Knowing the key issues and terms to negotiate any business deal and business contract is an essential factor for a company’s growth and success. This article addresses some key considerations and important tips a business owner or key executive should consider when negotiating a business deal. We selected a few which we found are useful when negotiating and finalizing business deals. However, this list of contract negotiation tips is not exhaustive.

Knowing Your Counterpart in Negotiation – Who is the other party?

Knowing and understanding the party you are negotiating with is essential to the success of reaching a business deal. Some considerations are:

• If this is the first time you are negotiating a deal with the other company, it is important to do research on or get references.
• Consider doing a credit check if relevant.
• If the other party is based abroad, laws may differ materially in the jurisdiction your counterpart is located in. Understanding the enforceability of your business terms and business contracts are essential.
• If the other party is part of a group of companies, it is important to understand their structure and determine if any other companies in the group related or affiliated to the other company will be involved in the deal. If yes, how.

What is the Company buying or selling?

A business contract governing the deal should contain clear terms so that if and when a dispute occurs, the parties are aware of the consequences.

• All key terms should be reduced into writing. Enforcing a verbal agreement is quite difficult, if not impossible under certain circumstances.
• A great number of contractual disputes relate to what services are to be performed or goods are to be delivered. The business contract should clearly and accurately describe the goods and services to avoid risk of disputes.

Price and Payment Terms Consideration

Each business contract should contain clear price and payment terms. Below are some considerations:

• How is the price determined? Is it a fixed or variable sum?
• If the price is linked to variable factors, what are the factors for determining price and at what points during the term of the contract will the price be determined?
• If it is a cross border business transaction, in what currency is payment to be made? Is there an exchange rate risk? If so, can it be limited in any way?
• Is tax included in the price (eg. sales tax)? Tax advice must always be sought if goods or services are being delivered or performed in a foreign country to ensure there is no unexpected tax liability.
• How is payment to be made (for example, check, electronic bank transfer, or bank draft)?
• When is payment due? Is it a single lump sum or by installments? Is there a retention of payments to be held as security?
• Any late payment penalties?

Our firm is experienced in preparing and negotiating business contracts. We also have experienced tax attorneys who can help with your tax questions. Contact us today for a quote.