Whether you have been negotiating contracts for years, or this is your first go around, it is helpful from time to time to go back to the basics. As a professional negotiator and trainer, here are a few of my basic contract negotiation tips:
- Prioritize what is most important to you. Not all parts of the contract are equally important, so one of the best ways to begin contract negotiations is to prioritize what is most critical to your company, and determine your bottom line. Write these down so that you can keep your eye on the prize.
- Address the “what can go wrong” issues. When lawyers discuss the “legal” clauses such as limitation of liabilities and indemnity, we’re really talking about what might go wrong and who will be responsible if it does. Address these issues with your counterpart in a real world fashion.
- For example, once you agree upon lead times, tell the supplier about the negative consequences to your company should they be late. Ask them how they intend to handle that potential (advance notice?) and what work around alternatives would be available, If you do an up-front real world risk assessment of the “what could go wrong issues” , you will gain the confidence of your lawyer. Plus, your future legal reviews will be greatly expedited.
- Understand the other party. As is often said, knowledge is power. Do your research on the other party. If you can track down information on the other company’s suppliers, vendors, prior large orders, determine what their needs are, or otherwise research the backgrounds of the principals and the person you are negotiating with, it may provide a competitive advantage in negotiations. If nothing else, you can build bridges with the other party over the difficulties in working with Russian distributors, or your shared love of the San Francisco Giants.
- Find some mutually agreeable points to start. With all negotiations, find common ground at the start, however small that common ground might be. If you can frame each one of these ‘agreed upon’ points at the beginning of negotiations on other provisions, it might benefit the negotiations as a whole. Look for any excuse to say things like, “it’s great that we agree on the delivery date” or “now that we’ve got agreeable terms for the production specifications, let’s talk about price per unit.”
- Avoid emotions, instead focus on the facts. Successful negotiators don’t take the negotiation personally. Instead they are motivated to ‘win’ the chess match that is a successful contract negotiation. Many negotiators refer to their company or the other side using impersonal contract language—even during the verbal negotiations. For example, instead of saying things like, “I think you and I can agree to a termination clause we both like,” say, “If both parties can agree to a termination clause, it will benefit everyone.”
If you have questions about negotiating agreements for your business, attorney Leslie S. Marell can help. Leslie has more than 25 years of experience as in-house counsel and as a legal adviser working with businesses, business people, and business contracts, in the technology, manufacturing, software, and medical device industries. She understands the real-world practicalities of what it takes to draft, review, and negotiate corporate contracts, and has presented her dynamic seminars to Fortune 500 companies and small to mid-sized businesses across the country. Leslie specializes in helping contract analysts, project managers, and department leaders work better with their own internal legal departments and outside counsel. To learn more about Leslie’s seminars, or get expert advice on contracting matters, contact Leslie at (310) 372-8663, or visit her online.