All You Need To Know About Contract Negotiation

A contract is the backbone of business settlements. The concept of contract negotiations has been the same since the beginning of time.  

However, there are new sets of legal technology that are making drafting contracts and negotiation easier. It is mitigating risks and making contracts smart and mitigates all risks.  

In this blog, we will delve into the details of contract negotiation. The blog will also discuss the different contract approaches and negotiations in business liabilities.

What is a Contract?

Imagine this: While you’re building a house, you need a plan and foundation to begin with, right? It’s the same when it comes to contracts. Be it a simple business deal or a complex partnership plan, contracts lay the foundation for bolstering professional relationships.  

In simple terms, contracts are a form of legal obligation between two or more parties that create a tangible agreement. The terms of contracts are legally enforceable and define the penalties and remedies if any sort of breach takes place.  

What are the Enforceable Elements for a Contract?

A contract is legally binding when there’s a consideration, offer, and acceptance. Here are the 6 elements you need to keep in mind in order to make your contract enforceable.  

Offer

This is a promise made by one party to another that they will or they might perform a specific action in the near future.  

Acceptance

It’s considered to be a mirror term with that of an offer. However, it’s an expression that determines that both parties have agreed to the terms of the contract.  

Consideration

It entails a value that is promised in exchange for different actions as defined in an offer. It is most common when it comes to payment for goods to be delivered. Consideration is the main substance that distinguishes a contract from a gift as it removes any voluntary nature of requiring something at the end of the promise.  

Capacity

This means that each signatory entering into the contract has to have legal capacity like a sound mind to understand what they’re signing.  

Legality

These are subjected to the laws of the jurisdiction under which they operate.  

Understanding Contract Negotiation

Contract negotiation is an intricate process of coming to an agreement based on sets of legally binding terms. Suppose, when two parties negotiate, both parties seek favorable terms on their side. This helps minimize any legal, financial, and operational risks.  

Contract negotiation adds an opportunity to come up with the economic value of the relationship. They also help to shore up any forms of supply chain vulnerabilities. Most importantly, contract negotiations help your organization against any risk.  

The main goal of contract negotiation is to look after the favors of every party and they must abide by the rights and obligations assigned to them.  

History of Contract Negotiations

The history of contracts dates back to ancient civilizations. The developments of contract laws are influenced by Ancient Greek and Roman civilizations. Other than that, there even have been significant developments in contract law during the Middle Ages when global trade was at its peak.  

Early civilizations had simple contracts where people informally negotiated with goods they required. These agreements were primarily enforced by the families their tribes or their religion. However, with the passing of time, the concept of enforceable contracts started adopting robust enforceability by documenting them.

After that, there were no new innovations that took place in contract negotiations. A significant change just took place in the 1990s when contracts were drafted over email.

Apart from Microsoft Word and email, there are no other suitable ways for contract negotiation. Using word and email fosters limitations in communications from specific parties. This helps in keeping up with the timestamp of every communication taking place. You can even share documents over email in a quasi-universal format.

Today, contract laws are much more extensive and complex and the use of digital contracts and e-commerce has significantly helped in managing agreements. Other than that, the evolution of Contract Lifecycle Management tools has also helped in making negotiations easier and feasible.  

Technology and Contract Negotiation  

With the advent and usage of legal technology, contract negotiation has now become extremely favorable. Earlier, legal professionals had to make a choice between security and convenience. However, with the introduction of new technologies, legal professionals don’t have to make any serious exchanges while implementing the new-age negotiation tools for contracts.  

Centralized Documentation

Legal professionals have acquired a reputation for scattering contracts all over the place. Be it filing cabinets or local hard drives, you’d find contracts everywhere. This is why, CLM solutions are now catering to centralization and creating a significant technological gap from any issues of security.  

Adaptability

Earlier, software was only built for consumers or other specialists. But now, legal technologies combine the best features of both. They cater to a high degree of configurability and control. This results in requiring minimal user training. These new contract negotiation tools allow users to quickly comment on different documents found online and also loop in with multiple colleagues. They can do this online or via email.  

Universal Compatibility and Security

Contract negotiations come in more handy when both parties are using the tools they’re comfortable with. Earlier, tools primarily took the walled garden approach. Now, the current tools have come up with immense flexibility and also provide both parties with opinionating on the contracts simultaneously.  

How To Successfully Negotiate a Contract?

Contract negotiations might sound tricky at a glance, but it isn’t. Here are some tips you can keep in mind to successfully negotiate a contract in your favor:  

Start With a Draft

Before you author any contract for negotiation, make sure that the other party understands and confers the main points of the contract. Always use a straightforward term sheet. It might even get complicated at times, but you can always go back to the beginning and start with the new terms.  

Break Down Your Contracts To Smaller Pieces

It isn’t realistic if you just get one party to agree with the swaths of the contract. Try and break the contracts into pieces. This in return, helps to make up for a larger contract. This also avoids any strategy to avoid any all-or-nothing approach in contract negotiations.  

Keep Your Initial Terms As Simple As Possible

Complex contracts that come with lengthy details might even complicate negotiations. These nuances should be avoided. Instead, contracts should be explained in simple terms for everyone to understand. This, in turn, would avoid any form of problems and even drafting any more complex contracts.  

Know Your “Why”s

Know and understand why you want to establish business with the other party. Go beyond any competitive or aggressive mindset and get the most out of your contract. Always aim to work collaboratively and also think about how this contract would benefit both parties.  

Prioritize All Your Key Objectives  

When you go into a contract negotiation process, you should definitely have a proper understanding of your top priorities from the arrangement you’re making. You should also understand the other risks and rewards so that all your initial needs are properly met.  

Ask Necessary Questions to Understand The Motives of Your Counterparty

Try and know about the interests of the other party. Know their goals even before starting a contract negotiation. Understand the pain points of your counterparty. This will help in aligning your negotiations much more easily. This will also support the needs of the party you’re representing while even meeting the interests of your counterparty.  

Research Your Topics

The legal niche always has a solution in its precedents. We’d recommend that you always research your topics properly before you enter into a contract negotiation. Support your claims with appropriate data that you’ve acquired previously from clients who faced similar situations.  

Don’t Let Emotions Get in The Way

Remember, negotiations are just business. Avoid any sort of emotions getting in the way of negotiations. Eliminate any sort of “I think” or “I feel” factors in the contract.  

Always Take a Positive Approach

Always express appreciation for the other party and what they bring to the table. Find similar points that you can agree upon. Always set the tone for contract negotiation and always come up with ways that would serve the best of both parties.  

Don’t Rush The Process

This is a common point for every aspect. It’s highly recommended that you take an adequate amount of time before you start any negotiation. Plan and research the entire case meticulously. Needless to say, don’t make any sort of hasty decision. Always follow through with your counterpart once the negotiation is done for.  

Final Thoughts

Contract negotiation might seem very daunting at first, but it isn’t. Once you grasp the adequate knowledge you need for mediation, you will soar with flying colors in the legal field. Remember to strategize first before you even take up a negotiation.  

We hope this blog was informative and helpful. However, do let us know if we missed out on anything.

Read Also:

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• Why Law Firms Outsource Their Legal Research And Contract Management Services?