Somalia: Contract for a paragon relationship to maximise performance and profit and minimise risk and reprehension

In the last issue of this journal my learned friend Mr. Hashi Mohamed dived in the deep seas to the bed of the legal ocean that is ‘The Rule of Law’ to determine ‘Why legal certainty is critical to economic prosperity’. 1 He proposed the creation in Somalia of a structure similar to the Dubai International Financial Centre Courts (DIFC Courts) to harmoniously co-exist with Somalia’s current civil law and shariah based judicial system.

In May 2013 I appeared before Sir Anthony Colman, the Deputy Chief Justice, at the Dubai DIFC Courts for the Claimant in the matter of Mr. Ahmed Zaki Beydoun v. (1) Daman Real Estate Capital Partners Ltd and (2) Asteco Property Management L.L.C.2 This claim concerned a breach of the Residential Sale and Purchase Agreement (SPA) for purchase of an apartment costing over four million United Arab Emirates Dirhams (AED). The Claimant wanted to terminate the SPA and recover his investment; and be compensated for the pecuniary loss he incurred. The defendants relied on the defence of force majeure for the delay in completing the construction. Thus, Colman J. had to determine:

a. Did a force majeure event occur?
b. What constituted force majeure under the SPA?
c. Whether the definition of force majeure under the DIFC Contract Law was relevant in that case?
d.Whether the delay caused by the first and second contractors resulted in force majeure?
e. Did the First Defendant act negligently in bringing about the force majeure by failing in its contractual duty to monitor the daily progress of the construction so as to avoid delays and to ensure timely completion of the project?
f. Did the First Defendant’s letters of 28 June 2009 and 25 November 2010 to the Claimant constitute valid notice of extension of the Anticipated Completion Date as per the Clause 4.1 and/or 12.1?; and
g. Whether the Claimant’s written notice of 9 July 2012 to terminate the SPA complied with Clause 4.1 of the SPA and that he had the right to serve it at that point in time?

As I envision the future of Somalia, I pray to AlIah to give me and Hashi (and our fellow Somalis) health, strength, wealth and length to participate in the construction of not just an effective legal system but in the country’s overall governance structure. I anticipate appearing before the Commercial Court of Mogadishu in the not so distant future inshaAllah and winning all my cases as I did that mentioned above. Until then, I appear before Somalia as counsel for the most valuable client that I am ever going to have the pleasure to represent, the Somali citizens. As a Somali I instructed myself in this matter.

Somalia is for Somalis, and it must be protected and preserved for the Somali citizens. Somalia continues to enter into various agreements and contracts with several regional and international parties for numerous investment opportunities including, but not limited to, infrastructure projects, agriculture, fishery and oil and gas. In all these Somalia must contract for a paragon relationship with the partners. If at all this is happening, that is if at all Somalia is contracting for a prosperous mutual relationship, who is instructed to represent the interest of Somalia and advise it on the performance, legal and financial elements of the agreements/ contracts?

Profitable and smooth conduct of business necessitates a commercially, operationally and legally solid written contract that is specific to the transaction. An empirical study found that approximately 80% of chief executive officers (CEOs) say that their organisation must improve on managing external relationships and this is because one of the major reasons why relationships end in disappointment is that most organisations are not very good at contracting. 3

A contract is a duly executed formal document which is a record of the legally binding terms and conditions between individuals; companies; governments; an individual with a company or government; a company with a government; or a government and another government, to deliver goods; services; give advice; or a combination of all of these. A written agreement/contract is the bedrock of legal and commercial protection for the parties. A contract is without a doubt the authority for effective cost and risk elimination; and a correctly created and effectively managed contract lays the foundation for a far more important, enduring, and substantial relationship between the parties.

Since a contract is a record of the most important details of a transaction, commercial or otherwise, it is comparable to a passport; birth, marriage and death certificate; an education qualification; a receipt for purchase of goods such as a television; for services such internet and telephone package; an airline, bus or train ticket, etc. For example, birth and marriage certificates confirm that the people named therein belong to one another. That has both legal and social significance for many reasons, not least for purposes of inheritance. This signifies the material importance of a written contract because everything in the life of a human being necessitates a written record containing pertinent details. Somalia is obliged to enter into agreements that are legally, commercially, operationally, and socially responsible. Is this happening? Let me demonstrate the necessity of contracting constructively.

