This article has been written by Surupa Hossain Bhuiyan, pursuing a Diploma in Cyber Law, FinTech Regulations and Technology Contracts from LawSikho.
Table of Contents
Introduction
Author Chester L Karrass said, “In business as in life, you don’t get what you deserve, you get what you negotiate.” Negotiation might seem like a mysterious black art to negotiate, but it is actually an activity that everyone participates in every day.
Interestingly, the negotiation methods are culturally diverse. Some negotiators may use a more direct or simple communications method, while others may use a more indirect or complex method. Each culture has its own standards, and one behaviour in a certain culture that has a certain meaning could be interpreted differently in another.
Although the processes of negotiating vary according to culture, the negotiator is required to prepare a negotiating framework and present a negotiation checklist as a tool for preparing this. There is a list of the contract negotiation checklist at the end of this post.
What is negotiation?
Negotiation is a discussion between two or more parties with the intention of reaching a mutually beneficial outcome or resolving a conflict. The aim is to avoid disputes and arguments and achieve some form of compromise between parties by convincing each other to reach an agreement. It requires a give and takes by both parties to attain a result that is mutually beneficial.
Strategies for negotiating
Understanding the interests and tactics of the other parties is essential for a successful negotiation. You will find the best results if you choose a strategy that best meets their interests and tactics. Apart from deciding on a strategy, you should also think about how you will approach the problem at hand.
How to approach a negotiation
When it comes to approaching a negotiation, experts believe there are three key negotiation techniques to employ: soft, hard, and principled negotiations.
It has been noted that when using a soft approach, negotiators are more concerned with avoiding conflict and maintaining their relationship with the other party, so they often put their own interests aside to keep the peace. The hard approach, on the other hand, entails competing through intense bargaining while being tough on the problem and the people by demanding one-sided gains as the price of the agreement.
As a result, among these negotiations, principled negotiation is regarded as the best practice. As it focuses on distinguishing people from the problem, concentrating on interests and not positions; generating a number of options before an agreement is reached and basing the agreement on objective criteria for a sustainable win-win result.
Contract negotiation through various means
Negotiation is the process of coming to an agreement on a matter between two or more parties. The ideal or conventional way to negotiate an agreement is through face-to-face communication. Since the world is changing as well as the way negotiations are communicated, it now takes place on virtual platforms via video conferences; and other media, like via email, messaging and over the telephone.
What is a contract?
A contract is an agreement between two or more parties that imposes legally binding obligations on the parties. Contracts can be distinguished from other legal instruments (documents) under which rights and obligations arise. In practice, contracts can be partly written, partly oral and partly by conduct.
A legally enforceable contract must have the following elements to be a legally binding contract in the court of law:
- Offer and acceptance
- Consideration
- A meeting of the minds
- Competent contract parties
If a clearly defined contract is signed between the parties, a dispute is less likely. Contracts are instruments to mitigate uncertainties, even if conflicts can hardly be foreseen at the beginning of a potentially fruitful partnership, but parties have to be realistic in this.
What is a contract negotiation?
The process in which the parties iron out the details of the contract before committing the terms to writing is. Contracting parties try to negotiate terms that are favourable to themselves.
Contract negotiation can be both challenging and inspiring. As a negotiator, you have to take your time to set up a successful negotiation strategy to prevent possible mistakes. It takes time to fully comprehend contracts, their legal complexities, and their terms and conditions. A detailed review will help you to understand what you agree to, without lacking any details. If you are fortunate, you will have enough time to look at the contract with the right contracting party.
To make the negotiated contract terms clear, each party negotiating a contract should have an equal understanding of all essential terms and conditions so that they can be workable for both parties.
Contract negotiation will usually involve some degree of compromise on both sides to achieve a final contract that is acceptable to all parties. The risk or benefit of including a specific term is assessed by each party when negotiating. A contract negotiation requires balancing risk with reward. It is successful when the risk is reduced or mitigated by the parties when they work on it; hence, reducing contractual risk requires planning and preparation.
How are contracts negotiated?
Contracts are negotiated like an establishment of a relationship as a contract may bind parties for months, years, or even decades. For the best agreement, therefore, it is necessary for both parties to be satisfied with the outcome (which will be including terms that are beneficial, fair, and adaptable within the parameters of their industry).
