CONTRACT

NEGOTIATION
(AN INHOUSE COUNSEL PERSPECTIVE)

DHANNY JAUHAR S.H, LL.M.

Presented at ALC – SKKMIGAS Webinar on Contract Negotiation
25 June 2021
 DISCLAIMER

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LAWYER IS THE BEST PERSON TO LEAD COMMERCIAL CONTRACTS NEGOTIATION;

LAWYER SHOULD BE THE SOLE NEGOTIATOR OF COMMERCIAL CONTRACTS;

LAWYER IS FULLY RESPONSIBLE FOR WHATEVER THE CONSEQUENCES/OUTCOMES OF COMMERCIAL

CONTRACTS.

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 - DUE DILIGENCE AND
N E G O T I AT I O N

CONTEN - C O N T R A C T N E G O T I AT I O N A N D F O U R
CORNERS DOCTRINE;

T: - L AW Y E R R O L E S A N D
RESPONSIBILITIES;

- PRACTICAL TIPS (DO’S

AND DON’TS)

- DISCUSSIONS
 COMMERCIAL CONTRACT NEGOTIATION
TEAM:
FINANCIAL
LAWYER ADVISOR

LEAD
TAX ADVISOR
NEGOTIATOR

DECISION MAKER COMMERCIAL TECHNICAL

ADVISOR ADVISOR
DIRECTOR/ULTIMATE BENEFICIARY
OWNER

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THE
TRIOS: Due Diligence

Negotiation RISK(S)
 - DUE DILIGENCE AND
NEGOTIATION

CONTEN - C O N T R A C T N E G O T I AT I O N A N D F O U R
CORNERS DOCTRINE;

T: - L AW Y E R R O L E S A N D
RESPONSIBILITIES;

- PRACTICAL TIPS (DO’S

AND DON’TS)

- DISCUSSIONS
Due Diligence/Uji Tuntas:

Business objectives, risk appetites,

Client/your employer
negotiation limits/mandates.

Who are they, business and track

Potential business partner record, financial capabilities, UBO.

Object of transaction: what is it, where is it,

Transactions applicable laws, conditions of transfer, etc.

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DUE DILIGENCE AND NEGOTIATION:

IDENTIFY TO MANAGE: FAILURE TO IDENTIFY MEANS FAILURE TO MANAGE;

RAISING RED FLAGS/SHOW STOPPERS;

SELECTING ‘BIG TICKET ITEMS’ AND ‘HORSES TO TRADE’.

TO BACK UP YOUR NEGOTIATION POSITION.

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 IDENTIFIED POTENTIAL MITIGATION
RISKS:
Counterpart status (SPV/USD1 Guarantor (PCG and/or Personal Guarantee)
Company)

Financial status of the Bank Guarantee and/or establishment of escrow accounts and/or delayed
counterpart payments

Status of the object Further due diligence and warranty (title, use as intended, etc), contingent
payments (subject to certain conditions)

Counterpart Residual obligations Indemnification ($ for $) backed up with money in the escrow.

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 - DUE DILIGENCE AND
N E G O T I AT I O N

CONTEN - C O N T R A C T N E G O T I AT I O N A N D F O U R
CORNERS DOCTRINE;

T: - L AW Y E R R O L E S A N D
RESPONSIBILITIES;

- PRACTICAL TIPS (DO’S

AND DON’TS)

- DISCUSSIONS
CONTRACT AND NEGOTIATION:

MODEL CONTRACT;
MEANS OF NEGOTIATION (F2F, CORRESPONDENCE – DRAFT – COUNTER DRAFT)

INTERNAL PREPARATIONS

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 CONTRACT NEGOTIATION AND FOUR CORNERS DOCTRINE:

Each Party confirms that this Agreement and together with any documents entered into pursuant to this Agreement,
represents the entire understanding and constitutes the whole agreement in relation to its subject matter and supersedes
any previous agreement between the Parties with respect thereto, and without prejudice to the generality of the
foregoing, excludes any warranty, condition or other undertaking implied at law or by custom.

