The 6-Day Commodity Broker Course

NCNDA is an abbreviation of Non-Competing Non-Disclosure Agreement

What is an NCNDA?

Today is a nice easy start as we build up through the next 6-days. I’d just like to say thank you again, for enrolling in the 6-day Broker course. My aim is to provide you with the tools you need for an initial enquiry, protecting your interests, and working with partners.

• I get a lot of messages from brokers on LinkedIn and WhatsApp asking for advice on certain parts of the deal process, and I’m amazed at just how lacking in certain areas many of them are.

• So, my aim with this short course is to help you structure your approach and develop a procedure to live by. Let’s begin.

  
  

4 Key Terms Of An NCNDA:

• Non-Circumvention

Simply put, this provision prevents parties from by-passing or circumventing each other regarding any business introduced by either party. As you’ll see in the NCNDA template attached, the term “business” must be construed as broadly as possible to capture.

• Non- Disclosure

Any information that is intended to be held confidential should be included in this provision. This includes all intellectual property, as well as trade secrets, customer lists, E-mail addresses and any other forms of contact.

• Terms

Carefully consider how long the NCNDA will run. A five (5) year term will run from the date the agreement is signed. You can also choose a date that the non-disclosure agreement will expire (such as when the contract is completed). You can also bind someone to secrecy indefinitely, meaning that at no point can the signer(s) divulge the confidential information contained within the agreement.

• Parties Bound

Be sure the agreement covers persons and/or entities associated with each party. It’s always a good idea to include a provision that makes each party responsible for making sure that their employees, agents and independent contractors abide by the provisions of the NCNDA.

What if someone breaks the terms?

Non-disclosure agreements are governed by contract law. Unlike other areas of the law and subject to a few exceptions, contract law does not provide for penalties.

Even a party that wilfully and intentionally breaches a contractual obligation will not be punished for it by the court. Instead, the non-breaching party is entitled to sue for damages. Damages are usually measured in one of four ways, which are:

1. Expectation Damages

Which means putting the non-breaching party in the same position it would have been, if there had been no breach. This is calculated by taking the amount of revenue lost by the non-breaching party, caused by the breach, less the amount of costs that the non-breaching party was able to avoid because of the breach.

2. Restitution Damages

Which means to return the parties to the position they were in before the contract. In this instance, each party returns to the other that which it has received as a result of the contract. This is usually an alternative remedy and is only available if the parties can in fact be returned to their original position.

3. Recovery Damages

Which means the breaching party paying to the non-breaching party the costs that the non-breaching has incurred in performing the contract up to the time of the breach.

4. Disgorgement

This is a situation in which a person or organization is forced to pay back money that they have made in an illegal way.

In the situation of a breach of a non-disclosure agreement, the damages are usually measured in terms of the harm done to the non-breaching party. That party will have to show what injuries it has suffered as a result of the breach, such as the cost to re-secure the lost secrets, the profits earned by the entity to which the secrets are divulged, etc.

The reason for limiting the damages to these amounts is because we as a society are not interested in forcing parties to perform a contract that does not make economic sense. We simply want to protect the party that relied on the contract from losing because of a breach by the other party. This is different than a tort such as an assault or a fraud. In those situations, society has a strong interest in discouraging such conduct and therefore we are willing to punish those that engage in the conduct.

On the other hand, an individual or entity that works with the breaching party to effect the breach may be liable for the tort of intentional interference with contractual relationships. Because this is a tort, the court may impose punitive damages, i.e., penalties, on that party.

If this does happen to you, and you get evidence proving a party that signed the NCNDA has broken the terms, there are attorneys that will take your case, on a no win no fee basis.

In case you’re wondering, “tort” is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. I hope that helps.

The NCNDA provided can be edited to be more specific for your requirements. Actually, the more specific it is, the better it holds up in court. Also, when editing the NCNDA, all parties can agree to a fixed penalty if there is an grievance. On day 5, you’ll receive a partnership agreement and we’ll delve more into the operating terms, which will outline roles and disputes etc.

So, there we have it. You now have an NCNDA to add to the collection. Tomorrow we will discuss the Letter Of Intent (LOI), and we will cover the importance of it and why it should not be a forgotten step in the purchasing procedure.

What's on the agenda for tomorrow?

Tomorow, we'll cover the Letter of Intent (LOI) and Letter of Credit (LC). You'll be provided with a template of the LOI for you to edit and make your own.

