11 Strategies for Contract Negotiation

Negotiation strategies for commercial agreements that are commonly used.

Negotiation is usually required before reaching a business agreement. That is, sit down at the table with the other persons or companies that are "party" to the agreement and iron out the contract's specifics. It's a good idea to study some of the tried-and-true bargaining methods if you're new to the game or need a refresher

Negotiation strategies have been the subject of numerous books. Many of the suggestions are ridiculous. For example, recommending that you serve caffeinated drinks and food laced with MSG (but abstaining from doing so yourself) and then waiting for your bargaining partners to give away the store in a drug-induced haze. Other bargaining strategies are sneaky and can backfire, such as pretending to have another suitor waiting in the wings, or insisting on discussing stuff you don't care about so you can seem to "give in" on them and obtain what you truly want.

We've compiled a list of 11 of the most typical and popular contract negotiating strategies. Some of these methods may seem simple (or even common sense), yet they've been demonstrated to work.

1. Divide the negotiation into sections. Some talks fail because the parties take a "all or nothing" approach, requiring the other side to agree to all of their requirements in order to proceed. Breaking the negotiations into portions ("compartmentalize") and reaching an agreement on each part individually is an effective technique to get around this type of blockage. This gives the impression that you're solving a number of problems and gaining progress rather than fighting a single large battle.

2. The "I'm only asking for what's reasonable" strategy. This approach highlights that the wishes of one side are merely in accordance with industry standards or current market rates. You won't have to justify your demands or spend time bargaining for them if you use this method. When you highlight that you are merely seeking normal contract conditions, the onus is on the opposing party to persuade you to make an exception in this circumstance (and to make that exception worth your while by offering concessions elsewhere).

3. The method of "getting to yes." The authors of this book stress the importance of separating people from issues in order to reach an agreement (or "yes") (that is, remove the emotion from the equation), look beyond the negotiation parties to see who or what is the true interest or influence impacting each party, produce options to create a problem-solving atmosphere, and neutralize conflict by adhering to objective and easily justifiable fairness rules.

4. Take command. Controlling the negotiation's venue, timing, topics, and pace (sometimes known as "controlling the agenda") may provide an edge. Lawyers, for example, frequently feel that the attorney who prepares the agreement is in control of the deal. Similarly, directing the negotiations allows you to choose which issues and in what order they are discussed. Parties will sometimes take a passive approach to gain control, such as appearing to function as the negotiator's moderator or offering to "summarize" where things stand (in a letter or brief statement at the start of a negotiating session). Regardless of how the reins are seized, the party that frames the issues has a greater say in how they are eventually resolved.

5. Prioritize, prioritize, and then some more. In most contract talks, the focus is on revenue and risk. However, certain incomes and risks are clearly more essential than others. When you're negotiating, you need to know what your top priorities are — usually the deal's business or money-making potential — and how your other priorities stack up against them. This will assist you in keeping your eyes on the prize and avoiding becoming distracted by matters that aren't as vital to you.

6. The approach of "offer-concession." Make sure the opposing party feels like they got a good bargain at the end of the discussion. You should always leave enough wriggle room in your offerings to make acceptable concessions to the other side. "The most important trip you can take in life is meeting people halfway," one CEO put it. This also implies that you should not begin a negotiation by declaring your absolute bottom line. If you instead offer yourself leeway to negotiate, you'll give the other party the impression that they've won something, and you might be startled to learn that the other party is ready to give more than you would have accepted.

7. Instead of making a demand, ask a question. Inquire as to why the other side is adopting a strong line on certain matters. Discussions are sparked by questions; disputes, on the other hand, frequently stifle communication.

8. Look for common ground and end on a positive note. This optimistic approach necessitates finding opportunities to say things like "You're right," or "I agree”. These modest instances of agreement, however minor, assist to establish a collaborative tone. Simultaneously, if the negotiations are spaced out over several meetings, make every effort to end each one on a favorable note. This, too, contributes to setting a collaborative tone that is more likely to promote development and lead to an agreement.

9. Do your homework. Typically, the party with more information has more clout. If you know that the folks who make an offer on your house have already sold their own home and need to move quickly, for example, you'll have greater leverage and negotiation power. You might be able to negotiate a better price if you're ready to let them seal the deal quickly. Even personal information about the parties can have an impact on your capacity to foster a more collaborative environment ("Hey, I'm also competing in that triathlon.")

10. Dealing with ultimatums and burnout. If the other party threatens you ("Agree to these terms or there will be no agreement") or drags out the negotiations, you'll have to assess how much the underlying transaction is actually worth to you. It's fine if the eventual prize is so important to you that you're willing to accept the other party's ultimatum or put up with protracted bargaining. Similarly, if the other party has complete control (for example, if it is the only known customer for your product), you may have to put up with it for a while. However, if this is not the case, the best tactic is to walk away from the discussions. If the other party truly requires your assistance, it may reconsider its strategy and return to the table. If not, you can move on to more fruitful discussions with another party.

11.Use facts rather than emotions. Successful negotiators distinguish between commercial and personal matters, facts from emotions. They don't let a disagreeable personality or style sabotage the negotiations. They also avoid making the discussions sound personal by avoiding phrases like "I believe" or "I think," instead focusing on factual facts ("If we pay this price, both parties to the venture will be at risk")

​​Yoel Molina, Esq. (AKA “Mo”)

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