A large customer sends you a contract and says:
“These are our standard terms.”
For many business owners, that sounds like the end of the discussion.
But standard contract terms aren’t necessarily non-negotiable.
In fact, a customer’s standard commercial contract will generally have been prepared to protect the customer’s interests – not yours.
That doesn’t mean every clause should be challenged. The real skill in contract negotiation is identifying which provisions matter enough to negotiate.
Which Contract Terms Matter Most?
The answer depends on the transaction and your business. However, when reviewing commercial agreements, some areas commonly requiring particular attention include:
- liability caps and indemnities
- payment terms
- intellectual property ownership
- confidentiality and privacy obligations
- termination rights
- warranties and service obligations.
A provision that appears relatively unimportant can sometimes create a significant commercial exposure.
For example, a broad indemnity or unlimited liability clause may leave a supplier accepting risk that is completely disproportionate to the value of the work.
Good Contract Negotiation Isn’t About Winning Every Point
Trying to negotiate every clause in a customer’s standard terms and conditions can waste time and potentially damage an otherwise valuable commercial relationship. A better approach is to identify the provisions that could genuinely affect your business and concentrate your negotiating position on those issues. Sometimes the commercial opportunity will justify accepting a provision you would ordinarily prefer to change. That is a business decision.
The important distinction is between knowingly accepting a commercial risk and accepting it simply because nobody noticed it.
Get Advice Before You Sign
Once a contract has been signed, your negotiating position may change considerably. A commercial contract review before signing can identify the provisions that deserve attention and help you decide where negotiation is worthwhile. A good commercial lawyer should also understand that the objective isn’t to produce a legally perfect contract at the expense of the commercial deal. The objective is to help you enter the agreement understanding the obligations and risks you’re accepting.
If you’ve received a customer’s standard terms and aren’t sure which provisions are worth negotiating, I’d be happy to review the contract and help you focus on the issues that matter commercially.