A letter of intent (LOI) is a document drawn up when two parties come to a mutual agreement but haven't worked out all the details yet.

What Is a Letter of Intent? (LOI)

This letter is presented before the finalized legal agreement, which means that a letter of intent is not legally binding. Not to be confused with a Letter of Indemnity. There’s an article on LinkedIn, that will have you believe that a Letter of Intent is incorrect, and that only inexperienced Brokers call it a Letter of Intent. Claiming that a Letter of Indemnity is the correct choice, when in fact, it isn’t.

A letter of indemnity, also known as an (LOI) is a contractual document that guarantees certain provisions will be met between two parties. Such letters are traditionally drafted by third-party institutions like banks or insurance companies, which agree to pay financial restitution to one of the parties, should the other party fail to live up to its obligations. In other words, the chief function of a Letter of Indemnity is to ensure that Party A won't ultimately suffer any losses if Party B falls delinquent.

Why Is An LOI Important?

The LOI is an important step because it lays out the basics of the final deal: the purchase price and terms, closing date, length, approvals, and much, much more. However, the LOI isn't necessarily the final deal. Rather, it's the framework or roadmap for that final deal.

Let’s go through the important information needed in an LOI that all Sellers need to quote.

• Company Headed Paper - This helps to provide vital information for due diligence.

• Date - If you have an outdated LOI that’s weeks or even a month old, most Sellers will not accept it, as it’s seen as generic.

• Attention - This is who the LOI is addressed to, so be sure it’s not generic. You want the order taken seriously by the Seller.

• Reference Number - You should have a CRM that you use to manage your orders. Even Excel spreadsheet is ok, as you can search reference and contract numbers easily.

• Opening Statement of Intent - Here is where you state your clients intent to purchase the products requested.

• Product Information - Here is where the full order details are required. Be as detailed as possible so that the Seller doesn’t need to go back and forth asking for more information. Should include: If the Buyer wants a trial order or go straight to the maximum quantity they require. Do they need delivery, or can they arrange their own shipping, as this will increase or reduce the cost given by the Seller. Does the Buyer want a long-term contract or one-time spot deal? A target price can help determine if the Buyer is genuine or not, as a genuine Buyer should know the market.

• Payment Terms - What method of payment does the Buyer require? They have a few options, such as Telegraphic Transfer (TT) that comes with a deposit, or a very popular requested method is a form of Letter of Credit (LC), which comes with variations, like a Standby Letter of Credit (SBLC) and Documentary Letter of Credit (DLC). These are issued as Transferable and Non-Transferable. Transferable can only be transferred once. The most important thing to remember is verbiage when dealing with any form of LC. The Seller should provide a draft LC template issued by their bank, for the Buyer to give to their bank for issuance. So, there’s no need to fear an LC, I will go through the verbiage with you shortly.

• Standard Operating Procedure (SOP) - This details each step for both parties to follow. The Seller will provide their SOP to follow.

• Closing Statement - Provides the Seller with further assurances and requests for their Full Corporate Offer (FCO).

• Required Specifications - Most manufacturers can produce based on specific requirements. For grains, oil, metals and more, the Buyer should know what specifications they require, if they don’t know this, then they’re either new in the market, or not the end Buyer.

All that’s left for you to do, is sign and send. It’s worth adding a validity on the LOI to stop it from being rotated multiple times. As you may have sent it to someone who claims to be the end Seller but is not.

Going back to the LC verbiage terms. Here are 10 that you should get familiar with if you’re unsure about this type of payment method.

• 1. Irrevocable LC. This LC cannot be cancelled or modified without consent of the beneficiary (Seller). This LC reflects absolute liability of the Bank (issuer) to the other party.

• 2. Revocable LC. This LC type can be cancelled or modified by the Bank (issuer) at the customer's instructions without prior agreement of the beneficiary (Seller). The Bank will not have any liabilities to the beneficiary after revocation of the LC.

• 3. Stand-by LC. This LC is closer to the bank guarantee and gives more flexible collaboration opportunity to Seller and Buyer. The Bank will honour the LC when the Buyer fails to fulfil payment liabilities to Seller.

• 4. Confirmed LC. In addition to the Bank guarantee of the LC issuer, this LC type is confirmed by the Seller's bank or any other bank. Irrespective to the payment by the Bank issuing the LC (issuer), the Bank confirming the LC is liable for performance of obligations.

