Plutonic Zoo article: 5 critical contract negotiation checkpoints for a healthy client/supplier relationship

We always encourage our clients to negotiate a client/supplier business contract, in particular if the parties will have an ongoing relationship.

Business executives sometimes shy away from negotiations. Some think a negotiation is a confrontation that will harm the relationship. Others think it's simply better to get on with the business and only worry about things when they go wrong. Even when interacting some don't speak up as they feel dependent on the other party. However, honest negotiations are in both parties' interest as they will allow both parties to:

• Explain and learn what's really important and what's less important for each party in the relationship;
• Practice together how to deal with future disagreements, both the talking and listening aspects;
• Open the way to effective early intervention when something untoward happens, reducing the chance of escalated conflicts.

One organisation terminated a supplier relationship for the same service twice before they realised that their own lack of openness and clarity caused both relationships to fail. Of course it is both parties' responsibility to query and explain.

We have found the following 5 practical negotiation checkpoints to be critical. Applying these during your negotiations will bring both parties closer together, in the interest of a successful business relationship.

1. Understand purpose

Make sure you understand everything that is written in the draft contract and its practical use. If you don't fully comprehend why something is written, ask. If the other party can't convince you of its practical use, suggest it is removed and see how they react. This will clarify the purpose of clauses for all.

2. Express expectations

Ensure your expectations for the relationship are included in the contract; deliverables as well as process and behaviour. Deliverables need to be defined in relation to business requirements and not a translated entity. You cannot expect the other party to satisfy you if you don't tell them what you need and expect. Everything that is talked about but not included in the contract can (and often will) be forgotten. Relevant documents can become contract appendices.

3. Anticipate issues

Use your experience to play 'what if' scenarios and include both parties' responsibilities in the contract. It is a lot easier to talk about these when they are not yet reality. Ensure consequences and remedy strategies of non-performance are included;

4. Balance interests

Ensure the contract is balanced so that both parties feel a winner and look forward to making the relationship a success. If you feel it is not balanced, find out what is bugging you and address it.

5. Communicate inclusively

Foster open communications during (and following) negotiations with both entire teams. This ensures the spirit and language of the contract reflect what you expect on an operational level, and there are no surprises for anyone.

Of course negotiations will cause some relationships to fail upfront. That is far better and cheaper than failing later. Relationships that survive good negotiations have a level of maturity and robustness that help make the joint experience that follows successful and enjoyable for all involved.

Related Plutonic Zoo services

Plutonic Zoo provides impartial professional services to facilitate contract negotiations and review contracts in any phase of the contract lifecycle.

If you are interested in discussing your situation please contact our Managing Director Victor Konijn for a no-obligation confidential discussion. Victor can be contacted on 1 300 654 523 (+61 2 9401 5516) or . For a full overview of our current services portfolio, please visit our services page.

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