Part of owning and running a successful business is contract negotiation and drafting. Unfortunately, there is a trend involving business owners finding a contract on the internet and copying it to use it as their own. Although there are websites that provide free contracts, many can do more harm than good. They may not be up-to-date, they may not accurately state the law where they’re located, which may be different from the laws in the location, or country, that you need. They may not include terms that are actually legally binding. Even if they do have legally binding terms, those terms may not actually be in the best interest of the company relying on the document. That’s not a full list of the inherent dangers of relying on a “contract” found online, but it does highlight a few of the more disturbing ones clients have brought in for review.
Contract negotiation and drafting can be a difficult and time consuming process. As such, it is important that the parties involved are represented by competent business attorneys. This helps ensure that each party understands the terms of the agreement and that they are fair to those involved. Here are 6 tips from Larsen Law Offices, LLC regarding contract negotiation and drafting.
The First Draft of a Contract Is Generally Not Ready to Sign
It doesn’t matter which party provides the first draft of the contract. It is, more often than not, a document that is not ready to be signed. It is very important that the parties review the first draft for potentially problematic terms as well as inadvertent typos that could (and sometimes do) change the entire meaning of a clause.
Although typos and the occasional poorly worded clause may happen, there are also times when a company may use ‘alternate’ language to try and take advantage of the other party, opt-out of long-standing industry ‘norms’, and even contract-out of statutory requirements. This is why it is imperative to have a business attorney review any contract offered to your company.
Keep Every Party’s Needs and Wants in Mind During Both Contract Drafting & Negotiation
When it’s time to draft the contract, it’s important to understand the needs and wants of all involved parties. Of course, managing this information when there are multiple parties can be difficult when a business tries to draft its own contracts. Although you may have a general idea of the needs and wants of all the parties, clarify the points that are most important and the points where some negotiation may be necessary.
During both contract drafting and negotiation, it’s fairly common for one party try to intimidate the other and sometimes both parties are attempting to obtain their objectives this way. These tactics can make the relationship uncomfortable, if not carefully controlled and brought back to a mutually-beneficial arrangement. This points to the importance of an experienced business attorney who can help manage the relationship between the parties and work to create a win-win situation for the parties involved.
Contracts Don’t Have to Create a Win-Lose Scenario
In fact, contracts that clearly take advantage of one party instead of balancing the needs of the parties create many future problems. Contracts that are unsustainable, that don’t create win-win positions for the parties only have to be re-sourced, re-negotiated, re-drafted much sooner than mutually beneficial arrangements. Contracts that begin badly often see that tone carried through the life of the agreement by increased invoicing problems, arguments regarding deliverables, and a host of other issues that require additional company time and resources to resolve. It’s good to be assertive and to ensure that the best interests of your company are protected. Instead of seeking to create the “upper hand” by forcing an issue, consider highlighting how what you offer solves specific problems for the other party.
Again, win-win contracts are always better for everyone. Good contracts that are properly drafted and negotiated can result in long-term, successful relationships. Your fair treatment of others in contracts may even lead to the other party referring your company to others they know.
Pick Your Battles During the Negotiation Process
If you’re navigating the waters of contract negotiation on your own, it can be hard to know which battles you should choose. Many battles have an obvious cost associated with them, rendering them easier to identify and fight for, but many higher-cost, and higher-consequence, items aren’t quite so obvious. A business attorney can help you pick the right battles that could better benefit (and protect) your business in the long run.
Tone Affects the Entire Business Relationship
How you approach the other party throughout the entire relationship, beginning at initial contract negotiation, can determine the future outcome of it. Does the other party see you as open to negotiation or could a few items benefit from reframing before the discussions begin? During both contract drafting and negotiation, the tone toward the other party is extremely important. To generate favorable terms, know your objectives, be assertive, but not aggressive, and maintain the relationship. As long as the parties are still talking and communicating, a good contract can be formed.
Focus on the Yes
If you’re truly interested in entering into a contract with the other party, focus on the yes. Understanding the benefit you bring to the other party and what they bring to you, can help bring balance and reasonableness to the table. Knowing what it is that will get the other party on board, in advance, can help you better understand their position and their needs and help you negotiate around some of them when the time comes.
Larsen Law Offices, LLC – Helping Businesses Draft and Negotiate Better Contracts for More Than 30 Years
Contract drafting and negotiation requires a lot of time, work, and relationship management. With more than 30 years of contract law experience, Larsen Law Offices, LLC provides you with the experienced business attorney you need to help you get to yes. To learn more about our contract drafting and negotiation services, schedule your consultation by calling us: 303-520-6030! We’re here to help.