Some anecdotes are necessary here. I recall a potential client requesting a quote for a lease agreement for retail units at a mall in Abu Dhabi. He was one of the board of directors. His response to a quotation of AED 4,900 is a story I will continuously quote (excuse the pun). The amount is not the issue. The fact that he would charge his tenants 10 or 20 or 30 times that amount in annual rent for a single unit is also not the issue. He asked “Why should I pay nearly AED 5,000 when I can go to a real estate agent and ask for their agreement and then use it?” I thought to remind him of my qualifications, skills and experience. But that would have failed to allure him. I thought to offer him a discount. That would not have gained his trust either. An appropriate response was to point him in the direction of millions of templates – the internet! The conversation was closed by wishing him luck in amending such agreement to suit his purpose. Why? To assume that whatever template he obtains would be suitable was not impossible. That he would understand it, not being a contract specialist, was, however, highly improbable. So what remained? The truth! 4 Which is? That he would still need a lawyer to interpret it when one of his tenants sought to terminate it thanks to the many loopholes in the not fit for purpose tenancy agreement. I mention this story so as to deter Somalia from involving incompetent individuals to negotiate and decide on important transactions for the country.

Compare that tale with that of an individual, earning a regular wage, who was in possession of an investment agreement where a consortium was to purchase breast cancer screening, diagnosis, and monitoring equipment. He happily accepted a quote for AED 3,000 for me to review the agreement and make the necessary amendment. He wanted as much protection as he can obtain for his contribution of 50,000 United States of America Dollars because he was spending his life-savings and it was for his future. The moral of this story is for Somalia to avoid appointing decision-makers with self-interest, but instead to select people who understand the task they are trusted to carry out and who would feel responsible for the country and its citizens so much that they would undertake the necessary due diligence to choose the right partners.

On Sunday 3rd January 2016 the English television programme ‘Dragon's Den’ 5 opened with Mr. Caner Veli, an entrepreneur of Turkish Cypriot origin. He pitched for 100,000 Great Britain Pounds investment in return for five percent equity to the investing Dragon. Liquiproof was his brand selling a clothing protector spray that made everything liquiproof; for which he did not own the patent. The exclusive licensing agreement he had with the patent owner was just a distribution agreement. Ms Deborah Meaden, one of the dragons, said to him that he had made two fatal errors “One is the contract. But secondly your valuation is off the scale...that agreement is the thing that will place the value on your business”. Mr. Touker Suleyman, a dragon and a fellow Turkish Cypriot to Mr. Veli, who in the show greeted him in their mother tongue, agreed to provide the investment needed to take the product to the next level. Mr. Suleyman’s two conditions were that his lawyers would draw up a new agreement with the patent owner to secure Liquiproof ’s future; and that his equity in the business would not be five percent but 50% - they would be equal partners. Mr. Veli agreed. The four dragons who declared themselves out of the race were flabbergasted that Mr. Veli had parted with 45% more equity than he intended. This narrative makes two points: (i) Somalia cannot afford to and should not sell more than it has, particularly when what it is absolutely valuable natural resources; and (ii) it is only Somalis who will love and care for Somalia and other Somalis – just like Mr. Suleyman did for his fellow country-man.

To negotiate, review, draft, interpret an agreement/a contract, and advise on dispute resolution in the event of breach of such agreement/contract demands the right skill set and experience. There are two fundamental rules for contract management, to maximise performance and profit and minimise risk and reprehension. Somalia must engage Somalis to do this for ourselves and our country because no one else loves our motherland as much as we do. Soomaaliyeey toosoo, Toosoo isku tiirsada ee, Hadba kiina taagdaranee, Taageera waligiinee!

1. Hashi Mohamed, ‘THE RULE OF LAW & BUSINESS - Why legal certainty is critical to economic prosperity’(2016) 2 E. Afr. Bus. J.
2. Case No: CFI-032-2012
3. Contract and Commercial Management: The Operational Guide (IACCM Series Business Management 2011)
4. “When you have eliminated the impossible, whatever remains, however improbable, must be the truth”, The Sign of the Four, ch. 6 (1890)
5. BBC 2, Series 13, Episode 11

Omar Said Imam Abasheikh
Barrister, England

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