My mother always told me “You never get a second chance to make a first impression.” It is true in life and true in contract negotiations. This article explores pre-negotiation strategies to ensure you get off on the right foot with your counterparty and set the stage for a productive negotiation.
In Nada Alnajafi’s book, Contract Redlining Etiquette, she shares invaluable tips on how to use redlines to make your contract negotiations efficient and effective. But what should you do before the first redline changes hands? Here are three tips for preparing for the negotiation.
1. Break the Ice
It’s no secret that attorneys and contract professionals are busy people. We face a constant barrage of requests from both internal and external clients – often with the expectation of responding yesterday. Countless studies tell us that attorneys experience among the highest rates of chronic stress, depression, and alcoholism.
In this environment of constant pressure, it is easy to view your contract review and response as just another task to check off your to-do list and move on to the next task. You must resist the urge! Otherwise, your response will come across as cold and transactional, putting your counterpart on the defensive.
Remember that the e-mail address on the other side of that contract represents a person, too. Odds are that person is overloaded, stressed, and has their own set of demands both in the office and at home, just like you.
Take a few minutes to get to know your counterpart and you’ll be surprised by how often you can find something in common. It just takes a bit of effort and curiosity. Once uncovered, this thread of commonality will do wonders to move from a defensive mindset to a collaborative and problem-solving approach.
A few recent examples:
Not long ago, I was representing a target in selling its specialty construction business to an industry competitor. Despite being several states away, I noticed that outside counsel for the acquirer attended the University of Illinois College of Law, where I currently teach. It turns out he was classmates with a former partner of mine. Going forward, at the beginning of each call we would spend a moment bonding over the most recent sporting success (or failure). That moment of humanity allowed us to lower our defenses and approach each negotiation collaboratively.
In another instance, I was negotiating a commercial lease with a national property manager, when we appeared to reach an impasse over parking. The negotiation was escalated to the landlord’s outside counsel in D.C. We quickly learned she grew up in a small town just 15 minutes away from my hometown in central Illinois. We developed an instant trust for one another and quickly resolved the remaining issues allowing us to finalize the lease.
I’m not suggesting that taking a few minutes to get to know your counterpart on a personal level is a replacement for thoughtful and principled negotiation, but it can go a long way in laying the groundwork for collaboration. Even if you can’t get on an early call or a video conference at the outset, a simple statement like “I look forward to working with you” can go a long way in setting the right tone for your negotiation.
2. Frame Key Issues in Complex Agreements
When dealing with complex agreements, I recommend outlining two types of issues in the e-mail accompanying your redline:
First, outline your key issues. I recommend keeping the list to 3-5 major issues. This will help frame the discussion and focus the negotiation on the issues that are most important to you or your client. This will also cause your counterpart to search for collaborative solutions before rejecting your changes outright, particularly when it comes to the key issues you’ve identified.
Second, identify proposed changes that you anticipate will be controversial to your counterpart. If you suggest controversial or out-of-market changes with no comments or vague justification, the change is often met with resentment or skepticism. Alternatively, if you shine a spotlight on them, you signal to your counterpart that you appreciate the controversial nature and that you are willing to work together to find a solution.
3. Consider Saving Your Explanatory Comments in Round 1, but Do So Carefully and Infrequently
You probably know the benefits of accompanying your redline edits with explanatory comments. The topic is covered in detail in Contract Redlining Etiquette, by Nada Alnajafi, and is considered best practice. There is even a helpful chart (on page 12 of the book) indicating when to use explanatory comments.
However, in addition to very simple and low-value contracts, one other scenario to consider limiting explanatory comments during the initial round of redlines is in unusually long and complex agreements (e.g. M&A agreements). These agreements will require several rounds of edits due to legal and business complexities and ongoing due diligence findings.
In this instance, provide a separate outline of the key issues and likely points of contention as previously mentioned, with minimal additional explanatory comments. This may allow the parties to quickly turn the draft and dispose of some of the less controversial issues at the outset, while identifying those edits that will require more context or discussion. It takes some practice to know when this approach will be effective and is more common at the outset of negotiations handled by outside counsel.
These foundational strategies may help you make a positive first impression and set your next contract negotiation up for success.
For additional strategies for keeping your complex contract negotiations on track, Part II of this article will be published here soon: Four Tips for Leveraging Redlines in Complex Negotiations.
