What are the Basics of a Contract Negotiation?

By The Law Office of Yoel Molina.
 
The exchange of concessions and demands that takes place during contract negotiations is what leads to an agreement. Alternatively, "you don't get what you deserve; you get what you negotiate," as the saying goes in business. The fundamentals of contract negotiation are examined in this essay.
 
The key elements of negotiation are risks and revenues:
In a typical contract negotiation, both parties make certain concessions to achieve their objectives. Even though there are always a lot of intricacies to iron out, the two most important considerations in contract negotiations are risks and revenues.

Here is one instance. In a residential lease discussion, a landlord seeks to secure a lucrative rental income (revenue), while simultaneously securing the right to promptly evict the tenant and safeguard the property if something goes wrong (risks).
 
Negotiation and attorneys:
If you are a business owner or manager, you may have come across the following circumstance. Your business thinks it has achieved an understanding with another firm over the parameters of a deal. To work out the details, both sides call in their legal counsel, but as soon as they get involved, everything falls apart. That might be the case because while lawyers are negotiating, three variables might be in conflict. They desire to:

• Reduce risks for their clients while increasing revenue.
• Perform ethically to avoid potential malpractice lawsuits and to avoid disappointing clients (who can always find another lawyer)
• Earn money (this latter element creates the perverse incentive because the longer it takes to negotiate a deal, the more money the lawyer makes). To put it another way, it is advantageous if one or both parties drag out the negotiation.
Even if the first and second elements receive the majority of attention, some lawyers are content to let talks go on until the clock runs out. By determining which issues are still in contention, ranking the most important risks, and giving their attorney the appropriate instructions, the client can influence the negotiation process to some extent.
 
What Kind of Negotiator Are You?
There are several bargaining methods, as you are surely aware from watching TV series like The Apprentice. The two most popular approaches are competitive ("I will dominate you") and cooperative ("Together we will prosper"). The many negotiation techniques are, of course, used by actual individuals, who bring their personalities, temperaments, and lists of phrases to the table. One negotiator might yell and threaten to leave the room, while another might speak in a cool, detached manner.

According to different authors, cooperative negotiations without significant emotional outbursts are most likely to result in the best outcomes. Anger and similar feelings sometimes lead to a vengeful attitude to problem-solving, cloud judgment, foster competitiveness, and prevent mutually beneficial conclusions.
 
When Does a Contract Become Enforceable?
Is it after the parties agree on the conditions of the company or after the legal contract is finished? A deal is not deemed to be closed in accordance with contract law until all of its significant elements have been discussed and decided. Therefore, the core of any legal dispute over whether and when a contract exists would be whether any of the unanswered legal concerns represent material conditions of the agreement.

If the parties have agreed on the business components of the contract and choose to proceed without completing the legal details, they may use an escrow account or condition the release of payments on the execution of a written agreement. This removes the issue of having to search for the money you invested if the deal doesn't work out. Everyone receives their investment back if the negotiations fail, and they continue their lives.
 
The "Take It or Leave It" Situation when Bargaining:
The respective bargaining positions of the parties play a significant role in the final result of contract negotiation. A party with much greater bargaining power, such as a landlord operating in a housing shortage or a business recruiting during a downturn, is not required to engage in negotiations. Instead, these powerful individuals frequently offer the weaker party a contract and instruct them to "take it or leave it." This can occasionally backfire in circumstances of contracts of adhesion—form contracts that cannot be negotiated—because the disadvantaged party may later claim that a clause is unfair or unjust.

Even though you are in a stronger position to negotiate, it is not always to your best advantage to set the terms.
 

If you have any questions about this article or similar matters please contact our office, Law Office of Yoel Molina, P.A., at fd@molawoffice.com or at 305-548-5020, option 1