Contracts 101: Contract Negotiation Strategies
Welcome to another Contracts 101 lesson.
Today we’re talking about contract negotiation strategies for any solopreneur or small business owner who negotiates service contracts as part of their business.
Here’s the thing about contract negotiation for nonlawyers: most of the work of it is getting past the thing in your brain that tells you that you can’t negotiate a contract because you’re not a lawyer.
The truth is:
You don’t need formal legal training to negotiate a contract; you just need to learn to trust your instincts.
Yes, you read that right. Getting good at contract negotiation is mostly about trusting your instincts. That and changing your perspective about contracts and what they’re here to do.
This article will talk about both.
First, we’ll briefly recap what the purpose of contracts is and how that purpose impacts your contract negotiation strategies.
And second, we’ll talk about how your instincts are critical for guiding your contract negotiation strategies and what that looks like in practice.
If you’re ready, let’s dive in.
Let’s start from the central premise of Contracts 101, which is that contracts exist to define the working relationship between whoever wants to work together.
For most of you, that relationship looks like a business deal between you and a client where your client is paying you to perform a service for them.
In that case, the purpose of the contract is to identify and set forth the conditions necessary for that working relationship to go well. It needs to lay out what’s needed for you to perform your services well and it needs to explain what the client needs to do to compensate you properly for those services.
Lastly, it needs to create a straightforward process for ending the contract early if, for whatever reason, you all aren’t a good fit for working together and need to go your separate ways.
To recap the Contract 101 rule is that at a bare minimum, a contract needs to do 3 things:
Clearly detail how you’ll perform your services (what the services are, how you’ll deliver them, and how you’ll establish a timeline for delivery with your client).
Clearly detail how your client will pay you (how much your services cost, when you’ll get paid and how much, and how you’ll get paid).
Describe the different ways the contract can end and what happens in terms of payment and performance of services if the contract ends early.
So now we need to figure out the following:
How do these rules impact contract negotiation strategies?
Well, let’s talk about it.
If these are the critical things that your contract needs to do well, then these are the first thing you need to check when you’re reviewing a contract.
What do the terms about services, payment, and termination/cancellation say?
Do they refer to other terms in the contract, and if so, what do those say?
And most importantly, do those terms work for you?
If the answer is yes, then you’re ready to read the rest of the contract and see what your instincts have to say about it.
If the answer is no, then take time to write out why the service, payment, and/or termination terms don’t work for you as well as what you would need to make those terms work for you.
By the way, those things that are saying this is a “yes” and this is a “no” in you are you instincts.
So let’s talk about the role your instincts play in contract negotiation strategies.
The reason I tell people to start reviewing a contract by looking at the payment, services, and termination terms first is because they’re the most important, but also because they tend to trigger the most visceral responses from your instincts.
To back up a bit, your instincts are basically just your body’s nervous system reactions. And when you’re looking over a contract, you want to pay attention to how you react to what you’re reading.
Things like labor/work and payment go to the heart of our basic needs instincts and so they tend to elicit strong reactions from us.
When you focus on these payment, services, and termination clauses in contracts first, the response from your nervous system is more obvious. It’s louder.
The “No” for things that don’t work tends to be much more forceful.
So I always tell people to start here and notice how they respond. Notice how your body feels and what your brain is telling you.
Are you pretty relaxed or do you feel tense?
Is your breathing shallow or do you feel like you can easily take a deep breath?
Is your brain in a doom spiral or are you already thinking about how you’ll start the project?
These are the cues to pay attention to and they tend to be much easier to notice when you’re looking at payment, service, and termination terms than everything else because I’ve found that most people feel like they “get” those terms. They can understand them.
But what they don’t get and where instincts and contract negotiation strategies get really thorny is on those other terms that feel really legalese-y.
You know the ones: the indemnity clauses, the intellectual property terms, the confidentiality provisions, and all that stuff about warranties, choice of law, insurance, and liability.
Those contract clauses tend to be packed with legal terms that most people don’t know the meaning of. This often triggers what is called a coping response where your brain tells you to give up before you start.
