Contract Negotiation – It’s the words on the page and much, much, more

by | March 7, 2014

As we’ve been discussing business deals – whether it’s a purchase and sale transaction or a services contract – each “deal” involves some aspect of negotiation.   Sometimes the negotiation happens early in the process when the parties are getting to know one another.  However, we most often think of negotiation occurring when the parties are at odds and trying to find some middle ground – and this is where the art and science of negotiation come into play.

As lawyers, we see this in two specific instances:  when parties are beginning to work together and when there’s a dispute that must be resolved.  In both situations, we see clients focusing on what they want; but negotiation is really about understanding what the other side wants or needs.  In focusing on the other side’s perspective and stepping into their shoes, you can see where mutual ground exists and where you can best play your cards to get a deal done – or not, depending on the circumstances.

Similarly, the negotiation is often as much about the emotion as it is about the facts.  Many people push forward to pursue their rights, not because the facts support it but because of “the principle of it.”  Even if it costs much more than what it’s worth, people will fight for what they perceive as getting what is due to them.   If you look at the situation from the other side’s emotional standpoint, you be able to address their needs and be better able to come to a resolution.

Negotiation is not about good vs. bad or right vs. wrong; and sometimes you must make a decision that feels bad or wrong to get the right thing done for your business.  For example,  there are business reasons to breach a contract.  It usually doesn’t feel good to do so, but sometimes it’s the right thing to do.  It can be easy to let others make us feel badly about taking such a step, but it’s important to remember that contracts have specific provisions regarding breach and dispute resolutions because these things happen in business and in life.  Be sure to address and negotiate these provisions as fully and completely as the core services and payment terms because you never know when you’ll need them.

Finally, remember that every negotiation has two viewpoints.  Even when everyone seems 100% in agreement on the terms, usually there are slight differences in interpretation of the words on the page.  Be sure you’re clear in what your rights, responsibilities and obligations are in the transaction and eliminate ambiguity wherever you can.  Ideally, have a third party who is unaffiliated with the deal review the agreement for words or provisions that aren’t clear.  When there’s a dispute, the words on the page will govern and the lawyer, judge, or arbitrator of that dispute will view them in light of their own history or intent.   You want clarity to be on your side.

Blog written by Michelle Bomberger, Equinox Business Law Group