One of the most important elements of an in-house legal team’s job is negotiating contracts. Successfully negotiating contracts with business partners, vendors, and customers is essential to keeping the lights on for your business. However, contract negotiations are a delicate art. Sometimes the other party may be hesitant to agree to certain terms or to let go of terms that might be disadvantageous to your business.

Let’s discuss some of the best tips that your legal team can use for effective contract negotiations.

What Are Contract Negotiations?

Rarely are contracts a simple matter of drafting the terms and then getting the parties to sign off on them. There’s often more of a back-and-forth as the entities involved try to find a solution that suits everyone. Especially when dealing with a more complex contract or a sought-after employment contract, you’ll likely have to go through hefty business negotiations.

The discussions that lead to an agreement on the terms of the contract all fall within the contract negotiations. This is a crucial skill for any company’s in-house counsel to possess, and it’s essential for good business relationships.

6 Contract Negotiation Strategies

As part of the in-house legal team, your first priority is going to be the best interests of your company. However, you also want to make sure that the other parties involved are satisfied with the terms of the contract, or you may damage the business relationship.

This is where contract negotiations take some artful skill, as well as an understanding of how to leverage bargaining power. Here are a few effective contract negotiation strategies you can use.

1. Prepare a Draft Contract First

Even if the contract will likely be subject to negotiations, it’s important to draft an initial contract first. This will allow you to put your thoughts onto the page and will give your team a sense of what your organization would like to get out of the business deal.

You can do this before you introduce an offer to the other side. Go over your priorities with the rest of your team and determine whether the contract seems fair and reasonable. Then open it up to the other side.

2. Identify Key Contract Requirements

What is most important to your company in this contract? Does your organization want exclusive rights to certain goods and services? Do you want a certain amount of prioritization? Discuss with the executives of your company what they are looking for in the contract and bring those priorities back to the legal team.

Once you open up the contract to the other party, you also want to identify the key contract requirements from the other side. Learn to separate wants from needs for both sides. What does each side absolutely need in order to move forward, and how can you both satisfy those priorities?

3. Take Notes During Bargaining Sessions

Next, the bargaining begins. Depending on the bargaining power that each side has, both teams will make offers to push certain terms to their own advantage. It helps to take notes during this time. Your notes will help you get a sense of what advantages your organization has, as well as what’s important to both parties. When you propose new contract terms, the notes you’ve taken can help ensure that the new terms take into account the needs of both sides.

4. Work to Fully Understand the Other Party

You may be advocating for the best interests of your company, but it is still important that you understand the other side’s mindset. Exercise empathy and try to see the contract from their perspective. What would appeal to them, and what might they be hesitant to agree to?

In addition, make sure you’re really listening to the other party during the contract negotiations. This understanding will not only help you put a good foot forward, but it will also help you propose smarter contract terms and negotiate your points more effectively. If you understand the other party, you can propose contract terms in a way that will appeal to both sides, not just your company.

5. Know the Time Frame of the Contract Negotiation Process

Chances are that you don’t have an unlimited amount of time to work out the terms of the contract. There may be a set time frame in which you need to close the deal. Even without a strict deadline, contract negotiations can go on for only so long before both parties get frustrated and give up.

It’s important to keep the time frame of the contract negotiation process in mind. Try to cut out any unnecessary time-wasting elements, including manual processes that can be automated instead. Old-fashioned contract management software that requires you to create a new spreadsheet for each process or take the time to write out emails for approval can slow down your team and frustrate the other party. Make sure your workflow is as efficient as possible.

6. Have a Backup Plan in Case the Initial Terms Are Not Accepted

The truth is that things may not go your way with every negotiation. That’s OK, as long as your business is flexible. You can enable that flexibility by preparing a backup plan in case the initial terms are not accepted. If your initial terms aren’t accepted, what demands would you be willing to drop?

By having a backup plan, you can stay grounded with the contract even if the terms you initially had in mind aren’t accepted. Be willing to compromise, but not so much that the other side can walk all over you.

Implement Contract Automation Tools to Make Your Contract Negotiations More Efficient

Contract automation tools from Aline can help make your contract negotiations more efficient. We can help automate and optimize your workflow, including approvals and collaboration, so your contract negotiations run smoothly. You can even import documents from other platforms and e-sign through Aline.

Contact us today to learn more about how Aline can help you get through your contract negotiations or to try our platform out for yourself.

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