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Contract negotiation is one of the most important parts of contract formation. Whatever is agreed upon in the negotiation will set up the framework for the contract. This means it is vital you approach contract negotiation in a way that will get you the most out of your agreement. In addition, the type of agreement that you are negotiating will determine how you approach it. This article will outline the different contract negotiation approaches you should consider. 

What Is Negotiation?

Negotiation is a process by which two or more parties will have a discussion aimed at coming to a mutual agreement. During a negotiation, both parties will outline what they want and compromise to reach an agreement.

Businesses will usually use lawyers during a negotiation to remove emotion. Some lawyers are trained in negotiation to get the best deal for their client. 

Types of Negotiation

Employment Agreement

The most common type of negotiation you may deal with is negotiating an employment agreement. The employment agreement covers the terms of your employment at a business. During the negotiation phase of an employment agreement, you may be discussing your pay, job description or benefits. 

Deed of Sale

Another common situation where you will use negotiation is when you are drafting a deed of sale. This is where one party sells something to another party, usually property. You will use negotiation to decide on a sale price that both parties are happy with. You may also use it to determine how the party pays the money, i.e. whether it is in instalments or the total price is paid upfront.

Supply Agreement

Negotiation is also a common technique you may use when arranging supply agreements. Supply agreements are contracts with your suppliers that govern the amount of product the party will supply you with. They will also outline the price and how often you receive the product. Ensuring that you are using negotiation to your advantage is crucial as you do not want to commit to a product you cannot afford.

How to Approach Contract Negotiation?

Know Your Limits

Before you enter into any negotiation, you must know your limits. This means you know how much you are willing to put forward or how much you can afford. If you do not know your financial position, it can be hard to negotiate, and you could commit to something not in your best interest. Therefore, you should have a limit in your head, and if the negotiation goes past this limit, you must walk away from it. 

Research Your Contracting Party

Another way to get the most out of your contract negotiation is to research your contracting party. This is to learn anything about them that might give you an advantage during negotiation. For example, if you know what they want out of the contract, you can steer the negotiation in your favour. Alternatively, you may discover that your interests align with the interest of your contracting party. Therefore it may become easier to come to an agreement that benefits both parties.

Three Types of Negotiation

Positional

A positional negotiation is a form of negotiation where both parties see each other as adversaries and fight for what they want. Under this approach, ‘winning’ is the primary goal, and there is little compromise. This means it may be harder to reach an agreement, but you are more likely to get what you want.

Interest-Based

This is another common form of negotiation that allows both parties to find a solution that works for both parties. Under this approach, compromise is at the forefront of the negotiation, and the parties see themselves as problem-solvers rather than adversaries.

Mixed

Mixed negotiation is the most common form of negotiation and is a mixture of positional and interest-based approaches. This allows for a compromise between the parties without them having to sacrifice their interests.

Key Takeaways

Negotiation is the process whereby two parties come to a mutually beneficial agreement. When entering into a contractual negotiation, it is essential your objective is clear, and you know what you can lay on the table. There are several different types of contracts, so how you approach a negotiation will differ depending on the contract.  A mixed approach is the best way to approach a negotiation, as you can find a middle ground without being taken advantage of. Before you enter a negotiation, always know your limits to avoid signing a contract that you cannot uphold.

If you need any legal assistance with contract negotiation, LegalVision’s experienced contract lawyers can help. Call us today on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Will a negotiation always produce a result?

No, some negotiations will not produce a result. In this case, you may want to think about mediation.

How do I make sure someone is not taking advantage of me during a negotiation?

The best way to avoid this is to get a lawyer to negotiate on your behalf. This will allow emotion to be taken out of the picture, and a lawyer will be able to tell if your negotiating party is taking advantage of you. 

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