Contract Negotiations – 5 Tips for Making the Process Easier, Faster, and Cheaper

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Tip #1: Focus on What’s Important

First, you need to realize that about 95% of the terms and conditions contained in most contracts will ultimately be meaningless.

For example, almost every commercial lease agreement will contain a page or two outlining each party’s rights if the leased property is taken through eminent domain.

Likewise, most residential purchase and sale agreements provide a clause explaining the rights of each party if the property is destroyed by fire or flood before the closing.

The odds of such events happening are incredibly slim.

Therefore, it’s usually best to spend less time and energy rephrasing or renegotiating such terms and instead focus on the provisions that really matter.

Typically the most important terms of a contract are (1) the parties (2) the dates and (3) dollar amounts.

Tip #2: Choose the Right Lawyer

If you choose the wrong lawyer the time and the expense of negotiating your contract will increase drastically.

Some lawyers–especially those that bill by the hour–will argue over every insignificant clause or sentence contained in a contract.

Usually, all their arguing and revising adds nothing substantial to the agreement.  Instead it creates only animosity between the parties.

Let me give you an example.

I recently negotiated a commercial lease agreement on behalf of a landlord.

The landlord’s lease stated that the tenant would not engage in any activity that could reasonably be considered as a nuisance by the property’s neighbors.

The tenant was fine with the clause.  However, his attorney demanded that it be removed.

This and other disagreements caused the contract negotiations to drag on for weeks.  And, in the end, hardly any substantial changes were made to the original agreement.

Tip #3: Customary/Standard Contract Terms are Usually OK

Almost every type of contract (e.g., employment contracts, lease agreements, purchase and sale agreements, etc.) contains standardized terms and provisions.

People often refer to these as “boilerplate” clauses.

Generally, such clauses are evenhanded and should not be removed or modified without good clause.

Conversely, provisions that are not standard or customary should be given extra scrutiny.

Tip #4: Don’t Make Ultimatums Unless It’s Necessary 

Never give an ultimatum to the opposing side unless it’s necessary and you fully intend to walk away from the deal if your demand is not met.

Nothing is more damaging to you in the negotiating process than giving an ultimatum to the other side and then having to eat your words.

Tip #5: Remain Professional and Be Nice!

People who are new to business often use contract negotiations to demonstrate how smart or tough they can be.

This is unfortunate because such behavior usual creates no advantages and often makes the whole negotiation process more stressful than it needs to be.

Conclusion

If you have any questions about contract or business law, please contact me at justin@jrmccarthy.com.

 

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