All in the Fine Print: How to Effectively Negotiate a Contract

By Katie Pickle and Chris Reid

            Everyone, at some point in their lives, will have to enter into a contract. In fact, we make contracts nearly every day, even if we don’t realize it. When you promised your friend you would pick them up from the airport, and they promised you they would buy you pizza in return, you two had a contract. When you agreed to give up your cat because your husband was a dog person, but only if he agreed to do the laundry every week, you negotiated a contract. Any time we make promises to others, or talk out deals and agreements with other people to get what we want, we are making contracts.

            Of course, the most important contracts in our lives are those that are legally enforceable. Agreements like employment contracts, sales contracts, and rental contracts can greatly change our quality of life for long periods, depending on their terms. When it comes to negotiating these types of contracts with other parties, it’s crucial to hire an attorney to help you get the best possible deal, and to enter into negotiations with a concrete strategy in mind.   

            At the outset of contract negotiation, it’s helpful to be the party that drafts the first version of the document. This way, you are setting the benchmark for negotiation and putting everything you want on the table. Know exactly what you want and set a clear goal, because if you don’t know want, how will you get it? You should ask for everything right at the beginning, even the little, less meaningful terms. With this strategy, you’ll either get everything, or you will have offered up enough terms that you can give some up without it being a problem. The most important thing you bring to the negotiation is your attitude—if you act like the deal will work, then there’s a greater chance you’ll be able to make it work in your favor.

            The other point to consider before negotiations start is what leverage you will have against your opponent. The party with the most information has the most leverage. Know what the other party wants, and what they would realistically give up to get it. You can insist on more if you know more about the other party’s position and intentions. Not only do you need to know what leverage you have, but what leverage the other party might try to use against you, so that you can plan a counter attack. Researching the other party and figuring out where they stand is where an attorney comes in handy. Experienced attorneys have likely negotiated a contract like yours before, and they will know what cues to look for and what information is key.

            It also helps to have an attorney to keep the negotiations civil and professional. It’s important to keep a good relationship with the other party, because you might be working with them again or need something from them in the future. With a lawyer present, it’s less likely that things will get hostile. Or, if things do turn sour, your lawyer can take some of the heat off of you.

In order to keep the negotiations friendly and with everyone’s best interests in mind, you should not rush negotiating. Although you no doubt want to get the contract signed and over with, it’s critical to take your time to avoid misunderstandings. If it seems like it’s going to be a lengthy negotiation, try to break the discussion into parts. By doing this, it seems like there are little victories along the way for both parties, rather than a hostile battle culminating in one winner-takes-all agreement. Agreeing on some small points as you go helps to set an overall positive tone.

            One useful technique is leveling- ie. putting yourself at the same level as the other side and making them look at you like a peer. Try not to make outright demands of the other party. Rather, ask questions related to what you want to open up discussion. If your opponent makes strict demands of you or is acting unreasonable, don’t be afraid to walk away. This strategy will force the other party to show how much they really need you; if it’s a lot, then they’ll convince you to come back to the deal.

            Be aware of when it seems like the contract negotiation is coming to an end. If you have gotten much of what you wanted already, it might be a good idea to just let negotiations stop there. Although going for extra concessions is tempting, pushing the other side too far could cause the whole deal to fall apart. Before signing the contract, it’s vital that you trust how it has all ended up, and trust that the other side will come through. Litigation is expensive, and it’s much easier if both sides abide by the terms of the agreement. Your lawyer will be a tremendous help in ensuring that the agreement holds up. A capable attorney will try to build terms of compliance into the contract that provide immediate remedies for breach; so that a party may breach some parts of the contract without killing the whole agreement. Your attorney should also see to it that there are exist clauses for penalties.

            Though we make contracts every day, legal contract negotiation is a skill. Lawyers know the specific elements necessary for a contract to hold up in court. Contract negotiation isn’t an exact science, and these strategies are only some of the possible techniques to employ. What matters most is that you go into a contract negotiation with your priorities in order, with as much information as possible, and with a confident and experienced attorney by your side.

 About the Authors: This article was co-written by Katie Pickle and Chris Reid. Katie is a law clerk at the Reid Law Firm and a 1L student at Emory Law School. She may be reached at Katie.ReidLawFirm@gmail.com. Mr. Reid is general practice attorney in Birmingham, Alabama. He has worked for Republican leadership in the United State House of Representatives in Washington, D.C., and was a health policy advisor to the governor of Alabama. You can contact him by email at chris.reid@reidlawalabama.com or by phone at 205-913-7406. A full description of his practice areas is available at www.reidlawalabama.com.

Sources:

  1. https://www.inc.com/alex-furmansky/don-t-sign-anything-without-knowing-these-7-contract-negotiation-tactics.html
  2. http://www.nolo.com/legal-encyclopedia/contract-negotiation-11-strategies-33340.html
  3. https://www.entrepreneur.com/article/248732
  4. http://www.itbusinessedge.com/slideshows/show.aspx?c=82197&slide=1