Contracts form the basis of all business transactions, and are usually the outcome of detailed discussions between the parties involved. However, there is a skill to negotiating contracts, and in the heat of the discussion, it can be easy to agree to inappropriate terms or feel pressurised into revealing confidential information.  That’s why we’ve created a guide on effectively negotiating business contracts for business owners and senior managers.

Does the other party have authority to negotiate?

There’s no point spending hours in negotiations if your counterpart has to seek internal approval before the contract can be finalised.

Should business negotiations be kept confidential?

It’s best practice to ask the other side to sign a non-disclosure agreement before any discussions begin. This document should prevent the other party discussing the potential deal with anybody else, at the outset, or if it falls through.

The agreement should clearly state that any information given is confidential and shouldn’t be shown to anybody else, that it should only be used for a defined purpose (which will be clarified in the agreement) and also that it should be destroyed or handed back if the deal doesn’t complete.

How do I prevent the other party fishing for information or poaching employees?

Before handing over any commercially sensitive information, it’s worth considering whether the other side are simply on a ‘fishing exercise’. In addition, be careful not to hand over any information illegally – such as personal data.

If you provide access to your employees, consider whether the other party might try to poach them. If this is a possibility, be sure to include a non-poach provision in the confidentiality document.

Can I exaggerate my sales figures to get a better deal in a business negotiation?

Avoid exaggerating sales figures, or projections, as ultimately it could make the contract non-enforceable and the business may even have to pay damages to the other party.

In addition, be aware of the Bribery Act 2010, which makes it an offence to bribe another person, accept a bribe, bribe a foreign public official, or fail to prevent a bribe. The penalties applicable under the Act are significant and should not be taken lightly.

Should I take legal advice before signing contractual documents?

It is common to agree a ‘heads of terms’ document during complicated or high value deals. Typically these documents contain a summary of the main terms. It’s always worth taking legal advice before signing on the dotted line to avoid unwittingly entering into any legal or moral obligations.

Is it possible to enter into a business contract by mistake?

A contract can bind the parties even if it’s not been signed, or even written down. To avoid this issue arising, ensure that all correspondence relating to the negotiations is marked “not legally binding” or “subject to contract”.

If you found this guide useful, feel free to contact one of the solicitors in our experienced commercial team for a no-obligation chat about your business on 0845  287 0939 or email us.