Most people think of negotiating as the verbal give and take that takes people from their different wants and needs to a point of agreement. That, of course, is the heart of negotiating but just as important is the transition to the written contract that formalizes the verbal agreement. Here are the things that Power Negotiators look for as they move toward the written contract:
Don't Let the Other Side Write the Contract
In a typical negotiation, you verbally negotiate the details, then put it into writing later for both parties to review and approve. I've yet to run across a situation where we covered every detail in the verbal negotiation. There are always points that we overlooked when we were verbally negotiating that we must detail in writing.
Then we have to get the other side to approve or negotiate the points when we sit down to sign the written agreement-that's when the side that writes the contract has a tremendous advantage over the side that doesn't. Chances are that the person writing the agreement will think of at least half-dozen things that did not come up during the verbal negotiations. That person can then write the clarification of that point to his or her advantage, leaving the other side to negotiate a change in the agreement when asked to sign it.
Don't let the other side write the contract because it puts you at a disadvantage. This applies to brief counter proposals just as much as it does to agreements that are hundreds of pages long. For example, a real estate agent may be presenting an offer to the sellers of an apartment building. The seller agrees to the general terms of the offer, but wants the price to be $5,000 higher. At that point either the listing agent who represents the seller or the selling agent who represents the buyer could pull a counter-proposal form out of his or her briefcase and write out a brief counter-offer for the seller to sign. Then the selling agent will present to the buyer for approval. It doesn't have to be complicated: “Offer accepted except that price is to be $598,000,” will suffice.
If the listing agent writes the counter-offer, however, he or she might think of some things that would benefit her seller. She might write, “Offer accepted except that price to be $598,000. Additional $5,000 to be deposited in escrow upon acceptance. Counter-offer to be accepted upon presentation and within 24 hours.”
If the selling agent were to write the counter-offer, he might write, “Offer accepted except that price is to be $598,000. Additional $5,000 to be added to the note that the seller is carrying back.”
These additions are probably not big enough to be challenged by either a seller or a buyer who is eager to complete the transaction; however, they substantially benefit the side who wrote the brief counter-offer. If the person who writes a one-paragraph counter-offer can affect it so much, think how much that person could affect a multi-page contract.
Remember that this may not just be a matter of taking advantage of the other side. Both sides may genuinely think that they had reached agreement on a point whereas their interpretations may be substantially different when they write it out. A classic example of this is the Camp David accord, signed by President Carter, President Anwar Sadat of Egypt, and Prime Minister Menachem Begin of Israel. After 13 frustrating days of negotiating at Camp David where they all felt until the last moment that their efforts were futile, they reached what they thought was a breakthrough to agreement.
Excitedly they flew helicopters to Washington and with massive publicity signed the accord. In the East Room, the normally unemotional Menachem Begin turned to his wife and said, “Mama, we'll go down in the history books tonight.” That may be so, but the truth is that many years later, hardly any of the elements of the agreement had gone into effect. Their enthusiasm led each of them to think that they had reached agreement when they really hadn't.
If you are to be the one writing the contract, it's a good idea to keep notes throughout the negotiation and put a check mark in the margin against any point that will be part of the final agreement.
This does two things:
1. It reminds you to include all the points that you wanted.
2. When you write the contract, you may be reluctant to include a point in the agreement unless you can specifically recall the other side agreeing to it. Your notes will give you the confidence to include it even if you don't remember it clearly.
If you have been team negotiating, be sure to have all the other members of your team review the contract before you present it to the other side. You may have overlooked a point that you should have included or you may have misinterpreted a point. It's common for the lead negotiator to let her enthusiasm overwhelm her to a point that she feels that the other side agreed to something when it was less than clear to more independent observers.
I'm not a big believer in having attorneys conduct a negotiation for you because so few of them are good negotiators. They tend to be confrontational negotiators because they're used to threatening the other side into submission, and they are seldom open to creative solutions because their first obligation is to keep you out of trouble, not make you money.
Remember that in law school, they are not taught how to make deals, only how to break deals. In our litigious society there isn't much point in making an agreement that won't hold up in court, however, so it's a good idea to have the agreement approved by your attorney before you have it signed. In a complicated agreement what you prepare and have the other side sign may be no more than a letter of intent. Have the attorneys work on it later to make it a legal document. It's better that you devote your energy to reaching agreement.
If you have prepared an agreement that you think the other side may be reluctant to sign, you may be smart to include the expression “Subject to your attorney's approval,” to encourage them to sign it.
Once the verbal negotiations are over, get a memorandum of agreement signed as quickly as possible. The longer you give them before they see it in writing, the greater the chances that they'll forget what they agreed to and question what you've prepared.
Also, make sure they understand the agreement. Don't be tempted to have them sign something when you know they're not clear on the implications. If they don't understand and something goes wrong, they will always blame you. They will never accept responsibility.
I find it helpful to write out the agreement I want before I go into the negotiations. I don't show it to the other side, but I find it helpful to compare it to the agreement that we eventually reach, so that I can see how well I did. Sometimes it's easy to get excited because the other side is making concessions that you didn't expect to get. Then your enthusiasm carries you forward and you agree to what you feel is a fantastic deal. It may be a good deal, but unless you have clearly established your criteria up front, it may not be the deal that you hoped to get.
