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Negotiating commercial contracts is part of business ownership in England. Depending on the circumstances, some business owners will take charge of the contract negotiation process themselves, whilst others will defer to a lawyer. Whichever way, how negotiations occur between parties has a significant impact on whether the deal is final. This article will explore three helpful tips to help your business break contractual deadlock and achieve a successful contract negotiation.
What is a Commercial Contract?
This is a written agreement put in place between two businesses. Most business contracts are recorded in writing and signed by both parties. A majority of business owners tend to engage lawyers to negotiate complex and valuable agreements.
The wording of legally-binding business agreements is critical because the financial consequences of a mistake or omission can be huge. Many well-known examples of contract typos, errors or poor negotiation lead to significant business losses.
With this in mind, let us consider three valuable tips for breaking any negotiation quagmire.
1. Avoid Confrontational Language
This is perhaps the least surprising tip within this article. You are likely to communicate better with someone on a personal level if they speak calmly and respect your view.
Instead, it usually benefits your business to simply lay down its aims and objectives and neutrally explain why it seeks specific clauses. If both companies do the same, they can quickly understand the gap between them. Consequently, they can work on considering a suitable compromise.
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2. Acknowledge the Other Party’s Position
It is a myth that the best negotiators wear down the other side until they ‘break’. Instead, successful negotiators acknowledge the legitimacy of the other party’s position and state that the other side has equally valid points of view. Thus, the best solution is to achieve a compromise. This approach can help avoid a deadlock where neither party compromises or respects the other’s position.
3. Focus on the Bigger Picture
Many commercial deals fail on contractual wording without proper cause. For example, it is not uncommon for a business to dramatically pull out of negotiations because of bitterness regarding one sentence in a clause when the rest of the contract is perfect.
Naturally, some pieces of wording (such as pricing) are more vital than others. However, it is usually possible to compromise a minor disadvantage against large advantages in other parts of the agreement.
Negotiations exist for the parties to explore and agree to compromise positions. Consider what a fair compromise within a commercial contract is. Two common examples include:
- finding wording that achieves both parties’ objectives (or, if not possible, language that goes down the middle and delivers some of each party’s aim); and
- swapping one clause for another (i.e. if each party wants to include a clause the other is not keen on, they could agree to each include or forfeit each clause in exchange for another).
It is important to remember that most commercial contracts are imperfect and do not deliver on every aim and objective of each business. Instead, they tend to get as close to the preferred position of each party as they are willing to compromise and accept those contract terms instead.
Key Takeaways
In summary, negotiating a commercial contract requires knowledge of which parts of the agreement are safe to compromise on. Where the commercial contract has particular importance and value, many business owners obtain legal advice on successful negotiation strategies from expert lawyers. This can be wise where the financial or reputational cost of a contractual error or poor deal could be huge.
If you need help negotiating commercial contracts, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
This will depend on the unique circumstances of the agreement in question. Realistically, the time spent on negotiations will depend on the complexity of the commercial deal, the closeness of the parties’ mutual aims and the attitude of the negotiators.
If the companies treat each other similar to that set out within the unsigned contract, then they may be treated to have accepted its terms by conduct. Your company should receive expert legal advice, as the courts treat each situation differently.
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