By UpCounsel Corporate Attorney Fiona Kaufman

I recently had the opportunity to moderate a roundtable discussion of a group of small business entrepreneurs on the topic of contracts and the negotiation process. From my experience, most small business owners dread the thought of dealing with contracts or any type of legal issue. It’s intimidating, it’s confusing and it can be costly. However, it is also my experience that the more information a small business owner has, the more comfortable and confident they become in understanding and handling their legal matters.

What’s in a contract?

By definition, a contract is a written or spoken agreement between parties that is intended to be enforceable by law. Yes, oral contracts may be enforceable. However, when dealing with business issues, it is important (and preferable) to have your agreements in writing. A written agreement provides all parties a clear understanding of their obligations and responsibilities, and consequences if they are not met.

What types of contracts do business owner have to deal with?

LOTS! All business owners have to handle many different types of contracts: leases, employment agreements, sales contracts, services contracts, liability releases, engagement agreements, intern agreements and much, much, more. Often times, no two documents are the same, and sometimes having to work through all the language and paperwork can be overwhelming.

How should a business owner prepare for negotiating a contract?

One thing I always advise my client to do is develop a clear understand of their business needs. Once that occurs, it provides a path as to how those needs are reflected in an agreement. It is essential to understand which points or provisions are ‘musts’, which ones are ‘like to have’ and those that are ‘don’t need’. One way to do this is draft a term sheet to make sure there is some level of alignment before proceeding to a full contract. Once priorities have become clear, it is important to take the time to prioritize them, from the most important to the least.

What are some tips for a successful contract negotiation?

Once you are ready for a contract negotiation, there are a few things that can be done to ensure success during the negotiation process:

  1. Understand your needs. As discussed above, knowing and prioritizing your needs is key.
  2. Seek professional help. Yes, it does cost money to retain an attorney; however, it is also important to ensure you are covered from both a legal and a business standpoint. Also get input from other relevant functional leaders in your organization to make sure you are not committing to something you can not comply with (i.e., SLA’s, technical resources, marketing commitments, etc.).
  3. Understand the needs of the other party. It also helps to understand why the other party may be asking for certain points or provisions – oftentimes it may not be for the reason you think.
  4. Read, and reread, any and all documents, including any exhibits or attachments. Keep track of versions so you know what the most recent changes are before accepting or changing anything.
  5. Communicate clearly, concisely, and professionally.
  6. Remember that almost all differences can be resolved positively.
  7. Don’t rush into anything that doesn’t seem right.
  8. Maintain a positive attitude.
  9. Make sure all agreements are signed by an appropriate party.

What role can an attorney play?

An attorney can help a business owner in many ways, including: drafting documents, reviewing documents, answering questions, providing input, revising documents, negotiating documents, providing a risk analysis and guiding a business owner though a contract negotiation process. When in doubt, don’t hesitate to seek professional help.

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About the author

Fiona Kaufman

Fiona Kaufman

Fiona Newell Kaufman is an experienced Corporate Attorney with boutique practice showcasing extensive experience working in-house for Silicon Valley High Technology companies. As a solo practitioner, her goal is to provide high quality, value-oriented legal services to publicly-traded and privately held technology-based product and service companies. In offering a full-range of 'in-house' counsel services, her focus is to address your specific legal issues in a clear, affordable and flexible 'outside' counsel basis.

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