As negotiators it can be easy for us to focus on using our negotiation styles and negotiating techniques to get the deal that we are working on. However, it turns out that what we really should be thinking about is what we can do in order to make sure that the deal that we’re working on holds up well over time. If we don’t take the time to do this then broken contracts, damaged relationships, and lawsuits are a common outcome. What can we do to avoid this from happening?
Make Sure That The Other Side Has A Mandate to Negotiate
I can’t tell you how many times I’ve believed that I have reached a deal with the other side only to then have them tell me that they need to get approval of the deal from their boss. Not surprisingly, they often return with the news that their boss is insisting on new concessions. Why did I waste my time negotiating with them?
If you want to avoid this contract negotiation tactic, ask the other side before you negotiate to clarify their ability to make a commitment on behalf of their organization. Clarifying the other party’s negotiating authority could pay off if the deal ever ends up in court and if the other side argues that its negotiator did not have the necessary authority to bind their organization to a deal. At the same time you should also confirm your own mandate to negotiate in your organization before any contract negotiation begins.
Try Before You Buy: A Contingent Contract
Often when we are engaged in a negotiation, the other side will be making promises to us that we don’t think that they will be able to fulfill. When we find ourselves in a situation like this, it’s right for us to be skeptical. How can we reach a deal without potentially being disappointed by the other side’s inability to deliver?
We can make this deal happen if we decide to write a contingent contract into your deal—basically, a bet that’s based on your different predictions. One way that we could go about doing this would be to ask the other side to accept a substantial discount if he doesn’t finish the work on time. If the other side believes that they can deliver what they are promising, then they should be willing to take the bet.
The power of contingent contracts is that they allow parties to reach agreement by managing uncertainty about the future. You need to make sure that the penalties (or rewards) you propose are prohibitive (or enticing) enough that they’ll motivate the other party to stay on target.
Prepare For The Worse By Preparing For Possible Noncompliance
During the contract negotiation, wise negotiators prepare for the possibility of a contract breach. First, you might agree—in writing—to meet regularly to review your progress during the life of the contract. This could give you the opportunity to nip potential problems in the bud while also strengthening your relationship with the other side. Second, write dispute-resolution clauses into your contract. You might be able to head off costly litigation by requiring parties to engage in mediation or arbitration before filing any lawsuits.
Always Seek Firm Commitments
If this deal caused you to end up in court, you’d need to understand that judges seek to establish each side’s intent to be bound to a contract by examining the concreteness of deal terms and the extent to which important issues remain unresolved. However these days, we often rush through contract negotiations via email, fax, text, and phone. Even when agreements are signed, they may be nonbinding due to poor documentation.
Whenever possible, you and the other side should both sign a formal, binding contract. Eliminate ambiguity by talking thorough notes during phone calls and meetings, and retaining as much documentation as possible. After the flurry of messages, meetings, and calls ends, ask the other side to confirm that you have indeed reached a deal that satisfies you both and to copy you on final versions of contracts and other documents.
It’s All About The Lawyers
You’ve gone to all of the work to reach a deal with the other side. Now who is going to actually create the contact? All too often negotiators rely on their lawyers to draw up the official contract. Unfortunately, miscommunication between negotiators and lawyers can lead to costly mistakes. Many things can go wrong: contract terms may not accurately represent the agreement; key deal terms could be missing; or clauses might be contradictory.
The best negotiators ensure that their contract accurately reflects both sides’ understanding of the deal. Make sure that you share the motivations behind the deal with your lawyer. When a lawyer understands the purpose of your contract, mistakes are less likely. Next, take time to read the completed contract yourself. Encourage your counterpart to read it carefully as well and then discuss any areas of confusion with your lawyers. Finally, ask your lawyer to read the contract back to you in “plain English.” Ask many follow-up “What if?” questions that probe the boundaries of deal conditions to make sure you’ve covered all the bases.
What All Of This Means For You
When we enter into a principled negotiation, it can be very easy for us to be focused on the big issues: how are we going to be able to reach an agreement regarding the major topics? However, it turns out that for a negotiation to be successful, we need to make sure that any deal that we reach with the other side will hold up. How can we make this happen?
The first thing that we need to make sure of is that we are negotiating with the right person. Double check to make sure that the person that you are talking with has the authority to reach an agreement with you. If the two sides see the future differently, then you can always try a contingent contract. This allows both parties to bet on how they think that things are going to unfold. A contract breach is always a real possibility. During the negotiation, plan for this and work clauses into the contract to deal with this situation. Finally, although lawyers can be valuable, don’t allow them to write the final contact – take care of this yourself.
It turns out that creating a successful deal is all about making sure that the little things have been tended to. As a negotiator, you have a responsibility of finding ways to reach agreements with the other side regarding the major terms of the deal. However, once you’ve done this, you then have a responsibility to make sure that everything else is taken care of. Spend your time wisely and you’ll be able to create deals that everyone can live with.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: What role do you think a lawyer should play in a modern negotiation?
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