Negotiating the Contract

• A negotiation strength is something that gives a party an opportunity to use the strength to benefit her interests. This decision may also consider the impact that using the strength has on the other party to the contract.
  
• A negotiation weakness recognizes absence of a strength. It identifies that one party has an advantage over the other party.
  

• The comparison of relative strength and weakness may also conclude that neither side has an advantage over the other and each side is in about the same situation as the other.

Bargaining Power

Another aspect of negotiation strategy involves the concept of bargaining power. This refers to a party’s ability to influence the terms of a contract to benefit themselves rather than the other party.

• The most extreme example of this type of bargaining power is where one party to a negotiation refuses to even discuss the terms of an agreement and insists that all of its proposed terms be accepted.
  
• Bargaining power can be achieved in many ways, such as through acquisition of wealth and political or military power.
  
• Having bargaining power requires consideration of how it is used. Is the power exercised solely for purposes of individual gain without regard to the situation or position in which the other party to the contract finds herself?

Improving a Negotiating Position

• How can these negotiation strengths be enhanced?
  
• How can negotiation weaknesses be overcome?
  
• How can a person improve her bargaining position?
  
• What can a person do to avoid making a mistake negotiating this agreement?
  

If a person has thought through their own situation in terms of what they need, what characteristics the needed item must have, and the price they are willing to pay for the item in order for this transaction to make economic sense, the chances of making a bad bargain are reduced.

Avoiding mistakes requires some additional effort that addresses some of the less obvious issues that involve contracts. The following list describes these questions in a very general way.

Questions to consider in most any type of contract:

• Are the obligations of the contract clear to all parties?
• Between the time that the agreement is reached and the goods are delivered what can go wrong that would affect the ability of the seller to deliver the goods? How have these things been addressed in the agreement?
• What if the seller is unable to deliver the goods on time? How will delay in the delivery of the goods affect the buyer?
• What can excuse a party’s failure to perform or fulfilling the contract? Do the parties understand how these excuses can be used and how they will impact on the contract?
• Can a party transfer or assign the obligation of the contract to someone else?
• If goods will be shipped from the seller to the buyer who is responsible for the transportation? Who pays the cost? Who provides insurance against damage or loss while being transported?
• When are parties to the contract expected to perform? Are dates for performance of any contract obligation clearly spelled out?
• Has the seller of the goods made any express or implied warranties or guarantees concerning the product or its ability to perform for the buyer?
• If the parties to the contract have a dispute of some sort, how will such disputes be resolved? Court resolution is a traditional means of doing so, but there are other means. Are the parties willing to use these other means, such as arbitration or mediation? Do the parties understand how these alternatives work?
• Key guidance: Don’t sign any agreement until you understand all of its provisions and you know how the provisions will affect your interests.

Monitoring Performance of the Contract

Once the contract negotiation stage ends and the parties agree to terms that are embodied in a written document, key contract terms that come into play are those that describe the performance obligations of the parties.

• Assuming that each party has fully performed her obligations, the contract will be fully performed and the transaction completed. Some aspects of the agreement, however, such as warranties or guarantees, may survive into the future.
• If during the course of the contract a problem arises that was anticipated by the parties, contract provisions addressing that problem will be applied.
  
• If the problem was not one the parties anticipated, the nature of the problem may cause the parties to evaluate their respective positions under the contract. For example, if a seller is unable to perform all obligations of the contract and there is no recognized excuse for the non-performance, the other party to the contract has several options to consider.
  
  A party can offer to adjust contract obligations according to what the other party can fully perform. If the other party agrees, this process will result in an amendment to the original contract and a new set of obligations described in the amended contract.
  
  A party who does not receive the full performance that she bargained for in the contract has her own contract obligations affected by the other party’s failure to perform.
  
  In addition, the party can seek legal remedies for losses or damage suffered because of the failure to perform. These damages are measured in terms of added costs to acquire replacements goods for those specified under the contract that was not performed. If the item being obtained is unique, unusual remedies may also be available to the disappointed party that may result in forcing the non-performing party to fulfill contract obligations.