Negotiating contracts is no longer just about getting the best deal—it’s about building resilient, mutually beneficial relationships in an unpredictable world.

As markets, technologies, and business risks evolve at breakneck speed, the ability to negotiate contracts effectively has become a critical competitive advantage.

Having reasonable and legally robust commercial contracts to underpin your commercial relationships with your customers, suppliers, and service providers is vital to building good relationships and growing your business.

Imagine a supplier meeting where both sides need to quickly adapt their logistics due to sudden global shipping delays. Instead of arguing over penalties, both companies work together to adjust timelines and responsibilities, saving the relationship and ensuring continuity.

This article explores the essential strategies and mindsets that define successful negotiations in today’s environment, along with our top ten actionable tips to help you secure better outcomes for your business.

Timing

Whether the contract is with your customers or your suppliers and service providers, it must clearly outline the rights and obligations of the various parties. Also, the commercial agreement must be negotiated at the right time to help build commercial relationships (instead of damaging them).

Elements Of A Commercial Contract

A contract is a legally enforceable agreement that gives rise to rights and obligations for the parties.

The formation of a contract is complete once the basic principles of offer, acceptance, consideration, and intention to create legal relations are satisfied.

An agreement is formed when one party makes an offer, and another party accepts that offer. This involves matching the two communications of offer and acceptance.

When a contract is formed through standard terms and conditions of business (sale or purchase), if both parties purport to impose their own standard terms, difficulties arise in determining which terms will prevail. This situation, commonly referred to as the “battle of the forms,” often leads to uncertainty about which set of terms applies.

A practical approach to resolving the ‘battle of the forms’ is to review the sequence of communications carefully and clarify during negotiations which terms are being accepted. Ideally, both parties should explicitly agree in writing on which terms govern the contract to avoid confusion. If a dispute does arise, courts may look at the final documents exchanged to determine which terms are binding.

Verbal

It is important to remember that contracts do not always have to be in writing to be enforceable.

If the parties act by an oral agreement or understanding for some time and one breaches that oral agreement or charity, the other party can rely on the verbal agreement.

However, it will not be easy to prove what was agreed upon and what was done or not if you don’t put it in writing.

Therefore, it is essential to have a contract in writing that is also a fair representation of both parties’ aims.

Top Ten For Contract Negotiation

You can take ten actions to get a better outcome from your contract negotiations.

1. Know What You Want

You need to have a good understanding of your own business requirements.  Be prepared to spend quite some time and energy on the process of setting the ideal terms for your business.

Collaborate with your colleagues and stakeholders to ensure you have their buy-in and commitment before you commence the negotiation.

Take ownership of hosting meetings with the various teams, groups, or divisions of the business to ensure all desired outcomes are agreed to before the contract negotiation.

2. Preferred Outcomes

Know in advance what would be acceptable results from the negotiation. Adopting a best and minimum position will create a middle ground from which you can move within to get the best terms for the contract.

3. Finding Compromise

During the negotiation, you will need to be clear about what, from your own position, is negotiable and what is not. You will also need clear escalation procedures for those points where it may be challenging to find a compromise.

4. Risk Mitigation

You will need to be clear about the risks you may be assuming and find a mutually agreed fair allocation of risks and shared responsibility, especially in critical provisions such as the limitation of liability. Consider using your legal advisor to recommend your best terms.

If you seek to limit your liability to a particular sum of money, you must consider:

• the resources available to allow you to meet that liability
• the extent to which insurance coverage is available
• if the insurance is limited on an aggregate rather than a per-claims basis
• if other claims outside the scope of the insurance might potentially arise under the contract

5. Remain Objective

You will need to be able to look at the same problem from different points of view.

You must be able to find an acceptable solution from your own, your supplier, and your customer. However, be careful. At the end of the day, you need to protect yourself. Understanding the other party’s argument does not mean necessarily agreeing with them.

6. Use Experts

Before deciding on a particular limit on liability, you should, therefore, discuss with your insurers the type of loss in which it may be possible to obtain insurance and the level of such cover.

Your resources will also be relevant in determining an appropriate upper limit, although in practice, few companies, however large their resources, will wish to accept potential liability for losses not covered by insurance.

7. Stay Focused

Do not discount and prevent ideas that were not viable in prior contracting situations.

8. Timebound

Have a clear timetable and stick to it.

9. Stay True To The Goal

Ensure all contracting parties’ goals are the same and always clear: do business together.

10. Avoid Breach Of Contract

You won’t be worrying about a breach of contract before you negotiate the terms; however, it’s worth keeping in mind what would happen if your business did not live up to its end of the deal.

Remedies for breaching contracts may include compensation, i.e., paying a penalty fee. Therefore, all stakeholders need to know what they are signing and that it’s a deal they want and can commit to.

General Negotiation Tips

Knowing the subject matter well provides added confidence, so do your research, formulate your arguments and be in a position to provide supporting evidence.

The power of listening and then responding as opposed to the other way around is critical in negotiating.  While you know what you want, you don’t know what the other needs and remember it’s a negotiation, not a fight.

A good deal takes time.  Avoid hurrying the process and, as a result, ending up with less than you could get for you or your business.  Don’t settle for a bad deal just because you’re fed up with how the negotiating works.

Be prepared to walk away and come back to the negotiating table when the other party is willing to reach an agreement that also works for you.

Summing Up

Being an expert negotiator will benefit you in your business and in life. Commercial contract negotiation requires an understanding of the critical elements of the contract.

Before you can commence a negotiation, you must know what you want and what you’ll settle for to reach an agreeable contract.

Practice makes perfect, so use your negotiation skills as often as possible. For example, try them out when you visit the local food market, or you need to negotiate who will look after the children.

Life has many opportunities to keep your negotiation skills honed and ready for commercial contract agreements.