Contracting is an important part of everyday dealings for most businesses. Although contracts constitute an important business asset, they don’t often get the attention they warrant. This oversight can lead to unnecessary costs and lost revenue in the long run. One reason that contracting ends up being a drain on company resources is due to ongoing or contentious negotiations. Here are three ways to avoid protracted contract negotiations:
Flexibility and Efficiency are a Must
Negotiations can be tricky if your company is substantially smaller or has significantly less resources than your counterpart. If you happen to be the bigger one in the ring, you may think you can bulldoze your way through the negotiation process. Of course, this leads to a contentious relationship, which does not bode well for the negotiation, drafting, or actual fulfillment of any future agreement.
The primary purpose of a contract is to give something of value in exchange for something of value, and there is an unspoken understanding that trustworthy businesses will adhere to the concept of good faith and fair dealing. It wouldn’t exactly be fair dealing for one party to assume that it is entitled to get more or should have more power simply because of the size of its bank account. In general, contracting requires a fair degree of flexibility to ensure that the needs and desires of both sides are accommodated in a mutually satisfactory manner. The willingness to be flexible during negotiations will ensure the formation of a cordial working relationship, which will help facilitate the efficiency of the proceedings as well.
Focus More on Creating Value than Consequences
When it comes to contracting, legal issues are always of prime concern. Any problems with performance and compliance are likely to lead to some kind of legal dispute, and how far that goes really depends on the nature of the contract and the severity of any breach. Unfortunately, the increasing frequency of legal hassles has caused companies to proceed with extreme caution during contract negotiations and drafting. It is obviously important to think carefully about the agreement and to ensure that key terms are clarified, but it is also important not to get bogged down in trying to micromanage all aspects of risk.
Efforts to predict risk and figure out ways to circumvent it are helpful in a broad sense, but the biggest focus should be on the economic purpose of the arrangement. Otherwise, contract negotiations will be never ending because there will always be more scenarios to analyze and address. Companies engaged in contract negotiations should focus on how each party can get the most value out of the business deal. In most cases, if each party leaves the negotiation table satisfied with the terms and subsequently strives to fulfill their end of the bargain, everyone will win and there won’t be any need to hash things out in court later.
Cooperation is Key
Cooperation is extremely important to finalize a contractual agreement. The negotiations will drag on and on if one side of the equation is doing all of the work or one side does not respond to requests in a timely fashion. It may be helpful to establish a timeline for the negotiation process if it is something that requires multiple meetings and a great deal of document review. This creates concrete deadlines and imposes accountability, which should help to speed things along.