Corporate Contracts and Agreements - Best Practices & Tactics
Some companies make mistakes that jeopardize their success and profitability. Fortunately, you do not need to be among them. This post lists essential clauses to include in corporate contracts to help mitigate risk and avoid mistakes.
Essential clauses to include in corporate contracts for risk mitigation
A few simple clauses in corporate contracts can mitigate risks substantially. Firms that include them can protect themselves legally and prevent counterparties from taking advantage.
Here are some essential terms to include in corporate contracts and agreements:
- Scope of work.
These clauses outline the work included in your price, what you will deliver, and how you will perform. It can also include things that cost extra or that you will not include. The scope of work is practical because it prevents scope creep (where customer expectations expand) and establishes relevant performance criteria. - Payment terms.
These clauses set out the fundamental payment parameters, including when, how, and how much clients will pay. Terms should normally include late payment fees. - Termination and renewal.
These clauses define the conditions under which you will terminate or renew the contract. Such terms are helpful when risks include force majeure, insolvency, or failure to pay. - Dispute resolution.
Dispute resolution clauses detail how parties will resolve conflicts in various situations. Before considering litigation, terms should consider scenarios under which mediation or arbitration could help. The terms should also confirm the laws governing disputes that may arise. - Intellectual property and confidentiality.
IP and confidentiality terms prevent sensitive or secret information from becoming public. Contracts may detail how to handle confidential data, who will protect it, and the consequences for revealing it. - Risk allocation and liability limits.
Finally, adding clauses that allocate liability can reduce risk by setting out who is responsible for contract performance as well as the duty to indemnify under specific scenarios.
Negotiation tactics for securing favorable contract terms
Including essential clauses in corporate contracts to reduce risks is straightforward. However, negotiating with opposite parties to secure favorable terms can be more challenging. Getting the human element right can be formidable.
Fortunately, there are tactics to get off on the right foot and maximize the likelihood of a desirable outcome, such as:
Use The First-Person Plural
One approach is to adopt a collaborative approach to negotiation, using terms like “we” and “our”. Being less trenchant and more accommodating can convince the other side you are seeking a solution that benefits you both.
Use Silence To Your Advantage
Another approach is to use silence strategically. Stopping the conversation provides time for the other party to offer concessions.
Build Rapport
Building rapport can also help during negotiations. Listening carefully and paying attention to the other party’s needs and emotions can direct the conversation in your favor.
Be Prepared To Walk Away
Another tactic for securing favorable contract terms is to be ready to walk away. Reminding the opposing party you are willing to walk away gives power back to you. It can feel uncomfortable but prevents you from budging on your core priorities.
Adapt Your Body Language
Finally, adapt your body language to fit the meeting. Adjusting your posture and maintaining eye contact during discussions shows your confidence and professionalism.
Common mistakes to avoid
Avoiding common pitfalls is also essential for successful corporate contracts and agreements. One mistake can derail everything.
Here are some pitfalls that affect various types of corporate contracts:
- Using the wrong language in contracts or leaving the wording ambiguous
- Rushing in and signing an agreement without understanding the other party’s terms
- Failing to apply contract enforcement when the other party breaches the agreement
- Ignoring relationship-building and rapport with the other party
- Keeping items off the sales agreement contract or relying on verbal assurances
- Giving up too many concessions early and weakening your position
- Reacting based on emotions instead of what is in your company’s best interest
Get Help With Creating and Analyzing Contract Agreements
Bingaman Hess is here to help you create and analyze corporate contract agreements. Our expert team of corporate attorneys can analyze your documentation, ensuring it mitigates risks and puts your firm in the best position.
Call now.
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