Contract Negotiation Tips

Tips to Keep in Mind when Negotiating a Contract

Contracts are one of the most elementary components of our legal system.  They can be long, short, written, verbal, and contain a single sentence or a novel-worthy page count.  In essence, they are any type of agreement that describes a “this-for-that” exchange of rights, obligations, money or services.  Many contracts, like simple purchases or contracts for quick services or utilities, are non-negotiable.  However, even in those situations, there may be more room for negotiation than you think.  If you find yourself in the position of being able to discuss what your contract might entail, here are some basic tips to keep in mind when preparing for a negotiation.

Contract Negotiation Prep Work

You need to know what rights and obligations you’re actually talking about in order to have a hope of successful negotiation.  This stage is crucial.  Contractual terms and desired outcomes can change during the course of negotiation, but it will almost always be easier if you have the fundamentals laid out.  Ask yourself questions like the following:

What is the current state of affairs, and how will it change? 

This is a very important step, and, depending on the nature of the contract at hand, it can be easy to get ahead of yourself.  A careful period of self-reflection can be useful before proceeding.  Think about whether you have an ongoing relationship with the other party already, and whether you stand to gain or lose anything from negotiations or from entering a contract. Think about the other party’s relationship with other persons (both before and after you come to an agreement), and think about how entering into the contract will affect your own relationship with the other party (and third parties!). 

What must I receive from the other party? 

This is the bare minimum that you need to get out of forming the contract. Is it clear and obvious to both parties that this is what you need?

What is the most I am willing to give/pay/agree to perform?

This is something you can keep to yourself, but it’s still a good self-reflective tool to prepare yourself.  Think about your budget, time constraints, or the amount of time you may be willing to perform an obligation.

What specific objects/rights/obligations do I truly intend to form the basis of the contract?

Try not to assume things will just work themselves out. Be clear about your position, ask questions from the other side, and know what the scope of the rights and obligations might be.

Is my (or the other party’s) intended result even possible?

Sometimes, negotiations can carry on for some time before one side realizes a key piece of information that makes them realize that the intended effect just won’t work.  Clearly, in the interests of time, money, and efficiency, it pays to think about this question in advance. 

“What-if...?” Questions:

Hypothesize! For the sake of argument and analysis, ask yourself some “what-if” questions and see how the proposed contract follows through with the hypothetical.  Try to imagine what might happen if something fundamentally changes.  If it’s a lease, what if you want to move?  If it’s a job contract, what if you get sick?  This type of thinking leaves you better prepared to use hypothetical arguments as leverage, and can help you prepare answers for when the other party insists or asks for something.

At the Bargaining Table...

Once you have a handle on the issues from the first step, you may want to consider the following principles:

Don’t Overcomplicate

This can be particularly insidious with boilerplate contracts.  If the other party asks you to agree to something that doesn’t seem to apply to you, ask about it. If a term, clause or section serves only to confuse, consider removing it.  

Don’t Oversimplify

The counterpoint to the above is to make sure that your (and the other party’s) concerns are addressed adequately.  This is especially important as it relates to the hypotheticals that you have considered. 

Know the Definitions 

Many contract documents begin with an “interpretation” or “definitions” section.  It is typically crucial to understand what exactly various words in the document actually mean.  One of the implications of these sections is that you should probably not assume that a term that appears in the contract has the same meaning it might have outside the contract! 

Consider the Context

The context of your negotiations can be critical in ensuring that you obtain your desired outcome, or in protecting yourself from giving up too much for the sake of coming to an agreement.  Some of your “context” will undoubtedly come from your prep work (e.g. - knowing what a reasonable salary to expect might be, or what sort of common area expenses might be included in your lease).  Some of it may come from circumstance, such as a deadline or relationship with a third party.  Having a good grasp of the bigger picture will help a lot with timing your requests, demands, or refusals in negotiation.

Know When to Pause

Putting negotiations on hold can be a difficult judgment call, especially in time-sensitive scenarios.  But there are ample reasons when it may simply be better to wait.  More research may be required, the consent of a third party or client may be worth looking into.

