Don't Swallow the Poison Pill 

What do you do when you’re given an ultimatum, take-it-or-leave-it in a contract negotiation? If you’re been negotiating contracts, you’ve faced this situation at some point with a difficult client or attorney representing them. 

In any negotiation the goal is to obtain a win-win. This requires give and take on both sides. But at times you run into someone on the other side of the table who wants only to obtain terms in their favor. Here are a few tips when dealing with difficult negotiations and ultimatums. 

Decision Maker

First, make sure you are dealing with a decision maker. Nothing slows down and makes a negotiation more difficult than dealing with an administrator and not a decision maker. You need to be talking with someone you can negotiate, make changes and agree on terms. Ask them directly, are you able to make changes and agree upon terms we will be discussing?  

Do Your Homework

Know the clients’ goals and objectives for the project, and how your firm and services will help them reach those goals. These are important and are anchor points for negotiations. Research if your firm has worked with this client previously and if so, what were the terms and project outcome. If not, talk to their peers, suppliers, customers, and anyone in your organization who may know them. Are they fair or are they hard liners, in your face negotiators. If the later, identifying common interests in working together will be essential.   

Give a Little, Get a Little

Based on the review of the contract and project scope, identify areas where you could give a little, but ensure you get something in return. Give something and see if the other party reciprocates. Most people will want to give a little back when the other party has done so; the law of reciprocity. For example; if the project schedule is reduced, request more fee for additional staff. If they don’t agree to your offer, ask what would they propose? Remind them you offered a good-faith concession and would like to keep the process moving forward, but point out that it will require effort from both sides. 

Deal Breakers

Ensure you have a contract checklist with preferred language and deal-breaker provisions. These provisions put your firm at increased risk and in many cases are uninsurable. The most problematic provisions include:

• Standard of Care
• Warrantee and Guarantees
• Indemnity
• Duty to Defend         

Your professional liability (PL) insurance policy is negligent based coverage. If you accept contract terms outside the scope of your PL policy, and accept the legal responsibility of another party such as your client or their consultants, these claims could be uninsured and an out-of-pocket expense for your firm. PL policies include language such as; 

Contract Liability

This policy does not apply to any Claim based upon or arising out of liability assumed by an Insured under any contract or agreement, whether oral or written, except to the extent that the Insured would have been liable in the absence of such contract or agreement.       

Evaluate Your Options

If they continue to offer the same unfavorable terms, with a take-it-or-leave-it response, then reevaluate your options. Is this a project your firm really wants, then you should stay in the negotiation, try to improve your position. Identify your common interests, and what items can you add to meet their demands.  Always try to get something when you give something. If you do accept the unfavorable agreement, give yourself a way out. You don’t want to be locked into a long-term deal that’s bad for you, so negotiate a termination for convenience clause into your contract. 

Change in Players 

If you’ re at an impasse, ask if there is someone else you can talk with, escalating the issue within their organization. Changing players can reset the negotiating atmosphere. But be careful with this strategy and only use it as a last resort because resentments can linger when you go above someone’s head. That said, there are times where it’s warranted. 

No Deal

When you have exhausted all negotiating options, and decided this contract is not right for your firm, nothing sends a more lasting message than walking away. Be professional and say, "thank you for considering our firm, but no thank you." At this point some clients don’t expect that response, and realize they have over-played their hand offering concessions. You are now in the driver’s seat. Identify the deal breaker provisions that you absolutely need in this agreement.  

Poison Pill   

The best course of action is saying no to unreasonable demands from a Client; one that puts increased risk on your firm, asked to accept unfavorable, uninsurable terms and does not listen to your concerns or advice. Let a competitor accept that risk and swallow that poison pill that usually leads to a problematic, unprofitable project and future litigation.