The Power of Package Negotiations
At a high level, a contract negotiation is simple: two sides exchange drafts, propose changes, compromise here and there and sign on the dotted line.
Of course, at a high level, a heart transplant is simple too: take the old one out, put the new one in, sew everything back up and away we go.
And while a contract negotiation is not as complicated (and, sometimes, not as bloody) as a heart transplant, it does have its share of wrinkles. In many cases, those wrinkles arise near the end, when the two parties, while understanding each other’s position and perspective, are unwilling to reach agreement on the remaining issues.
These issues can involve any number of topics, but often come down to some combination of liability limitations, indemnification, representations and warranties, or data security obligations. Business terms, such as pricing, volume or term of the contract may also be on the table.
At this point, and even though few items may remain open, the parties may refuse to move off their respective positions. Now what?
One option, of course, is to just keep going back and forth, rehashing perspectives, and negotiating each remaining issue one by one. It can work, certainly. But it’s tedious and enhances animosity. Often, one side may feel taken advantage of by the other.
Instead, I recommend a different (better) approach, something I call “package negotiation.” As the name implies, rather than trying to resolve each issue separately, a package negotiation occurs when one side offers a single solution that attempts to resolve all remaining issues at once.
Within the package we make sure to protect our most critical concerns, of course. But in return, we also attempt to accommodate the highest concerns of the other party, too. We offer the package as a Win/Win proposal, making clear that it’s a package offering — i.e., some of the “gives” are being made in return for some of the “gets.” Both parties must win, or the package won’t work.
The package proposal has a number of benefits:
It’s faster. At this point, each side knows and understands what the other side wants. No need to go item by item. Although by no means perfect, the proposal usually gets the parties quite close to the goal line. Often, with a few tweaks, the contract can be completed.
It’s evenhanded. Requests are conceded openly and all at once. This averts the tendency to fight hard over every point and/or negotiate harder for later requests as a result of earlier “losses.”
It builds trust. Most participants in a negotiation want to protect their interests without burning down the relationship house in the process. Ultimately, this approach demonstrates a real desire to work together and resolve issues, establishing a mutually beneficial, positive bond.
Naturally, there are some things to beware of when using this method:
Sometimes, the other party will accept the concessions but still try to negotiate further. Here, we politely remind the other party that the proposal is a package offering, with both sides ceding some ground.
Although the offered package concedes some items important to us, we often keep some leeway “in our back pocket,” to be used as final concessions if needed to reach final agreement.
Finally, as you’ve probably already guessed, this type of fair, evenhanded approach is ineffective with some negotiators. These are the people who feel the need to win every battle to walk away satisfied. With them, we stay the course and grind things through point by point.
Under the best of circumstances, a contract, once negotiated and signed, sits in a drawer and never needs to be consulted, let alone litigated. Going forward, the two parties do business together happily and fairly.
But none of that happens until the contract is signed. The package approach offers an efficient and effective way to get that done!