• 5. Unconfirmed LC. Only the Bank issuing the LC will be liable for payment of this LC.

• 6. Transferable LC. This LC enables the Seller to assign part of the letter of credit to other party(ies). This LC is especially beneficial in those cases when the Seller is not a sole manufacturer of the goods and purchases some parts from other parties, as it eliminates the necessity of opening several LC's for other parties.

• 7. Back-to-Back LC. This LC type considers issuing the second LC on the basis of the first letter of credit. LC is opened in favour of intermediary as per the Buyer's instructions, and on the basis of this LC and instructions of the intermediary a new LC is opened in favour of the Seller of the goods.

• 8. Payment at Sight LC. According to this LC, payment is made to the Seller immediately (maximum within 7 days) after the required documents have been submitted.

• 9. Deferred Payment LC. According to this LC the payment to the seller is not made when the documents are submitted, but instead at a later period defined in the letter of credit. In most cases the payment in favour of Seller under this LC is made upon receipt of goods by the Buyer.

• 10. Red Clause LC. The seller can request an advance for an agreed amount of the LC before shipment of goods and submittal of required documents. This red clause is so termed because it is usually printed in red on the document to draw attention to "advance payment" term of the credit.

What Are The Advantages Of An LC?

Advantages of LC for the Buyer:

- Elimination of risk of losing money for the Buyer

- Payments are made after fulfilment of the Seller's contractual obligations

- Transfer of ownership over shipped goods to the Buyer within the period indicated in the LC and according to other terms.

Advantages of LC for the Seller:

- Guarantee of payment independent of the Buyer (subject to the fulfilment of contractual obligations)

- Possibility of payment before handing the goods over to the Buyer

- Possibility of execution of complex commercial contracts

What is the procedure for issuing an LC?

1. Buyer and Seller address the Bank for LC issue.

2. A special account is opened with the Bank for payments.

3. Buyer transfers the amount indicated in the contract to this account in the Bank.

4. Buyer submits a document confirming the transfer of ownership over delivered goods and then the Bank transfers the funds from the special account to the Seller's account.

5. If the required documents are not submitted within the time period indicated in the contract, the Bank returns the funds from the special account to the Buyer's account.

There are still risks when it comes to LC. If the Buyer is responsible for sending documents to their bank, they can delay this in order for the money to go back into their account. The goods are shipped, and the Seller gets no money and loses their goods.

I’ve known a few times of Buyers receiving a draft LC given to them by the Seller, and the Buyer changed the verbiage and issued the LC in hopes that the Seller wouldn’t realise. So, don’t be fooled into thinking an LC is the safest method of payment, because it too can be tricked.

I’ve added some red flags to look out for regarding the SBLC scam that is appearing more and more on LinkedIn.

How to identify an SBLC scam (Red Flags)

• Sharing of confidential information “sample information” with you casually

• Images of unclear identification documents of the counter parties

• Doctored identification documents

• Fake email addresses and contact numbers in the sample documents

• Bogus sample company

• Upfront payment requirements

To Note: Some countries have restrictions on the type of LC they can issue.

• Bangladesh Central Bank tightened LC rules again in August to reduce Imports by increasing LC margins on essential items.

• Egypt imposed mandatory LC for importing to their country. This is because the use of LC’s requires Egyptian banks to guarantee and take over the risk for all transactions.

• China cannot issue an SBLC directly from the mainland. They use outside means to issue it using bonds.

This is the type of information you will be collecting during the market research part of your day.

What's On The Agenda For Tomorrow?

Tomorrow we will delve into the Full Corporate Offer (FCO) & Irrevocable Corporate Purchase Order (ICPO)

As we know, an LOI is the initial step, the opening request issued from a Buyer. After which, the Seller issues their formal offer in the form of a Full Corporate Offer (FCO), and in turn the Buyer issues an Irrevocable Corporate Purchase Order (ICPO) once all is agreed.

What Is An FCO & ICPO?

A Full Corporate Offer is a standard business practice for all corporation in the resource market- together with a ICPO), a BGL (Bank Guarantee Letter) and a LOI (Letter of Intent) it is a basic term in modern business = business over electronic exchanges.

Some Sellers may issue a Soft Corporate Offer (SCO).

What is the difference between Soft Corporate Offer and a Full Corporate Offer?

