Law of Contracts – Part 22
Enforcing Your Contract: Homework – What To Do Before You Go Ahead.
By Adv Louis Nel.
(For a summary on this series see end of article).
THE NEXT STEP I.E. STEP 3 IS TO CONSIDER THE IMPACT ON VARIOUS ASPECTS OF YOUR BUSINESS (REFRESHER: STEP 1 WAS: HOW ENFORCEABLE IS YOUR CONTRACT & STEP 2 WAS: HAVE THE REQUISITES BEEN MET]
The general topic is enforcing your contract and what to do before you do so. The suggestion is that you should proceed with caution and not simply ‘jump in at the deep end’/’shoot from the hip’.
Thus we have guided you through the process of checking that the contract under discussion is enforceable by revisiting all the requirements for a valid contract.
As a next step, before you instruct an attorney and he/she in turn an advocate (and more than likely a junior AND a senior!) and start incurring debilitating legal fees, there are a number of other aspects to address. We will start with assessing the impact of litigation, the non-litigious options and finally how to prepare for trial.
The impact of litigation is always traumatic, pervasive and if not carefully considered and managed, debilitating not only on management time, but also cashflow and relationships. The loose language ‘Don’t talk to me, talk to my lawyer’ and ‘See you in court’ has come to haunt many a businessman, so be warned, especially those ‘serial litigators’ out there!
Please note this is not in order of importance, but to keep things simple let’s consider the impact on shareholders and the share price (I use the term ‘shareholders’ for ease of reference but this applies equally to members of a close corporation, partners in a partnership, trustees in a trading trust and any other form of ‘business associate’ who has injected money into the enterprise). Shareholders invest for a return of their investment (‘ROI’) and unless litigation is justifiable and the only option and this has been clearly communicated, they may well ‘vote with their feet’ and invest elsewhere in fear of their ROI, which may well be with your competitor!
How many business leaders will regularly proclaim that their main asset is their employees – really? Those very same leaders, driven by testosterone and the (misplaced) ‘excitement’ of litigation, will quickly forget about these comments and more often than not employees will learn about the litigation via the grape vine!
And even when management is approached for clarification, it will often be denied or played down as a ‘minor hiccup’. The concept of ‘internal branding’ goes way beyond the sexy marketing slogans and advertising – it includes involving and taking into your confidence the staff, whether by internal memos or discussing the matter with employee representatives, unions etc. At the end of the day, who keeps the business ‘ticking over’? Of course: the customer and that applies even when you have a captive audience/market.
This sector is often treated by management with the same disdain and ignorance as the employees with rumours ‘flying around thick and fast’. If the brand is not managed carefully, they will react like shareholders i.e. ‘vote with their feet’ and purchase their wares elsewhere, which may well be your competitor. Managing and continually polishing your brand is a key component of ongoing success and should be extended to the approach suggested above as far as disputes are concerned.
Finally let’s talk about the one ‘commodity’ we all never seem to have enough of: time. The negative impact on time is astronomical – just ask anyone who has even been involved in litigation and I’m not just talking about time as in hours of the day.
‘Yes’ you (and your staff) will be wasting away valuable time searching for documents, compiling evidence and attending meeting after meeting with your legal team, but that is not all. The most damaging aspect is that the issue is constantly on your mind – so much so that the preoccupation with the dispute can have a major negative impact on the creative side of your brain and may lead to the loss of material business opportunities!
Disclaimer: This article is intended to provide a brief overview of legal matters pertaining to the travel and tourism industry and is not intended as legal advice. © Adv Louis Nel, ‘Louis The Lawyer’, October 2016.
- In Part 1 (Aug 2014), I categorised risk into five categories, namely; 1. PEOPLE, 2. MONEY, 3. LAW, 4. SERVICE and 5. ECOLOGY. In this series, I deal with the risk profile of each, i.e. broadly speaking the areas of risk that any business is exposed to can been allocated under these five categories.
- Part 2, (Sep 2014) covered the category of ‘People’ under four sub-categories: Staff (discussed in Part 1); Third party service providers (‘TPSP’); and Business Associates.
- Part 3 (Oct 2014), continued with ‘PEOPLE’ as Customers.
- Part 4 (Nov 2014), started the discussion on the 2nd category, namely ‘MONEY’ in terms of CASH and CHEQUES.
- Part 5 (Dec 2014), looked at CREDIT and CREDIT CARDS.
- Part 6 (Jan 2015), looked at LAW and CONTRACTS, with an introduction and Requisite #1: Offer & Acceptance.
- Part 7 (Feb 2015), continued with Requisite #1 covering telephone enquiries, e-mails, websites and advertising.
- Part 8 (Mar 2015), covered Requisites #2: Legally Binding Obligation, and #3: Consensus in contracts.
- Part 9 (Apr 2015), covered Requisite #4: Performance Must Be Possible.
- Part 10 (May 2015), covered Requisites #5 & 6: Performance Must Be Permissible, and Capacity of the Contracting Parties.
- Part 11 (Jun 2015), continued with Requisites #6: Capacity of the Contracting Parties.
- Part 12 (July 2015), covered Requisite #7” Negotiating a Contract.
- Part 13 (Aug 2015), covered Requisite #8 Drafting a Contract.
- Part 14 (Oct 2015), covered Requisite #9 Contract Management.
- Part 15 (Nov 2015), covered Requisite #10 Enforcing Your Contract – Part 1.
- Part 16 (Dec 2015), Requisite #10 Enforcing Your Contract: Requisites (continued-1)
- Part 17 (Jan 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-2)
- Part 18 (May 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-3)
- Part 19 (Jun 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-4).
- Part 20 (Jul 2016), Requisite #10 Enforcing Your Contract: Requisites (continued-5).
- Part 21 (Sep 2016), Enforcing a Contract: the 8th & final question.