How to Negotiate a Contract

Everything is negotiable.” Ok, well not everything, but many things are. Here are nine tips to help you negotiate your next contract.

To begin, you should note that if a contract contains errors, or simply doesn’t meet your expectations, you should raise your concerns and negotiate new or modified terms that are mutually acceptable. If you don’t do this, you may end up with contractual obligations that you cannot meet. 

[Learn More: How to Review a Contract]

Here are nine tips to help you in the negotiation process:

  • Ask Questions. Get an understanding of why the other party is proposing their terms.
  • Understand Your Bargaining Power. If you are small and they are big (think, Google), you have less bargaining power. That doesn’t mean you should agree to everything, but you should pick your battles wisely.
  • Be Assertive, But Reasonable. Stand up for yourself, but remember that no one wants to work with you if you are unreasonable. (And keep in mind that if you are unreasonable in a contract negotiation, the other party will remember this after you sign, if you sign at all.)
  • Add Missing Terms. If something is missing, add it! Don’t leave things out simply because you want to get the contract signed. If you do, you will likely regret it later.
  • Don’t Be Afraid to Strike Something. If you cannot agree to a provision, strike it. However, make sure you have a substantive reason to strike it in case the other side pushes back.
  • Use a Redline. If there are more changes than can be covered in a simple email or phone call, redline the agreement using Microsoft Word track changes.
  • Consider Redline that Keeps Their Terms. If the other side includes a term that places too much risk on your business, consider how you can slightly modify the term to reduce your risk but address their concern. Here are some examples:
    • “NewCo represents and warrants that there are no lawsuits pending or threatened against it” might be changed to “NewCo represents and warrants that, to its knowledge, there are no lawsuits pending or threatened against it.”
    • “NewCo shall keep the service up and running 100% of the time” might be changed to “NewCo shall use its commercially reasonable efforts to keep the service up and running 100% of the time.
    • “NewCo shall deliver all documents created under this Agreement to Client” might be changed to “NewCo shall deliver the following documents created under this Agreement to Client: [insert list].”
    • “NewCo shall not use subcontractors without Client’s prior written consent” might be changed to “NewCo shall not use subcontractors without Client’s prior written consent, which shall not be unreasonably withheld or delayed.
  • Accept Legalese. Ok, this one is hard to say, but don’t redline legalese unless there is a substantive reason to do so. It just adds more redline and causes more work. (But if your lawyer is drafting the first draft, don’t be afraid to tell them not to use legalese!)
  • Accept Their Language. You probably prefer your language. But unless there is a substantive reason to strike their language and paste in yours, just accept their language and redline as necessary.

Bonus: Get a Lawyer

Yea, we may be a bit biased, but seriously, getting a lawyer to help you negotiate contracts is usually money well spent. If you need help finding a lawyer, check out our post on How to Find and Work With Attorneys.

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Image: Adobe/katty2016
*This article is very general in nature and does not constitute legal advice.

By | 2017-08-28T20:49:35+00:00 August 28th, 2017|Contracts, Freelancers, Small Business, Startups|