• An SCO is addressed to the Buyer in general but not addressed to anyone specific.

• An FCO is not “full” without being addressed to the name of a specific party representing a Buyer.

  
  

  What information goes into an FCO?

  • Like the LOI, it should have company headed paper and Sellers full information. It will answer each of the LOI’s requests with what they can offer, with everything listed and outlined clearly. Along with the Sellers standard operating procedure.

  • Buyers will sometimes list their own procedures, but it’s the Seller, that dictates terms, not the Buyer. I find Brokers try to insist that the Buyer won’t deviate from their procedure, and then I find out they are speaking to another Broker who told them this.

  • So, who is right? Is the Seller correct by refusing an order from a Buyer that refuses to follow the steps given to them in an FCO? Or, is the Broker in the position to make decisions on behalf of a Buyer? It can be difficult when the Broker refuses to present the offer to the Buyer, so that they can make the decision. Fear of losing a deal may play a factor in that.

  • You will find most issues arise when it comes to the payment terms. For example, in most Eastern European countries, producers and manufacturers want TT payments. LC’s are rarely accepted, especially in the meat and poultry industry. They require a 30% deposit in advance for initial production cost etc. Somehow, this comes into question too often, especially when they deal directly with the plant.

  • If a Buyer refuses a TT deposit paid directly to the plant, then that should indicate to you maybe they’re not the end Buyer. Most likely, will receive an LC and want to do a back-to-back or transferable.

  • Another point to make regarding FCO’s, there are some suppliers that won’t issue an FCO at all, they have simple procedures. For example: The Buyer issues an LOI, Seller gives the price, and invites the Buyer to the factory or plant. Buyer signs the contract and pays the deposit on the spot. They have their procedure and they stick to it.

    
    

    How many FCO’s have you seen issued, and no deal was closed? They can take time to create and if 1 in 50 ends in a deal closing, is it worth it? In some cases for some products, absolutely it is. Especially with a template (provided), if the Seller refuses to issue one, you can take all the information they have given you, and fill it in yourself. Get the Buyer to sign it and then confirm with the Seller that all is agreed.

    Once the Buyer signs the FCO, they can now issue an ICPO. Alternatively an FCO can come after an ICPO. Just depends on the initial contact and Sellers procedure.

Who can issue an ICPO?

Only the end Buyer issues the ICPO and confirms Ready Willing and Able (RWA) accompanied with a Bank Comfort Letter (BCL) as Proof of Funds (POF).

An MT-799 SWIFT message bank to bank is also another method of POF.

The ICPO is a legally binding document and must be honoured by both parties, hence the ‘Irrevocable’ part.

General Procedure:

• 1. Buyer issues a Letter of Intent (LOI) or Irrevocable Corporate Purchase Order (ICPO) with banking details.

• 2. Seller issue’s Full Corporate Offer (FCO)

• 3. Buyer signs the Full Corporate Offer as token of acceptance and sends it back to the Seller.

• 4. Buyer sends an LOI and BCL or MT-799 that proves they are capable to purchase their requirement, and that their bank is ready to prepare the (Payment Method) for the agreed monthly shipments value.

• 5. Seller’s Bank sends POP (Export License, Certificate of Origin and SGS certificate for first shipment of Quantity) to Buyer’s Bank.

• 6. Seller issue’s draft contract to buyer for negotiations.

• 7. Buyer and Seller sign the final contract after making amendments, if any.

• 8. Fax, E-mail or courier exchanges for hard copy of contract.

• 9. Buyer’s Bank sends a non-operative (LC Type) for the value of monthly shipments, payable against shipping documents at loading port.

• 10. Sellers bank will verify and send 2% PB if applicable.

• 11. Buyer’s bank will confirm the payment instrument will become operative.

• 12. If needed, a site visit is allowed for the Buyer at the Loading port at their own expense.

• 13. Seller prepares shipment within the agreed amount of days.

This procedure isn’t set in stone, and may be edited based on the terms agreed upon by both the Buyer and Seller. As a Broker, the only situation where you will issue an ICPO to a Seller, is when you are receiving payment and essentially acting as the Buyer. You’ll do this if you are uncertain that the Seller will pay, or if it’s a new relationship.

But, if you do take this option, you MUST 1,000% do all the Due Diligence you can do! If you can visit the Seller, go and visit, see the facilities and be sure that you are dealing with the right people. It’s your duty to ensure a safe transaction. More on that later.

