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How to correctly make agreements in the Republic of Armenia

In all areas, especially in the business one needs to pay special attention to the terms of the signed agreement at the conclusion of transactions. There is no need to refer to this process irresponsibly and without due attention, but on the contrary, it is worth spending a little extra time when drawing up the contract. After all, in the Republic of Armenia, there are problems with the performance of contractual obligations due to the unclear definition of the rights and obligations of the parties.

Detailed and descriptive wording in the contract – Due Diligence:

Remember that when signing a contract (providing services, purchase and sale, transportation) one usually needs to request documents to confirm the reliability of the counterparty. Firstly try to avoid performing your duties before signing the contract. It may be that your business partner can be very reliable and have a clean reputation, yet relying only on the oral agreement is not worth it.

As an example, when a large part of your obligations is fulfilled and the counterparty at the last moment refuses to sign the contract. In this case, judicial protection of one’s rights are complicated, as the signed contract is strong evidence to prove the existence of the agreement, without which it will be much more difficult to prove or disprove anything. Always check the counterparty to know who you are dealing with and check the contract’s details to know what are the duties and rights you are to assume. Additionally, check that there is sufficient authority for the person that is going to sign the agreement. That this person holds the powers of a director or trustee, in order to avoid unnecessary problems.

Before drawing up a contract in the Republic of Armenia one needs to ask the company for the following documents:

  • A copy of the certificate of registration of the legal entity;
  • Copies of leases, ownership certificate and articles of association;
  • Copy of the decision, or the protocol on the appointment of the director and if the contract is concluded by another person, a copy of the power of attorney, or other document confirming the authority of the person;
  • Copies of the tax returns of the company.

If the prospective business partner with whom you are signing a contract in the Republic of Armenia is an individual entrepreneur, you need to ask for the following:

  • A certificate of registration as an individual entrepreneur;
  • Lease agreement, or proof of ownership on the premises where the entrepreneur operates;
  • Copies of tax returns of the entrepreneur.

Do not be surprised should your counterparty present the same requirements before you do. On the contrary, faced with such a move, you can to some extent remain confident that before you is a reliable business partner, who is able to do business.

The terms of the contract should be clear and transparent to all:

Terms of the contract should be clear and transparent to both parties. Often the concept, context and conditions are formulated in such a difficult language, that it is hardly possible to understand their essence. Therefore it is better to state the conditions in plain and simple language, avoiding highly complex linguistic structures. However, the simple language should not be abused by renouncing the use of slang or household words where appropriate in the text of the contract. Pay special attention to the terms, conditions, precedent and other minutes of the contract. If one wants to set a specific procedure for dispute resolution (obligatory claim procedure, arbitration, and so on), be sure to check this point in the relevant part of the contract.

Do not be afraid to put forward your own suggestions and point to errors in the contract:

Be sure to stipulate conditions with a partner of force majeure and circumstances, which may disrupt the performance of the obligations of the contract. Often a draft contract by the counterparty may contain a very risky clause, which in the future may lead to conflicts on party positions on all issues. For example; the issue of subordination of relations of the parties to the jurisdiction of a particular country. Should the subject of the contract and other essential terms be written in the ungrammatical language, then one must notify the opposite side in writing. It is necessary to send a letter to the company directors or entrepreneurs, where the unnecessary or inappropriate language and/or conditions are shown and where one may put forward counter-proposals and/or conditions.

One cannot foresee everything:

In business, everything can happen. For example; the company will change the executive body and the new body does not want to deal with the same partners. As a result, you may lose lucrative contracts and in some cases, you may even make a complaint about the quality of performance of obligations. In this case, it is in your best interests to find a common ground/language with the new leadership of the company. If you do not succeed, you have to terminate the contract. In some cases such as contract services, you will need to abandon further duties of indemnity, which must be justified by the contractor. In other cases, differences may lead to litigation, and you must be prepared to defend your rights.

Our legal office is highly experienced in drawing up draft business contracts. By contacting us you can rest assured that we will prepare your business contract with all the subtleties of the Republic of Armenia legislation in mind.

12.10.2015

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