Are you uncomfortable signing contracts and don’t know how to deal with them like a boss?
Before we tell you how to do that, let’s understand what is a contract and why is it important to negotiate business contracts.
A contract is a legal document that defines the rights and duties of the parties to an agreement. One party defines the contract terms, and the other party accepts it. Any lapse in keeping the promise as prescribed in the contract can saddle the party with legal obligations.
Many people understand the importance of a legal contract the hard way. Business contracts are essential to eliminate miscommunication, misinformation and frauds. When two parties sign a contract, they agree to certain terms and conditions mentioned in the legal document and become liable to fulfil the promises as agreed.
A contract ensures transparency in business deals and protects all parties against any malpractice.
But, how do you negotiate a contract to agree with all parties?
Two parties negotiate a contract to come to obtain favourable terms and minimize financial and legal risk. For example, if your company is negotiating terms with vendors, it may want the vendors to agree on an annual payment mode rather than monthly.
Negotiation is the best aspect of an agreement. A delay in contract execution can slow down the business.
Here are tips on how to negotiate a contract wisely
Take professional help: You may know what you want to write in the contract, but you may not know how to construct it in the right manner. Take help from your lawyers and business consultants to put across the terms legally. Also, always get a contract reviewed by an expert lawyer before signing it.
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Take time: You may overlook significant terms and conditions while signing a contract in haste. Many people don’t want to go through the endless number of contract pages and sign without reviewing it. Take time and negotiate to make the contract protect both parties’ interest.
Negotiate in steps: Focus on the easier aspects first and then move to the other terms. This way, you will gain some confidence and negotiate the difficult terms better. The contract has to protect both parties. Therefore, take time and go easy on each problem to come to the best solution.
Start with a term sheet: Term sheets show the broader terms of the contract, that are mostly in the best interest of both parties. There isn’t any point discussing the contract document if you don’t agree to the term sheet.
Do your homework: Don’t depend on the other party to set all the terms. Do your maths and understand your gain out of the agreement. Take help from your business partner and get a concrete idea of where you stand in the contract, before closing the deal.
Go the traditional way: a lot has changed with the advent of emails and technology advancements. Contract negotiations have become quick and easy. But, don’t rely too much on an email for contracts. If you find something’s not right and doubt the sender’s intentions, then call the person over the phone or meet them in person to understand the terms and conditions. Back off from the contract if you are still not convinced.