Each Party confirms that this Agreement together with any documents entered into pursuant to or in
connection with this Agreement, represents the entire understanding and constitutes the whole agreement
in relation to its subject matter and supersedes any previous agreement between the Parties with respect
thereto.

Each Party confirms that this Agreement together with any documents
entered into pursuant to this Agreement, represents the entire
understanding and constitutes the whole agreement in relation to its subject
matter and supersedes any previous agreement between the Parties with
respect thereto, and without prejudice to the generality of the foregoing,
excludes any warranty, condition or other undertaking implied at law or by
custom.

ENSURE WHATEVER AGREED DURING THE NEGOTIATION IS ACCURATELY REFLECTED IN THE TRANSACTION DOCUMENTS.
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INTERNAL PREPARATIONS:

UPDATED DUE DILIGENCE CHECK LIST (LEGAL, COMMERCIAL, TAX,

TECHNICAL);

NEGOTIATION MANDATE;

TERM SHEET;

ADVISORS' COORDINATION.

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 - DUE DILIGENCE AND
N E G O T I AT I O N

CONTEN - C O N T R A C T N E G O T I AT I O N A N D F O U R
CORNERS DOCTRINE;

T: - L AW Y E R R O L E S A N D
RESPONSIBILITIES;
- PRACTICAL TIPS (DO’S
AND DON’TS)

- DISCUSSIONS
WHEN TO CALL THE HEAVY
CAVALRY:
HIGH VALUE AND/OR NON-ROUTINE/CORE BUSINESS TRANSACTIONS (DIVESTMENT / ACQUISITION);

FOREIGN JURISDICTIONS;

COMPLEX TRANSACTIONS (EX: ASSETS SWAP, RBL, PROJECT FINANCING, ETC).

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LAWYERS' ROLE:
Stages: Inhouse
  Project Screening (red flags
identification).
 
Internal process/negotiation (board
 
presentation).
Pre-negotiation
External counsel selection process;
 
 
Drafting/reviewing the draft of
transaction document(s);
Internal coordination with transaction
team (forming negotiation strategy).
External Counsel
-
-   Reviewing/re-drafting the draft of
 
Proposal submission/Engagement
letter negotiation.
Drafting/reviewing the draft of
transactions document(s);
Internal coordination with transaction
team (forming negotiation strategy).
Stages: Inhouse External Counsel
     
  Attending rounds of Attending rounds of negotiation.
negotiation.
Reviewing/re-drafting the draft transaction document(s);
  of transaction document(s);
  Ensure the business is aware of
Negotiation the legal risks of making certain  
concessions.  
  Developing legal strategy to cater
Developing legal strategy to business needs.
cater business needs.  
Obtaining internal approval
(sign off) on the fully
negotiated documents.

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LAWYERS' ROLE:
Stages: Inhouse External Counsel
  Signing and Completion/Closing of the Transactions.  Signing and Completion/Closing of the
Transactions.
   
  Managing legal issues of the assets/object of transaction.
   
 
   
Assisting the organization on the interpretation of executed
transaction documents.  
   
Post -negotiation
 
Forming claiming strategy (including to launch
legal measures/engage dispute settlement clause
under the transaction documents).
 
Managing arbitration/litigation relevant with the
transaction (if any).

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LAWYER’S ROLES IN THE NEGOTIATION:
Identifying legal risks and reminding the principals of certain potential consequences in accepting certain
concessions;

Developing legal strategies to manage the identified risk (legal and otherwise);

Drafting/reviewing transaction documents to ensure the parties agreements are properly and accurately reflected;

IN ANY CASE LAWYERS ARE NOT BUSINESS DECISION

MAKERS

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 - DUE DILIGENCE AND
N E G O T I AT I O N

CONTEN - C O N T R A C T N E G O T I AT I O N A N D F O U R
CORNERS DOCTRINE;

T: - L AW Y E R R O L E S A N D
RESPONSIBILITIES;
- PRACTICAL TIPS (DO’S AND
DON’TS)
- DISCUSSIONS
DO’S:

