One of the more frustrating things to run into during a contract negotiation is the “stock position.”\u00a0 These are negotiation positions often used as tactics to shut down discussion on a point, or to push back on an otherwise reasonable request\u00a0 Part of every attorney’s job\u00a0is to\u00a0find and leverage ways to make the negotiation cycle more efficient.\u00a0\u00a0Being prepared for these 10 common negotiation positions, and knowing ways to work through\u00a0them, can help\u00a0you avoid a stumble on your way to the negotiation finish line.<\/p>\n
10. It’s\u00a0Locked Down<\/span>\u00a0(“We only send our agreement as a [PDF\/locked Word document].”) 9. Can’t Help You There<\/span> (“I don\u2019t have the authority to negotiate that.”)<\/strong> 8. We’re The Best Around<\/span> (“Do you know who we are? We\u2019re the number one [vendor\/supplier\/provider\/client] [of\/to] [thing] in the [geographic area].”)<\/strong> 7. Don’t\u00a0Stop Us Now<\/span> (“Why are you asking about that? You\u2019re slowing the deal down\/this [will\/may] cause us to miss our [contract execution date\/launch date\/etc.].”)<\/strong> 6. Take Our Word For It<\/span> (“I know the contract doesn\u2019t say that, but it\u2019s our practice.”)<\/strong> 5. We Can’t Afford That<\/span> (“That will affect our revenue recognition.”)<\/strong> 4. You Don’t Need To See That Now<\/span>\u00a0(“We don\u2019t give our [customers\/partners] our [documentation\/policies] before they sign the agreement.”)<\/strong> 3. I Can’t Believe You Said That<\/span> (“We take offense to your position that we might [lose your data\/breach the warranties, etc.]”)<\/strong> 2. That Comes Later<\/span> (“We will [address\/schedule] [your implementation\/that topic] in a [SOW\/Addendum] after we sign.”)\u00a0<\/strong> 1. That One’s New<\/span> (“No one has ever asked us for that before\/we’ve never given that to anyone before.”)<\/strong> One of the more frustrating things to run into during a contract negotiation is the “stock position.”\u00a0 These are negotiation positions often used as tactics to shut down discussion on a point, or to push back on an otherwise reasonable … Continue reading
\n<\/strong>Why you hear this:<\/em> Some companies try to limit redlines to their agreements by only distributing agreements as a PDF or a Word document locked against editing, making it very burdensome if you want\u00a0to propose changes.
\nHow to respond:<\/em>\u00a0 Propose capturing any changes in an amendment or rider to keep the agreement itself as-is, but ask for a Word version so you can show the changes you’d propose be captured in the amendment or rider.\u00a0 If they won’t budge, consider creating your own Word version to redline (modern versions of Adobe Acrobat Pro have built-in OCR that lets you save a PDF in Word format, or you can print and then use Optical Character Recognition (OCR) to convert the PDF to an editable version).\u00a0You can also create an unlocked version of a Word document for editing purposes fairly easily – see\u00a0my earlier article on this topic<\/a>. \u00a0If you create an editable version yourself, be sure to state in your cover note\u00a0when sending the agreement back that you have created a Word version solely to facilitate your and their negotiation of the agreement, and reiterate that you would be happy to capture the agreed-upon changes in an amendment or rider to the agreement.<\/p>\n
\nWhy you hear this:<\/em>\u00a0The person you are negotiating with either doesn’t have the authority to approve changes to this provision, or wants you to think that he\/she can’t make changes to it.
\nHow to respond:<\/em>\u00a0If the change is important to your company,\u00a0let them know why, and\u00a0ask them if they can break out to seek approval from a person with authority (you’ll hold if on a call). Alternatively, ask if the person with authority can join the conference call or meeting so you can explain the importance of the change or provision directly. \u00a0If they balk, ask them to set up a follow-up call or meeting with the person with authority. \u00a0If they’re bluffing, asking them to bring in someone with authority\u00a0may result in a change in position.
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\nWhy you hear this:<\/em> \u00a0This\u00a0response is the equivalent of “we’re the big fish in this pond – be lucky you’re working with us.”\u00a0 They’re trying to use their market position to get you to back off your position or request.
\nHow to respond:<\/em>\u00a0This is one of the reasons it’s important to have a credible backup partner\/supplier\/vendor waiting in the wings, or at least know who the other party’s major competitors are. \u00a0If your position or request is reasonable, you’ll need to stand your ground. \u00a0Let them know that while you are aware they are a major player, your request is important to your company, and\u00a0that you hope they can\u00a0negotiate on this point. \u00a0If you hold fast, you may have to drop the names of their competitors (if you know the name of a sales rep in\u00a0your area, drop that) and let them know, expressly or by implication, that their willingness to work with you on this point is more important than your desire to work with the top player in the market.<\/p>\n
\nWhy you hear this:<\/em>\u00a0All too often, parties enter negotiation where one or both are already committed or invested in the relationship — implementation has already started, financial forecasting has already assumed the agreement is completed by a certain date, commitments regarding the agreement have been made to senior management, etc. The other side may be trying to leverage a “need for speed” on your company’s part to avoid discussion of potentially contentious or unfavorable points.
