Why Are Contract Negotiations SO Hard?
How many times have you pondered a clause in an agreement wondering what it meant? Whether it’s a consumer loan agreement or a complex corporate purchase contract, the complexities of contract negotiations rears its ugly head.
Let’s break down a consumer loan agreement. It’s generally a minimum of three pages and has terms like interest rate, length of term, late fees, and more. But, surrounding these terms are words like “All borrowings hereunder shall be evidenced by a promissory note to the order of the Lender substantially …” What?
On the other end of the spectrum, a complex partnership agreement, could be a minimum of 10 pages. Terms like price, percentage discount, or limitation of liability are the norm. But, surrounding these terms are words like “In no event will … be liable for any indirect, punitive, special loss of business, revenue, profits …” Worse, they’re often all in CAPS. Excuse me?
Legalese gets in the way of doing business. Somewhere along the path of creating a contract that both parties feel good about signing, the “surrounding words” are added to give parties a false sense of protection. And, yet, we live in one of the most litigious societies in the world. Clearly, legalese is not reducing litigations. Perhaps it’s even increasing it. After all, if a party can’t determine the meaning of a phrase or clause, then it must be open to interpretation. Think about that!
Efficiency in negotiation process management requires that people and parties understand to what terms they are agreeing. Legalese has obfuscated the essence of a contract’s purpose, i.e. business terms to which both parties can agree and from which they can execute sales and marketing plans.
Here’s another example where legalese has clouded negotiations. “It is the policy of … and the Partner to maintain as secret and confidential all information (i) relating to the products, components, programs and systems heretofore and hereto after acquired, developed/used by each of them, (ii) relating to pricing policy and financial data and (iii) relating to their respective clients, customers and employees (all such information hereinafter referred to as “confidential information”). Such confidential information is of great value to both … and the Partner.” Wouldn’t it simpler to say that “All information exchanged between both parties is strictly confidential?”
To a businessperson, there’s nothing more frustrating than trying to negotiate business terms that are obfuscated by legalese. Not only is it frustrating, but legalese also slows down the whole negotiation process. It’s time to rethink the negotiations process and the reason why we’re negotiating in the first place.
Intellext is an AI startup that is revolutionizing the way contracts are negotiated, accelerating time to close, and improving deal terms. Intellext’s Intelligent Negotiation Platform™ eliminates the complexities of contract redlines and stakeholder collaboration and optimizes deal terms by applying machine learning during the negotiation process.