What's On The Agenda For Tomorrow?

The Commission Agreement secures the funds you have earned as part of the successfully closed deal. This is why you are doing what you're doing!

As the name suggests, this agreement is a legally binding document that covers your commission when you complete the transaction between the Buyer & Seller. Usually, this is paid within 3-days of receipt of the final payment.

It’s best to wait until the full payment is completed before requesting commissions. If there is an issue, for any reason, and the Seller has to refund the Buyer, you will also have to return the funds as the deal wasn’t complete.

What Is A Commission Agreement?

Commission agreements essentially set out the key financial details of payment between intermediary’s and the paying Party. Commission based jobs are used to provide a financial incentive to produce maximum productivity and success in sales.

It is important that the terms and conditions regarding the structure of the payment of commissions are known by both employers and employees before entering a working arrangement.

Commission agreements are usually unique to the individual or agent being employed as they are directly involved with the sales or marketing of the product or service. As a Broker, you will earn commission for bridging the gap between Buyers & Sellers, and only upon completion of the deal, do you get paid.

Brokers work on 100% commissions being fixed by you, unless you work for a brokerage firm, your commission will be lower.

Lets take a look at an example:

• You introduce a Buyer looking to purchase 270MT of whole chicken from the Seller. The Seller has issued the SPA after receiving the ICPO from the Buyer which outlined everything they required. That means the price given to the Buyer has been accepted, and the Seller agrees to pay the commission to you.

• Your commission is $30MT for 270MT, (27MT of chicken goes into 1 40ft container), which equates to $8,100 every month as meat and poultry deals are usually based on a 12-month contract. So, that’s $97,200 per year. That is a fantastic amount of money for your business.

As I’ve just shown you, closing just 2 deals successfully can make you almost $200k in a year. This industry is essentially based on small margins and huge volumes. That’s the game, that’s where we make serious money as Brokers.

But, unfortunately, there are 100’s of Brokers getting this so wrong on a daily basis, and it’s killing other Brokers spirits, confidence and even their abilities to close deals. Greed is the number 1 deal killer. An example of this I saw recently;

There was a deal in process for 12,500MT of yellow corn to Africa was $360MT. All was going smoothly until I found out the sale price had been increased to $400MT, because there were 4 Brokers adding $10 each. That’s half a million dollars total to be split between the 4 of them.

Tell me, which scenario do you think was the outcome of this deal?

• 1. The end Buyer accepted the price and we shipped 12,500MT to Africa nice and easy. We are currently preparing their second order.

• 2. The end Buyer didn’t accept the price. He asked if we could come down to $380MT. I asked the Brokers to reduce their commissions to $5 each instead. 2 of them refused, and 1 of them was direct to the Buyer. So the deal collapsed.

If you chose option 1, you must live in a Disney movie. Because of course the correct scenario is number 2. If you cannot compromise to ensure the deal goes through successfully, then you shouldn’t be in this business. You won’t make any money and you will corrupt every deal you are involved in, and take food out of other people's mouths that are working their arses off every day to become successful.

I’m sure you have already been involved with similar people, that won’t do a deal because they are too stubborn and think they will become millionaires over night with 1 deal. The PPE train has left the station people, you’re now dealing with commodities that have been around a lot longer than us, with Suppliers that know what they are doing, possessing years upon years of experience.

Don’t be greedy, base your sales on volume not margins and you will become more successful. Get yourself into positions where you can make $5MT and you can sell 5,000MT per month for 1-year. That’s $25k per month or $300k per year. Now, imagine getting 2 or 3 of them each year. Almost a million dollars per year from 3 deals. Sellers will not pay out $50MT for 5,000MT. You might think that you can add what you want, and the Seller should pay. But why should they pay out so much?

So, be mindful of your commission. Whether you add on top, which is the most popular choice, or if you set a fixed percentage. Usually, Brokerage firms take between 3 and 10%, but it depends on the industry for sure. You are the maker of your own commission, so get out there and start thinking about closing 2 or 3 smaller deals to accumulate more over time. You cannot rush in this business.

You have to have patience and be tactful when dealing with Buyers that are in no rush. You don’t want to appear like they have to decide yesterday and buy today, as if you come across as needy, you’ll lose the interest of your customer. Being forceful isn’t always a good idea, but being a pushover isn’t advisable either.

