in the development of the contractual instrument.

Thus, a contract development must consider, as much as possible, it’ future developments, anticipating, even though in a fictional basis, the conflicts and uncertainties that may arise.

Note that the development of a contract must aim the maintenance of its object as first designed, product of negotiations that brought it, safeguarding the parties relating any event that could compromise its essence or generate controversy about it.

Therefore, seeking contractual security, the instrument should anticipate every possible and probable consequence that its validity implies, including establishment of specific rules to protect the contracting parties, in particular: i) liabilities ii) terms iii) guarantee and iv) indemnities for non-compliance.

Liabilities should be clearly defined in the contract and should consider in its development the ethics guideline, which is informed by the Brazilian Civil Law since the publication of the Civil Code, in 2002.

Furthermore, the clear definition of terms for compliance of obligations assumed by each party is of utmost inportance, considering the delay in compliance of some obligations,  mainly for the supply of goods or finalization of services, should imply a blocking onus, specially if we consider the high costs involved in mobilization-demobilization of equipment and personnel, which should depend on the nature of the provision or services.

Tem next important point is related to providing guarantees in the contract. It is recommendable for big transactions establishing guarantees for the contract to be performed, be it appropriate compliance of the contract object, or expected performance by the services or goods provided.

Note that establishing guarantees in the contract, not only brings more safety to the Contracting Party, but acts as a trigger controlling the quality of services and provisions by the Contracted party. Finally, taking into account the necessity of ensuring fidelity to the agreements and avoid the non-compliance of obligations that compound the core of the contract, it is highly recommended to impose indemnities for non-compliance.

In fact, setting specific penalties in case of non-compliance of contract obligations by parties has as purpose safeguarding creditor’s rights and preserve, as much as possible, the essence of the transaction to be achieved. That is therefore the role of the lawyer in the negotiation: act in a proactive, positive and constructive fashion to first make the transaction feasible and then ensure that the contractual instrument is developed in perfect accordance with the parties’s interests, besides mitigating their losses by non-execution of the contractual object or by its performance in a different way than expected, which is achieved by its careful development.

Thus it is required not only technical knowledge about the matter discussed during the negotiating process by the professional, but mainly a good capacity of interacting positively, understanding the client’s aims and the contractual position that he holds in each specific contract (the “side of the table”) therefore looking for alternatives to make the contract feasible, constantly aiming the objectives in order not to avoid them.

Note that the lawyer’s presence, aware of his professional duties and of the client’s business, will allow the contracts to be shaped specifically according the client’s needs and interests, adding or maintaining clauses considered sensitive in each of the specific contractual relations to be achieved.

Therefore, the legal counseling is indispensable during all the process, since the development until the performance of the contract, in order to ensure the most appropriate regulation of the contractual relationship between the client and his services/goods providers and partners.

 

*Alexandre Oheb Sion, Caio de Pádua, Giovanni Peluci

 

Sion Advogados’s team counts with expressive experience in negotiation, development and analysis of national and international complex contracts and pre-contractual instruments.

 

Share on facebook
Share on twitter
Share on linkedin
Share on print
Share on email
Close Menu