8 Steps to Contract Negotiations

Here are 8 points to refer to when negotiating a contract or lease. If all eight are not met, negotiate harder....

1. Define the duties and standards of performance. In other words, explicitly write down every thing each side has to do. Not only what to do, but how well it needs to be done.

2. Define ambiguities, terms, and foreseeable issues. Every business has jargon, special terms, and technical terms. Everything should be clear to both sides. If there is an issue that could come up, define it and the contingency plans. This is what makes contracts so wordy.

3. Define the context, inherent risk, and the assumptions of the contract. Risky businesses need a lot of assumptions and calculations. Make sure that both sides understand the nature of the business and how risky it is.

4. Clearly set out the pricing structure. Spell out how much money is due, and when it is due.

5. Define control and property rights. This is the proverbial baby in the bathwater. This is the cash cow. My be it is a house, the right to live in a house, the right to make money off of a book, or any other set of rights. In addition to the right to money, define the right to have final authority over the property.

6. Write duration, termination, and business succession clauses. When and how either of you can get out of this arrangement must be understood.

7. Set forth the process to resolve controversies. A contract or lease is a legal document, meaning it can be enforced in court. You must have a plan for arbitration and litigation. An important part is whether it will be decided in DC, or elsewhere.

8. Make sure each party acknowledges in writing that they understand the seven points above.

Those are the basics. If the stakes are big or you are dealing with a professional, have your own professional look over a draft for you. Lastly, anytime you are given a contract to sign, it is written in favor of the person who gave it to you.