Clarity is Key

Make sure the words on the page can only be read in the way the parties intend it to read! Ask yourself if there is a different possible interpretation. Consider making new defined terms rather than using a stock or official-sounding word.  Confirm with the other party that they get the same result when they try to interpret the meaning of specific terms.

Ask!

Communication is crucial in any negotiation setting.  Especially if one side has less bargaining power than the other, it is almost always helpful to ask questions, if only to confirm that what you think the contract means is correct.  If something seems to be missing, be explicit and ask for it! If it looks like the contract requires more of you than you were expecting, bring this up, too.  This is especially important when there is vagueness or ambiguity of terms.

Conclusions of Contract Negotiation

Contract negotiation can occur in a huge variety of settings, and knowing how to discuss and confirm terms is a worthwhile skill to be developed.  Remember that even if the other party suggests there is "no room" for negotiation, you still do not have to sign, and you can still ask questions. After you have read through these tips, then read about Negotiation Strategies and Tactics to better prepare.

These tips are intended to give some general tips for negotiation situations. If you feel overwhelmed, lost, or just in need of a bit of guidance for a specific situation, a great start is to seek out a lawyer, mediator or other counsellor who can give you professional help.  

About the Author - Contract Negotiation Tips

Dan - Mediate2go Editor and Blogger

Dan Lawlor is a Mediate to Go Blogger focused on estates and commercial dispute resolution. Dan is a graduate of McGill University's Faculty of Law with interests in conflict resolution, business law and writing. He played an important role as a director with Mediation at McGill, building connections with the community to improve outreach. Currently he is a student-at-law with Campbell Mihailovich Uggenti LLP in Hamilton, Ontario. Dan loves team sports, reading, and traveling.
 

Negotiation Strategies and Tactics

Negotiation happens all the time, and often we are not even aware of it.  Sometimes, particularly when something is important to you, negotiation or even expressing your position can be a monstrously stressful task.  Whether at work or in your personal life, it can feel daunting or intimidating to have to approach the “other side”, whatever that may be.  Alternately, negotiation may not phase you in the least, though you may still wish to improve your efficiency in reaching an agreement.  Remember that many conflicts involve two or more viewpoints that could at least potentially reach an agreement.  It tends to be in both disputants' best long-term interests to settle before litigation, just as much as it is in the interests of co-contractors to effectively understand and agree with each others’ position before signing the deal.  I offer the following general suggestions to consider whenever you enter into a negotiation. 

1. Negotiation: First Things First

It is a good idea to reflect on and internalize any elements of the outcome that you absolutely must achieve. By this I mean the be-all-and-end-all, an absolutely essential component that must be part of any end agreement. Examples might be a hard budget, a deadline, or the involvement or actions of a specific person. Especially in cases where you represent more than one person’s interests in negotiations, it is best to get a firm grasp of what absolutely must be present to reach an agreement. Be careful not to underestimate the amount of time or critical reflection it may take to pinpoint these so-called “first things”. It is possible that your particular negotiation does not truthfully have any imperatives!  If that is the case, be prepared to recognize that, and be thankful that you will have even more leeway to reach a mutually beneficial arrangement.

I find that crucially important issues are best dealt with up front. Time, energy, and frustrating can be saved by fully disclosing your requirements to the other parties. This will affect how others can respond to you, and prevents unexpected surprise. Rare is the case where obscuring a crucial issue for disclosure at a later period works out favorably, and that type of strategy can easily lead to accusations of deception. 

Do not be afraid to clearly articulate what the “needs” of your position are. Introduce them early, and reiterate as necessary. Not forcefully, but tactfully and with the expectation that if one side cannot have its elementary needs met, there cannot be a mutually acceptable outcome. 

        

          2. Negotiation: Know Your Goals and Your Limits

The next and possibly most important skill is recognizing the hazier area between the "absolute-must-haves" and the "desirable but not indispensable". For this skill, I invite you to think about what you (or your client) would ideally like to achieve through the negotiation process. These are elements of any agreement or settlement that you could probably do without, or else they would be addressed in the "First Things First" category above. In most situations, there is a range of acceptable outcomes on a spectrum between your most desired outcome, and your least desired (but still tolerable) outcome. Giving yourself this spectrum to play with, and thinking about it in advance, will give you more peace of mind and a greater sense of where things stand when you converse with the other parties.  