Power Negotiators know that you should always try to be the one that writes the contract. When the verbal negotiations are over, it's time for someone to put everything in writing, and the person who gets to put it in writing has definite power in the negotiations. There are bound to be little details that you didn't think of when you were verbally negotiating that need to be specified in the written contract.
If you're the one who gets to write the contract, you can write those to your favor. Then it's up to the other person to negotiate them out when it comes to signing the contract. So, try to be the one who writes the contract.
I'll say to the other people, “Look, we need to put this down in writing. But let's not go to a lot of expense on this. I have an attorney on retainer, it won't cost either one of us anything for me to have my attorney do it.” Even if I had to pay the attorney to do it, I still think I'd be better off to be the one who is writing the contract.
Read the Contract Every Time
In this age of computer-generated contracts, it's a sad fact that you have to reread a contract every time it comes across your desk.
In the old days, when contracts were typewritten, both sides would go through it and write in any changes, and then each negotiator would initial the change. You could glance through the contract and quickly review any change that you had made or to which you had agreed. Nowadays with computer generated contracts we're more likely to go back to the computer, make the change, and print out a new contract.
Here's the danger. You may have refused to sign a clause in a contract. The other side agrees to change it and says they'll send you a corrected contract for your signature. When it comes across your desk, you're busy, so you quickly review it to see that they made the change you wanted and then turn to the back page and sign it. Unfortunately, because you didn't take the time to reread the entire contract, you didn't realize that they had also changed something else.
Perhaps it was something blatant such as changing “F.O.B. factory” to “F.O.B. job site.” Or it may be such a minor change in wording that you don't discover it until years later when something goes wrong, and you need the contract to enforce some action. By then, you may not even remember what you agreed to, and you can only assume that because you signed it you must have agreed to it.
Yes, I agree with you-you have a wonderful case for a lawsuit that the other side defrauded you-but why expose yourself to that kind of trouble? In this age of computer-generated contracts, you should read the contract all the way through, every time it comes across your desk for signature.
People Believe What They See In Writing
The printed word has great power over people. Most people believe what they see in writing, even if they won't believe it when they just hear about it.
The Candid Camera people did a stunt to prove that a number of years ago — you may remember seeing it on television. They posted a sign on a road next to a golf course in Delaware that said, “Delaware Closed.” Allen Fount stood by the sign in a rented trooper's uniform. He wasn't allowed to speak to the people as they came up, only point up at the sign.
What happened amazed me. People were coming to a screeching halt and saying things like, “How long is it going to be closed for? My wife and kids are inside.”
People believe what they see in writing. That's why I'm such a big believer in presentation binders. When you sit down with someone, you open the presentation binder, and it says, “My company is the greatest widget manufacturer in the world.” Then you turn another page and it says, “Our workers are the greatest craftsmen in the business.” You turn another page and start showing them reference letters from all your previous jobs.
They find it believable even when they know you just came from the print shop with it.
This is how hotels are able to get people to check out of the rooms on time. Holiday Inns used to have a terrible time getting people to check out of their rooms at 12 noon, until they learned the art of the printed word and posted those little signs on the back of the door. Now 97 percent of the guests check out of their rooms on time, without any question at all, because the written word is so believable.
Recognize this when you're negotiating with people. In our litigious society, it's essential to eventually get your agreement into writing. As regrettable as it may seen, it doesn't make much sense to verbally negotiate an agreement unless the other side is willing to attest to it in writing somewhere down the line. Power negotiators know that it's important to wean the other side onto seeing in writing what they are agreeing to verbally.
So every chance you get put things in writing.
Take the time during the verbal negotiations to say, “Let me be sure that I understand what you're proposing.” Then stop to write down your understanding of the point that you were discussing. Show it to the other side, but you don't have to have them sign it at this point. All you're doing is getting them used to seeing it in writing. This subliminally confirms what, up to that point, has only bee a verbal understanding. If you don this at intervals during the discussion, you'll have much less trouble getting them to sign the final written contract.
It's important to realize that, at every point of the negotiation, the other side is more persuaded by what they see in writing. For example, if you have salespeople selling for you and you have to put a price change into effect, be sure that they have it in writing. Because there's a world of difference between them sitting with a potential customer and saying, “We're having a price increase at the start of next month, so you should make a commitment now,” and them saying, “Look at this letter I just got from my boss. It indicates that we're having a price increase on July 1st.” Always show it to people in writing whenever you can. If you're negotiating by telephone, back up what you're saying by also faxing them the information.
If you sell big-ticket items and don't have a method of creating computer-generated proposals, I'd suggest that you stop everything and go get a computer system right now. It'll pay for itself on the first job. Many years ago I was in Australia on a lecture tour and a fire broke out on the second floor of my home in California. When I returned I had three contractors bid on repairing the damage.
Two of them scrawled out bids by hand. They both bid around $24,000. The third contractor prepared a very comprehensive bid by computer. Every little detail was spelled out in detail. But his bid was $49,000-more than twice as much. I accepted the higher bid because the Power of the Printed Word was so great that I just didn't trust the hand-written bids.
What's the bottom line? Because people don't question what they see in writing, you should always present written backup evidence to support your proposal. If the negotiation includes expectations that the other side will meet certain requirements, it also helps to confirm those requirements in writing.
The transition from a verbal negotiation to a written contract can be a delicate one, but Power Negotiators known how to set it up so that it doesn't become a traumatic experience.