What to know about negotiating a contract

On Behalf of | Mar 31, 2021 | Business Law

A contract is an agreement that defines a specific relationship between two or more parties. In most cases, a contract may be oral or written, although some contacts, such as those involving the purchase and sale of real estate must be in writing to be enforceable.

In some instances, the existence of a contract may be implied by law from the conduct of the parties. For a contract to exist, all parties must be in agreement as to all of the essential terms, and it must be for a legal purpose.

To minimize the risk of future legal disputes, a contact should be written and as clearly, concisely and objectively as possible. Furthermore, it should be constructed in a manner that conforms to Pennsylvania law in order to be enforceable. Take a look at some tactics that you might be able to use to negotiate a favorable deal.

Focus on getting what you need

The best deals are the ones that allow both sides to get what they need even if they don’t get everything they want. Say that you’re seeking an investment from a prominent business owner to accelerate the growth of your startup. You also want to retain a majority stake in the company as a condition of any deal.

In such a scenario, it may be a good idea to accept that person’s offer to purchase 49% of your company even if you only wanted to part with 25%. Although you’re giving up more than you wanted to, you’ll retain your role as a majority stakeholder.

How will disputes be resolved?

Despite your best efforts, disagreements may occur between yourself and the other parties to the contract. The contract itself may specify how these disagreements should be resolved. For instance, the document might stipulate that terms can be changed at any time assuming that all parties agree to them.

It might also stipulate that disputes be resolved through mediation or arbitration as opposed to litigation. It might also be a good idea to have provisions that allow the contract to be terminated early if a disagreement cannot be resolved in a timely manner.

If you are entering into any type of business arrangement, you should do so with the help of an attorney. Legal counsel may be able to best represent your interests at any point before or after a deal goes into effect.

A business law attorney can advise you as to the meaning and importance of various contractual terms and provisions, and can draft the contract so that it clearly expresses the agreements of the parties and covers all foreseeable “what ifs” in an enforceable manner.