Why Is Contract Negotiation So Painful?

Visualise this. You agree to buy a car from someone and the first thing you agree is the price – £10,000.

Then you discuss the mileage. Oh no, you say, for that price, I expect the mileage to be 50,000. On the contrary, says the seller, for that price a mileage in excess of 100,000 is entirely justified.

You then say for £10,000 the car must be a hybrid. ’Fraid not, says the seller, it’s a diesel.  And so on.

No-one buys cars like this. We recognise instinctively that this is putting the cart before the horse.

The logical order is:

1.agree exactly what you are buying/selling (fuel, mileage, engine, etc),

and then

2 agree the price and payment terms.

The reason that contract negotiations are so painful is that we often put the cart before the horse. We agree a few key points – price, duration – and then we try to retrofit the rest of the terms.

So, of course, it becomes a complicated, protracted process – there’s no simple way to agree all the other terms because there’s no natural right or wrong for any of the deal points.

How do you avoid this impasse? You agree a set of key terms upfront. These have to include (otherwise, what’s the point?) all the points that people invariably argue about (limitations of liability being a prime example). Once these are agreed, you agree a corresponding price.

It’s not as glamourous as agreeing a few deal points and lobbing it over the wall for someone else to close off, but it’s cheaper, faster and – heavens to betsy! – more rational.