Contract negotiations are a process that involves discussing and compromising on contract terms in order to reach a final agreement between two or more parties involved in a transaction. In most contract negotiations, each party tries to negotiate for the best interest of themselves or their business. There is a lot of back and forth communication, but most contract factors boil down to risks and revenues.
Contracts that are negotiable can include real estate leases, manufacturer warranties, employment contract, business deals, and financial contracts. The negotiation aspect of a transaction is very important because once the contract is final, all parties are legally bound to the terms of the contract terms and cannot overlook these terms without being liable.
In typical contract negotiations, each party involved in the contract must compromise on each in order to get what they really want out of the transaction. The best way to approach contract negotiations is the following:
- Identify the objective for entering the contract: Every party to the contract must have a specific idea of what they want to gain from the transaction. Before attempting to negotiate a contract, make a lost of things you will compromise and a list of terms that you will not negotiate or give up.
- Research contract laws: Contracts are legally binding agreements, which are regulated by the courts. Before attempting to negotiate a deal, search online or get expert advice to determine whether the terms of the contract you are trying to form is legally allowed.
- Prepare for negotiations: Gather all facts, figures, financial statements, and documents for the negotiation process in case you need to show proof of anything that you may need to back up your negotiation points.
- Prepare a backup plan: Create a plan for the possibility that the contract fails to form and that both side cannot agree on the terms after negotiation.
- List your priorities: It is important to know the difference between what you need out of the transaction and what you want.
- Set a goal: Know your bottom line so you can determine when to accept a deal and when to walk away.
- Know the difference between what you need and what you want: Review your priorities and ask yourself if the term that you are chasing for is worth negotiating
Under contract law, there is no enforceable contract until all of the material elements of the transaction have been negotiated and agreed upon by both sides. All the contract terms and conditions must be legal in order for them to be enforceable or that term or condition is void. Some contracts must fall within the statute of limitations, meaning that the contract must be in writing and signed by the parties.
If the parties have agreed to the terms of the deal and want to move forward with the contract and legal details, they can draft a contract that lists all the terms and both sign the contract as the final agreement.
Attorneys have three goals when they are helping a client negotiate a contract with another party:
- They want to protect their clients from anything that would hurt the client by minimizing the risk involved in the transaction and maximizing revenue.
- They want to review the terms of the contract to determine whether the terms are legally binding.
- They want the client to earn money and make the transaction as profitable as it could.
If you are attempting to negotiate a contract, an experienced contract attorney can help you in the negotiation preparation and process. Contracts Attorneys are trained in negotiations and they can address all your needs to the other party. If you are participating in a negotiation process, contact an experienced attorney to ensure an appropriate agreement is reached.