The art of Negotiating Commercial Agreements and Making Sure You manage Legal Risk without Pissing off your Customer or Partner!

Negotiating commercial agreements requires a certain combination of preparation, skill, art, anticipation, guess work and sometimes just dumb luck to ensure that you are able to come to terms that are satisfactory to both sides.  If you push too hard and you ask for too much, then you are likely to meet stiff resistance and encounter more obstacles to working out a deal or reaching an agreement.   Preparation is key in this respect, know the industry, know what is standard, know what you do not know, know the other side’s hot buttons and concerns, know your bottom line and know your risk tolerance, and lastly be creative–not everything has to be the same as it was before.

There are many ways to negotiate around and draft around concerns that both parties have.  Foster an atmosphere of frank and open discussion about the issues that both sides are trying to manage.  Understand when the other side is making a reasonable request.  Make sure you are not being unreasonable, but do not be afraid to ask for what you want.   A good negotiator and a contract draft can usually find a way to appease both sides.   However, if the parties are not willing to discussing business points and openly air their concerns, then it is hard to identify the business driver for the negotiations.  In this case, it is really hard for both sides to come to terms and agreement, because neither, sides are discussing the real obstacle to the deal.

While it is true that sometimes you may be able to get what you want, because the other party is lacking in sophistication, the reality is that anyone can play hide the ball or withhold information.  It doesn’t take a genius to recognize when the other side is not being forthcoming or is being less than candid with you.   Thus, it inherently leads to a scenario where the other side reacts and conducts him, her or itself in the same manner.  Often times, the sophisticated party doesn’t realize that they have fell for the oldest trick in the book.  No matter what concerns or risks you are trying to manage the more frank and candid you are the more likely that you are to bridge the gap and come to an agreement.

Often times, concerns surround legal ease or boiler plate that is outdated and unenforceable.  In fact, sometimes the more you overreach the less protection the law and contract interpretation principles will award you.  Many times, I have advised clients to just not worry about something that is unenforceable, but being a litigator it makes it easier for me to know what will work and withstand scrutiny by a Court.   It is often better to just leave overreaching language in a contract, because you know it will give you grounds to invalidate the contract.   However, there is a bit of art involved in this, because the language has to be interpreted by a court in the manner that you would like it to render it unenforceable.

I always suggest that if somebody is playing hardball take on hardball posture and allow them to feel like they have the upper hand and are getting some very tough language to protect their interests, but then pick certain issues that truly are risks that need to be managed and you can discuss frankly.   In fact, you may get more than you should in certain areas, because the other party believe it has gotten everything it wants in areas that are truly not a concern for you.   However, this requires careful preparation and a nuanced understanding of the law, the industry, and the clients risk tolerance.

If you have any concerns or questions about negotiating a commercial agreement, acquisition, divestiture, sale of your business or the purchase of your business, then please do not hesitate to contact us at http://www.corporateacquisitionattorney.com

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