Usually the script goes something like: (a) I don’t know what this legalese means; (b) Why am I trying to do this, I’m not a lawyer?; (c) I can’t even afford a lawyer so there’s no way I can I negotiate this contract; (d) Well I need the money so let me just accept the terms.
This is where I tend to lose people on the contract negotiation strategy journey. The brain is so so powerful and frankly, it loves to tell y’all that you aren’t qualified to review and negotiate that contract in front of you.
But like I said earlier, you don’t need to be a lawyer to negotiate a contract successfully. You just need to learn how to trust your instincts.
So how do we disrupt this cycle?
You have to commit to engaging your brain in the moments where it’s telling you to give up. If that means being old fashioned about it, so be it.
I recommend taking out a notebook and a pen or pulling up a new document on your computer so you can take notes while you read the rest of the contract with all that legalese in it.
Taking notes helps you stay engaged with what you’re reading. This is especially important if what you’re reading feels intimidating.
So go through the contract line by line and make note of sections that trip you up. If they don’t make sense, note it. If you don’t know what that word or phase means, note it. If the way something’s written feels off to you or like it might be screwing you over, note it.
When you’re done, notice how you feel again and answer the central questions:
Do I feel settled or tense?
Is my breathing shallow or normal and can I take a deep breath with relative ease?
Is my brain in a doom spiral?
Am I already thinking where I’m going to start the project?
If you took a ton of notes, your brain is likely to say something annoying and possibly mean to you like “man, I have no idea what the heck I’m doing.” Just tell it thanks and get back to paying attention to how your system is reacting to the contract.
If you feel tense, have shallow breathing, and/or find your brain in a doom spiral, then your instincts are telling you that something about this contract isn’t sitting right with you.
Now go back over your notes. When you look at the all the stuff you wrote down, what’s the one thing or what are the few things that make the hair on your arms stand up?
Start with those things.
For terms that you don’t know what they mean, Google them, ask chat GPT, ask your entrepreneur friends, or ask a lawyer.
For the terms that feel like they’re unfair or create unnecessary risk exposure for you, think about asking questions as a contract negotiation strategy. You can ask your entrepreneur friends if they’ve come across the say issue and how they handled it. Or, you can just ask the person who sent you the contract what’s up with that contract term.
Because here’s the truth: when your instincts tell you something is off, you just need to keep following that hunch until you get an answer. And that in and of itself is one of my favorite and most effective contract negotiation strategies.
Our brains love to jump to conclusions and tell us that the next step is asking for specific changes to that contract term.
But if we aren’t quite sure what the term means or how it puts us at risk, how are we supposed to know how to change it?
That’s why I think the best contract negotiation strategies for lawyers and non-lawyers alike start with questions.
Why? Because questions are how you gather information.
Again, you don’t need to be a lawyer to deploy questions as a contract negotiation strategy.
Here are a few questions you can try:
What are you trying to achieve with this term?
What’s the purpose of this paragragh?
Sorry, but I’m not the best with legalese, what’s the point of this paragraph?
So why are questions one of the most powerful contract negotiation strategies?
One. They help you collect information. A lot of times when you ask what a term means or what it’s trying to accomplish, you will get a plain language explanation of that term in response. That’s great. Ask to replace the language in the contract with that plain language description of it.
Two. They tell you whether or not there’s potential for a good working relationship. Remember those instincts we talked about? If you’re tense, spiraling, and/or having shallow breathing, they’re telling you something is up.
Sometimes, it’s not something in the contract. It’s the someone you’re thinking about working with. Notice how people respond to your questions. Are they patient and cooperative? Do they provide satisfying answers to your questions?
Or do they say things like “it’s just a standard contract term” (because there’s no such thing. There are common contract terms, but the way they are written is rarely standard)?
Or are they kind of dismissive?
When it comes to contract negotiation strategies, questions are your friend. They help you get curious about your instincts and they often lead to answers that tell you whether to move forward or to let the deal go.
The more you practice listening to your instincts and asking questions based on your instincts, the better you’ll get at understanding and negotiating contracts.
Trusting your instincts and asking questions is a great way to build confidence and remind yourself that you don’t have to be a lawyer to create effective contract negotiation strategies. You just have to be willing to listen to your instincts, ask questions and keep asking them until you get a satisfying answer.
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