Beginner’s Guide to Contract Negotiation

While contracts often get more attention than the people who create them, the latter brings those agreements to life. Due diligence plays a vital role in any contract negotiation.

Contract negotiation is an art! Each contract negotiation brings in a new experience and perspective. Whether you’re fresher or a seasoned lawyer, there’s always room to improve. In terms of the ground rules, we are all aware – build rapport, act ethically and communicate clearly. The majority of the freshers are quick learners, but sharpening negotiation skills takes a while and there’s simply no substitute for experience.

Let us consider a few practical pointers for beginners in terms of contract negotiations. For most freshers i.e., lawyers, outcome is what matters- deal closed or not? However, business savvy lawyers realize that success is what is best for a particular situation, with a particular risk level, at a particular time. They come prepared for every situation depending on the requirements– understanding leadership’s risk appetite, stakeholders’ desired outcomes and a view on what matters to the counterparty. The point of contract negotiation is not to see who has the flowery language or most exhaustive clauses. Top negotiators are very clear in terms of what they want and know what an illusion is. Risk mitigation, inconsistencies and redundancies are the key areas of the top negotiators.

A negotiator’s goal is to execute the agreement quickly without jeopardizing the client’s interests. For instance, if a counterparty pushes back on three issues, assigns a value to the issue based on importance, one could consider trading 1 and 2 in order to get the 3 which is probably the most crucial point. This is probably the most practical and pragmatic approach to any negotiation. Once the negotiator becomes actually aware of what’s actually required and is aware of the negotiating chips on hand, it becomes easier. Strategies, points, strengths/ weaknesses all fall in place. After years of experience and expertise, trust your gut!

While contracts often get more attention than the people who create them, the latter brings those agreements to life. Due diligence plays a vital role in any contract negotiation. For example, check for any clues on the individuals involved in a particular negotiation. By doing so, the negotiator would be better placed to handle them all. If you’ve worked with them before, don’t reinvent tactics. New things can scare people, but familiarity breeds comfort and confidence. Also, keeping your cool is as important as the negotiation itself. Stress, trauma and fear don’t usually have happy endings in a negotiation and upsets the equilibrium. The best negotiators don’t fall into “us vs. them” battles.

Last but not least, most in-house lawyers are burdened with contracts review. So, they rely on technology such as automation and AI for drafting, reviewing, negotiating and executing contracts. Key is to understand which technology suits best, effective, practical and economical.

While there are many more practical suggestions available, the above-mentioned points are the most important and practical from a contract negotiation perspective.

“Follow effective action with quiet reflection. From the quiet reflection will come an even better action.” Peter. F. Drucker

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.