Contract review and negotiation is an old-school concept. We’ve been negotiating in our day-to-day lives for eternity. Whether it’s buying groceries or something else, we ask for a lower price and finally, both parties come to a mutually agreed price.
Therefore, negotiation is a way to resolve an issue through discussion and making a strategy that both parties find acceptable.
In order to negotiate, you need to review the contract properly.
what is contract negotiation?
As mentioned, negotiation is a mutual discussion between parties who create a policy and resolve an issue by persuading each other to agree on their terms and finally, meet somewhere in between to settle the issue without argument. Thus, putting forward their points and compromising in a way that both parties find justifiable.
On the other hand, the contract is a legal agreement that defines the mutual rights and obligations of the parties involved.
Consequently, contract negotiation is the process where two or more parties discuss the terms and conditions through contract review, to reach an agreement. In simple words, both the parties talk over and mutually agree on terms beneficial to each one of them.
Contract review and negotiation are a lot to process. Therefore, we’re here to make it easier for you by breaking the whole procedure into step-by-step activities. Since every contract is different, the process is different too. These steps will do the trick!
- Set aim: As a matter of fact, it is important to know why the contract exists. There is always an underlying goal to achieve through every contract. No contract is built for boiling the ocean! Always make sure that the aims are clear and achievable. Set realistic goals. This will help in contract reviewing as one will know what terms to mend and what to agree on!
- Get the facts and information right! In order to achieve goals and aims, one will need to gather every possible piece of information related to the contract. Analyze the information and prepare for future plans, i.e. terms they want to be mended, removed, or added. As much as contract review will help in jotting down important information, it will also help to answer questions and concerns of other parties. Knowing will make the process smoother and quicker.
- Know the rights: Make sure to know what laws are applicable in each scenario. Make oneself familiar with various contract laws, so that one can save themselves from being cheated or from unfavorable agreements. Also, in the case of doing business with someone in another country, one may need to check if all laws are applicable to them as well.
- Be ready with BATNA: BATNA is an acronym for “Best Alternative To a Negotiated Agreement.” It means that the best alternative to choose is if negotiations fail. This alternative should be most advantageous after the main one. Suppose the negotiation fails, i.e., if lawyers are unable to create a mutual agreement, the contract cannot become official and as a result, will be declared null and void. But if they have their BATNA ready, they will be able to present other alternatives that the firm is willing to negotiate towards.
- Prioritize! During contract review, parties typically focus on increasing their revenues and decreasing their risks. Firms deal with various activities providing revenue, and not all of them are equal. Some revenues and risks are more important than others. One should rank their negotiating terms and set their priorities towards the conditions that will bring in the bigger prize.
Tips And Hacks
- Take expert advice: Contact lawyers for contract review and they will assist you in drafting the best-negotiating terms.
- Always be open to new terms: Do not be stubborn, this could lead to loss. Be open to other alternatives. Listen to the other party’s ideas and come to an agreement favorable to both!
- Present facts, not feelings! Do not let the emotions come in between. Contract review and negotiations are not a simple job, it is easy to get emotions involved. Try to take a break between meetings and prepare beforehand. Just keep the goals in mind.
- Get everything on record: Keep all letters, emails, verbal communications, etc. documented. This will help in case of disputes or sudden disagreements.
Challenges Faced During a Negotiation
Contract negotiation usually takes place after contract review. Once the contract is reviewed by both parties, set up a meeting for negotiation and then finally make it official. This is a very important part of contract management. Therefore, one must stay careful during contract review and negotiation. Here are common hurdles that may come in your way:
- The inability of lawyers: Attorneys mostly focus on short-term gains or immediate profits without considering future complications and impact.
- Inequality: During negotiation, one party always has control over the other. In such a case, the other party becomes weaker and might not gain as much as the other.
- Internal-external pressure: There is a lot of pressure to close the deal and finish the contract both from the inside as well as outside. This may lead to leaving out important factors.
- Mental stability: Sometimes too many emotions get involved. Parties come into an argument leading the whole contract to be void. Individuals get anxious under pressure and make silly decisions or mistakes as well.
- Lack of proper planning: There is a lot of rush throughout the process, which may lead to improper planning and you might win half the battle.
- Stubborn and closed mind: Since both parties want a favorable deal, there are chances that one party is not ready to mend its rules for the other, resulting in losing the deal.
- Poor communication: There is a reason why the quote “communication is the key” is so famous. Poor communication leads to misunderstanding, which either leads to stalling of negotiation or future problems.
An enforceable contract is the beginning of a partnership mutually beneficial to all parties involved. It is an agreement that can be imposed in court. When all the negotiations and terms are mutually accepted by all involved parties, the contract becomes enforceable.
Once this happens, the contract becomes official and all parties are legally bound to fulfill their part. An enforceable contract is an official contract, after contract review, negotiations, discussions, and signatures between parties.
The Game-Changer: Negotiations Made Easy!
The task of negotiations faced by organizations is hectic. It creates frustrations and above everything, so many challenges faced by executives throughout the process. Little did we know that there’s an escape to this problem as well- technology!
Whether one is bargaining or trying to review documents, technology makes everything smooth and easy. But how? Technology crops the three most common problems that occur during negotiating.
- Convolution: Negotiations over technology use hardware and software in such a way that’s beyond the human mind. It presents the whole contract in a much-simplified manner.
- Unpredictability: No human can be considered reliable when it comes to handling huge pressure and even bigger costs. With the use of artificial intelligence, the software provides accuracy and performs as promised, providing better results to help take a lead in the negotiation battle.
- Egos: During negotiation lawyers and their egos mostly come in between and make the process more complicated. The technology eliminates this factor.
The Bottom Line
Contract review and negotiation is an important part of contract management. There will be a lot of hurdles and a whole lot of ups and downs throughout the procedure. But, contracts play a vital role in any firm, and therefore, negotiating is crucial too. It helps make the contract more favorable and profitable for the parties involved. Technology makes contract management and every step involved in contract management, be it contract review or negotiating, a piece of cake! With the help of this blog, it will be easier for you to prepare for contract negotiating and present yourself like a pro!