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Negotiation is an exchange of ideas between two or more parties

interested in some transaction or venture and resorted to for arriving at mutually
acceptable positions in the spirit of give and take. Negotiation provides a
platform to thrash out differences and reach to a position where all the parties
feel comfortable and consider that their interest in the bargain is protected.
Negotiation generally involves making of statement of facts, taking of
positions, stands etc., therefore during negotiation care is to be taken to verify
facts before statements are made. It is also because of the legal position that
consent of a party must be free and not tainted or vitiated by misrepresentation,
fraud, coercion, threat etc. When consent is not free, agreement is void or void
Before going to negotiation certain steps are necessary to be taken:
Formulation of a negotiation team with multidisciplinary
Must consist of group of experts with specialized knowledge to
cover all angles of negotiations.
Selection of leader
Identification of issues
Delegation of power to the negotiation team
Knowledge of limits on contentious issues.
The team to familiarize itself with complete facts and documents
related to the transaction-due deligence
Familiarization with the country of the opposite party.
Understanding their sensitivities, law and order situation, legal
system, political risk.
Setting of main goals, objectives and fall back options.
Analysis of relative strength and weaknesses
There must be brainstorming sessions for working out alternatives.
The Negotiation Team
The negotiation team may comprise of lawyer, finance man, technical
men and backed by a group of persons conversant with the type and nature of
transaction. Lawyer has to look for legal implications, translate ideas in legal
language and prepare draft documents.
The technical representative is to look in to specification, work
programmes, definition of technical terms and practical aspects of fiscal package,
techno-economic implications. The finance representative is to look in to the
financial implications including payment terms and mode and manner of

The consultants may either be used to fill up the gap where in-house skills
are not available or to advice on specific issues. In complicated and high value
transactions full time consultants can be hired.
Conduct of Negotiation
As a negotiation strategy, issues of likely agreement should be
finalized first and of disagreement later. The contentious issues must also be
followed up diligently. A proper record of the negotiation proceedings may be
kept so as to avoid any misunderstanding. Rigidity and flexibility can be used as
negotiation tools. The other party may be made aware of the negative aspects of
a stand taken by opposite party on its own interest. A negotiator must have a
broad outlook and must be honest in his dealings with other parties. Give and
take can be adopted as a tool. The practical problems which can be faced in the
execution of contract are to be visualized, understood and to be shared with
other party. Drawing inferences from past experience is usually a great help for
negotiation. The negotiation process may proceed by gaining bit by bit. Some
issues may be kept pending for final bargaining.
A model contract document may form the basis of negotiation or parties
may draft their contract as negotiation proceed. Sometimes even drafting can be
utilized to dilute the bad effect of a stand, thus drafting can also be a tool in the
process of negotiation.
Impact of Negotiation
The negotiation is to be conducted to ensure that contract management is
facilitated, financial aspects and implications are clearly spelt out. A speedy and
easy procedure is provided for dispute resolution. The contract document should
contain workable provisions.
Dos of Negotiation
Effort is to be made to create faith, confidence and win respect of other
party without compromising ones stand. This points towards negotiators success.
Punctuality has to be maintained. One must keep smiling disposition. The view
point of other must be given due respect and attention. The interruptions must be
avoided. Some times humor has a very positive effect. A congenial and friendly
atmosphere both physical and professional should be maintained.
The approach must be reasonable and consistent. The organizational
strength must be kept in focus. Apprehensions and fears of other party may be
accommodated to the extent possible. Actually negotiation should be on the
basis of and to protect interest and not holding on to positions.

Do nots of Negotiation
Utmost care is required to avoid irritation and any effort deliberate or
otherwise to provoke the other party. Before going to negotiation the negotiation
team must meet and should have intimate consultations and participate after
adequate preparation. The team members should not give any impression of
rigidity in stand or arrogance in their behavior. One should not be unrealistic and
show proper respect to others point of view. One should not only listen patiently
but also try to understand others apprehensions and concerns.
Documentation During Negotiation

Heads of Agreement
Letter of Intent
Telex/fax of Intent
Memorandum of Understanding
Letter of Agreement
Comfort Letter
Side Letter
Memorandum of Agreement
Memorandum of Understanding

Under Indian Contract Act,1872, a contract may be written or oral.
However certain contracts are required to be in writing like arbitration. Law
does not provide any form for a contract. An oral contract may be reduced in
writing at any time and right and liabilities be given effect from retrospective
date. Contract covers only those areas for which parties have provided for;
rest is regulated by law of contract.
Drafting Techniques
While drafting a document simple, clear and direct language should be
used. People talk about difficulty of understanding legal language. Actually
there may not be any thing like a legal language. For expressing and dealing
with complex situations language invariably becomes complex and lawyer is
blamed for making language complex. There must be complete consistency
in different parts of the document. It must be clearly mentioned that who has
the obligation and to whom it is owed. Since drafter will not be the executer of
the document so try to understand practical problems which will be faced by
executing authority to understand the document.

Structure and Format

In the opening Para a contract document contains date of execution.
Another date which is important is commencement date. Generally date of
execution is also commencement date but commencement date can also
be different. This is followed by introduction of the parties.
Recitals or pre-amble is another important part after introduction of the
parties. This contains background facts and in some cases representations.
The legal importance of recital is that these are admitted facts which can not
be disowned by a party.
The definition clause contains the meanings in which these terms have
been used in the document. The General Clauses Act also contains
definitions of the terms so one can also look for certain definitions in this
Negotiation and Drafting
It must be kept in mind that once final agreement is reached and a
contract is executed, drafts of agreement used for negotiation will not be
looked or considered for any purpose whatsoever. It will be presumed that a
term not included has been expressly excluded from the document. Further
oral evidence is not admissible to oust or vary the written terms of a contract.
Negotiation is an art based on and drawing upon persuasion skills which
is widely used in day to day working. Good negotiation habits can be
cultivated through practice. An atmosphere of give and take to prevail and
impression must be given that both parties are in a win- win position. It must
be understood that negotiation is a process of coming in to stage of
agreement by parties with their free will and not an instrument of surrender.
Therefore, one party can not get all the good terms and the other all the bad
or disadvantageous terms. Even if it happens, one sided document may start
creating problems when the other party becomes aware of inequality and
starts trying to wriggle out.