Commercial parties rarely participate in the drafting of the contract and prefer to leave these tasks to their corporate/transaction colleagues. However, the different roles of transaction agents and lawyers fade when a transaction contract is being developed. Immersion in the unknown sea of contracting creates new risks and challenges and requires appropriate vigilance, especially with regard to hidden (or less hidden) tax issues. If the tax impact of a transaction is a determining factor for any lawyer, the proper drafting of a transaction agreement is often the key to avoiding any misunderstanding afterwards. The Third Circuit made this point in its recent non-accidental statement in White and Williams LLP et al. Michelle T. Seidner, et al., C.A. No. 14-4606 (3d Cir. May 16, 2016). While the district court still retained jurisdiction over the underlying litigation, the ex-wife filed an application to challenge the distribution as contrary to the terms of the settlement agreement or, moreover, to attempt to quash the agreement as based on an error of fact. The Amtsgericht found that the agreement was binding in writing and that it had been essentially respected. While not predicted, this notice is a wake-up call that the tax debt of all parties to a transaction must be taken into account when developing a transaction agreement.
Start by consulting a tax expert, but don`t stop there. Take a close look at the language of the agreement itself and make sure it is as accurate as it should be. A transaction agreement is legally applicable only if the employee has been advised by a qualified independent consultant, usually a lawyer. If you ask us to advise you on a settlement contract you obtained from your employer, we believe we have two main tasks. If they have not yet done so, the employer will submit the formal agreement and the worker will have to provide independent legal advice. If the worker is not interested in reviewing regulations, the employer should stop negotiating and try to address the underlying problem. We have a transaction calculator that shows what you might be entitled to. This can happen when the worker is already in a long-term illness. Here, too, a draft contract is presented and an answer is requested from the employee. A longer period of time may be granted, as the situation is probably less immediately unpleasant if the parties do not interact on a daily basis.
It is not uncommon for a worker who has complained to go on a long-term sick leave, leading to a “winless” situation for both parties, where the relationship seems unlikely to return to normal. These negotiations must be conducted with care and sensitivity, taking into account the health of staff and possible disability problems. For example, a meeting may be proposed off-site or at the home employee`s home. The court found that the ex-wife was unable to challenge Vanguard and Wilmington Trust`s decision to withhold 20 to 30 per cent of the funds distributed, since the settlement contract only sets out the payment of the fraudster`s taxes and not the tax debt of the fund`s beneficiaries. Since the transaction agreement provided only that “excess sums” would be distributed between the wife and the ex-wife, without specifying the amounts of these amounts, the ex-wife had no reasonable expectation of obtaining more than she had received. The Third Arrondissement also accepted the regional court`s argument that “an agreement between private parties cannot exempt part of this agreement from the tax debt, regardless of the party`s view that it should not be taxed.” Whatever the reason, a transaction agreement is an agreement that prevents the worker from asserting future rights against the employer for a sum of money (usually) and is not binding unless the employee has received legal advice both on his terms and on the employee`s ability to assert his rights as soon as he has signed it.