How to Avoid Unfavorable Contract Terms

Business negotiations can be situations where everyone feels pressure to seal the deal, but sometimes it's best to break off negotiations and seek another solution. For example, in the National Football League, the more successful teams tend to avoid entering bidding wars with expensive free agents who can demand unfavorable contract terms. As a result, they get the players they need without jeopardizing their bottom lines. There are other reasons why bad terms can cause issues in your business.

The Fallout of Negative Terms

Whether they're subtle or blatant, unfavorable contract terms can cause many problems for your business. For instance, if you agree to pay too much for a vendor's product or service, you may need to make budget cuts in critical areas like marketing. If entering the deal will increase your employees' workload by an untenable amount, you may end up losing employees. And if the contract doesn't have firm deadlines for the other party, you may lose time waiting for them to deliver. The bottom line is that you shouldn't let the pressure to make a deal quickly force you into an arrangement that will harm your business in the long run.

The Importance of Appearances

The appearance of the contract itself can raise warning flags. If your counterpart presents a poorly formatted or sloppily worded contract, then proceed with caution: The terms may be badly spelled out, unfavorable, or unenforceable.

Contracts can serve as legal protection and guardrails that ensure both parties meet their obligations — but only if the details are right. The good news is that if you're in charge of drafting or revising a contract, then tools that allow you to convert PDF to Word can help you nail and accurately transmit the details.

The Terms to Focus On

Try defining which terms are critical for your business and making sure those are acceptable in the contract. For instance, if you have specific schedule and pricing benchmarks a vendor must meet, spell those out — as well as what happens if the vendor doesn't come through.

While your business's key priorities should be reflected in the terms, it's also important to be on the lookout for various "gotcha" clauses. For instance, the other party may sneak in terms that make it very difficult to end your agreement, like automatic-renewal triggers. These can be hard to spot, so read carefully.

A Different Perspective

If you're having difficulty coming to terms with negotiations that aren't working out, it may be helpful to shift your perspective. It's possible that now isn't a good time for the deal to take place, but circumstances will be better in the future. And sometimes one party or the other might just have a gut feeling that the deal isn't right. Regardless, walking away from a deal isn't necessarily a signal of failure; in fact, if you avoid a bad situation, you can consider it a win. 

Avoiding Bad Terms

Entering a negotiation knowing what you need — and being willing to walk away — can help you avoid being duped into accepting unfavorable contracts. After all, agreeing to one bad deal can close many doors.

To find support for your business, try joining your local chamber of commerce.