A Guide to Simple Contract Negotiations

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February 01, 2022

Some things you can compromise on, and other things you just can't. Either way, you need to enter negotiations with a clear understanding of what falls into each category. You also need to keep the initial phases of negotiations as simple and straightforward as possible. 

Know What You Need

Make a list with two columns, one for need-to-have items and the other for nice-to-have items. For example, if you are selling a product, a nonnegotiable might be how many units the buyer commits to per month. However, you might be willing to wiggle on product placement within the store. Once you've got a handle on the negotiables and the nonnegotiables, you'll have an easier time during discussions with the counterparty. 

If you struggle in the initial stages to reach agreements with the counterparty on the nonnegotiable items, that might be an indicator that you should consider abandoning talks so as to not risk being presented with a final deal that doesn't meet your needs.

Start On the Same Page

Contract negotiations can get complex, but that doesn't mean they should begin that way. Using a standard term sheet, a document outlining the main points of the contract, create a bullet point list of the basic terms. It's not meant to be a fully fleshed-out agreement but rather a guide to lead you to the final deal.

Don't be afraid to call in more people as negotiations progress. A key part of successful negotiations is involving the right stakeholders at the right time. Cultivate an open and transparent atmosphere in which everyone feels heard and is able to freely share their thoughts and opinions on the proceedings.

A good idea is to require a sign-off from all parties involved before moving on to a new phase of the contract talks. This way, you ensure that everyone feels comfortable with any agreements made and is clear on the details. Additionally, this method gives all stakeholders a final chance to voice any questions or concerns before the negotiations continue.  

Take a Step Back

Sometimes miscommunications or mistakes occur early on that inhibit progress on the negotiation talks. If this happens, be sure to call out the situation right away and offer to start fresh with a new term sheet. The good thing is, a term sheet is not a legally binding document, so you are free to revise and edit as necessary before using it to draft the official contract.

A Final Check

Hopefully, your contract ends up in pretty nice shape thanks to the term sheet. However, it's still possible that it needs cleaning up before its final presentation. Do a double-check for grammatical errors and spelling mistakes. Make light edits to the content for clarity if necessary. Also, compress a PDF online to produce the final document.

Tying It All Together

A solid contract is built upon a solid foundation. Terms sheets are a standard way of getting all parties on the same page before negotiations begin to give everyone the best chance at success. As talks progress, ensure the appropriate parties are involved and that everyone understands and agrees to the contract.

Contact your local chamber of commerce for more information.