Upfront Contract: Everything You Need to Know
The term “upfront contract” is liberally applied to oral contracts formed during a sales call or meeting negotiation.3 min read
The term “upfront contract” is liberally applied to oral contracts formed during a sales call or meeting negotiation. If the consensus about upfront contracts is still “buyer beware” there is perhaps good reason if one considers the particularities of contract law, not to mention the unwieldy conveyance of person-to-person discussions. In the United States, the framing of contract law comes from two sources: 1) the common law of contracts as originally bespoke in English law: and 2) the Uniform Commercial Code (“UCC") applied to trade contracts. Still, the upfront contract approach to sealing the deal is an effective method of keeping sales prospects and the process of negotiation on track.
The Art of the Deal
These five (5) steps to the Art of the Deal are essential for creating an upfront contract:
The big question is who and what are the priority? Be prepared to represent the organization whom you are working on behalf of in an ethical and effective manner.
2. THE AMOUNT OF TIME ALLOTTED
Allow sufficient time for communications to form evidence that there is a substantial basis for an upfront contract.
3. THE CLIENT'S AGENDA
Listen to a client's agenda with an open mind. Clarity is key in forming a legitimate agreement.
4. YOUR AGENDA
Convey your agenda with credibility. Clients respond better to discussions focused on mutually beneficial results.
5. OUTCOME AND NEXT STEPS
Specify targeted outcomes and communicate the next steps toward realizing coinciding objectives. Both parties should walk away from the meeting with the perspective that and an upfront contract will maximize return on investment.
Upfront Contracts: Power in Mutual Respect
The best business deals have a basis in equity. If a seller and buyer acknowledge mutually beneficial potential in a venture, an upfront contract will be easy to forge. One of the most powerful sales tools in practice today, an upfront contract contains a series of intelligent questions that establish mutual respect with a prospect, eliminating any delay to actionable results. Use questions to create a positive, and therefore powerful agreement. Upfront contracts are legal contracts. Knowledge of contract law is the key to the formation of a binding agreement. Whether oral or written, an upfront contract solidifies a relationship and structures the future interactions between seller and buyer, establishing a strong enough foundation for any challenges or modifications to trade that may arise.
The Legal Takeaway
Contracts law principles apply to every aspect of business negotiations. Sales prospecting using the upfront contract approach may first involve an oral agreement that later turns into a solid trade deal requiring the framing of a written contract. The common law of contracts governs contractual transactions in the areas of employment, insurance, real estate, services, and exchange of intangible assets. The UCC governs contractual transactions involving goods exchange and tangible objects. The contract's substance is mutual assent to contract in a bargained for exchange where there is acceptance of an offer, its terms, and conditions with the stipulation that consideration of a promise to perform will be upheld.
Valid contracts must have enforceable agreements. The Statute of Fraud is common law provision of both federal and state law in the United States, articulating the terms and conditions of enforceability in circumstances where a material (“written”) or oral fraud of contract has taken place in response to promissory estoppel (i.e., unconsented to modifications by one party, nonperformance, or act of misrepresentation).
While the Statute of Fraud requires that most contracts be in writing to enforce them, bargained for exchanges involving the sale of goods under the UCC must have a value of $500 or more to meet rule criteria for enforceability. In the U.S., the Statute of Limitations for contracts varies according to type. Verbal agreements generally have an abbreviated statute of limitations compared to that of written contracts. Any transaction agreed to orally, however, is proven by a circumstance where a reasonable observer would conclude a contract likely exists. Testimony about verbal agreements in court is only considered if uncontested in most cases.
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