The Scenario…
You’ve been asked to lead the Contract Negotiation for an important project. It’s been a long negotiation meeting. The parties are hopelessly deadlocked about whether the Supplier will agree to provide an Advanced Payment Guarantee to the Purchaser in return for upfront payment of 40% of the Purchase Price for the turbine.
If this issue can’t be resolved, the deal can’t go ahead! You are leading the Purchaser’s negotiation team. What would you do?
Step 1…
Ask the Supplier to explain its reasons for the position it has taken.
The Supplier refuses point-blank to provide the Advanced Payment Guarantee as security.
But why?
Until you know why the Supplier won’t provide this security, it will be impossible to move forwards.
Step 2…
Dig deeper!
In order to move the negotiation forward, it is critical that the Purchaser understands the Supplier’s position. Ask questions and make sure you dig deep into their reluctance. Perhaps there’s a company policy against it. Perhaps they’ve had a bad experience in the past. You won’t know until you ask.
have taken and their concerns behind why they do not want to accept your position.
Step 3…
Going through the explanation process can lead to a mindset shift, as one or both parties realise that the reason they were insisting on their own position is not as strong as they thought. Asking for the counterparty’s reasons also shows goodwill in negotiating and helps to lead to a “give and take” mentality, which I believe is the key to a successful negotiation.
After all, it is important to remember that contractual negotiations take place at the BEGINNING of a relationship between the parties. The stronger that relationship is AFTER negotiations have concluded, the better the project will run.
FAQs
Contract Negotiation is the art of bargaining with the other party to achieve mutually satisfactory results for a project. The challenges with negotiation arise when one party has a position they refuse to move from, and the other party is attempting to find a way to encourage them to change their mind.
You don’t require formal training to carry out Contract Negotiation, however experience in watching negotiations and taking part in negotiations – as well as leading negotiations – is extremely beneficial.
You don’t need to be a Lawyer to carry out Contract Negotiations. Contracts Professionals who are experienced in negotiating can also carry out and lead the negotiations. However, it is important that the Contracts Professionals work with their Lawyers to understand the implications of negotiations on the contractual agreement between the parties. And it is essential that a Lawyer takes the negotiated outcome and amends the Contract to reflect that outcome, as Contracts Professionals do not generally have the training or skills to carry out this task.
