Earlier we wrote about what to do when there is a dispute Part 1 -https://acelawllp.com/f/contract-disputes-%E2%80%93-part-1---how-to-deal-with-contract-disputes.This is the second part of the contract dispute series. Something contracting parties often do not appreciate is that practical and easy steps can be taken at the outset to prevent the dispute in the first place.
The number one factor to ensure a contractual relationship does not end in a dispute and even if there is a dispute that it resolves and parties come through successfully is how well the parties know each other.
In today's age of hyper-connectivity, social media platforms and physical and virtual presence, businesses are concluded in a relatively short period, often with a click or emoji and affords little time for actually knowing the other party. However, getting to know the other side is an investment worth making if the contract is especially lucrative.
By knowledge, I do not mean just the name and address. It will help to know a bit further, as to what are the professional and social backgrounds, present and past addresses and even the family connections of the business owners, tax declaration, operating bank accounts and investments. This is important to understand the reliability of the individual or the corporation. Very importantly enquiries into the background can also reveal the party's conviction to the contract. One may take the view that the other side will find it intrusive, however, those who are likely to abuse their position are those who will pull the victim card of intrusion, not the ones who are confident about their conviction to the deal.
To give an example, businesses are conducted orally in Bangladesh and ongoing relationships often the issue of credit comes up. Business efficacy can mean a party has a very short time to decide on credit and often is compelled to allow a deal on credit. There is a marked difference when a party had done the diligence at the beginning and therefore in crunch moments can have the confidence at the back of their mind that at a time of need, they have material with which they can exercise leverage. If they have nothing then the position is different and the party offering the credit is left with uncertainty. This can fundamentally alter the dynamic of the parties. In the worst-case scenario, the offending party will get evasive and the debtor party will keep getting more and more disgruntled leading to the collapse of the business relationship.
Post Aug-2024 the political landscape is thoroughly altered and even if there is political uncertainty, people will need to continue having business and it is impossible to stall matters. However, generally, everyone is very cautious and this is evident from the property market and reduction of property transactions. Generally big commercial decisions are deferred.
This context is helpful to understand why knowledge of the party's background is now even more vital as it would allow parties to operate and continue business relations with awareness. For foreign organisations, knowledge of the party's tax return and assets can provide a valuable backup of resources in case the party cannot deliver for genuine and unavoidable reasons without resorting to the courts. The counterpart in Bangladesh will know the other party has that knowledge and will act more diligently to ensure compliance with the terms or at the least best efforts to keep the promises.
Find below our helpfulgetting-in business checkerwhich features a simple list of questions that we recommend one should ask their would-be business counterpart in Bangladesh before embarking on business.
- What is your trading name as per your trading licence? Please provide a copy of your trade licence
- May I have all your addresses – home, registered trading location, (office/showroom/shop/warehouse)
- Who is in business with you?
- Do you have a bank account if so please provide details.
- What other assets and investments do you have?
- Do you have any existing insurance covering a breach of the potential contract? If not do you mind if I arrange one?
If one has started a business already then we recommend discrete private investigations aimed at finding out the same things as above, rather than directly approaching the individual/corporation. This is to prevent the possibility of them getting more cagey which can potentially aggravate a worsening situation.
In conclusion, business is fast-paced and if it matters then getting to know your counterpart will go a long way to ensuring that the contract terms are honoured even in these uncertain times of political uncertainty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
