Contractual drafting and negotiations
The drafting and negotiation of agreements are essential elements for business activity.
Independently from the specificities of each area, transversally we find the same key points which must be rigorously analyzed in order to secure your company’s interests.
This common base often includes the following points:
- The amount of the agreement determines the economy of the operation
- The payment methods enable an anticipation of the payment installments, a better management of your financial flows, and also to secure the parties’ commitments for a practical standpoint. Whether for the provider or the supplier, it is a crucial point as, depending on the timing of the settlement, you may be obliged to advance amounts in order to be able to enforce the agreement. Furthermore, acceptance to be paid in full at the end of the agreement, involves taking the risk of having the client being unable to meet its financial commitments on the payment date. From the client’s standpoint, payment in advance involves taking the risk that the provider disappears with the funds cashed, without having provided the goods or the service.
- The duration or the exit conditions enable an acknowledgment of the period of commitment and to indirectly determine the economy of the operation. It may constitute effective negotiation leverage as a long commitment duration often allows for better contractual conditions.
- The applicable law and the competent courts ensure awareness of the legal rules and also the case law rules governing your agreement. Depending on the applicable law, the economy of the agreement may take on a different proportion. For example, an agreement governed under American law is likely to be sanctioned by punitive damages (amount intended as a sanction beyond the prejudices suffered by the other party), which is not the case for a French agreement, which is subject to the principle of indemnification of the sole prejudice suffered. Accordingly, such damages may significantly multiply the financial sanctions incurred in the context of a court action and thereby significantly increase the litigation risk.
Other points, appearing more anecdotal, are nonetheless paramount to ensure the proper performance of the agreement, and especially its full effectiveness.
For example, the sanctions in the event of non-performance of the agreement can be effective and dissuasive tools. The sanctions provided by the law and case law may be insufficient or not dissuasive enough (limitation of the prejudice suffered, absence or very minimal consideration of the indirect prejudices such as the prejudice of image or reputation, etc.).
MOSAIK shall accompany you in order to determine the most protective solution that best meets your needs.
This may involve the integration of a penalty clause (financial sanction, the amount of which is agreed in advance in the event of a default by the other party), financial penalties per day overdue and/or per offense acknowledged (amount to be paid per period insofar as the obligation is not enforced, or per offense, each time the offense is repeated), automatic consideration of certain costs or the setup of a compensation mechanism (withholding of payment, granting of complementary time periods, etc.).
On the other hand, the limited liability clauses enable a control of the financial risk and to anticipate the risk beforehand and the cost, in the event of non-performance of the agreement. Nonetheless, these clauses should not provide for a derisory amount, as it could be cancelled by the judge.
MOSAIK shall assist you to fix the amounts that are the most consistent with the economy of the agreement.
MOSAIK shall also assist you in order to prevent difficulties or identify your partners’ defaults by providing for contractual surveillance mechanisms. Accordingly, the agreement may provide for a verification of the accounts for a given period or a surveillance mechanism to control the evolution of services. These mechanisms should not be ignored as they enable an early identification of the first defaults, and enable cooperation with the other contracting parties in order to resolve them and prevent an escalation. They may also constitute alert mechanisms for you to prevent an aggravation of any subsequent prejudice (for example, a detailed surveillance of a project’s development could enable speculation as to whether the initial schedule could be met).
Similarly, MOSAIK may take into consideration the difficulties to determine the economy of an agreement and may provide you with economic price progression mechanisms.
MOSAIK may assist you with the drafting of indexation clauses according to the INSEE, SYNTEC indexes, revision clauses or progressive or sliding scale performance clauses.
These elements should enable a customized response to best meet your needs.