Contract negotiation includes two or more parties negotiating the specifics of a contract until consent is reached and the contract is signed and authorized. Contracts are part of a standard business transaction that allows each contractual party to outline their provisions for lawful accountability and industry expectations.
In addition, during the contract negotiation procedure, all parties will take into account their party’s obligations, advantages, and any possible risks they may assume by the contract. The goal of contract negotiation is for all contractual parties to feel satisfied with the provisions contained within the agreement.
In other words, rather than a ‘zero-sum game’, the objective of contract negotiation is one of a ‘win-win situation’. Unfortunately, it is not always possible to satisfy all parties completely and therefore some must settle for a mutual compromise.
Many business owners fear the day they fail to read the ‘fine print’ on a contract and their business suffers. Hence, businesses spend hundreds of thousands of dollars a year employing the right people to use the language of a contract to their economic advantage.
With each business seeking advantages through language and contractual clauses, caution is key in matters of negotiation. When contract negotiations are not taken seriously, the negotiations can result in losses and damages to a business or company. Unsatisfactory contract negotiations are a primary stumbling block for many entrepreneurs and small business owners in launching their companies.
Whether it is due to ill-intention, lack of attention, or inexperience, poor contract negotiation can quickly turn a favorable deal into a nightmare. Below are some effective contract negotiation strategies that you can employ to help mediate a fair agreement toward a mutually beneficial contract.
The more you research the party you are negotiating with, the less likely they are to surprise you. Research is one of the most important preparations for contract negotiation you can make. Proper research will help you quickly gain confidence and respect in the negotiation room and help you to form a positive rapport.
In addition, setting common ground early in contract negotiation leads to better outcomes, and the best way to accomplish this is by promoting mutual interest and trust garnered by preparation. While research might initially take some of your valuable time, it will always yield favorable outcomes and help you accomplish the agreement you want.
Key negotiation research preparation topics:
Try to extract data on what kind of contract negotiations took place in the past with your contractual party. Ask whether they were self-sufficient and what negotiation styles they primarily used. Upon collecting this data, modify your contract negotiation proposal or negotiation techniques to mirror their previous successful negotiations. Continued modification guided by the data from the opposite negotiating party will prepare you to find a mutually beneficial agreement.
Social media is an easily accessible data treasure trove; online platforms like Linkedin and Instagram can offer a variety of details regarding an individual's or company’s professional persona. In addition, you can even connect with some of their former or existing coworkers and ask for practical insight. Also, remember that individuals love hearing about themselves, so if you show up with comprehensive details about them, they will appreciate you more.
Social media also offers you a contact list of skilled legal associations able to assist you in negotiating contracts through a solicitor. Ultimately, social media provides both insights as well as personnel that can assist you in producing a successful negotiation.
Networking with mediators and employees who have been involved in previous negotiations can provide personal details on the opposing negotiation party. These personal details can inform you on how you can enhance your proposal and work with particular personalities. It will provide valuable insight into the other party’s negotiation style and how they present themselves during contract negotiations. Look for any vulnerable particularities and use them to your benefit such as whether the other party acts aggressive or passive in their dealings.
Negotiation is a talent that you can acquire and master with a bit of practice. A good starting point is to focus on the key skills you’ll need to close an advantageous deal. Below is an overview of the three key skills needed for successful contract negotiations:
Active listening refers to the ability to remember specific details without recounting them. Exhibiting this skill indicates to the speaker that you are invested in their words and is often viewed as a gesture of respect. Active listening is an important way to show that you are taking the negotiation process seriously and that you are also in favor of a mutually beneficial outcome. In addition, active listening implies that you can engage with others and retain the facts they share with you.
Instead of seeking a quick or temporary solution, it's important to wait until you can obtain your objectives of the contract negotiation. If the negotiations are rushed, you deprive yourself of sufficient time in negotiations which will limit your ability to obtain the best deal possible. Time is a key contributor to contract negotiation success. Hence, patience is one of the most effective contract negotiation skills because it gives you control over time. Time can work to your advantage in a number of ways, such as waiting as a means of getting the other party to give you more favorable terms to continue negotiations with you. In many steps of the negotiation process, patience is an advantageous skill to have.
Part of the success of contract negotiation hinges on a party's ability to be adaptable. Sometimes this adaptability comes by way of adjusting perspective on an issue, changing a strategy or approach part way through the process, or handling surprising information. Being able to make quick adjustments can transform a lose-win into a win-win proposal. This skill should be used before the negotiation starts by exploring various areas of the contract to prepare for potential questions and topics of discussion. This way, you’ll remain prepared to answer everything efficiently and clearly.
Keep in mind, that flexibility is essential as each negotiation round is unique and impossible to prepare for completely. Thus, developing a skill of adaptability will also help you during the process of negotiation to guide each obstacle as it arises.
Attempt to eliminate emotional reactions from the contract negotiations as much as possible to better concentrate on the key facts of the contract. Instead, focus on ways to decrease disagreement by understanding the desires of the opposing contractual party. Remember, the negotiations are not about you and are not a reflection on you personally.
Apart from following the negotiation tips above, it's important to end the contract negotiation on a positive note. Ending a contract negotiation towards a positive ending helps both parties exit negotiations feeling that they earned the best possible outcome. This positive outcome promotes a healthy business association opening possibilities for both parties in the future.
Using an intelligent contract negotiation platform such as Inkly can help you simplify your negotiation process and close your deals faster. Get started here to learn more about how our platform can help your business.