Miller Magazine Issue: 115 July 2019

73 ARTICLE MILLER / JULY 2019 1. KNOW YOUR CLIENT New companies constantly appear on the market, and if you want to grow, you should work with them. There is always a risk of default or even worse, fraud. These risks cannot be absolutely avoided, though you may minimize them. The first thing is to ensure that you know with whom you are doing the business. First, you should answer some basic questions: Do I know this company? Is it known in the market? Gather information of potential partner from market participants – your current partners, brokers, banks etc. Absence of publicly available information about the company also means a lot. Another hint is to check the company with trade associations such as Gafta and Fosfa, - whether the company is a member in any of it - and God forbid that should occur – is in defaulters’ list for one of its’ awards of arbitration (this information is available only for association members). As a rule of thumb, no one can tell your story bet- ter than you, so give your prospective partner such opportunity. One of easiest ways is to ask it to com- plete a so-called Know Your Client (KYC) form. KYC is a simple questionnaire, in which your counterpar- ty should give information about itself. Usually such forms request basic company information (registra- tion number, country of incorporation, legal and actu- al address, parent and affiliated companies, banking details, directors’ names, email and postal address- es, telephone numbers etc.). Preferably, such form should also ask for copies of certain common com- pany documents such as certificate of incorporation, certificate of good standing or the like, articles of as- sociation, power of attorney of its representative. You may create and advance such KYC form with any questions you want your potential partner to an- swer. However, refusal to fill in basic company infor- mation and provide some general documents should definitely be an alert to you. Why do you need all this information? There are at least two good reasons for that: 1) To assess your risks while deciding whether to deal with that company or not; 2) If things go wrong after conclusion of the con- tract – to ensure that you have enough information about your counterparty to enforce your legal rights and remedies. 2. BE CLEAR Another important thing is communication with a counterparty, both before and after the contract con- clusion. It is often the case that parties are conducting ne- gotiations with a view that the contract will be con- cluded once a single written document, containing all necessary terms, is signed by both parties. However, under many national legislations, before the contract is actually signed, the parties may well find them- selves bound by the contract – once the offer is un- conditionally accepted. And this is a common thing for agricultural mar- ket, where many contracts are subject to English law and agreements are often reached in email or other (messengers) correspondence. In other words, during negotiations parties may believe that they are merely discussing terms of potential transaction and have no liability for breaking off negotiations, but in fact may already be bound by contract, without even realizing it. To avoid such surprises, at least be maximally clear of what is your offer, what are conditions of the offer (for instance, how long it is valid), and how it must be accepted in order to result in a binding contract. If you do not want to be in the contract until both sides will sign it, indicate it by making that condition explicit in your correspondence. For instance, by marking all correspondence ‘subject to contract’, you are indi- cating that you are not bound by the contract yet. Clear communication is no less important during contract execution. Your counterparty should be properly informed about each step in execution pro- cess, and all required notices and documents shall be served accordingly. All messages should be clear and unequivocal. The message should not leave a space for misinterpreta- tion by another party. Always remember that every word counts. There- fore, correspondence should not include things that may be interpreted as contradicting to contract terms. A few ‘technical’ recommendations in relation to correspondence that may be decisive to building successful position vis-à-vis counterparty: 1. Link correspondence with counterparty to the par- ticular contract in question. It should be identifiable.