Newsletter January 2016

A note from our Head of Chambers

Welcome to our newsletter!

We decided that the best way to celebrate our 50 years in practice was to open ourselves to dialogue with our clients, not only from us to you but also to respond to the most common questions we face in our daily interaction.

We realise that while the issues coming to us are mostly specific to your situation, sometimes a little awareness could have gone a long way to protect your interests.

We believe that the best measure we can take is to educate and raise consciousness.

This is not a newsletter for lawyers. In fact, quite the contrary. We have endeavored to keep things as simple as possible. We believe that service is having open ears and speaking the same language.

Both in my practice at the Bar and during my long career as Head of Legal for Barclays Mauritius before my return to Gokulsing Chambers, the strongest message I have received from clients is to
make things easy to understand.

Our ambition is to make law accessible to you. So here we are. Talk to us and open the dialogue.

In the meantime, our warmest best wishes for 2016.

Mrs Preeti Gokulsing

Contract Risk:

There are five risks inherent to all contracts:

1. Performance violations
2. Automatic renewal of bad or obsolete contracts
3. Rogue transactions
4. Unapproved contracts
5. Non-compliance

Each risk is analyzed below.

1.Performance violations or non-performance:

When either party does not fulfill a material term or disregards the basic terms of the contract there is a performance violation.
One party must undertake certain action (or refrain from it) and fails to meet the requirement.
Further action may be required to (a) enforce the contract terms, (b) to claim any loss caused by this action or omission or (c) to terminate the contract.

2.Automatic renewal of bad or obsolete contracts:
 
Either party’s view of a particular contract can change over time.
In that case, a once promising contract becomes an encumbrance. Without due attention to the renewal provisions, procedures and dates, the  bad contract can renew automatically.
Contract monitoring is required to follow up on renewals and variations which may be agreed between the parties to refresh their expectations.
Termination of contracts should also be envisaged in the contract monitoring process.

3. Rogue transactions:

Contracts create parameters for the operation of commercial transactions between the parties and often provide upper and lower thresholds for those transactions to occur over time so that the parties understand their maximum exposure under the contract.
Rogue transactions occur when an individual in either party’s organisation proceeds with a transaction outside of the agreed threshold.
A rogue transaction can be intentional or unintentional. Without careful monitoring of the thresholds, rogue transactions can accumulate and threaten the organisation with litigation or cause financial loss.

4. Unapproved contracts:

An unapproved contract typically occurs when an employee with apparent authority on behalf of the organization signs a contract which binds it to unintended and unapproved obligations.
Only a rigorous approval process for such authority can mitigate this risk.

5 Non-compliance:

When it comes to compliance, it is natural for parties to focus on the obligations and conduct of the other party rather than their own conduct.
However, breaches may happen in spite of best intentions, if important provisions are not monitored for compliance by both parties and may lead to financial loss

How to manage contract risks:

A contract analysis has the proven ability to help your organization manage contract risk. This analysis should ideally be conducted at the time the contract is being envisaged.
Whether or not a party may negotiate the terms of the contract at the outset, the contract analysis will materially identify the risks associated with the obligations under the contract as well as the contract monitoring process required to
ensure that your organisation understands and complies with it.
While this may sound simple enough, this is a critical step which most organisations omit.
A simple discussion with a specialised lawyer should guide you in the right direction towards avoiding costly litigation or financial loss at a later stage.

In other words, it is a ‘stitch in time which saves nine.’.