Contract Negotiations – 6 steps to making sure the deal works
October 15, 2015 The NonProfit Times
Everyone is born with the ability to negotiate, slowly losing the skill as they grow older, according to Jed R. Mandel of Chicago Law Partners, LLC. Anything is negotiable and one cannot get what they want without asking. “Your kids understand that,” Mandel told attendees of the 2015 Risk Summit during his workshop, “All That Jazz: Everything You Wanted To Know About Contracts But Were Afraid To Ask.”
During his presentation Mandel emphasized the importance of putting deals in writing, understanding the organizational authority of the party one is speaking with and framing negotiations such as employment contracts in comparison to what is, not what is being requested. The nonprofit-focused lawyer also provided considerations for six common elements of contracts:
• Termination. Contracts should have some sort of timeline spelled out, whether it is a specific date or when a project is completed. If a contract is defined by the completion of a project, how complete is defined should be agreed upon by both parties, Mandel said. Force majeure, the improbability or impracticality of executing a contract under unforeseen circumstances should also be considered, Mandel said. For example, a fire or airline shutdown could impact a contract between an organization and convention center.
• Indemnification. It is not unusual for one party to indemnify, or secure from legal responsibility, the other in a contract in the event of wrongdoing by the former. It is important, however, to only indemnify the other party in the case of one’s own wrongdoing, Mandel said. At times, should agreeing over indemnifications become too complicated, it is not necessary to include them in a contract, Mandel said.
• Restrictive covenants. Non-competing restrictions are more enforceable with reasonable, set terms, Mandel said. Indefinitely preventing a past employee from working in a similar role for another organization anywhere in a given region is not enforceable. Stating in a contract that the employee many not seek similar work for six or 12 months after leaving or within 30 miles of the organization’s headquarters is more realistic, Mandel said.
• Predicting the future. Placing agreements to agree in contracts is “dreadful,” according to Mandel. Instead, consider basing yet-to-be-resolved issues such as cost by definable means such as the rate of inflation or the Consumer Price Index. When drafting a contract consider set measurables that will define whether or not you are satisfied with how a contract is being met. Without defined measurables, it is difficult to illustrate a breach, Mandel said.
• Intellectual property. Be careful how your name and logo are used. If you own your own trademark, be mindful of how you limit its use with others in contracts, specify each way it can be used and do the same when entering into a contract in which you will be using another party’s trademark. Be mindful of who owns copyrights to certain materials. If an organization brings on a third party to design a promotional piece, the third party owns the copyright unless he or she signs a work made for hire agreement with the organization, Mandel said. Organizations own, within reasonable limits, work created by employees, but it may be wise to put specifications in employee manuals to avoid gray areas, Mandel advised.
• Dispute resolution. In the event of a disagreement, there is value in setting the rules and venue in the contract, Mandel said. In the case of two parties from different states entering into a contract, a party may wish to define which state’s law would apply in the event of a disagreement and where legal proceedings would take place, Mandel said. NPT