How to Negotiate a Contract

“Everything is negotiable.” Ok, well not everything, but many things are. Here are nine tips to help you negotiate your next contract.

To begin, you should note that if a contract contains errors, or simply doesn’t meet your expectations, you should raise your concerns and negotiate new or modified terms that are mutually acceptable. If you don’t do this, you may end up with contractual obligations that you cannot meet. To help you spot the important stuff, check out this post: How to Review a Contract.

Here are nine tips to help you in the negotiation process:

1. Ask Questions

Get an understanding of why the other party is proposing their terms.

2. Understand Your Bargaining Power

If you are small and they are big (think, Google), you have less bargaining power. That doesn’t mean you should agree to everything, but you should pick your battles wisely.

3. Be Assertive, But Reasonable

Stand up for yourself, but remember that no one wants to work with you if you are unreasonable. (And keep in mind that if you are unreasonable in a contract negotiation, the other party will remember this after you sign, if you sign at all.)

4. Add Missing Terms

If something is missing, add it! Don’t leave things out simply because you want to get the contract signed. If you do, you will likely regret it later.

5. Don’t Be Afraid to Strike Something

If you cannot agree to a provision, strike it. However, make sure you have a substantive reason to strike it in case the other side pushes back.

6. Use a Redline

If there are more changes than can be covered in a simple email or phone call, redline the agreement using Microsoft Word or Google Docs track changes.

7. Consider Redline that Keeps Their Terms

If the other side includes a term that places too much risk on your business, consider how you can slightly modify the term to reduce your risk but address their concern. Here are some examples:

• • “NewCo represents and warrants that there are no lawsuits pending or threatened against it” might be changed to “NewCo represents and warrants that, to its knowledge, there are no lawsuits pending or threatened against it.”
  • “NewCo shall keep the service up and running 100% of the time” might be changed to “NewCo shall use its commercially reasonable efforts to keep the service up and running 100% of the time.
  • “NewCo shall deliver all documents created under this Agreement to Client” might be changed to “NewCo shall deliver the following documents created under this Agreement to Client: [insert list].”
  • “NewCo shall not use subcontractors without Client’s prior written consent” might be changed to “NewCo shall not use subcontractors without Client’s prior written consent, which shall not be unreasonably withheld or delayed.”

8. Accept Legalese

Ok, this one is hard to say, but don’t redline legalese unless there is a substantive reason to do so. It just adds more redline and causes more work. (But if your lawyer is drafting the first draft, don’t be afraid to tell them not to use legalese!)

9. Accept Their Language

You probably prefer your language. But unless there is a substantive reason to strike their language and paste in yours, just accept their language and redline as necessary.

(This article is general in nature and is not legal advice.)