Negotiation and compromise are a part of our everyday lives; whether it’s at home or a business situation. Contract negotiation is a discussion between parties with the desire to reconcile or resolve conflicting priorities in a written legal document. This can be a challenging task, especially when considering the risk or benefit of being too passive or aggressive in your discussions and how that might impact the bottom line.
Whether you’re an amateur or veteran, here are some strategies to keep in mind when negotiating your next contract:
- Set the Scope of Your Negotiation
It is important to be involved in setting the agenda of the negotiation. This could involve the method, forum, location, time, topics and the overall terms. By taking an active role, you can set topics of discussion that can protect and advance your interests.
- Understand the Counterparty
It is important to research your negotiating counterpart and consider what issues are important to them before you enter the conversation. Having more information and background allows you to predict what factors will be important and what they’ll likely ask for, so you can be prepared to respond accordingly.
- Identify Your Best and Worst Case Scenario
Make sure you have a clear idea of what you want from the agreement. Consider which parts of your contract are the most important to you or your company and identify what is your best or worst-case scenario. For example, ask yourself: which contract terms are non-negotiable for me? Which contract terms would be acceptable to compromise on? Highlight these legal issues in the agreement and work your way through the discussion one issue at a time. This exercise will help you prioritize your interests by keeping your eyes on the prize and avoid getting distracted by issues less important to you.
- Find Your Middle Ground
Prior to entering contract negotiations, you should set ambitious goals that you believe the other side will not agree to. This creates opportunities for concessions, showing the other side that you can compromise. For example, typically any first offer will be high and not realistic, so the party will expect that you will provide a counteroffer; this process may happen a few times before you find the acceptable middle ground. This exercise will allow you to make concessions that will not ultimately jeopardize your position and give you space to barter on issues of greater importance to you.
- Use Collaborative Language
In order to have productive contract negotiation discussions, you should see the counterparty as a collaborator rather than a villain. It’s a good idea to strike a collaborative tone and always attempt to end discussions on a positive note to maintain a professional relationship. For example, ask questions when reviewing the contract like “What’s the purpose behind this?”, “Could you explain what your intention was here?”, and “What about this alternative?” Showing your proactive efforts to work toward a constructive solution will help close the deal sooner.
Reviewing and drafting contracts take up to 70% of an in-house legal department’s time. With ever-increasing pressure to do more with less, improving contract efficiency through automation represents a significant opportunity to improve business performance. Learn how artificial intelligence can help you automate and manage a contract’s lifecycle.