Properly managing contracts is an integral part of business success and is crucial to creating sustainable outcomes and relationships.
1. Set Clear Goals
When negotiating a contract, take some time to list the goals you are trying to achieve by enshrining the agreement in legal form. What do you want from your counterparty? What are you willing to give to your counterparty? What will the key negotiation points be? Which stakeholders within your organisation will need to have input into the agreement?
2. Avoid Giving Your Counterparty Ways to Avoid Their Commitments
If the counterparty asks for information or actions to be performed by your organisation in order to fulfil their commitments, make sure these actions and information requests are specific. Moreover, ensure that your team is ready and able to perform these requirements, thus avoiding costly renegotiations and failed expectations.
3. Build Relationships
Your business relationships will be the most fruitful to all parties involved if you develop cooperative, collaborative and respectful relationships. Use a win-win frame of mind. Make sure to meet your own obligations in the negotiation stage (information requests, meeting agreed deadlines for contract drafting, et cetera can be easily managed in a Contract Management System) to set the tone for what you expect for performance of the contract. In addition, trusting relationships are more likely to create a forum to discuss potential pitfalls, saving future time and effort.
4. Contract Performance Assessments
If this is a repeat contract, what do the stakeholders within your organisation think of the counterparty’s ability to perform the contract? While some teams may think the counterparty is excellent, others may be frustrated in ways which could be easily resolved through small changes in contract terms. Engage with your stakeholders, who will often be pleased that their views are being taken into account. Use a Contract Management System like ECAS from https://www.contractswise.com/ to keep track of ongoing performance.
5. Risk Mitigation
What are the potential impacts of your counterparty failing to perform on their contract? How will this impact your business and what would you need to do to make up for this contract failure? How mission-critical is the performance of the contract? If you identify significant risks for your business, engage your relevant stakeholders within your organisation to isolate and put in place potential action plans to mitigate the risks.