The top terms when negotiating contracts

Contract terms“Disagreements over acceptance or delivery are the number one cause of contractual claims and disputes. So it is not surprising that the parties to a contract focus so strongly on the question of who will be liable for the consequences of failure.” So says the opening statement of the International Association of Contract and Commercial Management’s (IACCM) report “2011 Top Terms in Negotiation”.

Each year the IACCM conduct a survey to establish the most frequently negotiated terms and conditions of contracts. For many years, the top three have consistently been:

  • Limitation of Liability
  • Indemnification
  • Price/Charge/Price Changes

Now this raises a question – if so much effort is placed on these three elements of a contract, then surely these must be important to an organisation? Why else would they expend the effort to negotiate the terms into the contract to begin with? But therein lies a problem – perhaps there’s a need to change behaviours going forward, but what about the hundreds, maybe thousands or even tens of thousands of contracts that are already in place?

Does any organisation truly have control over these top terms for contracts that have perhaps been in place for many years? Contracts that have renewed many times and may have been the source of many a price hike!

Are such organisations getting a fair deal, at least in terms of the contracts that they fought so hard to negotiate in the first place? Probably not is the common answer that we see. If you don’t know what’s in the contract, or even how many contracts are still effective and binding, how can you possibly know if the terms you sweated to enshrine are working for your benefit?

Dolphin Software  specialises in locating, analysing and reporting on contractually binding documents by first ensuring, through a contract discovery process, that all contractual terms are fully understood. For example in M&A environments, the top two terms identified by the IACCM, were also among the top terms that our clients requested in our add on M&A rule pack. (cDiscovery Metadata M&A Rule Pack) Make sure you understand the entire contract landscape of your organisation.

The full report, “2011 Top Terms in Negotiation”, is published by IACCM (www.iaccm.com).

The IACCM study was undertaken in the period December 2010 – April 2011 and the results are based on input from 1,123 organisations, representing more than 8,000 negotiators. Individual contributors came from procurement, legal and sales contracting functions in more than 60 countries. Input typically represents large international corporations.

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