Negotiating better contract terms: a practical guide

Many people assume a contract they are sent is take it or leave it. Often it isn’t. Even large companies with standard terms will sometimes move on the points that matter most to you, and smaller counterparties usually expect some negotiation. You won’t know unless you ask.

Understand your leverage

Your leverage depends on how much the other side wants this deal with you compared with its alternatives. You are in a stronger position if you have other options, if you are the bigger customer, if the other side has already invested time in the deal or if the market is competitive. You are in a weaker one if you need the deal urgently, if they are your only realistic option or if they are much larger and don’t negotiate their standard terms.

Prioritise what you ask for

Before you start, sort the terms into those you can’t accept, those that matter but where you can compromise and those that would be nice to change. Put your effort into the first group. Sending back a long list of minor points can make it harder to get movement on the ones that count.

Negotiate with a plan

Find out what is usual for this type of contract and what you can about the other party before you start. If you can, put forward your own proposal first, because the opening position often shapes where things end up. Keep changes in writing, ideally as a marked-up draft, so there is a clear record of what was agreed. Be ready to trade: “I can accept the longer notice period if the liability cap applies to both of us.” If the deal is complex or valuable, a solicitor can negotiate for you and spot the knock-on effects of changes.

Know when to walk away

Decide your limits in advance. If the other side won’t move on terms that leave you with no realistic remedy if things go wrong, lock you in on one-sided termination terms or restrict your business too much in the future, walking away may be the better option. A bad deal can cost more than no deal.

Before you start negotiating, QuickLegalCheck can review the draft and highlight the terms most worth raising.