\nHow to respond:<\/em>\u00a0It depends on what is more important to your company — getting the deal done quickly, or taking the time to negotiate your point. \u00a0If it’s a “nice to have” point, discuss the pros and cons internally of giving on the position in the interests of time. \u00a0If it’s a “must have,” call the other side’s bluff and let them know that while you\u00a0understand that digging into this point may impact the negotiation or launch schedule, resolving this point must take precedence. If you do that, be aware that the other side may try to “forum shop” and reach out to one of the negotiating parties, or a superior, who they think is feeling pressure to close the deal and can exert leverage to get past this point. Propose alternative or compromise positions, and offer to work on a compromise in real-time on a call or via a WebEx or GoToMeeting session to keep the ball rolling.
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\nWhy you hear this:<\/em>\u00a0The contract template you are working from may be\u00a0old and no longer tracks to\u00a0the operational realities of the parties’ obligations and duties. \u00a0It’s also used where the other side is unwilling to commit\u00a0contractually to a negotiating or marketing statement or position.
\nHow to respond:<\/em>\u00a0Stress that the contract needs to accurately reflect the business and operational reality of the relationship. \u00a0If it’s their practice, they should be willing to give you a contractual commitment on it. If they refuse, let them know that if they can’t back up their statement with a corresponding obligation in the contract, that’s a red flag and you’ll need to discuss their position with your\u00a0business team (in other words, give them a Don’t Stop Now). Consider\u00a0ending the call\/meeting early to huddle with your business team on this point – it can send a message to the other side that you are serious about this issue.<\/p>\n
\nWhy you hear this:<\/em>\u00a0The requested change could require them to spread the revenue across a longer period of time, or shift it from one fiscal month\/quarter\/year to the next. If the sales rep has already\u00a0committed a contract close to the business, or is planning on it to meet quota or get bonus, this can be a major stumbling block for them. For\u00a0example, a termination for convenience clause can often affect revenue recognition.
\nHow to respond:<\/em> This can be a legitimate argument. \u00a0However, there is often a creative way to structure terms that meets their revenue recognition\u00a0requirements yet gives your\u00a0company the flexibility it needs. \u00a0Put on the creativity hat and work with your business\/legal counterpart, and your finance team, to try to find an alternative that will work. \u00a0If not, you’ll need to stand firm and see whether they want the business even with altered revenue recognition terms.
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\nWhy you hear this:<\/em>\u00a0If an agreement has policies that apply to your company and are referenced or incorporated by reference in the agreement (e.g.,\u00a0Terms of Use, Terms of Service, Vendor Code of Conduct, Conflict of Interest Policy, Trademark Guidelines, etc.), taking the time to review these policies can extend the negotiation cycle. \u00a0They agreement may also contain a warranty that the product or service conforms to the documentation, which you’ll need to review to understand how strong of a warranty you’re getting. If there’s anything in there that your company can’t abide by, you could be setting your company up for a problem out of the gate.
\nHow to respond:<\/em>\u00a0Explain that your company can’t fully commit to an agreement until it has reviewed and signed off on all terms and policies related to the agreement. If they’re balking at providing documentation relating to a warranty section, let them know you need to see the documentation first. \u00a0See if there’s a group within your company that can play “bad cop” here, e.g., “Internal Audit needs to see it before we can sign.” Consider adding a 30-day right to rescind to the agreement in your client’s favor, which lets you sign first, but lets you back out if you don’t like the terms of their policies. Search online — many times you can find a policy on the other side’s own website.
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\nWhy you hear this:<\/em>\u00a0The “rightful indignation” argument is common when the other party\u00a0wants to avoid a discussion on a topic, or truly doesn’t understand why you would be asking about that. \u00a0They may be confusing your risk management with an insinuation that\u00a0you don’t trust they can live up to their obligations.
\nHow to respond:<\/em>\u00a0Explain why the issue is important to your company. \u00a0If your company has been burned by the issue in the past, or your General Counsel\/management team is focused on this issue, let them know — almost every company has some hot-button issue\u00a0that can impact\u00a0its contract negotiations. \u00a0You can also let them know you’ve seen recent articles about this issue and it’s top of mind. \u00a0Be sure to stress that you’re not playing Devil’s advocate and looking at the worst-case scenario, but you’re rather be prepared for the worst and have some extra words in the contract\u00a0than be caught unprepared when the unthinkable happens.
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\nWhy you hear this:<\/em>\u00a0Punting on a contentious or time-consuming issue, such as ownership of deliverables, can help move the agreement to completion. \u00a0Once the contract is signed, however, you may lose your leverage to negotiate that provision. \u00a0Alternatively, the other party may attempt to\u00a0include a provision\u00a0in the SOW\/Addendum that will take precedence over a corresponding\u00a0provision in the base agreement, essentially renegotiating it.
\nHow to respond:<\/em>\u00a0If a provision is material or critical to the agreement or to\u00a0your company, insist that it’s negotiated as part of, or at the same time as, the agreement. Ensure you have a strong\u00a0order of precedence clause\u00a0so your\u00a0negotiated wins in the agreement aren’t undone in a later document.<\/p>\n
\nWhy you hear this:<\/em>\u00a0Unless a company is very new, it’s very uncommon that no one has ever asked for a particular request before. \u00a0It’s more likely that the person you are negotiating with has never heard anyone ask for that before.
\nHow to respond:<\/em>\u00a0Ask them to confirm they are saying that no contract the company has ever signed has had that provision. \u00a0If they hold firm, use it as an opportunity to push for a contractual representation to that effect (putting their money where there mouth is), and\/or push for a “most favored nations” (MFN) clause on that term so that if they do offer that term to anyone in the future it will be automatically incorporated into your agreement. These approaches often lead to a change of tune. They may try to limit a rep or MFN clause to similarly situated clients\/partners – consider whether this makes sense.
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