Contract negotiations refer to the process of two or more parties trying to reach an agreement on legally binding terms. However, even while both parties may have the best intentions from the start, they will try to obtain the most favorable contract terms for themselves and their companies, which can lead to conflict of interest in the process. Negotiations can quickly become lengthy, cause problems in workflows, and lead to inefficient contract management processes and wasted time.
This post will show you how the contract negotiation process typically works and highlight ways to streamline and simplify negotiations.
What the Contract Negotiation Process Looks Like
Negotiations come into play when two or more businesses are creating a legally binding agreement. The parties negotiate because they want to obtain favorable terms and minimize the risks in this agreement, including legal, financial, and reputational ones.
Typically, one party drafts the document or term sheet and sends it to the other for review. Internal legal departments then comment, ask clarifying questions, request to remove terms or clauses, or revise language for the other party to accept or negotiate. Legal professionals aim to ensure that nothing in the contract will lead to problems for the business down the road. The back and forth can result in multiple versions of an agreement before all parties are satisfied and ready to sign.
Traditionally, negotiations happened in person, over the phone, or via express mail. However, today’s contract managers commonly utilize email or software to send documents and comments back and forth, manage versions, get signatures, and file the final documents. As digital solutions can streamline tasks like redlining, collaboration, and signature coordination, they tend to ease the entire contract negotiation process.
The new ways of negotiations are not without drawbacks, though. The workflow from contract creation to signature coordination can still weigh down a legal department. Fortunately, there are proven ways to simplify and speed up contract negotiation.
Contract Negotiation Tips to Help Simplify Your Process
Negotiating any deal can feel daunting, even if you're using the latest technology. Nevertheless, the right strategy can help you simplify the process for everyone involved. Here's what you can do:
Know Your Objectives
Before you even approach negotiations, determine your objectives for the agreement and the relationship in advance. Do you know what protections you need in place to proceed, and which terms or clauses are non-negotiable for your business? Having clear goals in front of you will help you reach them and identify red flags during prime contracts review.
Research Contract Laws, Standard Agreements, and Standard Provisions
If you want to approach the prime contract negotiation process the right way, perform thorough research about the standard terms and provisions. Learn all there is to know about the current contract laws and trends for legal professionals in your industry. This knowledge will help you negotiate business contracts without missing out on anything.
Legal tips, contract templates, and detailed legislation information are available online and in research libraries, so you can easily stay up to date on the latest legislation and standards.
Start With a Simple Draft Contract Proposal
When composing and later sharing a basic contract proposal, you may want to start by including the key points of the agreement. Outline any terms that have already been agreed upon and continue to build things steadily. Keep the language straightforward and clear.
If you begin collaborative negotiations with a complex contract, the other party may put the defenses up or assume that you’re asking for too much right away. It’s best to start simple and only include special terms you need.
Pay Attention to Contract Terms
Even if you’ve read a particular provision a million times, always carefully read through it once more. It can be easy to miss a small change that could become a major issue later.
Starting negotiations with a simplified term sheet can help you avoid overlooking important information. Break the agreement down to the essential terms. Ensure each one of them has a clear purpose for the business relationship or project at hand. Pay close attention to details in the contract to improve negotiations and minimize risks.
Use Proven Contract Negotiation Strategies
Some methods work better than others in contract negotiations. Here are a few contract negotiation strategies commonly used by successful businesses that will help you improve your results:
- Start with your key objectives and prioritize them in the contract document and language.
- Be open and willing to ask questions about a change or suggestion made by the other party.
- Try to be more positive than negative — focus on the terms both parties agreed on before jumping to conclusions about disagreements or bad motives.
- Keep emotions out of negotiations, and remember that it’s all just part of doing business.
- Be prepared for every meeting and discussion with facts and reasons behind your comments and changes.
- Create contract templates to refer back to if you contract similar services regularly.
Being patient, prepared, open, and honest can only help you in negotiations. When you negotiate business contracts, stay firm on your must-haves, like critical timelines or fees, but balance the process with a willingness to keep the process moving.
When You Should Change Your Approach to Contract Negotiations
Sometimes, a contract negotiation process that showed excellent results in the past can stop working. The signs of a no-longer effective approach may include the following:
- Issues continually arise after an agreement gets set
- Your negotiation process is taking more time than you anticipated
- Heated arguments often occur in negotiations
- Your process utilizes outdated technologies and has cumbersome workflows
- You frequently see unsuccessful contract performance
If you notice some or all of these signs, it may be time to bring in new negotiation tactics for your business. But where do you even start? Incorporating contract management software can be the first and most efficient step in improving your strategy and moving toward better business outcomes.
Use Contract Management Software to Simplify Negotiation
Contract management software can be a game-changer for business contract negotiations. The software helps you improve collaboration and streamline contract redlining and reviewing. You can manage all tasks from one place instead of dealing with a lot of back and forth over the phone or through email.
With an intuitive contract lifecycle management platform like Lexion, you can streamline and gain control of your contract negotiation process. Lexion Workflow helps legal teams navigate contract negotiation tasks and stay organized throughout the process. You can track the status of contracts to see where the holdup is, and you can easily coordinate with non-legal departments in the platforms they already work in, such as Salesforce, Slack, and Teams.
Lexion Repository also saves legal teams time with AI-powered contract storage and analytics. Documents can be located and referenced in moments, and you can pull and share key metrics with a few clicks. Waste no more time and improve your contract negotiation process today with Lexion’s intuitive contract management system.
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