BE PREPARED (READ READ READ – NOT ONLY LEGAL DUE DILIGENCE REPORT BUT ALSO FINANCIAL/TECHNICAL);

SEEK INTERNAL INPUTS ON THE BIG TICKET ITEMS (TAX, SECURITY ENHANCEMENTS, ENVIRONMENTAL/SOCIAL LIABILITIES);

GET THE MOST OUT OF YOUR EXTERNAL COUNSEL  … TEST THEIR KNOWLEDGE AND UNDERSTANDING ON THE TRANSACTIONS;

BE VERY ACTIVE IN THE NEGOTIATION AND DRAFTING PROCESS (REMEMBER IT IS GOING TO BE YOUR BABY AFTER IT IS SIGNED);

PREPARE YOUR ARGUMENTS FOR THE THINGS YOU SEEK FOR FROM THE OTHER SIDE OF THE TABLE

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DON’TS:

NEVER ASSUME YOUR COLLEAGUES DO AS MUCH READING AS YOU ARE (FORCED THEM TO DO SO)

ALWAYS REMIND YOUR COLLEAGUE THAT CONTRACT IS A DOCUMENTS WHICH EVERYONE IS RESPONSIBLE FOR;

BE A ‘ GUN SHY’ (I E. SE AT ING AT THE BACK OF THE ROOM AND LE T THE E XTE RNAL ADVISORS FULLY NEGOTI ATE YOUR DOCUMENTS UNCHECK) ;

ALWAYS CHECK YOUR CHEAT SHEETS/TERM SHEETS TO ENSURE YOU ARE ACTING WITHIN YOUR NEGOTIATION MANDATE;

MAINTAIN YOUR COMPOSURE (TRY THE POKER FACE EXERCISE).

ASKING SOMETHING WITHOUT VALID REASON (BECAUSE YOU SIMPLY WANT TO).

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HOW TO SAY (LIKE A BOSS) IN THE
NEGOTIATION:
I DON’T UNDERSTAND THIS VERY CLAUSE YOU ARE PROPOSI NG = CAN YOU HELP US TO UNDERSTAND ON WHAT IS THE REASON AND
PURPOSE OF THIS PROPOSED CLAUSE(S)?;

THAT IS A COMPLETE NON-SENSE = INTERESTING, BUT W E DO NOT THINK WE CAN RECOMMEND OUR PRINCI PALS/ CLIENTS TO ACCEPT
THI S;

I HAVE SEEN ENOUGH OF YOUR ACROBATS = I THINK IT IS A TIME FOR US TO TAKE A BREAK;

SLAM DUNK, WE ACCEPT THIS =THANK YOU, WE APPRECIATE THIS AND W E WILL BE IN THE POSITION TO RECOMMEND TO OUR
PRINCI PALS/CLIENT OF ACCEPTING YOUR PROPOSALS;

I COMPLETELY DO NOT HAVE ANY RESPONSE ON THIS =THANK YOU, WE W ILL TAKE INSTRUCTIONS FROM OUR PRINCIPALS FROM OUR
PRINCIPALS/ CLIENTS ON THIS ISSUE, AND LET’S MOVE TO DISCUSS OTHER ISSUES

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NEVER FALL INTO THESE COMMON
TRAPS:
“THIS IS MARKET STANDARD”

“YOU HAVE ACCEPTED THIS CLAUSE IN THE PAST TRANSACTIONS”

“WE HAVE A STRICT POLICY ON THIS ISSUE”

“YOUR CLIENT MUST AGREE”

“I WOULDN’T BE WORRY ABOUT IT”

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 - DUE DILIGENCE AND
N E G O T I AT I O N

CONTEN - C O N T R A C T N E G O T I AT I O N A N D F O U R
CORNERS DOCTRINE;

T: - L AW Y E R R O L E S A N D
RESPONSIBILITIES;

- PRACTICAL TIPS (DO’S

AND DON’TS)
-
DISCUSSIONS
 ‫شكرا‬
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