May 29th, 2014 By Virtual Paralegal Services

Creating win-win contracts has less to do with bargaining, compromise, and competition and much more to do with reaching a mutually beneficial business-to-business relationship. When the contract is completed and signed, both sides of the negotiation should walk away feeling like they were listened to, understood, and dealt with fairly. Both sides should feel confident that they achieved their goals and the contract will be honored. Finally, there should be a sense of looking forward to continuing their business relationship with the other party.

This is possible when both businesses:
• Strive to understand the other business’ needs and desires
• Attempt to solve problems on both sides of the equation
• Maintain a mindset of flexibility, rather than rigidity
• Focus on enlarging the pie rather than dividing it
• Aim for win-win outcomes

When creating the contract

Focus on key issues:
• Value: what is an accurate representation of the value being exchanged, not just monetarily, synergy value, etc?
• Performance: conformance to an agreed upon set of requirements and clear criteria for when those requirements are met
• Expectations: specified itinerary of actions, events, milestones, and completion
• Budget: systematic plan for expenditures – who owes who what; when is it due, how is it to be paid
• Liability: what is a fair allocation of liability and limits to that liability?

Define:
• Each party’s responsibilities
• Exactly what constitutes conformance
• Elements critical to success
• Definition of terms
• Identify external variables
• Specific task, events, and milestone schedule
• Liability and risk

Communicate:
• Paraphrase each other’s statements’ to affirm understanding
• Avoid finger pointing – use third party evaluation when appropriate
• Keep issues in writing
• Focus on the goal
• Ask questions

Establish
• Limitations of liability
• Indemnities
• Dispute resolution procedures

Consider clauses
• Recognize which party benefits from clause and which one will benefit from the default at law
• Have a clear picture of which party is more likely to breach the contract and which one is most likely to suffer damages
• What are the underlying interests of each party
• How should risk be allocated

In the end, win-win contracts share multiple traits
• User friendly – both parties find them easy to understand
• Concise
• Simple to add-on new agreements rather than having to renegotiate
• Uncomplicated contract administration

When both sides focus on creating a win-win contract, and follow sound principles for creating those contracts, they significantly increase their chances of long-term mutually beneficial relationships. Contact Virtual Paralegal Services.

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