In this era, prior to negotiations, many industries rely on Artificial Intelligence (AI) to carry out a detailed analysis to identify the risk and reward scenarios in different terms. AI software assists negotiators to learn where they stand and can predict the terms the other party will propose. What AI software does is, takes existing data, compares it to market analytics, and provides a company with a detailed report based on predicted outcomes.
How to negotiate a contract?
Strictly speaking, contract negotiations are a discussion between two or more negotiators who are trying to reach a mutually beneficial agreement. When a negotiator learns how to negotiate a contract then must have end goals in mind and also should have a flexible approach.
Why need a contract negotiation checklist?
A clearly drafted agreement can define the contracting parties’ obligations and expectations (also minimize future disputes). A checklist for contract negotiations is an important tool as planning is a key to successful negotiation. Contract negotiations can be difficult but the keen negotiators look at negotiations from the other side and deal with the main issues to take into account when negotiating a contract.
The contract negotiation checklist serves as a guide to considering an interesting initial negotiation. The checklist helps to prepare a successful negotiating strategy for any potential conflict and to reach the best possible agreement. That being said, it is an invaluable analysis of the negotiator’s methodological approach and the confidence and information obtained by preparations rewards the negotiator.
What is a contract negotiation checklist?
For a contract negotiation, a negotiation checklist means thorough preparation.
Harvard’s Program on Negotiation has created a 32-step checklist to prepare for negotiations of any type; using this checklist will help to prepare for any negotiation including contract negotiation. The checklist’s main points are as follows:
It is important to understand what you want out of this negotiation process by identifying the short and long-term hopes and objectives related to negotiation. Besides identifying what are your strong points, abilities and resources, identify, in the negotiation, what are your weak points and possible threats? Investigate history, past problems or the other party’s sensitivities. The more you know about the other party’s situation, the better the position you will be in for negotiations. In the course of negotiation, you should try your best alternative to negotiations if you are not satisfied with the agreement or reach a standstill if possible. Your point of view, for example, how indifferent do you feel from deal to deal?
You should consider what possible ethical challenges during the negotiations should be taken into account. You need to identify the competitors and know how to deal with your related advantages and disadvantages. It is necessary to see if you are willing to conduct interest-based negotiations and to try to create value by trading differences in resources, preferences, forecasts, risk tolerance and timescales. In the negotiation process, it is important to know what authority you have or your team has to make any strong commitments to the other party.
Hence, it is necessary to know who is on your negotiating team to negotiate with the other party. Who will be the one to speak for you? And what particular tasks should each team member have? You must assess whether any third parties (agents, lawyers, mediators, and interpreters) are required to engage in the negotiation process.
Conclusion
It is not difficult to conclude effective contract negotiations, it only takes discipline. Negotiators cannot know everything before entering the first meeting, so it is wise to prepare for the tactics and strategies as situations change. But good preparation is crucial, but flexibility is vital.
The purpose of a checklist is not to complicate your life, but to ensure that we have identified every minor annoyance as well as those aspects of both functionality and value. This will allow us to determine its fair market price and then leverage our skills against this potential competitor to achieve the best-value solution for the company. A negotiation checklist has no set limit because it is determined by the negotiator’s creativity and experience, the acquisition’s specifics, the risks associated with this decision, and the competitive landscape of the item under consideration.
References
- Government,QLD.( 2020,May 27).Strategies for Negotiating.Business Queensland. https://www.business.qld.gov.au/running-business/marketing-sales/managing-relationships/negotiating/strategies
- Karrass,C.Dr. Chester Karrass.Karrass. https://www.karrass.com/dr-chester-karrass–
- Lebovic,D.(2020,May06).Contract Negotiation Basics.LegalMatch. https://www.legalmatch.com/law-library/article/contract-negotiation-basics.html
- Shonk,K.(2020,December 14).A Negotiation Preparation Checklist.Program on Negotiation at Harvard Law School. https://www.pon.harvard.edu/daily/negotiation-skills-daily/negotiation-preparation-checklist/
- Vanni,R.(2020,July 29).How Are Contracts Negotiated?.Kira. https://kirasystems.com/learn/how-are-contracts-negotiated/
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