Negotiating a business contract means agreeing terms both sides can accept while protecting your commercial position. In England and Wales, most contract disputes are resolved through negotiation or mediation rather than the courts, so the terms you settle now shape the risk you carry later. Strong negotiation starts before any meeting. You review the contract, set your best and fall-back positions, and understand the other party’s priorities. The aim is to resolve as many issues as possible on paper, hold firm on what matters, and compromise on the rest.
1. Narrow the issues
Although it may be tempting to immediately meet with the other side when you receive their contract, it is more prudent to review it from legal and commercial perspectives first. During the review, you and your solicitors can flag any clauses you would like to negotiate. In our experience, doing one or two rounds of negotiations ‘on the paper’ (i.e. by sending an amended contract between the parties) can help to reduce the number of contested items. In addition, this process allows the parties to understand one another’s perspectives and concerns.
When proposing amendments to a contract, it is essential to provide reasons to support your requested amendments, or the other side may reject them. Providing reasons helps the other side to understand the rationale behind the change and either accept it or propose a middle ground.
Key Statistics 1. 21,000 civil and commercial mediations took place in 2023 to 2024, up 24% 2. Mediation is estimated to save the UK economy £5.9 billion a year 3. Mediation has delivered an estimated £50 billion in cumulative economic benefit since 1990. Sources |
2. Preparation is everything
Much of the work in negotiating a contract is done in the lead-up to the negotiations. It is critical to:
- understand how important the deal is to your business;
- consider your business’ risk profile. For example, whether the nature of the transaction is likely to expose your business to commercial risks; and
- learn about the other party (their size, reputation in the market and who will be attending the negotiation).
It is also essential to familiarise yourself with the contract and to know your business’ position on any outstanding items. For example, for each outstanding item, you should ideally have a best position, a first fall-back position and a final fall-back position. This allows you to understand how far you can negotiate on specific issues and when to ‘park’ an issue and take it offline for further internal discussions.
3. Know which clauses to focus on
Not every clause carries the same risk, so spend your negotiating effort where it counts. In most commercial contracts, the heavily contested terms are payment, termination, liability and intellectual property.
Payment terms decide when cash reaches your account, so check amounts, timing and any late payment interest. Termination decides how you exit, so look for clear notice periods and the grounds for ending the contract early. Liability decides what you pay if something goes wrong, so consider a cap and clauses that limit liability for indirect loss. Intellectual property decides who owns what you create, so confirm ownership and any licence before signing.
Set your priorities before you start. Mark each term as a must-have, a tradeable or a nice-to-have. That way you can concede a nice-to-have to protect a must-have, and you avoid arguing every point with equal force.
4. Find your style
Everyone has a different style when negotiating contracts. Some prefer a domineering or combative approach, while others may be more subdued and happy to lead the negotiation. There is no right or wrong approach, and finding the style that works for you is important. Sometimes, you might need to be adaptive and adjust your style, particularly if you have leverage on a transaction.
Our recommendations, regardless of your style, are to:
- open the negotiation with some friendly small talk to warm the room. Do not be afraid to smile and be friendly. Often being friendly initially can facilitate a more productive and cooperative negotiation;
- be firm but respectful. There can be a tendency for people to think being friendly means being viewed as a pushover in a negotiation. That is not the case. It is good to be friendly but to hold your ground on key items, be firm yet respectful in presenting your views on certain items; and
- listen and search for common ground. Actively listen to the other side’s reasons for their position instead of simply being defensive. This can often allow you to find a middle ground. It is a good idea to let the other side know you have heard and understood their position and then to respond with your concerns.
Key takeaways
Negotiating contracts successfully takes preparation and experience. It is essential to try to resolve as many issues as possible before having a formal negotiation in person or via teleconference to save everyone’s time. Once you are ready to meet with the other side, it is critical to be prepared, open and willing to hear the other side’s view. Importantly, aim to find ways to compromise.
If you need help negotiating contracts, our experienced contract lawyers can assist as part of our LVConnect Pro membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 0808 258 4780 or visit our membership page.
Frequently asked questions
1. Do I need a solicitor to negotiate my contracts?
It is not necessarily vital to engage a solicitor. However, having a solicitor in a negotiation can be a great resource for larger or riskier transactions, especially those involving complex contracts.
2. What do I do if I cannot reach an agreement with the other side during a negotiation?
Preparing for negotiation with multiple positions will reduce the chances of reaching an impasse. You often will not be able to resolve all items in a negotiation. It is okay to pause the negotiation to allow each party to hold internal discussions before recommencing. However, it is essential to understand when to take a break to avoid conceding items you may not have the authority to decide on.
3. What is a BATNA, and why does it matter in a negotiation?
BATNA stands for best alternative to a negotiated agreement. It is your fallback if the deal collapses. Knowing it before you start tells you how far to push and when to walk away, which strengthens your position.
4. Which contract clauses are usually the most negotiated?
Termination rights are among the most heavily negotiated terms in a contract review. Liability and limitation clauses, payment terms and intellectual property ownership also attract close attention, because each one decides how much risk and cost your business carries.