There is obviously a close relationship between the ideal goals and the "imperatives" we talked about in step one.  The time to hash out which elements apply where, in your particular case, is before you start making offers or stating your position. Canvassing the possible outcomes of each element in dispute, as well as how desirable they are, is important when negotiating for yourself but even more important when acting on behalf of others. Negotiating for someone else carries even more responsibility, so it is best to be as prepared as possible.

Be aware that we often have knee-jerk reactions when we set limits or goals. Sometimes a few days of reflection, or even a few minutes, can cause us to realize that what we once thought was an absolute is actually subject to possible changes. Being able to keep these instinctive reactions in check is a good skill for any negotiator.

An excellent tool to practice this step is something at which most of us are already adept: "What-if?", and other hypothetical questions, like "What could..." or "What would...". 

Here are a few examples:

• What if they refuse to pay the target price?
• What if he can't meet until next week?
• What would I ask for in return if they need more from me?
• What if they spring something on me?
• What if they will not budge on issue X or Y?

         3. Negotiation: Know Your Audience

This is also a crucial step, and some preparatory work in this regard will often be useful when you enter into discussions. There are two pieces of this skill. The first is to try to understand the other parties' background. Chances are, you know some general information about who they are, and perhaps about the types of restraints they may have. Try to consider, in advance, what the other parties' answers to steps 1 and 2 above would be! It is rare that you will have access to all of the information or perspective that belongs to the other side, but thinking this way may help approximate it. 

The second piece is to consider how others might react to your position. Again, this is informed by steps 1 and 2. Think about what it would mean for the other person if you got exactly what you are asking for - both in terms of your essential needs and your ideal goals. Really think about this, as it can help you narrow down the range of acceptable outcomes you have settled on in step 2.  

In both of these parts, take caution not to draw too many assumptions.  Avoid straw-manning the others' positions, and try to uncover which issues you think will be "non-negotiable", that is, the other side's First Things. 

         4. Attune to the Negotiation Environment

No two negotiations are the same, and how you phrase your discussions may depend on variable factors. Remember that you may be negotiating whether face-to-face, in a mediation or settlement conference, or even writing an email. There is no catch-all way to present yourself that will work in every scenario. However, if you have gone through the above steps, it will be easier to gauge the appropriate tone or techniques.

If negotiating with sophisticated parties, you may feel as though you are at a relative disadvantage. In such cases, be sure to vocalize your needs so that you are understood. Your potential landlord may have a standard way things are done, but if it will not work for you there is little point pretending it will. It is possible that you or your client may feel pressured, sometimes exceedingly so. In many scenarios, including face-to-face negotiations, it is perfectly acceptable to make your feelings known. Saying "I'm feeling a lot of pressure right now and I think I will need [a few minutes or days, to speak with my partner] before we continue" can be helpful. No, perhaps not in time-sensitive situations - but recognize that many deadlines we set for ourselves are themselves negotiable. If delaying the closing date by a few days is necessary to make sure both sides feel satisfied with the arrangement, where is the issue?  Likewise, pausing an ongoing mediation for a month does not mean the sessions have failed. 

On the other hand, if it feels like you are more in control of things, remember that the other parties may be the ones feeling pressured or confused. It is good practice in these situations to remain calm and candid. Make the extra effort to try to understand the others' needs and desires so that any arrangement reached is well-understood and clear. Aside from helping to make the whole process more amicable, this strategy can help preserve an ongoing relationship with the other party, and may help guard against any future claims that the discussions were unfair.

Author

Dan Lawlor is a Mediate2go Blogger focused on estates and commercial dispute resolution. Dan is a graduate of McGill University's Faculty of Law with interests in conflict resolution, business law and writing. He played an important role as a director with Mediation at McGill, building connections with the community to improve outreach. Currently he is a student-at-law with Campbell Mihailovich Uggenti LLP in Hamilton, Ontario. Dan loves team sports, reading, and traveling.

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Negotiation Strategies and Tactics