What to do when contract negotiations go bad…

July 2011

Page Director

When helping out clients with contracts recently, I’ve had a few comments along the following lines from the other side:

“This is our standard contract - we can’t change it without board approval”

“It’s not our policy to accept that type of clause”

“These changes you’ve asked for aren’t helpful”

“Everyone else accepts these terms”

In all of the above cases, the scenario was that my clients had asked me to help them review contracts that had been put before them by prospective customers/suppliers. So my clients had combined their review of the commercial terms with my review of the legal issues and had submitted contract amendments to the other parties they were dealing with. In all cases, the only amendments that were suggested were the ones that were felt to be important – there was no nit-picking. In all the cases, we provided detailed explanations of why the proposed amendments had been suggested. Basically, a sensible and reasonable approach had been taken.

And we got the responses detailed above. Disappointing is a word that comes to mind. All of those comments above can be roughly translated as any/all of the following:

“Bugger off”

“We’re bigger than you”

“Stop making my life difficult”

“I don’t understand what you’re asking for but can’t admit that”

“Our terms are very one sided (in our favour) and we’re keeping them that way”

I’m happy to say this is not always the way of things. A lot of businesses understand that contracts need to be reasonable and that they need to accurately describe the commercial deal that is being done. This means a lot of negotiations go reasonably smoothly – most sensible changes that are proposed will be accepted without argument and where points are a little more contentious, these will be negotiated to a sensible conclusion. Both parties should walk away from a contract negotiation feeling reasonably happy with the way it went. If negotiated sensible, a contract can help the process of doing business by making it clear to both parties how the relationship will work. If you feel screwed over before you’ve done any work that may not bode well for an on-going relationship!

So how do you deal with the more difficult scenario? Very simply, you never accept any of the above responses. You have to keep banging against the brick wall until you make a break through. You need to say “Ok then, please go and get your board approval because I’m not signing up to your standard terms”. If you ever come across these responses, your unhelpful reply could be:

“Well I won’t get board approval to sign it in its current form”

“It’s not our policy to sign up to a contract without that type of clause”

“The initial contract you proposed wasn’t helpful”

“We’re not as stupid as everyone else”

The less fun but more helpful response would be:

 “The terms you provided us with didn’t quite describe the deal properly and they are unreasonably one-sided in a couple of areas. We’ve made some reasonable suggestions to try and put these issues right. Can we have a sensible discussion about them please?”

It is perfectly reasonable to want to negotiate a contract if it is not right or it is too one-sided. You wouldn’t be doing your job properly or looking after your business properly if you didn’t try and do that.

You may be concerned that asking for changes could lose you a deal but think of it this way – if you have got to the point where a contract is on the table, the other side probably wants to deal with you. Would you really be jeopardising the deal by having a sensible conversation about the contract terms?

The ‘no changes’ approach is one that a lot of people try as an opening gambit but quickly back down from if pushed. If you give some resistance, the other side will probably start to talk. Sensible businesses and business people understand that contracts are there to be negotiated.

Unfortunately, the ‘no change’ approach is sometimes stubbornly stuck to even when you’ve pushed. The answer to this is that you, equally, have to be stubborn about this approach being unreasonable. At the end of the day it is a negotiating tactic and it’s sometime about who blinks first. You can even get the supermarkets to change their standard terms if you push hard enough.

But you have to be stubborn.  In a recent negotiation, I finally got a concession from an unreasonable and bullying other side by telling them on a conference call that they were being unreasonable and that they may as well be honest and just tell me and my client to “bugger off” (using one from my list above) instead of wasting our time pretending to negotiate. It actually worked and they seemed (amazingly) to be shamed into doing something a bit more sensible.

And finally, sometimes, you will keep pushing and you won’t get anywhere – what do you do then? There is a simple choice – sign up or walk away.

Twitter Instagram YouTube LinkedIn Facebook Google + WhatsApp Link Email icnUpArrow Right Arrow Down Arrow Left Arrow Search Checkbox Check Close Map Pin Shopping Bag