Contract reviews and negotiations are time-consuming, stressful and they require a higher degree of accuracy at each stage in the procedure. Even for professionals in the industry, beginning with negotiations and redlining contracts remain crucial, requiring involvement from many stakeholders. With these agreements impact the whole organization, the effort required grows exponentially.
In these situations, when this happens, using contract management platforms like ContractSafe.com could aid legal teams in coordinating the whole process and ensure proper communication between all participants. At the beginning of negotiations, the contracts go through several revisions and edits to ensure that the text is clear, legal and correct and the roles assigned are mutually agreed upon.
Key Objectives During Contract Negotiations
There are two major reasons that business contracts are needed. The first step is for the parties to determine the nature of their relationship. They should identify the deliverables (from the supplier) and compensation (from the purchaser) and define the milestones to be measured.
Suppose a company hires catering services to host an event, for example. In that case, it is necessary for the parties to determine what food items the caterer will prepare, what time and place it will offer drinks and food, the kind of service it’ll provide in addition to food, and at what point the deal will be deemed complete.
In addition, every company will try to reduce the risk that arises from the deal. For instance, think about a contract for the supply of computers to a car dealership. Both companies are at risk of operational issues due to disruptions that could occur to their supply chain. The car manufacturer will need assurances that the chipmaker will use every effort to provide the chips or provide a viable alternative so that the company will continue manufacturing and selling automobiles. The chip vendor, in turn, must be aware that it will not be held accountable if circumstances that are beyond its control can hamper its ability to meet this obligation.
The common goal of all parties involved in negotiations over contracts is to establish achievable goals and provide each other reasonable security in the hope of establishing the foundation for a long-term win-win partnership.
Tips to Ensure an Effective Contract Negotiation
Begin with an Outline
Before drafting a formal agreement to negotiate, be sure that both parties can agree on the major elements. Utilize a simple term sheet. If the sheet becomes too complex now, return to the beginning and start with new concepts.
Break It into Smaller Bits
Getting one side to accept wide swaths of a contract won’t be feasible. Break up the contract into smaller pieces that can be negotiated in separate agreements. The more minor contracts will make the larger contract, and this approach will help stay clear of taking the “all-or-nothing” approach to contract negotiations.
Make Your Initial Agreements Simple
Contracts that are complicated with a lot of detail and nuance could create a mess in negotiations. Begin with straightforward phrases that everyone understands regardless of whether it eliminates some of the more complex benefits of contracts with complex clauses.
Learn The “Why”
Know why you wish to work with the other side. Be able to transcend the mindset of competitiveness or aggressiveness of maximizing the agreement’s value and strive to collaborate. How will this relationship benefit both of the parties?
Prioritize Your Main Goals
Enter into a contract negotiation with a clear awareness of the primary goals from the contract, in addition to the order in which other risks or rewards are ranked after your initial requirements are satisfied.
Ask Questions and Learn About the Motives of Your Adversary
Learn all you possibly can regarding the opposing person’s intentions and objectives prior to starting negotiations on a contract. When you understand the motivations and demands (or problems) are more clear, you will be able to make better sure that your negotiations are based on actions that meet your company’s requirements while also addressing the other party’s interests.
Prepare Yourself with Some Research
Be sure to back up your claims by providing relevant information or testimonials from comparable customers.
Do Not Let Your Emotions Stand Out of the Way of the Possibility of a Win-Win Situation
Negotiations in business are just the same – business. Don’t overburden the process with personal emotions. Remove “I think” or “I feel” statements and concentrate on the facts.
Try to Be Positive
Show appreciation to the other side and for what brings to the table. Find things you can be able to agree on. Establish the stage for a process of contract negotiation that is most beneficial for both sides’ interests.
Be Patient and Take Your Time
Be patient before, during and after discussions. Prepare the necessary research and documents prior to any negotiations or meetings. Beware of making snap decisions throughout the process. Once negotiations have concluded, make sure you follow up with any concerns or deliverables.
Negotiation methods can help achieve better results; however, they do not address the inefficiencies of contracts. Contract management software can reduce redlining. Each party can access a secured document and see any changes in real-time. Find out more about how Ironclad’s contract negotiation and collaboration technology makes it easier to conduct contract negotiations.