Brief considerations on the structuring and negotiation of contractual instruments

01/08/2013

The Vertiginous Recovery of the International Commercial Scenario Post-Crisis and the Heating of the Economy in the Country and the World Have Generated an Increasing Demand for Products and Services, as well as an Increasingly Larger and More Varied Supply, Stimulating Competition in Various Sectors.

Thus, the market faces the need to create business solutions that allow it to operate transactions securely, making it advisable to pay special attention to the contractual instruments that will record them, given the substantial complexity of some of these legal transactions.

Indeed, the consequences of the contracting process must be considered, notably regarding the assumption of responsibilities and the fulfillment of guarantees agreed upon in the original contract. Any contract will require exceptional caution in the drafting of the contractual instrument.

Therefore, the drafting of a contract should consider, as much as possible, its future developments, anticipating potential conflicts and uncertainties that may arise during its execution.

It should be noted that the drafting of a contract should aim to maintain its object according to the original conception, the result of the negotiations that originated it, safeguarding the parties against any event that may compromise its essence or generate controversies about it.

Thus, aiming at contractual security, the instrument should foresee all possible and probable consequences that its validity implies, including the establishment of specific rules for the protection of the contracting parties, addressing, above all, the following: i) responsibilities; ii) deadlines; iii) guarantees; and iv) penalties for non-compliance with contractual obligations.

Responsibilities must be clearly defined in the contract, and its construction should consider the principle of ethics, which informs Brazilian Civil Law since the publication of the Civil Code in 2002.

Furthermore, the clear definition of deadlines for fulfilling the obligations assumed by each party is of fundamental importance, given that delays in fulfilling some obligations, especially for the delivery of goods or completion of services, can imply prohibitive costs, especially considering the costs involved in the mobilization and demobilization of equipment and people, depending on the nature of the supply or service.

Another relevant point relates to the provision of guarantees in the contract. For large contracts, it is advisable to establish guarantees for the execution of the contract, whether for the proper fulfillment of the contracted object or the expected performance by the provider and/or supplied goods.

It should be noted that the provision of a guarantee in the contract, besides providing greater security for the Contractor, also acts as a trigger for quality control of the provision and/or supply by the Contracted party. Finally, given the need to ensure fidelity to agreements and avoid non-compliance with the obligations that form the core of the contract, it is advisable to impose penalties for non-compliance.

Indeed, setting specific penalties for non-compliance with contractual obligations by the parties aims to safeguard the creditor's rights and preserve, as much as possible, the essence of the business to be realized. This is, therefore, the lawyer's role in the negotiation: to act proactively, positively, and constructively to, first, enable the contracting and, second, ensure that the contractual instrument is drafted in perfect consonance with the parties' interests, and mitigate the damages they may suffer from the non-execution of the contractual object or its execution in a manner discordant with what is expected, through careful structuring.

For this, the professional requires not only full technical knowledge about the subject debated during the negotiation process but also, and especially, a satisfactory ability to relate positively, understanding the client's aspirations and the contractual position occupied by them in each specific contract (the "side of the table"), seeking alternatives that enable the contract, constantly focusing on its objectives without deviating from them.

It should be noted that the presence of the Lawyer, aware of his professional duties and knowledgeable about the client's business, will allow the formatting of contracts that specifically mold to the client's interests and needs, with the insertion and/or maintenance of clauses considered sensitive in each of the specific contractual relationships to be established.

Therefore, professional guidance and assistance are essential throughout the contracting process, from negotiation and drafting to the execution of the contract, to ensure the most appropriate regulation of the contractual relationship between the client and their suppliers, providers, or partners.

Alexandre Oheb Sion, Caio de Pádua, Giovanni Peluci.

The Sion Advogados team has extensive experience in negotiating, drafting, and analyzing complex national and international contracts and pre-contractual instruments.