Contract negotiation steps are a set of steps that should be followed by both parties before formally entering into a contract. Before signing a contract with another party, you should first negotiate the terms and provisions of the deal itself. This step is usually referred to as the negotiation stage, as both parties will need to come together to agree upon the essential terms of the contract.

What is Contract Negotiation?

It is essential to have the proper skills required to be able to properly negotiate a contract. Whether the contract is one for services or goods, you should have the proper tools and understanding of what it takes to negotiate a contract.

Be mindful that the negotiation stage will include a back and forth between the parties wherein the parties will need to compromise and collaborate with one another to ensure that the contract serves the interests and needs of both parties.

While all essential items should be addressed during this stage, there are usually two key items to discuss regarding the contract – risks and revenues. The parties will want to know the risks of entering into the contract with the other party, along with the revenue expected from the terms of the contract. Thereafter, the parties will weigh the risk vs. reward to determine if the terms of the contract are beneficial to them.

Contract Negotiation Stages

There are two main contract negotiation stages, including:

  1. Negotiating business terms
  2. Negotiating legal terms

The business terms will be the overall terms of the project itself, including what type of work is being done or the services being offered, the length of the project, costs associated with the project, how the payment will be made, how often the payment will be made, and any other essential elements that the parties deem appropriate.

The legal terms will be standard legal terms that are generally featured in every contract. This could include what happens if one of the parties breaches the contract, how a legal dispute will be brought, the venue of such a legal dispute, and if the parties are required to first enter into mediation before filing a legal suit.

Should I Hire a Lawyer to Help My Company Negotiate?

There are some advantages and disadvantages to having an attorney help in the negotiation process. This is because there are three conflicting factors if an attorney is involved. These factors include:

  1. The attorney is there to protect his or her own client by minimizing the risk and maximizing revenue only for that party
  2. The attorney will always want to act professionally to avoid potential malpractice claims and angering his or her own client
  3. The attorney is there to make money, and therefore, the attorney might try to prolong the negotiation process to make even more money

While the first two factors above are the most significant and applicable factors for any attorney helping in the negotiation process, there are also some lawyers who will allow the process to go on for as long as it needs to, simply to make some additional money. However, the client can control the negotiation stage by working with the other party to ensure that they reach an agreement sooner rather than later.

Negotiation Styles

There are several styles that a party can use when entering the negotiation stage. Some people prefer to be non-negotiable, even though that is the entire point of this process. Therefore, the person might not be willing to negotiate at all with the other party.

Another style could be a willingness to collaborate with the other party. The business might want to establish a lasting, trusting relationship so that they can continue doing business with one another.

Another style could be an avoiding style, which means that the party will want to avoid confrontation at all times. If the other party is argumentative, then the avoiding party will shut down and not engage the other party in an argument.

Another potential style is an accommodating style. It involves one party wanting to simply accommodate the other party, and will therefore do everything they can to ensure that the other party is satisfied.

If you need help learning about contract negotiation steps, or if you need an attorney to present you throughout the negotiation process, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5-percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.