Contract negotiations are one of the most important elements of the entire contract management process. You might have some lingering questions regarding how to go about contract negotiations successfully, when negotiations occur, and what skills and strategies you should learn for an effective negotiation. We touch on all of these topics below.
Negotiating contracts is central to reaching agreements, and to identifying some other key items pertaining to a given contract. For example, during a contract negotiation, you can assess where potential risks may occur, add value to the business partnership, and pinpoint how you can improve upon the current agreement to make it more favorable for both parties.
We’ll discuss the necessity of centralizing the collaboration involved during your contract negotiations in a cloud secure and all-in-one contract management system. Such solutions give negotiators the ability to reach more lofty business goals due to a simplified and technologically enhanced contract negotiation process.
By conducting your contract negotiations on a centralized, in-browser platform, communication and collaboration is improved, assisting legal departments in saving time and in identifying ways to increase the value of the contract at hand. Now, let’s go ahead and dive into to contract negotiations and learn some key skills and negotiation tips that will help speed up your negotiations and maximize business success.
Contract Negotiations Defined
A contract negotiation is the procedure by which two or more parties develop terms, obligations, and rights to be included in a legally binding agreement. During a contract negotiation, each party must be fully content with every item included in the agreement and be ready for the signature step ahead to get the contract moving forward.
When Do Contract Negotiations Come Into Play?
Contract authors must confirm that internal contract stakeholders and the legal department approve the contract draft’s terminology and language prior to delivering it to a counterparty for reviewing. Automated, preapproved contract drafts help to standardize contract language with appropriate legalese which can help mitigate risks and errors. During contract authoring and reviews, parties will work to satisfy their individual objectives regarding issues that might impact the contract, such as risks and possible outcomes. If a party is not satisfied with contractual terms or if they find that the language included is not conducive to their goals, the contract is sent off for negotiation. Other items including outdated clauses and contradictory language can also initiate contract negotiations.
A company’s legal department typically plays a central role in both negotiating and reviewing contracts. However, other relevant departments will oftentimes be involved in contract negotiations, and these departments include HR, procurement, operations, finance, and sales just to name a few. These departments may complete contract negotiations by themselves of they may simply contribute their insights when their assistance is requested for contract revisions.
Legal plays a huge role in overseeing the language and terms of a contract. If an employee needs help understanding heavy legalese, determining whether certain contract phrasing is favorable or not, or is confused about the risks associated with a given set of contract terms, their first move is often to consult the company’s legal department for their expertise and assistance.
What are contract negotiations like without an online, centralized contract platform? Well, you’ll have to resort to a process requiring longer turnaround times which can stunt the overall productivity of your contract management.
How To Negotiate Contracts
With a centralized and comprehensive contract management system complete with automation capabilities, you can collaborate with counterparties effortlessly during contract negotiations in a single digital location.
Here’s what contract management software has to offer to simplify your contract negotiation phase:
- Redlining features make it easy for parties to make changes to documents
- Commenting can be used to communicate which parts of the contract are in conflict and to query
- Version tracking makes it easy to view a timestamped history of revisions and to identify who made changes and where
- Audit trails are securely documented, allowing stakeholders to gain insights on each negotiation so they can improve upon them in the future
With a collaborative and accountable contract negotiation phase, counterparties are able to gain a better understanding of contract expectations and where the other party stands. In this way, negotiators can assess their needs and make informed decisions during the negotiation. When all of these aspects are considered, you can have successful negotiations that result in mutually beneficial terms and goals as well as an increase in the contract’s value.
Something necessary to consider is for contract negotiations is data capturing. By collecting key data at the beginning of a contract’s lifecycle during the contract intake and request phase as well as during contract authoring, you’ll increase the efficiency of your negotiations due to losing the need to gather data manually later on. You can gain great insights by analyzing contract data that will help your team effectively complete negotiations that lead to better outcomes. Your legal department can let the data drive their decision-making, and they can have increasingly strategic contract negotiations by utilizing preapproved contract templates and standardized company negotiation procedures.
Key Contract Negotiation Skills
You can develop meaningful business relationships by leveraging powerful contract negotiation skills. Let’s dive into some important skills to keep in mind when undergoing a negotiation:
- Appropriate legal knowledge
Automated contract negotiation software and preapproved contract templates are most likely built with the help of a team of legal professionals and their legal expertise. All of these items are available for business teams to leverage to increase their level of legal knowledge, so use them to your advantage.
- Risk awareness
Closing deals properly while maintaining an awareness of areas for risk potential is key. An online contract management system allows stakeholders to easily collaborate and adhere to industry regulations and policies, as well as maintain security of private company data.
- Effective communication
It’s necessary to draft your contracts with simple, concise language. Each party should assess and understand the potential pitfalls of a given agreement and then discuss them during the negotiation clearly. By having clear communication, you make it easier for your counterparty to understand your concern rather than them having to interpret a vague concept – meaning more time is spent on understanding rather than on actually reaching an agreement.
- Business-driven and goal-focused approach
You want the end result of a contract negotiation to be in alignment with the goals set by your company. No matter what department you work in, it’s key to understand which provisions of an agreement are up for negotiation and how to concede in a manner that can still lead to positive business outcomes. By having an appropriate level of transparency during the negotiation, you can help your counterparty better understand your stance which may help solve problems and add value to a larger goal at hand.
Professionalism is always the best approach to take – no need to engage in an adversarial manner during your negotiation phase. During contract negotiations, you want to effectively collaborate and arrive at mutually beneficial solutions with your counterparty in a manner that adds value to both sides of the agreement. Your counterparty can function as a strategic and helpful business partner that provides your company with competitive advantages in the form of their services so long as you create an environment that allows for it!
Top Strategies and Tips for Successful Contract Negotiations
Some helpful strategies to increase contract negotiation success include the following:
- Consider your counterparty’s perspective and what they seek to gain from your business relationship
- Ask “why”-based questions to increase the depth of communication
- Assess possible solutions and options for resolving disagreements
- Only revise contracts when the revision can assist in reaching a well-defined goal
- When you are confused by the counterparty’s communication, speak up and ask for clarification
- Prioritize contract terms that are weighted heavily rather than wasting time negotiating lower-value items
With Dock 365, negotiating contracts is made easier than ever before. Stay in control of your contract negotiations and achieve the results desired by using a platform that centralizes all counterparty communication and collaboration with Microsoft Office 365 and SharePoint. Now, you can have a simple, yet optimized contract negotiation experience that drives results. If you’re in the market for software that enhances the effectiveness and security of your negotiations, then Dock 365 is for you.
Provide your legal team with intelligent and user-friendly contract management software for seamless contract negotiations. We hope you gained value from our discussion of contract negotiations and if you have further questions, feel free to contact us here at Dock 365. Dock offers an affordable and user-friendly approach to contract management that leverages your existing Microsoft 365 infrastructure. If you're in the market for a dedicated contract lifecycle management software solution, reach out and we would love to assist you with a complimentary demo of our solution.
Learn more about our Dock 365 Contract Management System here.
Learn more about Contract Lifecyle Management (CLM) Software here.
For more information, we welcome you to schedule a free demo with us today.
Written by Lindsey Paulk
Lindsey Paulk is a Content Writer in Jacksonville, Florida that specializes in digitally communicating all-things contract management.