Negotiation can be best described as an interactive process between two or more negotiators or parties seeking to find common ground on issues of mutual interest and create a mutually acceptable agreement that will be honoured by all.
Negotiation skills are required in daily life for a peaceful and stress-free existence without misunderstandings. Moreover, negotiation is essential for a successful commercial lawyer in a corporate setting. A lawyer with strong negotiation skills can turn a loss into a beneficial compromise for their client.
Given how relevant negotiation is to our personal and professional lives, it is important to understand what it entails and how to ace it!
The goal of such contract negotiations is for all parties to feel comfortable with the details of the contract.
Unfortunately, drawing up an exhaustive list of things to remember while negotiating a commercial contract is nearly impossible.
However, you can effectively negotiate commercial contracts by adopting the mindset, and strategies.
Additionally, set out below are 8 pointers to keep in mind at different stages of negotiation for executing effective commercial contracts:
- Before Negotiation
Before any commercial negotiation, it is essential to:
- Understand the underlying contract or context of the transaction: It is necessary to gauge the importance of the contract or settlement for your client and the risks posed by the failure of such settlement
- Understand the extent of the bargaining power
- Understand the hard stops or walk-away positions of your client
- Anticipate the risks of failure and hard stops or walk away positions of the counterparty
- Understand the market: What is possible and what is not, given the market scenario?
- Identify and understand the laws and regulations relevant to your transaction
Before the negotiation, knowing the commercial implications of any actions or decisions is necessary.
- Negotiation Process
During the negotiation process, it is essential to:
- Communicate with the counterparty
- Build rapport with the counterparty; small talk is an underrated factor!
- Listen to the counterparty’s position without countering or criticizing it.
- Communicate your position
- Always know your position, market, and audience before deciding on the negotiation strategy.
- Appropriately cite market practice for standard clauses, as it saves discussion time.
For example, if you are negotiating a loan agreement and representing the bank, it is easier to justify your position, stating that these align with the market practice. It shifts the burden on the other party to convince you that an exception should be made. Therefore, know your position, market, and audience before deciding on the negotiation strategy.
iii. Emphasize the positive factors in the negotiation and areas of agreement
iv. Clarify the hard stop or walk away positions of your client
It is vital to negotiate in a manner that leaves the other party feeling that they have made a good deal. When you make the other party think they have won something, it is much easier to reach your desired outcome.
- Bridging Differences
During the negotiation, it is necessary to identify the critical differences between party interests and assess if those gaps are bridgeable.
Bridging the gaps between parties is the ultimate goal of negotiation.
- Prioritize
A contract has a thousand elements that can be negotiated. However, such an approach could be more practical.
Hence, it is essential to identify the critical tasks of your client and negotiate accordingly.
There is no point in losing sleep over minor points which do not substantially change your position. Keep your eye on the prize – the absolute non-negotiables.
- Understand the Value of a ‘Time-Out’
People would like to take short breaks during the negotiation because it may get overwhelming or too strenuous. Hence, during negotiations:
i. Avoid losing patience; maintain a calm, confident, pleasant demeanour
ii. Try to cool tempers or calm any tension that the negotiation may produce
iii. Leave space for internal deliberations, for re-adjusting positions
Time-outs help people step away from the situation and assess it more objectively. After pausing, one can make better decisions instead of making one in haste.
- Suggest Options
During negotiations, it may happen that what you want is different from what is being discussed or offered. In such situations, it is best to consider alternative options.
Accordingly, parties should:
i. Be open to suggestions
ii. Keep interests above egos
iii. Use facts, not feelings
Negotiation is an emotionally draining process. Hence, it is important to dissociate your feelings from the facts. A successful negotiator will avoid letting an unpleasant personality drag down the negotiations. Viewing negotiation as a means to achieve common goals and not as a warfare technique is also important.
iv. Remain firm about walk-away positions and balance that with managing the client’s expectation of cracking a good deal
Keeping alternative options allows one to make the most out of the negotiation process.
- Conclusion of Negotiation
One must always end the discussion positively, even if it fails.
Further, in case of paucity of time, I suggest another round of negotiations to continue the discussions.
- Presentation of Contracts
It is vital to capture the discussions in a manner that does justice to the negotiation process. Hence, one must:
i. Always use simple, business English while drafting a contract. Simple language allows the parties to fully understand the implications of a clause and quickly negotiate to reach the desired position.
ii. Similarly, avoid unnecessary jargon or Latin terms.
iii. Avoid drafting a one-sided contract; instead, adopt a balanced approach to make the negotiation process timely and effective
Presentation matters when drafting a contract after rounds of negotiations; hence, one must always take due care and consideration in this regard.
To learn more about the mindsets and techniques that can be adopted during negotiations, check out Lawctopus Law School’s self-paced course on negotiation.
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- Give you a solid foundational knowledge of what is negotiation
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- Learn about the psychology of Corporate Negotiations
- Learn how to become an ace Negotiator
- Learn how to start a career in Corporate Houses as a Professional Negotiator.
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