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Phrases used in contract negotiations and what they mean.


Phrases used in contract negotiations and what they mean.

Following my blog last week - What to look out for in contract negotiations, I have some further reflections on points that are often made in contract negotiations.  If there are any regular phrases or difficult points you have to deal with, email me and I will try and include them in upcoming blogs.

“That’s the basis upon which the service is priced.” 

Well, is it really?  Part of the difficulty in contract negotiations is that the price is often the thing which is fixed first, because it’s the business priority.  It may be the basis upon which specific suppliers are chosen.   Plenty of us would choose to take a degraded or inferior service at a lower cost, whether as consumers or in business but we expect that choice to be suitably informed.   

If there has been no discussion on contract terms, then it hasn’t been agreed.  If a price has been agreed ‘subject to contract’ or otherwise then that is a legitimate topic for negotiation.  Some suppliers will provide quotations or proposals ‘subject to our standard contract’ or the like.  If that happens, then those terms need to be considered to evaluate the overall proposal properly.  In the public sector, suppliers often have to submit tender proposals against specified contract terms and it is reasonable to expect them to price for the liability requirements they set out.  But if there is no agreement, then there is no agreement and this also means that the price is not finalised either.  Depending on the circumstances, it may be better to revisit the price as part of ensuring the overall contract is fit for purpose.

“We aren’t authorised to agree that.” 

OK, well who is authorised, then?  Can we get that person on the call?  This will often be a bluff, but not always.  Large organisations will usually equip their sales teams with limited mandates to negotiate.  Contracts are to be concluded within certain parameters and in some cases NEGOTIATORS may be actively discouraged from escalating issues.  There is no point trying to negotiate with someone who is dealing with issues above their pay grade.  If that person can’t deliver an appropriate outcome there may be no choice but to push for an escalation.  Often this is resisted on the basis getting contract or legal teams involved will take too long.  However, if it is necessary to get others involved to resolve an issue then don’t be shy about pushing for this.  A statement of this sort is usually a sign that something is capable of negotiation.  If it was an absolute deal-breaker, you’d usually be told:

“There is no way we could ever agree to that.” 

Not a phrase good negotiators use lightly because it’s effectively either inviting, or threatening, a walkaway.  That means failure.  It also means that anything, other than a failure, is a contradiction.

Lastly, it’s important to ensure that while liability and indemnity provisions are carefully considered, they aren’t everything.  Liability limitations are important but so is the rest of the contract because this will determine the actual scope of liability.    In drafting and defining the scope of services, it may well be clearer for a supplier to define what is in-scope and out-of-scope than to argue over the extent of liability.  Often it’s the proper context in which to have that discussion. 

Liam McMonagle is a specialist Intellectual Property and commercial solicitor. We are always delighted to talk without obligation about whether we might meet your needs. Call Liam on 0131 225 8705 or email lmcmonagle@thorntons-law.co.uk

Posted by Liam McMonagle

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