Typically, before reaching a business agreement, you’ll need to negotiate with the other party.

As easy as it seems, it gets very complicated because both parties seek to obtain favorable terms and meet their needs. On any occasion, it’s a good idea to review some ways of effective negotiation since it is a very important aspect of contractual management.


What is contract negotiation?


Contract negotiation is the process of coming to an agreement between two or more parties that look forward to creating a legally binding contract. Negotiation needs to be executed because it minimizes financial and legal risk. Since every party expects to achieve its own objectives, negotiating turns out to be often decisive and you may need some strategies to fulfill your party’s interests.


Types of negotiations 


When preparing to negotiate, business professionals often wonder what types of negotiations are available to them during this process. There are various types of negotiation tactics but the most common are distributive negotiation, integrative negotiation, team negotiation, and multiparty negotiation.

  • In a distributive negotiation, parties compete over the distribution of values. A winning for one party is a loss for the other one. We may refer to it as a win-lose negotiation.
  • Integrative negotiation presents the biggest opportunity for a dual win between parties. It means that in this type of negotiation, there is one more issue to be negotiated so the parties tend to make tradeoffs.
  • Team negotiations include parties that are made up of more than one person. Usually, this means that the parties allocate roles and responsibilities, and often they even choose a leader to lead the negotiation process.
  • Multiparty negotiations include as the name suggests, multiple parties. Often this kind of negotiation is more complex because more people are involved. Even if the negotiating is harder in this case, the value of contracts is usually bigger.


Five steps of the negotiation process


As a starting point: there is no magic trick that makes a master negotiator. There are 5 steps that consistently work. This model is very popular and is presented in a circular way, representing the fluid movement of all negotiations.

Step 1


  • Prepare by understanding the interests and the most desired outcomes. 
  • Identify potential value by research and data analysis. 
  • Plan to build trust, after all a negotiation represents a relationship that is being legally built.


Step 2


Engage with the other side by sharing information and begin to explore the interests and shared needs. In this phase, it is essential to build rapport and trust as it can lead to likeability and alignment of interests.


Step 3


Bargain. This is where the inevitable give-and-take happens. When this happens it satisfies both parties interests so the outcome is more fruitful. In this stage communication skills are greatly appreciated and effective.


Step 4


This is the time to write down the common interests and what is achieved during the 3 first stages. Produce a summary of the agreement and conclude every aspect of the contract.


Step 5

This is where the implementation of the agreement takes place. You must ensure that you follow through on promises made in order to finish it off in the best way possible.


Technology as a contract negotiation tool


Before technology, legal teams used to have lots of contracts scattered around their offices, on local hard drives, or elsewhere. Technology changed this forever and in other aspects too. Contract negotiations are most efficient when both parties are able to use the tools they’re familiar with. In the past, both parties would use email or Microsoft Word but today technology provides flexibility and different options for editing and commenting on contracts securely and discreetly.

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