Being prepared and understanding the basic elements of contracts are key to ensuring the best possible outcome in all negotiations involving contracts. Consultation with a contract lawyer can ensure that you understand your rights, obligations and expectations under a contract and are aware of any ambiguous terms that may affect your perceived understanding of what it is you will receive or provide under the terms of the contract.
There are 7 key factors to consider before signing any form of contract, and it is these considerations that are vital to discuss with an experienced contract lawyer before entering any negotiations. Having these considerations in mind prior to entering negotiations will help ensure that your negotiations are reasonable, carefully researched and will truly address your priorities in the proposed contractual relationship.
7 Tips for Successful Contract Negotiations
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Your goals for the contractual relationship
When preparing to negotiate a contract, it is important to consider the kind of relationship you wish to establish with the other party and what impact this may have on the negotiation and the eventual outcome. For example, in employment contracts, there will be differences in the negotiation between short term or one-time employment contracts in comparison to ongoing employment negotiations. If you are attempting to foster a long term partnership through a contract agreement, your negotiation should include terms for renegotiation, termination, dispute resolution and profit and loss distribution.
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The necessary elements of your specific contract
Before entering negotiations for any contract, it is important to understand the specific elements that should be included based on the individual requirements of the contract and what it is for. These will differ depending on the subject matter of the contract. For example, an employment contract should include the following key terms:
- Compensation
- Termination
- Length of employment
- Performance indicators
- Business expenses
- Health insurance and retirement plans
- Paid leave
- Work status (full or part time)
In comparison, a contract for a partnership should consider the following specific factors and terms:
- Commencement
- Place of business
- Terms for the introduction of new partners
- Distribution of profits and losses
- Management
- Banking
- Partnership property
It is therefore important to enter negotiations with a firm understanding of what specific factors need to be addressed based on the specific requirements of the contractual relationship. This will ensure that key terms are not missed that will have dramatic impacts on the likelihood of success in your contractual relationship.
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When to negotiate and when to stand firm
Before entering negotiations, it is important to know which terms you are willing to be flexible on and which terms are non negotiable based on your specific needs. The goal of negotiation is to work together to find a middle ground. In order for this to be achieved however, it is important to enter with a firm understanding of the terms you may be willing to sacrifice in order to reach this point of agreement. All negotiations involve an important balance of standing firm on important terms, whilst not being perceived as unwilling to discuss or compromise.
Consultation with a contract lawyer can help create a reasonable plan of factors or terms which can be compromised to find this middle ground, and terms which if changed will result in the negotiation becoming unsuccessful in fostering the achievement of your goals under the contract.
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Notice periods
When negotiating a contract, it is important to consider the minimum notice periods required for the termination of the contract. This will differ based on the nature of the contractual relationship. For example, in employment contracts this is likely to be a non negotiable period as prescribed by law, however depending on the nature of the employment, it may be necessary to consider and negotiate an increase or decrease in the minimum notice period.
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Availability of remedies if the contract is breached
The availability of remedies will differ depending on the nature of the contract, the financial vulnerability of the parties and the magnitude of losses should the contract be breached. Prior to negotiations, it is important to consider your own vulnerabilities should the contract be breached, and whether it is necessary considering the subject matter of the contract to seek for clear terms to be included for remedies in court or specific performance.
The availability of remedies will differ depending on the likely losses that will result from the breach of a contract. For example, appropriate remedies for the breach of a real estate contract may be specific performance or damages, whilst the breach of an employment contract may invoke damages or in rare cases, an injunction to stop the termination of employment.
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Your bargaining power
Before entering negotiations, it is important to know your bargaining power based on the relationship you seek to develop through a contract. For example, if the contract is for employment, your relevant bargaining power will be an understanding of average salary for the position in your specific industry.
This should be considered alongside your professional worth which involves the consideration of your skills, qualifications, proven results and other individual skills.
Having a clear understanding of your bargaining power will ensure you do not undervalue yourself prior to negotiation and accept less in the contract than you deserve. Alternatively, if you are negotiating for a supply contract, your bargaining power will increase in proportion to the potential suppliers need for your business. Prior to entering negotiations, it is therefore important to research the other party, the available sources they have to select from to carry out the terms of the contract if you do not and any time constraints that may exist to make the other party more flexible in negotiations.
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Your negotiating strategy
It is essential to plan a thorough strategy before commencing negotiations for any contract. This will ensure that you do not stray from your goals and objectives for the contractual relationship, and will provide you with an understanding of when to push further and when to walk away from the proposed deal.
A negotiating strategy should begin with a clear outline of what your priorities are and what you think the priorities of the other party may be. It is then important to consider your negotiating strengths, and through research of the competing bargaining power between you and the other party, develop an idea of the likelihood that exists of you achieving the concessions or adjustments that you require. When developing an honest negotiating strategy it is important to think critically, to recognize your weaknesses and the other parties strengths.
Having a realistic understanding of your bargaining strength compared to the other party will ensure that you are reasonable in negotiations and are ready to walk away should the other party be able to address your priorities. Walking away from negotiations is not failure, in fact it is successfully understanding that this particular contractual relationship will not promote or provide your desired goals.
Consideration of these key factors in contract negotiation are vital to ensuring that you enter any negotiations with the best possible chance of achieving your priorities under the contract. Entering negotiations prepared through prior research and the assistance of an experienced contract lawyer will ensure that you are not undervalued and that the contract reflects your goals and desired outcomes.
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