Contract negotiation is a crucial aspect of contract management. Contract negotiation involves a lot of coordination; the process poses a logistical challenge to the team for getting contract feedback from a large number of counterparties or stakeholders. On top of that, imagine doing this for multiple contracts.
Let's go through what contract negotiation is and how can the business effectively negotiate the contract:
What is Contract Negotiation?
Contract negotiation is a process whereby two or more parties discuss the terms of the contract before making it official. During the contract negotiation, all the parties involved discuss their roles and responsibilities, the benefits of entering into the contract, and the risks involved. The main objective of contract negotiation is to make all the parties feel comfortable and informed of the details of the contract.
Strategies for Effective Contract Negotiation
1. Start With Term Sheet
A term sheet is a nonbinding agreement that outlines the basic terms and conditions under which a contract will be made. It can be a practical starting point when building and later negotiating the contract. The term sheet lays the groundwork for ensuring that the parties involved in a business transaction agree on major aspects. If all the parties agree to the terms and conditions outlined in the term sheet, the negotiation process gets less stressful.
2. Negotiate the Contract in Bits and Pieces
People typically negotiate contracts as a whole. However, a lengthy contract can lead to confusion, frustration, and disagreement among different parties. So, it is best recommended to break the contract into bits and pieces while negotiating. It helps parties agree to the contract faster, eventually motivating them to continue.
3. Know Your Priorities
Having clear priorities before entering the negotiation process helps guide discussion with the counterparty. It allows both parties to start with the most important factors and then move on to less important ones. If the parties know their priorities, it is easier for them to compromise on less important aspects of the contract.
4. Prepare Alternatives
Consider alternative options of prioritized terms and conditions that one can settle for. And mention it only if the counterparty is challenging the already presented terms.
5. Understand the Counterparty's Intentions
Research the counterparty's interests and goals before starting the process of negotiation. Evaluating their business motive and needs may help to decide your next move in the negotiations in a way that addresses both parties' interests.
6. Separate the People from the Contract
Business negotiation is the same as business. In both cases, keeping personal feelings aside is the best thing to do. One of the parties can agree to specific items in the contract to make the other party happy. Nonetheless, this could cause conflict in the future if compromises are made on items that not all parties agree upon.
7. Be Open to Communication
Communication is crucial in any business relationship, especially when a contract is about to be signed between two or more parties. A contract between two parties is based on trust, so it's essential to ensure that all parties continue to communicate their concerns.
8. Don't Rush the Process
When negotiating any contract, it is best not to rush the process. Research and collect the required documents before the negotiation meetings. Be careful before making any decisions because one wrong decision can lead to problems.
9. Keep the Goal of the Contract in Mind
Don't forget what the objective of this contract is. When you enter a contract negotiation, be clear about your goals and how other risks and rewards rank after your initial needs are met.
10. End on a Positive Note
Show appreciation for the other party and what they contribute. Set the tone for a negotiation process that will best serve both parties interests. Find opportunities to say, "I agree," "you are right on your part." These minor points help set a collaborative tone.
The negotiation process can help the business produce better outcomes, but it cannot fix contract inefficiencies. You will need InkPaper, a contract workflow management platform, to have an efficient and robust contract execution. From drafting, collaboration, negotiation, and e-signatures, to secure storage, InkPaper enables teams to boost productivity and focus on business growth.
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