Many may overlook this, but etiquette is key to a successful conclusion of contract negotiations. Some may even say etiquette would “soften” one’s negotiation power.

That is not the case.

The Power of Etiquette in Contract Negotiation

What happens psychologically when the other side does not employ etiquette? Here are some examples:

The Risks of Relying on Contract Templates

Contract templates and a legal department with political power can make you lazy in procurement.  Instead of applying critical thinking to contracting efforts, you may be tempted to simply give the supplier your template.  Bad move.  When you do this, the likelihood is high that you’ll include something – like an unreasonable insurance requirement or payment terms that are inappropriate for the industry – that doesn’t apply.  This forces the supplier to “correct” you, which essentially becomes a new negotiation.  This is unnecessary and counterproductive.

You’re smart.  You should be able to go through a contract template within an hour and, pick out the parts that are obviously not applicable to the deal, and delete them (with management and/or legal approval, as appropriate).  Doing so can shave weeks off of a typical negotiation and prevent the supplier from feeling that you’re forcing them into a battle they didn’t sign up for.

Importance of Using “Track Changes” in Contract Negotiation

Word’s “Track Changes” feature makes it easy to spot changes to a contract so that you can focus your negotiation efforts on only those parts of the deal where your organization and the supplier disagree.  The feature has become so common that it can feel sleazy to a party when it receives from the other party a revised contract that doesn’t use it – especially if Word’s “Compare” feature reveals dozens of changes!

Therefore, etiquette suggests that both parties use it to help the other party identify where the discrepancies are.  But you always have to ensure that no versions were skipped when a new “Tracked Changes” contract comes across your email.  If the supplier redlined a previous version, the most recent changes you negotiated may not be represented.  And if you similarly were to ignore a supplier’s changes, they would have the right to call you out and question your integrity, so be careful yourself!

Ensuring Completeness and Relevance in Initial Contract Proposals

This kind of ties in with the preparation required for #1.  Just like you should make sure that the first contract you present to a supplier should not include anything irrelevant, you should also make sure that the first contract contains everything it should include.  Say, when responding to your first contract submission, your supplier objects to the amount of insurance it is required to maintain and, in the next revision, you revise the insurance clause but add an unrelated and onerous liquidated damages provision that just feels wrong.  Like why wasn’t that there in the first place?  Is it due to incompetence?  Or is someone playing a game or being unethical?  Don’t allow yourself to appear incompetent or unethical in this regard and don’t tolerate such bad etiquette from your suppliers either.

The Value of Direct Communication in Closing Contracts

After each part has made one revision to the original contract and the agreement is still not reached, it should be clear that emailing contracts with Tracked Changes isn’t getting the deal to closure fast enough.  In many cases, it is simply a matter of decision-makers not understanding why the other party needs the language they are asking for.  We live in a world where it is practically a line item in everyone’s job description to protect important people’s time.

But, sometimes, a 10-minute phone call between decision-makers can result in the understanding necessary to find common ground so that a contract can get signed.  Insist that suppliers bring their decision-makers to the conversation and do the same yourself.  If one party does and the other doesn’t, the one that doesn’t employ bad etiquette is likely the cause of unnecessary delays.

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Recommended Reading

• Contract Review Checklist
• Contract Termination Letter
• Eliminating the Pain Out of Contract Management
• Is Contract Management a Critical Process?
• How To Accelerate A Contract Negotiation

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