Negotiating a contract can be a tedious and time-consuming process. What’s worse? Many legal departments enter into contract negotiations without having first defined their goals and expectations. More often than not, this lack of coherent strategy causes longer contract cycles, misinterpretation of contract terms, disagreements among counterparties, and less-than-ideal results.
The good news is that you can get the best deal for your firm and set up win-win situations with other companies if you know the tricks of a strategically negotiated contract. But how do you make sure that everything goes without any problems?
Here, we’ll talk at length about what contract negotiations are, and along the way, we’ll provide our top tips to help you negotiate like a pro.
What is Contract Negotiation?
Before a final contract is set up and signed by both parties, negotiation is a crucial aspect of the contract management process. In principle, it involves discussing and ultimately agreeing upon the terms of a contract that are fair and equitable to all the stakeholders. Parts of a contract may be negotiated (or changed) until everyone is satisfied with the conditions before the agreement is signed.
Why is Contract Negotiation Important?
The primary objective of every contract negotiation is to ensure that all parties are happy with the scope of their respective responsibilities and rights. To this end, the parties will use the contract negotiation process to draw attention to problematic clauses and propose more favorable alternatives. Because a contract becomes legally binding after it has been signed off, it is important to take the time to negotiate a contract in order to ensure that everyone benefits from the deal.
Tips for Contract Negotiation
Companies may improve the efficiency of contract negotiations by centralizing the negotiation process and allowing parties to work together in real-time on a single platform. To do this, businesses often use contract automation software like Contractbook.
Whether this is your first time negotiating a contract or you’ve gone through several before, these tips will help you gain some self-assurance.
Research the counterparty.
Spend some time investigating the opposing party’s motivations before initiating the negotiation process. Think about what they want, what they’re good at, and what could potentially derail the discussion. You will be better equipped to negotiate if you do this research in advance.
Learn basic contract law.
Contract law is complex, which is why most businesses have in-house legal departments. Knowing the basics will give you a good head start and save you time. For instance, you should know that in order for a contract to be valid and enforceable under common law, it must contain certain key elements:
- Signatory awareness
In case of confusion, you should consult with a professional lawyer about whether your contract holds up in court or not.
Write a rough draft.
You and the other party should reach an agreement on the contract’s core provisions before writing out a formal version of the agreement. Use a contract template to get the ball rolling and customize it as the negotiations progress.
Keep it simple.
Kicking off negotiations with highly detailed and complicated contracts can invariably heighten the complexity of the contractual relationship. It might be prudent to start with simple terms that everyone can understand, even if it means missing out on some of the fancier advantages of complex contracts.
Put your most important goals first.
Know what your company needs most from the contract before entering into negotiations and how the risks and benefits stack up when those requirements are addressed. At this point, you might consider learning about the counterparty’s interests and goals. Knowing the other company’s motivations and pain points can help you negotiate in a way that benefits your firm while also satisfying the other side.
When negotiating the terms of a contract, it is essential to pose questions to the potential client in order to get insight into the position the client has with respect to the contract. You’ll learn more about their thought process, and you’ll be better able to accommodate their needs once you understand the rationale behind them.
Acknowledge the other side’s contributions and express your appreciation. Identify a common ground and expand upon it. Establish the groundwork for successful contract negotiations by laying out the parameters of the process. If you can, refrain from injecting your personal feelings into the discussion. The use of “I think” and “I feel” should be avoided in favor of a focus on facts.
Learning how to negotiate effectively is crucial in the field of contract management. Strategic thinking, clear lines of communication, and an emphasis on win-win results can help you negotiate contracts like a pro. You may also improve your connections with your counterparts and achieve your goals with this approach.
Qurat-ul-Ain Ghazali, aka Annie, is the growth manager at Contractbook and looks after all the organic channels. She has been with tech startups and scaleups for a couple of years with a B2B focus. You can find her socializing, traveling, indulging in extreme sports, and enjoying the local desserts when she is not working.