And please, avoid putting time pressure if it’s not genuine. You run the risk of sounding like a used car salesman instead of a high-flying deal closing machine that you should be. There will be genuine time straints, such as the sea freight quote, which is usually valid for 3-days, or an FCO is usually valid for 3-5 days as we have already covered, otherwise the price will need to be recalculated depending on the current market etc, you get the point.

What Are The Key Elements Of A Commission Agreement?

• Contact Information - First name and last name of representative, name or company, address and phone details for both parties

• Authorization - Authorizes the salesperson to sell goods or services on the Sellers behalf and defines the responsibilities.

• Commission Structure - Lays out the payment details, commission rate.

• Non-Disclosure Clause - Requires a representative to act in the best interest of the Seller and keep business secrets and proprietary and confidential information protected at all times.

• Acceptance - The parties accept the agreement by signing and dating it.

What's On The Agenda For Tomorrow

Tomorrow is an important step in the structure of your deals, especially when you have partners. The Partnership Agreement outlines each of the Parties responsibilities, also known as an Operating Agreement (US)

Today we will be going through an agreement you should have when starting a new partnership. This operating, or partnership agreement will outline each partners responsibilities, and what will happen in disputes and so on.

Too many partnerships end in dispute, and nothing is clear on the next steps.

What Is An Operating Agreement?

An operating agreement is a legally binding document that limited (Ltd) and limited liability companies (LLC’s) use to outline how the company is managed, who has ownership, and how it is structured. If a company is a multi-member LLC, the operating agreement becomes a binding contract between the different members.

In addition to clarifying ownership and structure, the operating agreement can also name the registered agent, give details like when meetings are held, select managers, and explain how the business can add or drop members.

Simply put, the operating agreement outlines a business's functionality and financial decisions. Once the owners of the company sign it, they are officially bound to its terms.

Most operating agreements contain six key sections, including:

• Organization

• Management and voting

• Capital contributions of members

• Membership changes

• Distributions

• Dissolution

Why You Need an Operating Agreement?

• Clarifies verbal agreements: The operating agreement puts all agreements between the managing members in writing, so there are no misunderstandings. Members can then refer back to the operating agreement in the event of conflicts in the future.

• Protects members from personal liability: The operating agreement is a formality that protects the managing members from being personally liable.

• Ensures you aren't subject to default state rules (US): When a business doesn't have an operating agreement in place, the default rules set by the state will apply. For example, states have default rules that require the company to divide profits and losses equally. To avoid having to rely on your state's basic operating rules, you should have an operating agreement in place.

What Is The Difference Between A Partnership Agreement & An Operating Agreement?

A partnership agreement and an operating agreement are very similar in what they define: ownership and investment stakes, division of profits and losses, and so on. However, a partnership agreement is used in partnerships, while operating agreements are used in LLC’s.

• Ownership: How much of the business does each partner own? This is usually expressed as a percentage interest in the business

• Decision-making: Does every decision need to be unanimous? Which decisions will you leave to majority rule? How much weight does each partner’s vote carry (for example, based on their percentage of ownership)? Detail exactly how you’ll make decisions in the business to ensure all voices are heard fairly and that no partner can question the validity of decisions after the fact.

• Capital contribution: How much will each partner put in to start and run the business? Will contributions be cash, property, or services? If the business needs more money down the road to continue operating, what is each partner’s responsibility — or, will you close your doors if you run out of cash?

• Profits and distributions: How will you allocate profits and losses among the partners? Detail when and how partners should be repaid for their contributions, and when and how they’ll receive distributions from profits.

• Death and disability: What happens if a partner dies or becomes unable to continue operating the business? Who inherits their share of the company, and does the new owner(s) also inherit their responsibilities or decision-making rights? Do the other partners have a right to buy out the departing partner’s interest? Include this clause to prepare your business for the unexpected as well as to think long-term about the possibility of your business outliving its founders.

• Withdrawal or addition of a partner: If anyone wants to leave the partnership, how can they do that? What happens to their share and decision-making rights? How will the business absorb their operational and fiscal responsibilities? What’s the procedure for admitting new partners and allocating profits, losses and responsibilities to them? It’s vital to define these terms now, while the partners are in good standing, in case you’re on bad terms when these scenarios comes up.

Are there any restrictions after ending the partnership?

