Admittedly, I take on some large issues in this column. But this is neither a treatise on contract law, nor the forum to attempt one. I am simply attempting to give some pointers for negotiating commercial contracts. I do very much appreciate the emails that I receive that suggest where I missed some salient information, or that offer critiques to some of my strategies. I’ve even used some of them and credited the authors, to the extent they’d allow. Funny thing about this site, most people don’t want to be identified. It’s almost end of year, so here goes:
Let’s say you’re in the heat of a commercial lease negotiation and the customer says to you: “What are these payments in the event of default? Why should I be penalized if your product doesn’t work as it should? Are you telling me that I have no remedies? Don’t you stand behind your products?”
I wrote about these contractual issues the week before Thanksgiving. I received so many emails that I thought it best to flesh these topics out a bit more. Also, some of these headings are from the anonymous “comments” section on this site, so I can’t attribute them (and I’ve also edited them for language).
1) “Real life example: Company A hired to refurbish shipping vessel owned by Company B. Contract obligated Company B to indemnify Company A fully, worded broadly enough and specifically enough to require indemnification for Company A’s own fault. Company A sets the boat on fire through clearly negligent actions and then tries to put it out with a garden hose. Fifth Circuit Court of Appeals tells Company B that yes, Company A was at fault; yes, you are out quite a bit for the value of the boat and the lost income, but you must eat it as you have to indemnify Company A for your own claim.”
Why on Earth someone would agree to indemnify a Customer for their own negligence is beyond me. I have been through this scenario many times, and I always inquire as to how I am expected to indemnify my Customer for its own negligence. In the B2B arena, indemnity should be limited (if possible) to third party claims against the potential indemnitee, at which point the indemnitor would take on the payment.
This raises another point: even if I indemnify you, who is going to defend you?
Caveat: I did not write the following dialogue. It is from the “comments” section of one of my columns where I mentioned I’d be writing about HIPAA and GLBA. Unfortunately, I cannot attribute the comments to the persons who wrote them, as they are anonymous; however they are quite apropos of today’s subject:
1) “I wish vendors would get it into their heads that indemnity for being sued on a confidentiality basis doesn’t cut it for financial institutions and other customers/clients that have affirmative obligations without being sued in the event of a breach of confidentiality.”
2) “I wish financial institution customers would get it into their heads that the ‘customer information’ they’re obligated to protect is not the sort of thing they would ever disclose to the vast majority of their vendors, and stop using their ‘affirmative obligations’ as a tool to cram unnecessarily restrictive confidentiality terms down the throats of vendors.”
Perfect. Those two comments capture the schism between vendors and customers when dealing with private financial or personal confidential information….
So, the Customer wants you to take on unlimited liability for breach of confidentiality, indemnify (and hold harmless) for any and all bad acts of your employees, and to carry a multi-million dollar insurance policy. What do you do?
First, begin by triaging these from simplest to more complicated. During a negotiation it can be helpful to appear to “give” as much as possible up front when you’re down to a few points. This way, when the final hot button items arise, you appear reasonable.
Insurance requirements are usually no-brainers, and as long as the amounts demanded are not grotesquely high, your Risk folks will approve the proposed language with very light editing, if any. Today, it is also not unusual for the Customer to demand to be named as a payee in the event of a loss; this is often fine, and usually not an issue. More practice pointers, after the jump….
Ed. note: The Asia Chronicles column is authored by Kinney Recruiting. Kinney has made more placements of U.S. associates, counsels and partners in Asia than any other recruiting firm in each of the past six years. You can reach them by email: [email protected].
Since late last year, things have been booming in Hong Kong / China in cap markets, especially Hong Kong IPOs. M&A deal flow has recently been getting a bit stronger as well. Although one can’t predict such things with any certainty, all signs are pointing to a banner entire 2014 for the top end US corporate and cap markets practices in Hong Kong / China. This is not really new news, as its been the feeling most in the market have had for a few months now and things continue to look good.
The head of our Asia practice, Evan Jowers, has been in Hong Kong for about 10 days a month (with trips every other month to both Shanghai and Bejing) for the past 7 months, and spending most of his time there meeting with senior US hiring partners at just about all the major US and UK firms there, as well as prospective candidates at all associate levels and partner levels, and when in the US, Evan works Asia hours and is regularly on the phone with such persons, as our the other members of our Asia team. Our Yuliya Vinokurova is in Hong Kong every other month and Robert is there about 5 times a year as well. While we have a solid Asia team of recruiters, Evan Jowers will spend at least some time with all of our candidates for Asia position. We have had long standing relationships, and good friendships in some cases, with hiring partners and other senior US partners in Asia for 8 years now.
The evolution of relationships between the genders continues. Currently, in law firms, there is an interesting conundrum; balancing the desire for a gender-blind workplace where “the best lawyer gets the work and advances” and the reality of navigating the complicated maze created by the fact that, in general, men and women do possess differences in their work styles. These variations impact who they work with, how they work, how they build professional connections and how organizations ultimately leverage, reward and recognize the talents of all.
Henry Ford sat on his workbench and sighed. A year earlier, he had personally built 13,000 Model Ts with his own hands. Fashioning lugnuts and tie rods by hand, Ford was loath to ask for help. Sure, there were things about the car that he didn’t quite understand. This explains the lack of reliable navigation systems in the Model T. But Ford persevered because he knew that unless he did everything, he could not reliably call these cars his own.
“Unless my own personal toil is responsible for it, it may as well be called a Hyundai,” Ford remarked at the time.
The preceding may sound unfamiliar because it is categorically untrue. And also monumentally stupid. Henry Ford didn’t build all those cars by hand. He had help and plenty of it. Almost exactly one hundred years ago, Henry Ford opened up the most technologically advanced assembly line the world had ever seen. Built on the premise that work can be chopped up into digestible pieces and completed by many men better than one, the line ushered in an age of unparalleled productivity.
Today, an attorney refers business because he can’t do everything the client asks of him.
There are three reasons why this is way dumber than a made-up Henry Ford story…