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Tips on Negotiating Commercial Contracts

    Preparation for Negotiations

    • Before you sit down at the negotiation table, you should have clear, written goals and a detailed plan for achieving them. You also should have researched the facts and the law underlying your deal. For example, when negotiating the sale of real estate, you should know that the phrase "time is of the essence" is generally interpreted by courts to mean that, if you fail to transfer title on the exact date specified in the contract, the other party has the right to refuse to proceed with the transaction even after having signed the contract. Finally, you should prepare your own preliminary draft of the contract to present to the other side for consideration.

    Negotiating the Major Terms

    • If the other side is represented by several people, you should attempt to speak with each of them individually. If you can get them to disagree with each other while maintaining a united front on your side, you will be able to negotiate more favorable terms. Nevertheless, you should know who the final authority on the other side is--it may not be the person who talks the most. Finally, you should try to spend more time talking to the business representatives of the other side and less time talking to their lawyers because, if the lawyers are outside counsel rather than employees of the company you are negotiating with, they will probably be paid by the hour and will have an interest in protracting negotiations. If business representatives on both sides are qualified to practice law or otherwise understand enough about the law to handle legal issues themselves, negotiations are likely to be expedited.

    Drafting the Final Contract

    • Many negotiation disputes center around the drafting of the exact wording of the contract. A single misplaced word or ambiguous phrase could cost a business millions of dollars. When negotiating the drafting of the final contract, imagine an opponent looking over your shoulder, trying to twist your words into something other than what you mean to say. Draft the contract so that this imaginary opponent cannot misconstrue your intentions. Don't neglect to include contract "boilerplate" (standard legal clauses dealing with matters such as as dispute resolution procedures, governing law, assignment of rights, etc.). Although standard boilerplate provisions are available on the Internet, you should read each one carefully and adapt it as your individual deal requires. This is the stage during which lawyers are most useful, although it is still advisable to limit their involvement.

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