The individual negotiators are not typically the ones to prepare final written agreements. But understanding the basics of those agreements can be helpful so that you don't give away concessions in Bargaining that are more significant than you thought, or fail to bargain for something that now threatens the final agreement.
- While agreeing to next steps, you may not bother to trade on the issue of which side prepares the final contract. Indeed you should get something in return for such a concession if you give it away because there are benefits to authoring the final agreement.
- During bargaining you agree to approval of the final product by the other party but fail to specify the standard or objective criteria upon which approval will be based.
- Your legal department requires certain protections for your organization, but since they weren't negotiated during bargaining by the business negotiators, now the attorneys, who were not part of Exchange or other stages of the negotiation and who have not built trust, start debating these terms and derail a relationship you invested in heavily.
To avoid these problems, be familiar with the basics of written agreements, include your support department stakeholders, such as contracting, legal, risk management, finance, etc., and consider their needs and perspectives before you enter negotiations.
- Watershed Associates does not give legal advice, and nothing that follows or precedes this section should be construed as legal advice. But we've seen many negotiations get derailed in the Conclude Stage, so we offer tips to make you familiar with the basics.
Benefits to having your organization be the one to prepare the written agreement
- You can use language that is clear to your team and stakeholders.
- You will think of minor terms that weren't covered in the negotiation and can include them at this point.
- The other side is less likely to balk once things are in writing even if it isn't exactly how they would have written it.
- Don't try to change the essence of the agreement or you will instantly lose trust that was hard won.
- In most common law countries, language in an agreement that can be interpreted two different ways is usually interpreted by a court against the drafter of the agreement.
Get legal review
Obviously not all agreements require legal review, and rarely does any internal agreement between departments and colleagues necessitate the involvement of lawyers. But for most complex business transactions between your organization and another organization, be it vendors, customers, project partners, financiers or others who expect performance under a detailed set of conditions and circumstances, legal review is helpful, and often essential:
- You've been close to a very interpersonal activity; it's easy to miss things or lose objectivity.
- Lawyers are called counselors at law because they are trained to counsel you on how to protect the organization in areas of risk.
- The cost of curing an ill can far exceed the cost and inconvenience of having a lawyer review the agreement before it is signed.
- It is usually helpful to share with the other side your standard terms and conditions during a positive stage of the negotiations so that you can learn of any concerns and make those part of the negotiation prior to legal review.
- Laws vary among jurisdictions and countries, and they change, so that what worked last year may not protect you this year. Lawyers follow the changes in laws and their interpretation to protect the organization.
Consequences of poorly drafted agreements, yours and theirs
- Unnecessary legal language (often arcane jargon) that confuses the performers; ask your lawyer to write in layman's terms where ever possible
- Missing terms and conditions that were agreed on by the negotiators
- Terms from standard T&Cs (sometimes referred to as boilerplate) that don't apply in this situation and therefore cause confusion
- Wording that can be interpreted differently than intended
- Wording that leaves too much room in the standards of performance, thus not matching expectations and actual compliance
- Incorporation of attached documents that have not been reviewed carefully
- Provisions that contradict each other in the same agreement
- The difficulties of nonperformance
- The increasingly expensive solutions -- re-negotiation, dispute resolution, mediation, arbitration, litigation, lawyers fees and damages
Basics of your agreement
We don't prescribe how to write your agreements. Of course you need to include all provisions about what each side agreed to do or not do. You also want to be sure to cover things like
- Delivery and what happens if…
- Circumstances under which this agreement can be modified
- Performance incentives and penalties
- A statement about items specifically agreed to be excluded that one would otherwise expect to find in the agreement
- Administrative procedures, including approval levels needed to certify performance or agree to modifications
- Payment: timing and any conditions
- Insurance, bonds, indemnification, warranties, etc.
- Dispute resolution process (hopefully you negotiated this early on when things were going well)
- Term (length of the agreement), termination (conditions under which the agreement can end), extensions (of performance and renewal deadlines)
- Legal terms your side finds relevant to the agreement