ART OF THE DEAL.
Dear Subscriber,
Contract negotiation is the process of give and take that parties go through to reach a business agreement. It is a common saying that “in business you don’t get what you deserve; you get what you negotiate” and it is fairly common for business owners to spend a lot of time negotiating with customers, suppliers, investors, prospective employees etc. Contract negotiations do not have to be unpleasant or one sided as each party is expected to compromise on some issues in order to get what it really wants.
Typically, contract negotiations consist of two stages: negotiation of the basic business terms followed by negotiation of the legal terms. For example in a typical sales and purchase contract the business terms usually revolve around issues of price, quantity, specification, delivery period etc. whilst the legal terms would include dispute resolution, governing law, termination, penalty for breach etc.
This week we take a look at the basics of contract negotiation and offers tips on how you can improve your success rates in negotiation.
A. Evaluate your bargaining position- The first step in business negotiation is to identify your bargaining position. What are your expectations? What are you prepared to give? How badly do you need what the contract will give you? Sometimes the bargaining power is lopsided in favor of one side or another. If you’re on the lower end, it is possible you do not get much from negotiations.
B. Get professional help- You may know your expectations from the contract but could be unable to document it in a way that protects your interests. It is advisable to get your lawyer involved in contract negotiations and documentation.
C. Negotiate with facts, not emotions- To get what you want from a deal usually requires a dispassionate approach devoid of sentiment or emotion. It is advisable to avoid letting an unpleasant personality or style drag down the negotiations.
D. Keep a Poker Face- Be careful in showing your hands in the course of negotiation. If as a buyer you see an item you want and exclaim loudly that it’s perfect and that you have been searching for it all of your life, the seller would most likely give little room for negotiation. The strength of your negotiating position relies on your actual alternatives to a deal.
E. Always read before you sign- A lot of business owners are quick to sign their rights away by failing to properly read the draft provided by the other party after negotiations. It is essential to look through the draft with the help of your lawyer and ensure the agreed terms are incorporated into the contract.
On a final note, it is not always in your best interest to dictate all the terms because as the saying goes “You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.”
The content of this document is solely for information purposes only and should not in any way be construed as a legal opinion. If you require specific legal advice on any of the matters covered in this article please contact a professional.
MOTIVATIONAL VIDEO
We understand how tough it is being in business, so the “IOC Weekly” Editorial Team has decided to add inspiring videos to our weekly articles to juice up your week. We hope it serves the purpose.
Cheers,to a fruitful week.
