I recently had the chance to lead a roundtable discussion of small company owners about contracts and the negotiating process. Most small company owners, in my experience, detest dealing with contracts or any form of legal problem. It’s daunting, perplexing, and perhaps pricey. However, in my experience, the more knowledge a small company owner has, the more comfortable and competent they become in comprehending and dealing with legal issues.
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What exactly is a contract?
A contract, by definition, is a written or oral agreement between parties that is meant to be legally enforceable. Yes, oral agreements may be enforced. When dealing with commercial matters, however, it is essential (and preferred) to have your agreements in writing. A written agreement gives all parties a clear knowledge of their expectations and responsibilities, as well as the repercussions of failing to meet them.
What kinds of contracts must company owners deal with?
LOTS! Leases, employment agreements, sales contracts, services contracts, liability releases, engagement agreements, intern agreements, and many other forms of contracts must be handled by all company owners. No two papers are ever the same, and trying to go through all of the terminology and documentation may be intimidating at times.
How should a company owner prepare for contract negotiations?
One thing I usually tell my clients to do is to gain a thorough understanding of their company’s requirements. Once that happens, it paves the way for those needs to be expressed in an agreement. It is critical to grasp which points or supplies are ‘musts,’ which are ‘nice to have,’ and which are ‘don’t need.’ Drafting a term sheet to ensure some degree of alignment before moving to a complete contract is one approach to do this. Once priorities have been established, it is critical to take the time to rank them in order of importance, from most essential to least important.
What are some pointers for a successful contract negotiation?
When you are ready for a contract negotiation, there are a few things you can do to assure success:
1 Recognize your requirements. As previously said, identifying and prioritising your requirements is critical.
2 Seek expert assistance. Yes, hiring an attorney is expensive; nevertheless, it is also critical to guarantee that you are protected from both a legal and a commercial aspect. Get advice from other important functional executives in your business as well to ensure you are not committing to anything you will be unable to meet (for example, SLAs, technical resources, marketing commitments, etc.).
3 Recognize the requirements of the other side. It also helps to understand why the other party is requesting specific points or concessions – it is not always for the reason you believe.
4 Read and reread all papers, including exhibits and attachments. Maintain a version history so you know what the most recent changes are before accepting or modifying anything.
5 Communicate in a clear, succinct, and professional manner.
6 Keep in mind that virtually all disagreements can be addressed constructively.
7 Don’t do anything that doesn’t seem correct.
8 Keep an optimistic attitude.
9 Ensure that all agreements are signed by the proper parties.
What is the job of an attorney?
An attorney may assist a company owner in a variety of ways, such as creating papers, reviewing documents, answering questions, offering input, modifying documents, negotiating documents, conducting a risk analysis, and helping a business owner through the contract negotiation process. When in doubt, don’t be afraid to seek expert assistance.