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Contract Negotiation: Important Things to Know

— February 10, 2022

Thoroughly scrutinize the possible outcomes, risks, and liabilities to ensure that your business doesn’t get a raw deal.

Contracts play an important role in several transactions and deals between businesses, businesses and customers, real estate deals, prenuptial, or employment. Regardless of your industry, you might need to get into a contract at some point. Negotiating during the contract process is normal. However, most people don’t know how to negotiate, the process, and the outcomes to anticipate.

The primary goal of negotiating a contract goes beyond reaching a mutual agreement. Contract negotiation allows you to improve the economic status of your relationship while cautioning your business from possible risks. Unfortunately, most companies still depend on outdated contract negotiation processes that can derail them from the main goals.

Below is a guide on contract negotiation and how a transparent and unified platform simplifies negotiations.

What is Contract Negotiation?

Contract negotiation is a process where two or more contracting parties debate and deliberate over various contractual terms. The main goal of negotiating contracts is to ensure that all parties are satisfied with the duties, responsibilities, benefits, and risks.

For instance, when negotiating with your contract vendors, you should advance your business’ interests by negotiating for lenient termination terms. On the other hand, vendors also hope to achieve the opposite to favor their deals. By negotiating such terms, both parties have to compromise and agree on conditions that favor all parties equally.

Why is Contract Negotiation Important?

Contracts are legally binding agreements. Before getting into a contract, participating parties should ensure that the contract is mutually beneficial and doesn’t favor the other party at their expense. Contract negotiation typically ensures that the contract is mutually beneficial.

Negotiation also eliminates confusion and conflicts by ensuring that all parties review, discuss, and agree on the contractual terms. If correctly done, contract negotiation enables parties to establish terms that favor them, instead of one party having the bargaining power or creating one-sided terms in the contract and possible breaches.

Contract negotiation is an important step in a contract lifecycle that determines whether the contract will be signed or not.

Contract Negotiation Approaches

Contract negotiation falls in either of these two categories;

1. Distributive Negotiation

Distributive or zero-sum negotiation is an approach where one party succeeds only if the other loses, and the discussion revolves around one issue. For instance, suppose a company wants the services of an IT vendor. In the contract, the company wants to gain maximum IT services for the least price possible.

Similarly, the IT vendor aims to provide the least possible IT resources for the best price. Both parties’ desire to get the best from the deal requires a distributive negotiation approach. To succeed in distributive contract negotiation:

  • Be persistent
  • Front the first offer – making the first offer swings the bargaining to your favor
  • Don’t disclose your minimum acceptable outcome

2. Integrative Negotiation

Also called collaborative or a win-win negotiation, the negotiating parties attempt to achieve mutually beneficial terms in the contract. Unlike the distributive approach, this approach often involves several issues. Negotiation tips for integrative approach include:

  • Have a principled approach
  • Discuss your business interests and needs openly
  • Be ready to bargain and compromise for other parties

 Platforms for Contract Negotiation

Changes may be made to various clauses of the original contract template during contract negotiations. As such, contracting parties should use favorable platforms to ease contract negotiation. Common contract negotiation platforms include;

1) In a Word document

Most people use Word documents because of the ease of tracking changes or revisions, which is important during negotiations. This is better than before, where negotiators used digital redlines. The contract originator can draft the contract and send it to counterparties, which then activate the “track changes” feature for their suggested revisions.

Woman signing contract; Photo by Karolina Grabowska from
Woman signing contract; Photo by Karolina Grabowska from

While Word is an efficient platform, tracking many revisions is quite impossible. Losing track of important attachments and knowing which party should respond to comments or edits also complicates this platform.

2) Google Docs

Google Docs can also be used for contract negotiations. However, your team’s internal dialogues are exposed to counterparties. Besides, you should grant access to your business’ cloud storage, exposing it to security risks.

3) Contract Collaboration Software

You can also negotiate your business contracts using contract collaboration software. These are text editors that are specifically designed for contracts. You can integrate the software to Word or Google Docs to enjoy special features that make contract drafting and editing easier. However, unlike Google Docs, you can designate your comments as internal or external for confidentiality.


Contract negotiation is important for all business deals. Before sending your contract with counterparties for review, ensure that your legal team and internal stakeholders approve the draft. Thoroughly scrutinize the possible outcomes, risks, and liabilities to ensure that your business doesn’t get a raw deal. Using a unified contract negotiation platform can ease and simplify contract negotiations.

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