Restrictions are usually included in partnership agreements with the aim of preventing an outgoing partner from poaching clients/customers/suppliers/other employees, and/or dealing with former clients/customers/suppliers.

However, unless there is a written agreement to that effect the law does not imply any post partnership restrictions on outgoing partners. As such, a partner is free to poach any customers or suppliers of that previous partnership.

This is likely to create significant difficulties where partners intend to continue in the same industry or set up a competing business in the same geographical area.

What if you have a bad egg in your team?

Tony Robbins says, “The quality of a person’s life is most often a direct reflection of the expectations of their peer group,” and that applies to businesses too. The quality of your decisions and the success of your business overall are deeply affected by who is on your team. A bad business partner can affect your success in all the wrong ways – and it’s not always easy to know how to deal with a bad business partner.

It seems obvious, but it’s true. Unfortunately, you can’t always tell if they are a bad egg in the beginning, unless they appear on scam sites and are constantly hounded on platforms like LinkedIn as being involved with shady deals.

As an Broker, your reputation is everything. When you have a bad business partner, your reputation will suffer.

Depending on what the issues are, a bad partnership could lead to loss of clients, a toxic company culture and an inability to find ways to increase profits. If your partner is unethical or engaging in fraudulent behaviour, it could even mean fines or legal action against your company.

A good business partner also helps you leverage the law of attraction to bring more knowledge, skills and positivity into your life. By surrounding yourself with good people who compliment your skill set, want the same things as you, and inspire you to achieve your dreams, you’ll automatically succeed in business – and in life.

What are the signs of a good and bad business partner?

You don’t have to have the same values as your partner or partners, it’s healthy to have differing values. But good morals, and positivity are really good traits for success. This industry is tough, really tough. The only way to get through the tough times, is to have a team with you, pushing each other, and being honest with each other. Good business partners are problem solvers, not problem makers.

Bad business partners come in all shapes and sizes, from moaners to liars. While bad qualities in a business partner are sometimes obvious, most of the time the signs are subtle and progressive. If you have different values but there are no concrete problems, it can be harder to recognize that you have a bad business partner.

But just like in personal relationships, when you know what a healthy partnership looks like, you’ll be able to determine if yours fits the description.

What's On The Agenda For Tomorrow?

You have the commission agreement template provided. Tomorrow, you will obtain the final pieces when successfully closing your deals. Which are of course, the Draft Sales Purchase Agreement, Invoice, and a copy of an LC Draft.

A Sales Purchase Agreement (SPA) is a legally binding contract that obligates a Buyer to buy, and a Seller to sell a product or service. SPA’s are often used when two parties are transacting a large item, or a large number of items such as commodities.

An SPA details important information including the product, price, and payment terms of the sale. An SPA also outlines what documents the Buyer will receive from the Seller relating to the product and shipping.

Before a transaction can occur, the Buyer and the Seller negotiate the price of the item to be sold and the conditions for the transaction. The SPA is a framework for the negotiation process.

An SPA generally outlines the next steps in the transactions. These conditions of the sale must occur in order for the sale to be legally binding; any inaction or failure to follow these conditions is considered a breach of contract.

Under these circumstances, the Buyer or Seller may have the right to terminate the sale (if such rights are identified in the section prior).

Many of these covenants surround risk mitigation and protection of the asset. This section often outlines what a Seller must do if there is any unforeseen litigation impacting the transaction. It also outlines what insurance requirements should cover the asset through sale, what warranties will continue to exist, and certifies the exclusivity of the asset being sold.

If the sale is contingent on other transactions, an SPA will outline the effects of termination in any sale should the other deal fall through. For example, imagine a real estate developer attempting to purchase two properties side-by-side with the intention of demolishing both to create one building.

The developer may include language in one SPA holding the deal contingent on the execution of the other SPA.

What goes into an SPA?

As the main legal document in any sale process. Essentially, it sets out the agreed elements of the deal, includes a number of important protections to all of the Parties involved and provides the legal framework to complete the sale.

Let’s look at the important elements that go into every commodity contract.

• 1. Buyer & Sellers Information

Both Parties will include their full company details such as, company name, address, representative, phone, email, company registration.

• 2. Product Details

Here should be a detailed description of the product/s that are being sold. Especially the quantity, and price, so all is clear. Is it a monthly or spot deal, what’s the origin? Be as detailed as possible, including loading port information, packaging details and specifications.

