How to Negotiate Conflict-Proof Contracts?
Contracts are the primary engine of the economy. At the same time, the market thrives on the exchange between people. As history has unfolded, the scale, diversity, and sophistication of economic transactions have come to represent an increasing percentage of everyday human interactions. Along this trajectory, contracting is not exempt from something as old as the coexistence of two or more individuals: conflict.
Certainly, negotiating these types of agreements is an exercise in foresight (What would happen if…?) that also involves some effort and resources from the parties. Therefore, it is advisable to allocate risks that allow for generating wealth and not creating more problems than business opportunities. This article addresses a couple of tips that can minimize conflict and make contracts a more efficient tool for the interests of those involved.
- It is important to express the goals intended to be achieved with the contract
Who is thinking about discussing, at the moment of initiating a business relationship? The clauses tend to be clearer when contracting. However, each party interprets the wording in their own way, and when the first obstacles arise, this may not necessarily be due to ill intent. An important point that can facilitate the resolution of conflicts through judicial, arbitration, or mediation means is to express in the contract itself the reasons for initiating the operation or the motives behind a clause having certain significance.
One of the most important questions that will arise during this stage will be: Why was it important for things to be done according to this clause? Of course, some things will be slightly indeterminate in a negotiation due to the rush to start a project, because it was considered unnecessary, or to avoid straining the trust that initiated it. Thus, it is important to clarify from the beginning what the needs and expectations of the parties are, which will facilitate issuing a ruling or recommendation in the event of any disagreement.
- The most basic things tend to be the most important
There are certain elements that should never be missing from a contract: price and goods. Building upon this, there are other strategic elements such as product quality, delivery times, or specific technical specifications. These concepts are handled so naturally between the parties that they are sometimes overlooked when documenting agreements. Crucially, establishing objective parameters for compliance or non-compliance with the most significant obligations is important.
- Anticipating methods of conflict resolution usually prevents headaches
It is common for transactions involving higher amounts to include an arbitration clause, so that a specialized tribunal will be constituted solely to issue a ruling on that specific case. Naturally, this dispute resolution dynamic involves a high degree of specialization and promptness. As a trade-off, the costs associated with the process tend to be quantitatively higher, something that usually doesn’t matter given the significance of the eventual resolution. However, structuring a stepped clause in the sense of establishing mediation or direct negotiation before the jurisdictional stage can prevent unnecessary strain on the parties.
The Almost Magical Formula for Negotiating an Agreement
Certainly, it’s confusing to know what to pay attention to and what not to. Many contracts, in fact, are not drawn up by specialized lawyers or those well-versed in the business dynamics of the parties, but rather by the parties themselves who know their circumstances better than anyone but may not know how to document their agreements in the best way. A systematic way to know where to focus efforts is to gauge how serious the breach of an obligation is, how high that risk is, and contrast both factors against the cost of crafting or foreseeing that situation in a clause. Undoubtedly, this reflection won’t lead to an exact numerical answer, but it will provide guidance for designing contracts even more useful for the parties involved.
