The Sunday Mail
This articles is introductory, simplified and not exhaustive.
A deal, in simple terms, can be described as an agreement entered into by two or more people or parties establishing a business arrangement for financial gain. A deal can be between individuals, an individual and an organisation or between organisations.
EXAMPLES OF DEALS
In everyday life people enter into deals of different types and values. These include:
◆ Buying and selling of commodities, mainly goods such as properties, shares in companies, machinery, motor vehicles, inventories, etc.
◆ Supply contracts including those secured through tenders,
◆ Foreign currency transactions
◆ Joint ventures. These can take various forms from simple to complex ones.
◆ Loans and overdrafts
◆ Agency, brokerage, distributorship, dealership
◆ Mining arrangements such prospecting, tribute arrangements, milling, etc.
◆ Mergers and acquisitions
Disputes in deals
These may arise out of badly structured deals, different interpretation of contracts, or behavioural changes by one or more parties. Many a time disputes arise on deals in areas such as:
◆ Shareholding and share of financial gain
◆ Misinterpretation of the deal, e.g. the parties, duties and obligations
◆ Breach or violation of contracts duties and obligations or terms and conditions
◆ Misappropriation or diversion of funds
◆ Continuity or exit.
Key aspects to a deal
The key aspects include those explained below.
Business arrangement
There has to be a business case justifying the arrangement. Parties should enjoy a mutual financial gain. The nature of the business arrangement can be misunderstood. This is common with “joint ventures”. At times two or more people come together, one with an order, another who knows the source of the goods, the third who has the funding, and they wish to enter into a “joint venture” or a “deal”. At times it is not clear whether the parties want to enter into a simple profit sharing transaction, want to form a company and trade, want to trade through a company owned by one of the parties and for how long. The way a deal is structured or housed will influence how one benefits from it.
Mutual financial benefit
Before finalising a contract or agreement it is advisable to understand where the mutual financial gain or profit comes from. The income streams and attendant costs have to be clear and understood including how the financial gain will be shared. There are many cases of people who have lost money by investing in deals which in which there was no clear benefit to them.
Structuring a deal
A deal has to be properly structured to cater for considerations such as legal compliance, tax efficiency, ease of implementation and management, governance, continuity, funding, etc.
Agreements or contracts
Parties to a deal are advised to reduce their arrangement to a signed contract for clarity and to avoid disputes. Each deal may require a specific type of contract with its own essential elements at law. However, a contract usually includes some common elements such as:
◆ parties to the contract
◆ an offer by one party to the other
◆ acceptance of the offer by the other party
◆ meeting of the mind (“consensus ad idem”)
◆ consideration, being the price or money to be paid
◆ capacity or competency of the parties to act
◆ legality or lawfulness of the objects of the contract
◆ goods or services to be transacted
◆ transfer of ownership of goods
terms and conditions such as payment
of the purchase price, breach, dispute resolution, termination, effects of termination, physical address, etc.
You are advised to consult on deals to avoid losing out.
◆ Godknows Hofisi is a legal practitioner, chartered accountant and corporate rescue practitioner. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected]
