The Law of Business versus Negotiation - Assignment Example

THE LAW OF BUSINESS VERSUS NEGOTIATION Name of Student : University : Date : THE LAW OF BUSINESS VERSUS NEGOTIATION Introduction Negotiation is both a business phenomenon as well as a dispute resolution mechanism. Unfortunately, the legal foundations upon which negotiation is founded are often taken for granted. This is perhaps because negotiation is a common pre-contractual mechanism in addition to being a known dispute resolution process. No two negotiations will be similar in terms of content. What is however important and relevant is the legal grounding of any given negotiation. As such this paper examines the legal foundations upon which negotiations are set. The paper identifies five reasons as being the legal foundations for negotiations. These reasons include duress, legislation, pre-existing agreements, and determinations from adjudicatory bodies, and custom. The paper focusses on the law of business and negotiation within an environment of business conflict. Legislation Legislation is the most authoritative basis for negotiations. In this sense, international treaties and regulations are construed as being part of the necessary legislation. As a way of displaying seriousness to important shareholders, countries often anchor negotiations in pieces of legislation. International business agreements often cover areas of business such as investments, types of investment, guarantees of protection and dispute resolution. Although there may be other ways of dealing with disputes as well as dispute resolution processes, negotiation is the most common. Egypt and the United Kingdom are in agreement that any disputes related to bilateral dealings between the two countries can be resolved through negotiation. This relates to in cases of disputes arising from the agreement and especially where conciliation and diplomacy have failed. Vietnam and Australia have also agreed to end disputes arising from the agreement through timely deliberations. Article 7(2) of the treaty between USA and Argentina obliges parties to settle similar disputes through consultation and negotiation. The languages used in these provisions seem to suggest the possibility of flexibility in interpretation. The importance of these provisions is that their existence tends to influence arbitral bodies and courts’ decisions to advise parties to exhaust local remedies first in the face or disputes. Nowadays, statutes are known to make provisions for that facilitate foreign investment. Unlike Bilateral Investment Treaties, statutes are more interested in promoting investment than providing a framework for protecting investment. They establish institutions to promote investments, and which institutions become the ‘rescuers’ of first instance whenever a dispute arises. For example, under the Mexican Investment Act, Article 26 identifies the Commission set thereunder as the body in charge of consultations concerning foreign investment. Similarly, the Albanian Investment Agency in Albania is empowered to assist in drafting and discussion of investment contracts. Apart from these, multilateral treaties are also a source of legislative grounding mandating negotiations. For instance, the GATT/WTO agreement makes provisions for periodic negotiations about tax. Pre-existing conditions and changes in circumstances Often, parties to an agreement usually agree mutually to settle disputed through negotiation. For instance, a business deal can be completed with provisions that negotiations be used to deal with emerging issues that may not have been provided for at the time of signing the agreement. Also, a common business practise involves the periodic review of agreements. Also, these periodic reviews could be made on the basis of expected/predictable events such as profit windfalls. In such cases, parties would review their agreements in order to share profits that had previously not been provided for. Often this is done to avoid situations of tension over profit-sharing. Also, events may occur that engender questions relating to practicability of an economic agreement. In this case, such an occurrence falls under the purview of the doctrine of rebus sic stantibus (fundamental change in the circumstances). The tradition as established under Civil Law has always favoured the alteration of contacts in the event of certain occurrences, and which occurrences may not have been occasioned by the parties. There is a French concept known as imprevision which is also referred to as Wegfall der Geshaftsgrundlage in German. The concept basically allows for the adjustment of contractual rights in the face of intervening events that had been unforeseen at the time of forming the contract, and that the continuation of these events would render the agreement difficult or unequitable. The principles of frustration and force majeure under the Law of Contracts are poised at releasing parties from performance of their obligations under a contract. However, they do not in any way prevent parties from re-negotiating and re-organising the terms of a contract in the face of intervening events. Adjudicatory Orders Orders from adjudicatory bodies requiring parties to a dispute to settle it out of court also have the effect of introducing negotiations between parties. Generally, final determinations are made by courts and other adjudicating institutions. Even so, there have been cases where parties have been referred to sort the issues out amongst themselves. Whenever such an order is given, negotiation is always their best bet in solving their disputes. Under Common Law, courts have discretionary powers to order resolution of disputes as they deem best. Such an eventuality can be realised through an application by the parties generally, severally or suo motto (at the behest of the court itself). For example in England, court proceedings can be stayed pending the outcome of negotiations between parties. In such cases, the outcomes from the selected dispute resolution mechanism are then adopted as the order of the court. It is also common to find that the statutes that establish adjudicatory bodies also do empower them to require parties to a dispute to seek dispute resolution mechanisms such as negotiation among others. Failure to comply with court orders resulting from such a process could easily invite legal consequences. Duress The need to re-negotiate a contract could be brought about by duress, deception and undue influence. The factors, either together or individually, act as vitiating factors to a consensual agreement. It is however debatable as to whether the presence of these factors renders a contract void or voidable. Should the contract be void, then it necessitates the re-negotiation of a new contract. However, should the contract be voidable, the contract can be ratified or major amendments done to reflect the intentions of the parties. Over time, the concepts of duress and undue influence have shifted from actual physical threat to other subtle ways such as economic pressure and exploitation of illiteracy. Custom Custom has to be well known to disputing parties. Such customs must also be enforceable under the law. It is enforceable if it is reasonable, certain, not unlawful, abides by the contractual terms and is generally recognisable within the profession. A custom has to satisfy these factors before it can be deemed to be juridical status. There are two kinds of custom. The first kind relates to operations between people of a social community. The other type relates to business. Both types are important and they play an important role in negotiations. There are countries in the world whose citizens are known to be litigious in the sense that they prefer court proceedings to sort out their disputes. On the other hand, there are also countries who believe in dialogue and negotiation. In the Japanese custom for instance, the Harmony principle obliges citizens to prioritise group interests before individual ones. This means that commercial disputes ought to be resolved in the best interests of the entire society. Hence, negotiations experienced from the Japanese culture are unavoidable within business dealings. The Confucian ethic also obligates peace-making and restoration of harmony. The necessity for parties to negotiate s therefore not only a legal obligation but it is also a cultural obligation among the Japanese people. In order for the Business-type custom to be valid, it ought to be recognisable within the business practise. In Agency Law for example, an agent is customarily deemed to be working at the behest of the master. It is also acceptable that in some trades, there are no set procedures of conducting business except as set over the years through accepted custom. It is these customs that come in handy in terms of negotiations. Personal Reflection Negotiations are important processes in the resolving of disputes. Indeed from the foregoing discussions, it is apparent that the law can (and actually does) compel business partners to negotiate. From the discussions, the law seems bent on protecting the sanctity of contractual relations. Through the five ways discussed above, it is clear that even though parties to a contract may not envision the necessity of negotiations in the face of a dispute, the law is very clear on the circumstances under which such parties have no other choice. Negotiations are advantageous over litigation because they end in a win-win situation that is favourable for future business engagements between the parties. Read More