Thought Leader: Farai Mushoriwa on Contracts
When drafting or negotiating contracts, there are numerous considerations and key factors businesses and consumers should take into account. These range from conducting thorough due diligence to ensuring the contract includes a dispute resolution mechanism, in case the contract is breached or difficulties arise.
On this matter, Lawyer Monthly hears from our next thought leader regarding the complexity of contract litigation, drafting, and the pitfalls therein, under the jurisdiction of Zimbabwean law.
As an expert in litigation – what would you say are the unique regulatory challenges involved in litigation proceedings in Zimbabwe, given the complex nature of this area of law?
Under Zimbabwean law, parties are generally free to contract in the various guises of the concept of freedom of contract, denoting freedom to choose terms of the contract and freedom of choice of contracting partner. However, this freedom is not absolute, and inroads on contractual autonomy are found from a regulatory standpoint, mainly statutory in nature, and also from the common law. These at times pose serious challenges especially to external contracting parties who may not be familiar with the various laws and customs which regulate Zimbabwean contracts and ultimately affect the process of contractual litigation in our jurisdiction.
While parties may freely choose with whom they contract, this freedom is curtailed under the Indigenisation and Economic Empowerment Act which reserves certain percentages of shareholding in any venture for locals. It is consequently vital for foreigners intending to invest in Zimbabwe to obtain appropriate advice regarding their investment and the allowable thresholds under the indigenisation law. This is especially so given that the law itself appears to be applied on a selective basis, with evidence from recent trends suggesting the relaxed government stance on the otherwise strict requirements of the law. A foreign investor must be alert as to the extent of control held in an enterprise as this may be problematic in the event of litigation related to the contract or investment.
There is also regulation as to terms of the contract where one or more of the parties to a contract are foreign. The Reserve Bank of Zimbabwe possesses regulatory powers in this regard in ensuring that every investment into the country is approved under exchange control regulations. Further to this, under the Zimbabwe Investment Authority Act, an organ called the Zimbabwe Investment Authority is mandated to approve ventures in which foreign nationals or corporates are involved.
When drafting a contract, are there common themes that must be considered, regardless of the type of contract?
When drafting contracts, regardless of the type or subject matter thereof, there are general themes which must be addressed to ensure compliance with the law and general protection of clients’ interests. The first is to ensure that the parties to the contract are competent under both common law (in respect of age or mental capacity, among others) and statute, which mainly relates to the indigenisation component discussed above and any specific qualifications which may be required by a party.
The terms of a contract must also be lawful and this includes the subject matter and nature of performance of the contract. This also speaks to the enforceability of the contract which must be clear and beyond speculation. It is important to consider statutory or self-imposed formalities when drafting contracts. In our jurisdiction, there is generally no requirement to have a written memorandum as a prerequisite for contractual validity. However, there are certain types of contract which are invalid if not made in writing; for instance a contract for the instalment sale of land.
It is important to consider the definition and consequences of breach, and under our law, certain types of contract require statutory notice periods for rectification of breach before one may avail themselves to the ordinary remedies attendant to breach. One must also consider an appropriate dispute resolution mechanism to suite the type of contract, the appropriate jurisdiction and applicable law which will vary depending on the requirements of each agreement.
Given the important role contracts play in ensuring businesses can properly function – when drafting a contract, which processes do you undertake to close any potential loopholes?
When drafting contracts we generally advise that a due diligence process is conducted to ensure that the client is protected as best as possible in the intended venture. Where this is not possible, or is not desired by the parties, it is very important to ensure that all stages of negotiations are recorded and documented in case of disputes in future. We also consider together with the above factors, the general application of boilerplate clauses, which come as standard for our contracts. The process of closing potential conflict points is one that requires -the utmost diligence and teamwork to ensure that every aspect of the draft adequately covers the client
