May 30, 2022
What is Contract Negotiation?
Table of Contents:
- What is Contract Negotiation?
- How to Negotiate a Contract Intelligently
- What Makes Contract Negotiation Important?
- Who Negotiates a Contract?
- Key takeways
In today's world, people negotiate both in personal and professional spheres. When it comes to business, contract negotiation is a common practice worldwide. Businesses engage in negotiating agreements with other businesses and customers alike.
But it is also true that businesses are getting more and more technology-driven. Contractbook is a tool that helps businesses negotiate contracts with the help of automation, AI, and machine learning.
But the question is, what exactly is contract negotiation? How can businesses negotiate effectively? What is the importance of contract negotiation?
This blogpost will answer these questions in the simplest possible manner.
What Is Contract Negotiation?
Contract negotiation is a set of steps taken to agree upon a set of terms and conditions that are legally binding. As such, contract negotiation is a crucial element of contract lifecycle management.
While negotiating an agreement, both parties try to seek favorable outcomes without adversely affecting their own position. Ideally, both parties compromise and settle for a more favorable contract in terms of risk and benefit.
As digitalization has become a vital element in the modern business fraternity, companies are looking for tech-based solutions, such as Contractbook. Contractbook is a tool that helps businesses negotiate contracts with the help of automation, AI, and machine learning.
How to Negotiate a Contract Intelligently
Businesses are increasingly becoming technology-driven. According to MIT Sloan Management Review, 81% of digitally strong companies consider innovation a top organizational strength. Similarly, with modern, comprehensive, and intelligent contract automation platforms, businesses can negotiate contracts in a unified environment that is secure, transparent, and quick.
However, certain contract negotiation strategies and steps can be very handy for both parties involved. Businesses can strike better deals or reach favorable outcomes by combining tech-driven solutions and following contract negotiation strategies.
Use Research to Your Advantage
To successfully persuade the other party, you must come prepared to the negotiating table regarding their perspectives, goals, and preferences. Comprehensive research on other parties can help you assess their current position, priorities, and things they are open to compromise on.
Set Clear Objectives and Priorities
If you do not clearly define what you want, you will agree on terms that go against you. Setting specific, realistic, and clear objectives and priorities will allow you to have a deeper understanding of what you actually want and help you explain it in such a way that the other party listens.
Aim for a Win-Win Outcome from The Start
Acting selfishly and manipulative only ends up harming both the parties involved. Striving for a win-win situation from the start creates an atmosphere of give-and-take and maximizes the chances of productive negotiation agreements for both parties.
Focus on Long-term Relationships
Focusing on temporary victories alone can harm you in the long run. The key to developing lasting relationships is negotiating a contract based on long-term relationships. It will ensure that both parties leave the table in a positive and satisfied mood.
These contract negotiation strategies are in no way exhaustive, but they are some of the time-tested methods that ensure a smooth and productive contract negotiation.
Now, let’s take a look at why negotiation agreements are important.
What Makes Contract Negotiation Important?
A well-rounded contract negotiation process is vital for the following reasons.
- Certainty: To achieve certainty regarding the terms and conditions across the board.
- Clarity: To achieve clarity concerning the parties' points of view, goals, and priorities.
- Mutual Benefit: To reach a deal that is a perfect balance of low risk and high benefit for both parties.
- Achievement of Objectives: To reach a position where the objectives and goals of both the organizations/parties are met in an amicable and agreed-upon way.
- Long-term Relationship: To achieve a long-term relationship with other parties that is helpful for increased growth and collaboration.
- Avoiding Conflict: To avoid future conflict arising from undiscussed agendas, conditions, or objectives.
Who Negotiates a Contract?
Generally, it is the legal counsel's job to review and negotiate contracts. However, HR managers, operations executives, sales managers, procurement managers, and financial leaders often negotiate contracts.
Contract negotiation is a prerequisite for reaching agreements that are useful, beneficial, and free of conflict. However, contract negotiation platforms like Contractbook can significantly complement the process by reducing time, discrepancies, and miscommunication while ensuring a secure and transparent environment.
Reach out to us to learn more about the possibilities.