Daw Khin Mar Mar Latt

TRADERS in Myanmar should increase their knowledge of business rules and regulations when they are preparing to negotiate a contract with another company, business experts told Myanmar Times early this month.

Awareness about how to make a contract is very important, especially when dealing with a foreign company, they said.

“I have seen many court cases based on breaches of contract between Myanmar and foreign companies,” said Daw Khin Mar Mar Latt, a Supreme Court advocate and legal consultant.

She said that the problems are often caused by a lack of awareness on the part of Myanmar companies.

“Most foreign companies do not have branch offices in Myanmar, which makes it difficult to take legal action against them if they breach a contract,” she said.

In such a case it is important to know the permanent address of a foreign company’s main office for the purpose of establishing a place of jurisdiction in the contract in case of any breaches, she said.

Many Myanmar businesspeople are reluctant to make contracts based on the laws of other countries because they are worried about misinterpreting them and they assume they will lose any court case based on those laws.

“What is most important is finding a way to implement the verdict of the court where company’s property is,” said Daw Khin Mar Mar Latt.

If breaches arise, a foreign company can be sued in Myanmar because that is where the jurisdiction of the contract is, but even if the court rules in favour of the Myanmar company it is difficult to take action in the offending party’s country, she said.

Many Myanmar companies are also afraid of canceling business deals with foreign companies if the contract between the two parties contains too many clauses, said Daw Khin Mar Mar Latt.

“Myanmar companies usually comply with the conditions set by foreign companies, thinking they can solve problems later when difficulties arise,” she said.

She said that even when legal experts advise them to exclude or include particular clauses, many Myanmar company refuse to obey over fears that the foreign company will cancel the contract.

Another weakness is that although breach of contract is a civil violation that can result in jail time, courts rarely impose such a severe sentence, so most people do not take the threat of jail seriously.

Many contracts also include specific international commercial terms whose meaning is clear to experienced businesspeople but which may go unnoticed by novice traders who are unfamiliar with contract language.

“For example, if the word ‘stowed’ is in the contract, sellers have to pay the stevedores’ charges, but ‘unstowed’ means the buyers have to pay the charges themselves,” said Dr Pyone Pyone Han, the Myanmar representative of the Singapore-based trading company, Agrocorp International Pte., Ltd.

Although these words may appear unimportant, they can have a huge impact on trading costs and profit margins, she said. Many contract breaches are rooted in speculation, when local companies make a contract in which they try to predict future commodity prices based on past business experiences, Dr Pyone Pyone Han said.

“Sometimes it is difficult to predict the market and the price of commodities in Myanmar, so there are often deviations between reality and the situation that was expected when the contract was made,” she said.

Mr C. Murali, the managing director of Myanmar Agrocorp Company, Ltd., said that contracts in Myanmar tend to be short and precise with basic clauses that are based on trust, unlike international-standard contracts that are full of strictly defined clauses, terms and conditions.

“We only include basic requirements like shipment information, tonnage, payment terms and packaging, while international contracts have far more clauses concerning damages, disputes, specifications and other provisions,” he said.

He said that problems in Myanmar are likely to involve domestic purchasing contracts because they are often drafted in the form of ‘contracts without lawfulness’ that depend on trust and personal friendship.

However, Daw Khin Mar Mar Latt suggests that even in such cases a legal expert should be consulted.

“There should be someone in the company with the legal savvy to understand business contracts even if the company does not want to consult a professional lawyer,” she said.