• 3. Delivery Terms

Be specific about the logistics details, including the incoterms, such as Ex Works, FOB or most common, CIF. Is it bulk or containers, or pallets on a truck, or maybe flexi tank.

• 4. Payment Terms

As we discussed previously, if it’s LC then which type? Ensure the full verbiage is listed. For example: Irrevocable, Confirmed, Transferable, Documentary Letter of Credit. If it’s TT, then what percentage of deposit is required? 30/70 split is pretty standard.

• 5. Inspection Details

Usually, this refers to SGS or an equivalent body.

• 6. Shipping Documents

Will state all of the documents required in the deal, such as: 1 original and 3 copies of, SPA, Commercial Invoice with numbers to match, Bill of Lading which is issued by the freight company, SGS report or equivalent body, Health Certificate, and Phytosanitary issue by the Ministry of Agriculture or equivalent.

• 7. Who Is Responsible For Taxes

Outlines the responsibility of each Party.

• 8. Force Majeure

Force majeure is a provision in a contract that frees both parties from obligation if an extraordinary event directly prevents one or both parties from performing.

• 9. Miscellaneous

The other elements include, Applicable Law, Disputes & Arbitration, NCNDA, and any additional information that is discussed between all Parties involved.

• 10. Bank Information

Includes both the Buyers and Sellers banking coordinates.

I have provided a draft SPA for you which just needs filling in. It was drawn up by an attorney initially.

Not all deals are the same, but if you are acting as Seller, being paid by the Buyer, and then paying the Seller, usually you’d mirror the Sellers SPA, or include parts of it into yours that are missing.

If you’re able to get an attorney to give it the once over, I highly recommend it to ensure it all goes through smoothly.

But if you manage to become a distributor, you can use this template and edit accordingly.

Regarding payment terms, if the deal is based on TT terms, there will be an invoice accompanying the SPA. I have also provided that for you. The designs are not set in stone, you can change the colours to match your brand, you should add your logo, full company details, and bank info.

Businesses need to create invoices to ensure they get paid by their clients. Invoices serve as legally enforceable agreements between a business and its clients, as they provide documentation of services rendered and payment owed. Invoices also help businesses track their sales and manage their finances.

What Are The 7 Benefits Of An Invoice?

• 1. Invoice processing is great for legal reasons.

• 2. They keep customers happy.

• 3. Keeping things professional.

• 4. Showcasing your brand.

• 5. They keep you organised.

• 6. It helps you to get paid on time.

• 7. Things have gotten easier with invoice systems for small businesses.

Regarding the LC draft, the receiving bank will issue the draft copy for you to send to the Buyer, who then agrees the verbiage, and then thier bank issues the LC.

The issuing bank transmits the LC to the nominated bank, which forwards it to the exporter. The exporter forwards the goods and documents to a freight forwarder. The freight forwarder dispatches the goods and either the dispatcher or the exporter submits documents to the nominated bank.

What Documents Does The Freight Forwarder Issue?

Bill of Lading (BL): The importance of a Bill of Lading lies in the fact that it's a legally binding document that provides the carrier and the shipper with all of the necessary details to accurately process a shipment.

This implies that it can be used in litigation if the need should arise and that all parties involved will take great pains to ensure the accuracy of the document.

Essentially, a Bill of Lading works as undisputed proof of shipment that is tracked. Furthermore, a Bill of Lading allows for the segregation of duties that is a vital part of a firm's internal control structure to prevent theft.

Typically three bills are issued - one for the shipper, one for the consignee, and one for the banker, Broker, or third party. There is no restriction on the number of Bills of Lading that can be issued, but the number issued must be stated on the bill. Because the Bill of Lading is a document of title, it is valuable.

How Can I Get The Due Diligence Bundle?

This concludes the 6-day Broker course. I really hope I explained everything clearly, and was easy to follow. But, if not, you can drop me an email at Course@Sam-Cutting.com and I will reply.

Alternatively, you can check pre-order the Due Diligence Bundle I have created for Brokers that want to learn how to Source Suppliers, Verify Buyers, and master the art of Due Diligence.

Upon completion of the the Due Diligence Bundle, you will have the opportunity to join an exclusive private network.

Here, you will meet other Brokers that use the same methods to ensure they are dealing with genuine and verified Buyers & Sellers.