In Part 1, we discussed what technology integration is and how to deal with it. In this section, we’ll look at how to address the risk of those helping people not providing the information or support they need.
Causation: Sole Cause vs Concurrent Causation
When the trust party is unable to proceed with the merger due to the failure of the supporting party to provide mutual assistance, the trustee must be relieved of responsibility. But what if the offender is the one who caused the violation?
Imagine a scenario in which the integration process is delayed by the following two factors:
- The group sponsor is unable to provide the necessary support
- The controlling party does not terminate the trust earlier in time
In technical merger proceedings, the supporting party can push the language alone, so a breach of duty will only trigger an appropriate action if such breach is the sole reason the party failed to proceed with the merger.
The First Cause
In contrast, the director may push the original language to exonerate the director if the agent’s breach was the main reason the party failed to perform.
Non-Financial Assistance: Temporary Adjustments, Pre-Approvals, Employment Loan Freezes
Let’s consider non-financial strategies that can be used to address the failure of the support group to provide the agreed support.
Merger obligations are generally indefinite, which means that the obligee will be in breach if the merger—or some part of the merger—is not completed on time. It is reasonable for the parties to agree that the deadline will be extended only when the supplier is in breach of his duty to provide mutual assistance. In some cases the parties may agree to extend additional days to allow the party to resume the merger activities that were suspended.
Time-adjusted clauses are most appropriate for contracts where the consignor is responsible for inclusion. In contracts where the receiver acts as a reliable party, time-shifting clauses are of little use unless the parties agree to foreclose some part of the consideration, and the arbitrator’s obligation to pay is suspended in the event of a breach.
Taken to Accept
Sometimes help from the host is so important to successful integration that it makes sense for the host to push for help. In this case, the responsible party will claim that its joint liability is fully and properly discharged if the agent breaches its duty to provide assistance.
Service Credit Freeze
In complex integration projects, the parties can negotiate a service level agreement (SLA) for integrated services. For this reason, it is not uncommon for a director to insist that no compensation is forthcoming if the agent violates its terms.
Financial Aid: Damage Wages, Service Loans, Price Adjustments
Where non-monetary remedies are not sufficient, the parties may consider initiating monetary remedies, for example, liquidated damages, interest, or price adjustments.
Diminished damages are most appropriate for contracts where the recipient acts as a principal. When preparing a damages award, make sure that the damages represent a reasonable estimate of the damages caused by the breach. If the amount of damages is found to be excessive – or if the damage would have been easy to calculate at the time of the contract – the contract related to the contract can be considered as a penalty and canceled. Check out ours post post on damage control for more information.
When the size of the support is so large that it can match the size of the combined services, it may be wise to agree on an SLA. In this case, debt settlement may be the right option. However, be aware of tax and accounting rules, as treating a support role as a separate activity can lead to unexpected tax consequences.
Price adjustment is a way for the receiver to create an incentive for the sender to achieve the actual results of the merger. It is especially useful when the success of the merger depends on the transfer of something that, strictly speaking, cannot be sold—for example, users or employees. In these cases, the supplier’s failure to provide the required service may result in a change in the purchase price. In order for the transfer pricing strategy to work, the parties must first agree on specific performance indicators (KPIs) for the merger—or separate KPIs for the merger types—and incorporate them into the transfer pricing process.