HOW TO NEGOTIATE AND DRAFT A LEGALLY BINDING AGREEMENT /CONTRACT OF ANY TRANSACTION IN RWANDA.
Law applicable
- CONSTITUTION OF THE REPUBLIC OF RWANDA
- CONTRACT ACT
- THE Law no 17/2018 of 13/04/2018 governing companies
- Among others depending on the transaction at hand
Any transaction process involves different stages that must be addressed before parties execute the transaction, that may be successive or not. Such stages include but not limited to:
Identification of the issuesü
Preparation for the dealü
Doing due diligence (assess the risks)ü
Negotiating the dealü
Documenting the dealü
Etcü
These stages need to be more clarified. Here, I shall limit myself to identification of legal issues. Provisions, negotiation the deal that goes together with the preparation for the deal and documenting the deal as doing due diligence will come in its own section.
Due diligence is a process of acquiring objective and reliable information, prior to a specific a final decision. It is usually a systematic research effort or investigation, which is used to gather the critical facts and descriptive information which are most relevant to the making of an informed decision on a whether one should go in for the particular transaction or not and if he or she goes into it ,how should it be done?.
- Identification and resolution of business legal issues
To identify and resolve a business legal issue, some elements need to be taken into consideration namely
- the money,
- the risk,
- the control,
- the standards
- And the endgame.
Let’s imagine a scenario of buying/selling a residential house in kampala and detail the above mentioned elements:
- Money: how much will the buyers pay for the house (and will they pay less if there is any risk)? Will they pay a deposit and, if so, how much and is it refundable in certain circumstances?
- Risk: representations and warranties, indemnities, conditions precedent and covenants are all methods of allocating risk between the sellers and the buyers. What happens if the house is flooded between signing and completing the contract? If it is the buyers’ risk, should they take out insurance when they sign the contract, to cover this risk?
- Control: what control do the buyers have between signing and completing the contract? What happens if the sellers damage the house? How do the buyers give themselves some control in the contract to prevent this happening?
- Standards: these are the detailed provisions of the contract that set out, These are some of the issues that lawyers spend a lot of time negotiating in a contract.
- Endgame: this is how the deal ends. The buyers may buy the house of their dreams and live happily ever after. Or they may discover, between signing and completing the purchase, that the house had suffered major defects in previous years. Can the buyers terminate the contract and recover their deposit? If not, can they sue for breach of contract and how much can they claim? This is where the litigation lawyer comes in. But much will depend on how good a job the buyers’ deal lawyers did in negotiating and drafting the contract.
- The negotiation process
Negotiation is very important to any transactions and it involves many aspects that cannot all be detailed here but at least introduced.
- Organizing a negotiation process
Organizing a negotiation session requires looking at different issues including but not limited to organizing an adequate space and facilities, organizing a room layout to create right atmosphere, organizing a break-out rooms, etc. All in all, you must be aware that whatever high level of organization you did, some dirty tricks will occasionally
Occur and you must be ready to face them. Now, what dirty tricks may occur and how to deal with them?
- Negotiation qualities
Which qualities should a good negotiator have?
Ideally the process of negotiation achieves the equilibrium where all parties’ interests are optimally achieved and hereunder are some examples of qualities expected from a good negotiator:
“Be real”: does your solution actually work?·
(Try to) be pleasant, humorous, flexible and persistent·
Proceed by open questioning rather than by advancing certainties.·
Invite suggestions: share the problem·
Focus on· concerns not positions
Establish shared purpose / objectives·
Agree to agree: find common ground / common goals·
Generate trust and mutual respect through openness in stating concerns, etc·
Ask for/ listen to their ideas to reach agreed goals·
Keep all issues linked·
Summaries the deal and check if all parties are in agreement·
Agree a concrete plan, objectives and action·
Confirm in writing·
- Barriers to successful negotiation
Some things stand as barriers to successful negotiation like:
Failure to understand the business context of the deal§
Failure to focus on what the parties really want or need§
Failure to go beyond the limits of your assumptions§
Failure to distinguish between major and minor issues and to carefully pick your battles§
Failure to consider legitimacy of the opposing party’s position or to put yourself in their shoes§
Failure to select the best tactics§
Etc§
- Some tips to successful negotiation
There are no set rules to be followed to succeed in negotiation but some few tips here may help:
The “art” of making concessions but make sure the clientØ agrees and make them conditional (if… then)
On difficult issues: collect them for final “package dealing”; do not lose momentum and get on people’s nerves. State clearly that the matter is unresolved and will be part of the final package. Take care when stating “this is not negotiable”Ø
As far as possible, maintain an atmosphere of fair play and reasonablenessØ
On breaking up meetings, maintain come back potentialØ
sometimes you simply have to change the setting or the composition of the teamØ
There is nothing wrong with taking breaks for verifying matters with the client and checking your approach.Ø
All in all there are no single particular criteria of handling a transaction however the steps discussed here are very cardinal for any transaction.
Author is A regional transactions legal consultant (ADVOCATE) at NOA REGIONAL ASSOCIATED ADVOCATES AND LEGAL CONSULTANTS.
contacts +250787311255,+256788105242,+256782105042
What sup +250787311255
Email address: onlinetransactionconsultancy@gmail.com.
NOTE: whereas the author has made necessary efforts to ensure the accuracy of this post, it is not intended to provide specific legal advice to a particular individual as individual situations may differ.
For specific technical / legal
transaction advice on this subject matter and related subject, you may contact
the author at online consultancy fee, or contact any transaction legal
consultant of your choice.
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