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Optimizing Your Business Contracts: Best Practices for Negotiation and Drafting

Editor's Note: Take a look at our featured best practice, ITIL Service Level Agreement Template (27-page Word document). This document is an ITIL V3 based Service Level Agreement Template. A Service Level Agreement is an agreement between an IT Service Provider and a Customer. It describes the Services being provided, the committed Service Level Targets, and the responsibilities of both IT Service Provider and [read more]

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“Contracts rule the business world” has often been said in boardrooms worldwide, highlighting the vitality of effectively negotiating, drafting, and executing business contracts. In this guide, we seek to unravel the practices that can enhance your capability to optimize your business contracts.

Preparing for Negotiation

Understanding your negotiation goals is the bedrock of successful preparation. Are you aiming to secure a better price, establish a long-term business relationship, or gain a strategic partner? Once you identify your primary goal, it’s easier to formulate a negotiation strategy that specifically targets these outcomes. Keeping sight of these goals during negotiation keeps the conversation focused and productive.

Knowledge about the other party’s needs, expectations, and constraints is almost as important as understanding your own. This requires research, relying on available resources to gain insights into their business model, market position, and strategic objectives. Armed with this information, you will feel more in control and be able to pitch your arguments in a way that aligns with the other party’s perspective, dramatically boosting the chances of a successful negotiation.

Best Practices for Negotiation

Negotiating a business contract is an art that requires a solid grasp of critical practices. Adopting these strategies can be instrumental in forging successful business contracts. Here are some of the best practices:

  • Establish mutually beneficial relationships: Aim for outcomes that benefit all parties involved. They foster healthier, long-term business relationships.
  • Balance assertiveness & cooperation: Assert your needs clearly and show a willingness to cooperate. Flexibility is a hallmark of effective negotiation.
  • Master active listening: Make a conscious effort to understand opposing viewpoints before presenting your own. This enhances comprehension and engenders respect.
  • Compromise isn’t losing: Don’t view a compromise as a defeat. A successful negotiation often requires finding a middle ground that satisfies the essential needs of all involved parties.

Successful negotiation lies in striking a balance between assertiveness and cooperation, underpinning respect for an opposing point of view. With these practices in your arsenal, navigating the sometimes turbulent waters of contract negotiation can become a far more manageable task.

The Importance of Clarity in Drafting Contracts

When it comes to contract drafting, clarity is paramount. Unclear or ambiguous contracts can lead to disputes down the line. It’s crucial to use straightforward language that leaves no room for misinterpretations. The contract should reflect shared understanding among all parties, ensuring smooth business dealings.

Essential Elements of Contract Drafting

Crafting a robust, effective contract requires a keen understanding of its essential elements. A contract is more than just a binding document; it serves as a guide that spells out the parties’ rights, responsibilities, and the actions to be taken in specific scenarios. Here are the crucial elements that well-drafted contracts must encompass:

  1. Clear communication: The contract should be written in plain, accessible language, ensuring all parties understand their duties and obligations.
  2. Definitions of responsibilities: Disclosing each party’s duties eliminates ambiguities and prevents potential disputes.
  3. Terms of agreement: These comprise information on how long the deal will last, how the agreement will be ended, and how payments will be made.
  4. Potential remedies: Specify the consequences or remedies if a breach occurs. These could include dispute resolution methods or penalties for non-compliance.
  5. Protection of business interests: A contract should protect your business from potential harm. This could include confidentiality clauses or non-compete agreements.
  6. Fairness: Both parties’ interests should be balanced. An overly one-sided contract could be found unenforceable and can damage business relationships.

In conclusion, meticulous attention to these elements during contract drafting will lead to a transparent, fair, and enforceable contract that safeguards your business interests.

Tools for Drafting and Negotiation

In today’s digital world, various legal contracts templates offer a solid starting point for contract drafting. These customizable templates provide structure and consistency while streamlining the process. While the convenience of these tools is undeniable, their effective use involves a delicate balance — they’re best used as bases to be augmented by bespoke details, preventing contracts from becoming generic or uninspiring.

Lawrina is taking this tailored approach to the next level. Its innovative interface simplifies contract drafting even further. Instead of pouring over a standard template, users interact with an intuitive interview system. The platform gathers the necessary information to construct a tailor-made legal document by answering a series of straightforward questions.

Furthermore, you can test the efficacy of their templates with a free 7-day trial. This risk-free trial offers limitless access to all their legal contract templates.

Involve All Relevant Parties

Communication should extend beyond negotiation with the other party. Internal alignment is equally essential for a contract to serve its purpose. Incorporating the inputs of all relevant stakeholders within your organization ensures everything is noticed and every potential impact is accounted for.

Finalizing the Contract

The act of finalizing the contract is just as critical as the initial negotiation and drafting stages. An in-depth review process involving meticulous vetting of contract terms is essential to ensure enforceability. Prioritizing this final phase safeguards your business against unwelcome surprises.


Mastering effective negotiation and contract drafting practices is a task that can be accomplished over time but undertaken progressively. Businesses can optimize their contracts by ensuring careful preparation, balancing assertiveness and cooperation during negotiations, and maintaining absolute clarity in drafting.

Stay open to incorporating modern digital tools while keeping a personal touch on each contract. Remember, an inspiring contract, much like any crucial business agreement, is a delicate blend of art and science. It requires legal acuity, business understanding, finesse, and, most importantly — the commitment to continuous learning and improvement.

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About Shane Avron

Shane Avron is a freelance writer, specializing in business, general management, enterprise software, and digital technologies. In addition to Flevy, Shane's articles have appeared in Huffington Post, Forbes Magazine, among other business journals.

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