Effective Agreements' Blog

Effective Contract Negotiation: 11 Tips

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Effective Contract Negotiation: 11 Tips¹

Formal Contract Negotiation Training

There are organizations that teach nothing but negotiation skills. You should consider taking advantage of what they offer. This post should help you better negotiate in some cases, but it should also cause you to consider formal training in negotiation. Such courses will provide much more insight into the kind of role to adopt, reading cues from the other side, more complex techniques, etc.

Prepare for the Negotiation

An attorney once paid the author what he considered a very high compliment, "he is always prepared for every negotiation.” He was referring to the following effective contract negotiation tips:

1. Read the contract a number of times until you are very comfortable with it. Any one contract can be very complex. As an example, download our 10 Tips on Negotiating a Basic Sales Agreement.

2. Analyze the sections so you are sure of their meanings. Do not forget the definitions.

3. Look for and understand the relationship between key sections, such as indemnifications and limitations on liability.

4. Consult with the right people – not just management and other team members, but also subject matter experts that will have to make the contractual relationship work from day-to-day.

5. Develop a written negotiation plan, usually a mark-up, but with copious marginal notes on:

   • What concessions should be made for what changes to the terms

   • When those concessions should be made in the negotiation

   A good outline of the type of agreement is a useful tool to have on hand when reviewing; download an example of one of ours dealing with OEM Agreements.

Have the Right Negotiation Team

Effective Agreements has always advocated three team members other than the attorneys, Read additional information here. The team members should be:

1. One person who is the main negotiator and the only one who speaks officially for the team Everyone else should feed information to the negotiator by note, during caucuses, etc;

2. One person who only takes notes so that, at the end of the day, the team knows the status of every issue (where the other side may not);

3. Perhaps the most important member: the one who remains silent and takes no notes, but is free to listen to everything that is said. This is a very powerful technique. This person has time to:

   • Listen to everything that is said by personnel on the other side, even if they are not active in the negotiation;

   • Think through what he has heard in relation to the negotiating plan;

   • Call for breaks and fill in the negotiator on what he/she has heard and his/her analysis of the current situation. Remember, the prime negotiator must be thinking about what to say to the other team next; this person does not.

View a "war story" about the effectiveness of the listener in negotiations here.

The above structure may not be optimal in every case, depending on such variables as the size of the other team, managements wish to be involved, and items requiring subject matter experts, such as highly technical issues.

Behave 

1. Do not get emotional and raise your voice, unless you have decided in advance to do so (hey, sometimes it works.) Definitely do not leap across the table and strangle anyone on the other side;

2. Never, ever correct something one of your team member says in front of the other team with the possible exception of correcting a technological error;

3. Do not talk if that is not your role.

Understanding negotiations is of critical importance to the outcome on each indivdual contract negotiation and, in total, on the health of your company.