BUSINESS

Contract Negotiation: Role of the Consideration Clause

Hey there! I’m so glad you stopped by to learn more about mastering contract negotiation.

With over 8 years of experience as a contract drafter, I’ve seen it all when it comes to crafting rock-solid contracts. I’ve negotiated complex deals, from messy partnership agreements to ironclad supplier contracts, and I’ve developed proven techniques to create mutually beneficial agreements every time.

This comprehensive guide will give you insider tips to become a pro negotiator yourself.

You’ll discover how to negotiate like a boss when it comes to that crucial consideration clause. I’ll walk you through real-life examples so you can avoid the common mistakes rookie negotiators make.

You’ll learn how to establish clear deliverables, structure seamless payment terms, and align incentives so both sides feel like winners.

One of the best parts: I’ll share the exact tips top lawyers use to draft consideration clauses that are as clear as day.

Without further ado, let’s start!

What is this contract negotiation?

Simply put, it’s the back-and-forth process of creating a legally binding agreement between two or more parties. The main pieces of a contract are the offer, acceptance, consideration, legal capacity, and legality.

Now, I won’t lie to you; negotiation can feel intimidating at first! But going in with a collaborative spirit focused on open communication and compromise is key. If you understand the terminology, evaluate provisions objectively, and use persuasive tactics at the right times – you’ll gain confidence in no time.

Of all the contract elements, the consideration clause is one of the trickiest to get right. Consideration refers to what each party brings to the table and exchanges with the other – it’s the very basis of a contract.

You want the consideration to provide clear mutual benefit, precisely outline obligations, and be proportional to the terms. My best advice is to research industry standards first and then get creative with structuring payments, deliverables, incentives, liabilities, etc.

Let me give you a few real examples from my past contracts:

Example 1 – Shared Revenue

An author was negotiating a contract with a publisher who couldn’t afford the high upfront cost.

The consideration clause was changed so that the publisher receives a massive 50% percentage of the book’s profits instead of a big upfront payment. The author’s book got published, and the publisher wanted it to succeed.

Example 2 – Trade of Services

Two companies, one offering marketing services and the other providing IT support, agreed to a barter agreement.

Instead of using money, both companies agreed to exchange their services with each other as specified in the consideration clause. This agreement benefited both businesses, which were aiming to save money and utilize their strengths.

Example 3 – Delayed Payment

A small business hired a software development firm to build their website. The firm wanted an upfront payment, but the business didn’t have enough money.

Instead of paying in cash, the business agreed to pay 30% upfront and the remaining amount plus an extra premium upon completion. This protected the firm from delays and non-payment and allowed the business to spread out its expenses.

See what I mean about consideration, which can make or break a contract?

Don’t worry though; with a few expert tips, you’ll be able to avoid these negotiation disasters.

Here are my top 3 secrets to drafting killer consideration clauses:

Tip 1 – Understand Value

Consider value beyond just monetary terms. It can include any obligation that a party is not already legally required to fulfill. It’s important to recognize the worth of what each party is offering, whether it’s goods, services, promises, or even choosing not to do something.

Tip 2 – Negotiate Creatively

Think outside the box to find win-win solutions. You can trade services, make payments in installments, share revenue, or exchange other forms of value instead of money. The solution should meet each party’s needs and abilities.

Tip 3 – Clarity is Key

When writing a consideration clause, it’s important to be clear and provide specific details of all the responsibilities and timelines for each party involved to prevent misunderstandings and disagreements.

Whew, we covered a lot of ground! Sorry if I got a little too “lawyerly” at points – I just really love this negotiation stuff.

The main takeaway is that, with the right skills and mindset, you can become an absolute pro at contract negotiation.

I can’t wait to see all the rock-solid deals you’ll craft in the future.

Onwards and upwards, my friend!