Negotiation Agreements: Draft, Evaluate, and Implement Deals
The negotiation does not end when you reach verbal agreement. The final and critical phase is translating that agreement into a written document that accurately captures what you agreed to and protects your interests. Many negotiations that succeed at the table fail during implementation because the agreement was poorly documented.
Effective agreement drafting requires attention to detail, clarity, and foresight. The agreement must be specific enough to guide implementation, complete enough to address contingencies, and clear enough to prevent future disputes. Investing time in getting the agreement right prevents problems later.
Key Elements of Effective Agreements
Well-drafted agreements include several essential elements.
Clear Terms
Every term in the agreement should be clear and specific. Vague language leads to different interpretations and disputes. Instead of we will deliver the products promptly, specify we will deliver the products within thirty business days of receipt of order.
If a term is subject to interpretation, define it. If there are industry-specific terms, define them. The goal is an agreement that a reasonable third party could read and understand exactly what was agreed.
Complete Scope
The agreement should address all issues that were part of the negotiation. If an issue was discussed but not resolved, it should be noted. Unresolved issues left out of the agreement will inevitably surface later.
Review your negotiation notes to ensure every agreed element is captured in the document. If something was discussed but not included, ask whether it should be.
Contingencies
Good agreements anticipate what could go wrong and address it in advance. What happens if delivery is delayed? What happens if quality does not meet specifications? What happens if market conditions change significantly?
Contingency clauses protect both parties by providing clear paths forward when circumstances change. They prevent minor issues from escalating into major disputes.
Dispute Resolution
Every agreement should include a dispute resolution mechanism. How will disagreements about the agreement be resolved? Common approaches include negotiation between parties, mediation by a neutral third party, arbitration with a binding decision, or litigation in court.
Choose the mechanism that fits the relationship and the stakes. Ongoing relationships often benefit from mediation or arbitration, which are less adversarial than litigation.
Common Agreement Pitfalls
Awareness of common mistakes helps you avoid them.
Ambiguity
Ambiguity is the most common source of agreement disputes. Words like reasonable, timely, sufficient, and material are subjective. Whenever possible, use objective, measurable terms.
If you must use subjective terms, define what they mean in the context of the agreement. Reasonable efforts might be defined as efforts consistent with industry standards.
Incomplete Terms
Agreements that fail to address important issues are vulnerable to dispute. Common omissions include failure to specify payment terms, delivery schedules, acceptance criteria, and termination conditions.
Use a checklist to ensure all important terms are addressed. If you are unsure what to include, consult with someone experienced in the type of agreement you are drafting.
Verbal Agreements
Verbal agreements are difficult to enforce and prone to misunderstanding. Different parties remember different things. Always put important agreements in writing, even if the written document is informal.
A simple email summarizing the key terms is better than nothing. For significant agreements, formal contracts are essential.
Implementing Agreements
The agreement is only valuable if it is implemented effectively.
Communication and Handoff
Ensure everyone who needs to implement the agreement understands its terms. Communicate expectations clearly. Document roles and responsibilities. Create a implementation plan with timelines and milestones.
Poor communication at the implementation stage can undo a successful negotiation. The people who negotiated may not be the people who implement. Ensure smooth handoff.
Monitoring and Adjustment
Monitor implementation against the agreement. If issues arise, address them promptly. If circumstances change significantly, consider whether the agreement needs adjustment.
Agreements are living documents. Rigid adherence to terms that no longer make sense damages relationships. Flexibility within the framework of the agreement supports successful long-term relationships.
FAQ
Do I need a lawyer for every agreement? Not every agreement requires a lawyer. Simple agreements with trusted parties may not need legal review. Complex, high-stakes, or long-term agreements benefit from legal expertise. When in doubt, consult a lawyer.
What if the other party wants to change the agreement after it is signed? Evaluate the request. If it is reasonable and addresses changed circumstances, consider agreeing. If it attempts to take advantage of you, resist. Any change should be documented as an amendment to the original agreement.
How do I handle a party who does not fulfill their agreement? First, communicate. There may be a legitimate reason for non-performance. If communication does not resolve the issue, follow the dispute resolution mechanism in the agreement. If there is no mechanism, consider mediation or legal options.
What is the most important clause in an agreement? The most important clause is the one that addresses what happens when things go wrong. A well-drafted force majeure clause, termination clause, and dispute resolution mechanism protect you when the unexpected occurs.