Contract Negotiation: How it works

Before the contract comes the negotiation stage where parties to the contract agree on the terms and conditions of their relationship. To make use of this phase to achieve your goals, there are certain things you need to understand about how the individual or company you’re going into a contractual relationship with works. Hence, the need for a contract negotiation borne of experience and expertise.

At Dushyant’s Legal Services, we ensure that our clients, both local and international, are parties to contracts of international standards. We negotiate brilliantly to meet our clients’ interests and aim for agreements that favor them in all situations.

Things You Need To Know About Contract Negotiation

First, it is important to understand the collective bargaining agreement which accrues to the industry or the laws that govern the services in the contract. For this, it is helpful to have a legal background.

Furthermore, understanding the trends in the particular industry the other party belongs to is very important in contractual negotiation. It ensures that one has an idea of certain factors that will be negotiated upon, such as the length of the contract and the substance of the contract.

At Dushyant’s Legal Services, we ensure that our clients are satisfied by our thorough understanding of the nitty-gritty of negotiation, which leverages our clients in any deal or agreement.

Secondly, it is important to understand the structure of the contract. This also helps to determine the rights and obligations of each party. It also helps each party to understand how certain clauses can be inserted into the contract. For instance, in the sports industry, clauses such as the early right to terminate the contract are inserted into such agreements. 

Thirdly, after one has a fair understanding of the collective bargaining agreement, it is necessary to have an understanding of the client’s negotiation position.

Apart from preparation, this could also be regarded as the most crucial step because it is not only a function of the reputation of your client, it is also a question of how much leverage one has. 

Where does leverage come from?

Leverage comes from an understanding of the competition from other clients. Where one has an understanding of the global marketplace and the entities that compete in the same industry, one can leverage one’s position in any negotiation.

The second source of leverage is an understanding of one’s client and the client’s reputation in the marketplace. This is an essential aspect, especially when negotiating with clients that possess a higher bargaining power.

Finally, one has to understand the bargaining power of the other party. One has to understand the authority of the other party, as well as their objectives coming into the negotiation. For example, the object of the other party may not be to close the deal but to simply have you lower your own objectives and expectations.

Furthermore, it is important to be able to identify trade-offs in any negotiation. This is the very essence of the bargaining process. Identifying, for instance, the duration of the contract is a classic trade-off. In circumstances that deal with the sports industry, Is the client emphasizing security? Or does the client want flexibility? Etc.

Another trade-off is Guarantees. In football, a very small percentage of contracts are guaranteed. Since guarantees provide security, teams will often pay a player more dollars if he will take fewer guarantees. Conversely, teams may propose that the player sacrifice dollars to get the entire contract guaranteed.

NEGOTIATION STRATEGIES

There are various styles or strategies to negotiation and we shall highlight some of these strategies.

HIGH-BALL/LOW-BALL

Typically, a party proposes an offer significantly higher than the fair market value and the other party proposes an offer significantly lower than the fair market value. While one party inches up from the bottom, the other party inches down. This is usually followed by emphasis from both sides on how far they have moved from the initial offer. This is one of the safest approaches in negotiation.

HARD-BALL

This is where one party places an offer and does not budge. It is a tough strategy and is mostly used by the party that has leverage over the other.

Other styles are used in negotiations. For example, a team can propose a false deadline. This is known as Bluffing. Although, when a negotiator begins to bluff too often, such a negotiator may lose his credibility. The timing of the offer and acceptance is very crucial in every negotiation. So, it can be used as leverage for any party that understands its bargaining power as well as its overall position in the market. Also, some parties adopt the philosophy of “splitting the difference.” This is where one party puts its price at X and the other party puts its price at Y, then both parties decide to split the difference between their offers.

Finally, some parties play the “good cop, bad cop.” This is where one individual is nice and tries to work with you, while the other is tough and does not budge, no matter the offer. Often, this approach is scripted to soften the stance of the other party. In summary, these are all legitimate approaches to negotiation.

WHY GO PROFESSIONAL?

With this, you now know more about contract negotiation today, than you did yesterday. While this helps a great deal, it cannot substitute the help of a professional.

If you have a pending contract to negotiate and you can’t seem to shake off the anxiety, Dushyant’s Legal Services can help!

We use all resources available to take on our clients’ contract negotiation and emerge with a favorable deal for them. With a thorough preparation and well thought out strategies to boot, we leave no stones unturned to gain the upper hand in our clients’ deals.