Have you fought hard to close a deal only to have it fall apart during implementation? Have you negotiated a contract that didn’t stand up to real-world conditions? Has a dispute arisen because you didn’t foresee a certain eventuality?
There are ways to prevent contracts from going sour and resulting in breaches or other disputes. A good business attorney knows any number of useful clauses to include in your contract. A great business attorney understands the point of the contract and works to get the result you expect.
Short-term thinking can limit you
One of the most common mistakes people make when negotiating contracts is focusing too much on closing the deal and not enough time playing “what if?”
Failing to foresee or predict contingencies can leave you struggling with how to proceed. One way to predict contingencies is the decision tree. At each decision point, consider what might happen and then decide what should happen if it does. This could involve mere agreement on what should be done in each instance. Or, it could include incentives and penalties that spring into action under specific circumstances.
Try to articulate how this contract will advance the long-term interests of your company. Make sure you’re bargaining for what you really need and want, and limit the “wiggle room” in your contract.
Don’t settle just to close the deal
There can be a lot of pressure to land the sale, grab the deal or simply finish the negotiations. Be aware that you may be feeling pressure, which can affect your decision-making. You may feel that you will lose out if you blow the negotiations, and that may make you willing to sacrifice some of your goals.
Remember that there are many ways to close a deal. Shrug off the pressure to close and give yourself breathing room. Take frequent breaks. If you have any hesitation about signing, give yourself a night to sleep on the question.
Slowing down the process of negotiation can calm the tempers in the room and keep you from making a mistake.
Don’t just pass off the details to your lawyer
Once you’ve come to an agreement, it is tempting to tell your lawyer to write it up and consider it done. In reality, your attorney needs to completely understand the deal you have made and all of your objectives.
Without enough insight into your deal, your lawyer could easily create terms that are vague or even contradictory to your goals. Terms may be missing, and that could affect implementation of the contract.
Before you hand off a contract to your lawyer to be drafted, communicate your motivations and expectations for the contract. Being clear about this can substantially improve your contract and also save you money.
When you get the contract back from your attorney, don’t just glance at it and assume it’s fine. Read it carefully to make sure it accurately represents the deal you’ve achieved. Then, set up a time with your attorney and have them go over the contract with you in plain English. Look for ambiguities and think of hypothetical situations where something could go wrong.
Contingency planning, taking your time, and ensuring your lawyer is fully onboard can improve the outcomes for your contracts.