Strategic Commercial Contract Negotiation: Build Value, Minimise Risk and Strengthen Relationships Training Course

Legal objective of the negotiation

• Exercise – Co-op v ILC
• Offer and acceptance process
• Power of attorney of negotiators
• Commercial confidentiality of content being negotiated
• Ensuring end result is legally binding – Legality, Intent, Legal capacity, Agreement,
• Consideration (LILAC)
  • What is being negotiated?
  • Understanding the relationship between implied term (Statute) and express terms (negotiated terms amending/ deviating from statute)
• Why negotiate the contract terms?
  • To move away from the ‘one size fits all’ of statute
  • To achieve better clarity of contractual obligations
  • To assign responsibility and liability
  • To proactively manage potential risk – practical solutions / remedies replacing monetary compensation
  • To allocate liability to reflect bargaining position
  • To enhance relations: ‘win-win’ approach for long term gains – realising opportunities
• Exercise – Review of real-life express term clauses

Preparing for the negotiation

Negotiation is two-fold: content and process

• Step 1: Content
  • Understanding your strategy – objectives/ goals/ motivation/ drivers
    • Alignment with organisations vision/ mission/ policies
    • Relationship (with other party) or Task (achieving the best outcome for you)
    • Win/Win v Win/Lose. Carter’s pie theory
    • Time v Quality v Price (Slack, Chambers & Johnson’s Iron Triangle)
    • Attitude to risk: risk minimisation/ sharing risk
  • Methodology for determining priorities: MIL, Must have; Intent to have; Like to have
  • Cost v benefit analysis of time/ effort dedicated to negotiation
• Exercise – Price v Scope or Risk
• Exercise - Preparing your MIL
• Exercise – Drafting potential settlement zones. 4T’s

Determining the bargaining position

• Different theories / methodologies, same logic:
  • Determining the bargaining power of each of the negotiating parties.
    • Difference sources of power: Reward; Coercive; Expert; Informational; Referent; Legitimate
    • “BRA”: Best Realistic Alternative / “BATNA”: Best Alternative To a Negotiated Agreement
    • Porter’s 5 Forces: Bargaining power of suppliers; of buyers; threat of new entrants; threat of substitutes; industry rivalry
    • Porter’s Generic Strategies for Competitive Advantage model: cost leadership; cost focus; differentiation; differentiation focus.
    • Steel & Court’s Supplier Preferencing model – Development; Core Business; Nuisance; Exploitable. Attractiveness of buyer’s organisation and value of buyer’s business to the supplier
    • SWOT analysis: Strengths; Weaknesses; Opportunities; Threats
    • Cox’s Power and Dependency matrix
• Exercise – Porter’s Generic Strategies

Undertaking the negotiation

Negotiation is two-fold: content and process. 

• Step 2: Process
  • Aligning your negotiation style and tactics to your bargaining position and strategy

Negotiation style

• Exercise – negotiation questionnaire identifying delegates default style
• Different theories, same message:
  • 6 styles theory: Acceptance, Compromise, Threat, Emotion, Bargain, Logic.
  • Cooperative (bargaining & logic) v Competitive (threats)
  • 3 C’s: Compromise, Compete, Collaborate
  • 3 types – Assertive (aggressive), Accommodator (relationship oriented), Analyst (conflict avoidant)
  • Thomas–Kilmann dual concern model: Competing, Accommodating, Avoiding, Compromising or Collaborate
  • Constructive v Destructive
  • Push (exerting power) / Pull (persuasion) influences
  • Rational compromise
• Consciously selecting an appropriate style to achieve objectives
• Exercise – ‘Push’ / ‘Pull’ and ‘Constructive’ / ‘Destructive’ approaches

Negotiation tactics

• Confidence v arrogance
• Honesty and trust, more than just rapport. Relationship values and drivers.
• Acknowledgement of past interactions – good or bad
• ‘Framing’ the negotiations
• Opening the negotiation / effective listening & asking questions, gaining insight
• Exchange of information / being aware of your own disclosures
• Getting a reply: ‘rephrasing / reframing’ the same question
• Use of empathy for ‘win-win’ and/or to encourage disclosure of information
• Ury & Fisher’s - ‘Getting to Yes’: separating people from the problem; focusing on interest rather than position; generating options; focus on objectives
• Body language
• Silence tactic – using it / diffusing it
• Breaking deadlock and moving negotiations forward
• Exercise – Effective questioning

Approach and environment to reflect objectives and maximise desired outcome

• Timing
• Mode / venue
• Environment
• Atmosphere
• Attendees

Structuring negotiations and good ‘housekeeping’

• Establishing power of attorney of attendees
• Ensuring confidentiality
• Keeping negotiation open until formal written agreement signed
• Focus – use of agenda: pros and cons
• Summarising and capturing the agreement accurately