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How to approach successful contract negotiation

The contract negotiation process can be challenging but it is an important process that can impact the success of contractual relationship and a business. Understanding how to negotiate contracts can help create a positive approach to the process and achieve a positive outcome--a contract that is good for the business and guides important business relationships.

To begin with, it is important to take time negotiating a contract and not rush it. It can also be helpful to begin with a term sheet as an outline of the contractual relationship being entered into. Parties negotiating a contract should keep in mind that an initial draft is likely to change and that there will likely be significant back and forth during the process to clarify and reach agreements so patience is essential. It is helpful to have a good idea of what is reasonable in industry-specific contexts, such as the commercial real estate industry, during the contract negotiation process.

Parties should begin by negotiating issues they are more likely to agree upon so that when more challenging issues are negotiated later on, the parties have invested in the contract negotiation process and the relationship. To help avoid potential disputes and misunderstandings during the negotiation phase, it can be useful to negotiate in person which can include discussing issues as simply as over the phone. In addition, it is important to have detailed knowledge of financial records and not simply make estimates. Contracts should be detailed, accurate and thorough.

During the contract negotiation process, it is essential to keep goals in mind and to know what can be conceded. Having proper guidance to ensure interests are properly protected, and keeping in mind never to rush the process, are also keys to a successful contract negotiation process.

Source: Entrepreneur, "9 Ways to Negotiate a Contract Like a Boss," Stephen Key, July 24, 2015

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