Navigating the complexities of contract negotiation requires skill, preparation, and a keen eye for interpersonal dynamics.
Whether you’re involved with a deal of the size of Vodafone and Mannesmann or negotiating terms for a freelance gig, the principles remain consistent. Below, we dissect the art and strategy of contract negotiation into three critical phases:
How well do you know the organization, company, or individual you’re dealing with? What’s their history? Reputation? Financial standing? Understanding your counterparty gives you an edge. Knowledge equals confidence!
Have a crystal clear understanding of what you bring to the table. It isn’t just about the money. Skills, expertise, networks, or unique selling points – list them. What does the other party find valuable? When you know your worth and why it's valuable to the other side, you can position yourself from a place of strength. Understanding your value is important for any negotiation, but especially job negotiations.
Define your objectives. Are you seeking a particular payment term? Specific working conditions? Know what you want, set your boundaries, and also determine areas where you can flex.
Anticipate potential challenges. Role-play negotiation scenarios with a trusted colleague. This rehearsal sharpens your responses and prepares you for real-time negotiations.
Throughout the negotiation, documents and terms will be exchanged between you and your counterparty. While email is ubiquitous, it comes with well-understood problems:
Top tools to support your contract negotiations
Email is, by far, the most widely used tool to support contract negotiations. Both parties send contract revisions as attachments. While email is ubiquitous, as we mentioned above, its deficiencies create many issues such as security/confidentiality, lack of structure (whose turn is it to work?), and version control (which is the last version?).
Collaborative document editing
Using a collaborative document editing tool (Google Docs, Microsoft 365) simplifies how two parties work on the same document. Nevertheless, most legal professionals refuse to use these tools because they cause issues in the flow of a contract negotiation. In a Google Doc, both parties work at the same time, so there is no turn-by-turn collaboration structure. And, the ability to watch edits in real-time and see every single change ever made can reveal a bit too much information about one’s negotiating strategy. Humorously, “Let’s Start a Google Doc” has become the five most dreaded words in the office setting of many professionals.
Contract Life Cycle Management (CLM) software
Most CLM software ( Juro, IronClad, etc.) is focused on managing an organization's contracts from initiation through execution, performance, and renewal/expiry. These tools often include redlining features that could be used by parties to review and edit a contract (i.e., the owner of the CLM solution and their counterparty). While this makes things a lot easier for the owner of the CLM solution, it forces both parties to use a proprietary tool to review, redline, and edit contracts. In most cases, lawyers are using Microsoft Word to edit all their contracts and don’t want to switch between specific tools.
TakeTurns
TakeTurns brings a new approach to collaboration on documents. Each party keeps using its existing tools to edit contracts but shares versions using TakeTurns rather than email. TakeTurns works turn by turn, so participants always know whose turn it is to work. All exchanged versions of a contract are automatically tracked, so there’s no confusion.
Begin with small talk. Ask about their day, comment on the weather, or discuss a recent industry event. Building rapport, though seemingly trivial, is a kind of confidence-building measure that lays the foundation for mutual trust. It’s worth remembering that technology can amplify or attenuate rapport depending on the level of pre-existing trust between the parties. Email can be a source of misunderstanding because context is often lost.
Let them speak. Active listening reveals vital clues about their priorities, concerns, and areas in which they might be flexible. Make sure you map their issues and interests to what you bring to the table and your issues and interests. In addition, you can document your shared understanding in a letter of intent, memorandum of understanding, or go-live plan. These initial consensus documents can serve as the foundation of your contract.
Once you've presented a term or proposal, wait. Silence creates a subtle pressure for the other party to respond, allowing you to gauge their reactions.
Avoid jargon. State your terms in plain language. This ensures all parties are on the same page and reduces the chances of misunderstandings.
Don’t pitch your proposal as a one-sided affair. Emphasize how the terms can benefit both parties. Mutual advantage is a powerful persuader.
If they push back on a term, don’t get defensive. Instead, ask open-ended questions to understand their concerns better. Often, this leads to finding a middle ground.
After reaching a verbal agreement, ensure every point gets documented. A well-drafted contract removes ambiguities and serves as a reference point for both parties. The tool or technology you chose to support your contract negotiation plays a critical role. It can help you manage the cadence of contract reviews between you and your counterparty, manage versions of documents, and support the inevitable Q&A between the parties. (And it’s a reason to look beyond email).
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Always get the drafted contract reviewed by a legal expert. They’ll spot potential loopholes or inconsistencies that you might have overlooked.
After wrapping up the negotiation, remain available for any follow-up questions or clarifications. Open channels of communication show professionalism and commitment.
Once the deal is sealed, take a moment to reflect. What went well? Where did you face the most resistance? Learning from each negotiation helps you hone your skills for the next.
The end of a negotiation doesn’t mean the end of a relationship. Periodic check-ins or simple thank-you notes can foster goodwill. Remember, today's negotiation partner can be tomorrow's business ally.
Once you've successfully concluded the negotiation (or not), the process doesn’t end at signatures. It's vital to consolidate and securely store all documents, files, their versions, and correspondence related to the negotiation. Proper archiving serves multiple purposes:
In essence, the meticulous task of wrapping up and archiving isn't merely administrative—it's a proactive measure to safeguard the integrity of the negotiation's outcomes and to equip oneself for future engagement.
Contract negotiation, while challenging, isn’t an insurmountable task. By breaking down the process into distinct phases and understanding the nuances of each, you set yourself up for success. Equip yourself with knowledge, approach each discussion with clarity, and always keep the bigger picture in mind. Here's to mastering the art of negotiation and forging robust, mutually beneficial contracts!
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