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“FREE-DOM”​ To Contract, A SME Perspective

“FREE-DOM”​ To Contract, A SME Perspective

In law the common parlance “FREEDOM TO CONTRACT” means that the Courts will be slow to impose its interpretation about the intentions of parties in a contract, unless the contract is vague. The policy consideration behind this, is to promote commerce. In essence, businesses are encouraged to contract however they like, with no or very little interference from the law (except in cases where the subject matter of the contract is illegal or immoral).

This is the theory, but for many SMEs this theory does not translate to reality, simply because they may not have the bargaining power. Nearly all my clients who ask me to review standard form contracts given by their big clients and complain they cannot amend or even vary terms which are not in their favour. In a sense, they are afraid to even meet their clients to try and negotiate for better terms. This fear of losing the contract, forces them to enter into contracts which they are unhappy about and a feeling of “no choice”.

By entering into such “no choice” contracts, they unwittingly or knowingly make their employees suffer too. This is particularly so for foreign workers who eventually will have to do the work for very small pay. Contracts are now used by big companies to “dominate” the small companies, so that labour can now be obtained nearly for “free”. I call this type of freedom; “free-domination”.

I recall in my recent course at the University of Oxford on Negotiations, my tutor, Dr. Marta Coelho told me that the lack of bargaining power is frequently a perception and may not be real. This made me reflect on my own experiences as a small law firm engaging with so many different larger entities and personas in my last 26 years of practice. I have had clients who were billionaires in their personal capacity, and they can be difficult to handle. I have had clients who are multinational companies with complex bureaucracies. I have had to deal with very large law firms, Senior Counsels and Queens Counsels who were on opposing sides. What did my course and my experiences reveal to me? I learned from my tutors at this course that behind every decision is a person. That person is just like you and I. No matter how wealthy, powerful or talented he or she is; that person has basic human needs for love, community, values and dignity.

The problem with law school is that we are trained to think only about the problem and issues. We are so good at it that we think we can solve and negotiate or argue our way out simply by using the power of logic. This was what I believed as well. I am now convinced that I am wrong.

I now know that this is only a partial skill set. A more holistic skill set in legal training is to include understanding of human emotions and psychology. In addition, understanding on how forums, processes and organisations can affect decision outcomes. In the military, we were taught that to find your way in the jungle, we need to rely on 3 things: your map, your compass and your visual landmarks. I now realised that I was navigating contractual transactions and contractual disputes relying only on my “map”.

How does this revelation translate for my SME clients? Go get yourself trained on negotiations. Understand how it works. This is one skill which you will need if you want to survive and succeed as a entrepreneur.

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