How to Negotiate with Big Companies (Tips from a Contract Attorney)

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Big companies play to win. Especially when they negotiate contracts.

We interviewed a contract attorney about how you can successfully negotiate with big companies.

Keep reading to learn his tips for negotiating contracts, the traps you need to avoid, and how to be sure you walk away with an equitable agreement.

The Subtle Way Big Companies Confuse You

Big companies can have massive contracts. If you’re not an attorney, reviewing 80 pages of legalese can be overwhelming. Your mind may start to wander, or your eyes begin to gloss over. Or both.

Some contracts “muddying the waters.” That's where clauses contain subtle words or phrases that favor one party over the other. 

Another tactic, which we’ll talk about in a minute, is posting their contract terms online or incorporating entire addendums by reference to internet hyperlinks.  

The goal of all of these tactics is to reduce risk by making you accept their terms without negotiation. To make you feel small, so you won’t realize your power to push back.

As a small business, it can feel intimidating to negotiate contracts with big businesses. But it doesn’t have to be. Let’s dive in.

Redlining: The Key to Negotiating a Good Contracts

Redlines are the changes you make to a proposed contract. The purpose of redlining is to create an agreement that works for both parties. And it’s part of the contract review process.

Never be afraid of redlining. 

It doesn’t reflect poorly on you. And it won’t change your working relationship down the road. In fact, some large companies think more highly of businesses that push back on their terms.

Remember, your job is to do what’s best for your company — to avoid as much risk as possible. The other party is doing the same. If you don’t redline obvious issues, they may wonder if you know what you’re doing.

That said, don’t redline every little thing. If it’s something you can live with, leave it. 

There’s no need to correct their grammar unless you feel it changes the meaning of the contract. Focus on the big items like intellectual property rights, scope of work, pricing and payment terms, and liability issues (such as liability caps and indemnities). 

The other party knows these will be redlined. So ask for fair terms. They won’t think less of you for negotiating.

Here are some basic rules for redlining a contract:

Use Track Changes

Track Changes is a feature in Microsoft Word that shows edits to a document. In Google Docs, the equivalent is Suggestions. 

Both allow the other party to see an edit and the original wording side by side. But for contracts, Microsoft Word is the preferred tool.

Tracking changes (rather than just editing the contract) is important because it fosters transparency in one of the first problem-solving opportunities you share with the counterparty. It also allows you to save each of the contract, which serves as a record of the requested and accepted changes each party makes.

Offer Explanatory Comments

Exchanging contract redlines with the counterparty is just another form of communication. Accordingly, your redlines are more likely to be accepted if the counterparty understands why you’re proposing the changes. 

This is where the comments function comes into play.

It’s not always apparent why a party proposes to change the contract terms. It may be because of logistical issues, cost implications, corporate policies, or something else entirely. 

To help contextualize or justify your changes, add a comment to your proposed redlines explaining why you’re proposing the changes. If your comment makes a good case, it’s harder for the counterparty to reject them.

Conversely, if you don’t add comments to your redlines, they may come off as arbitrary or unfair, or the counterparty may misunderstand your intentions. This can result in them rejecting your redlines (or worse, a breakdown in communication).

Don’t Ask for Changes – Make Them

You can’t expect the counterparty to do all the work or negotiate against themselves. If you want to make changes, make them yourself in Track Changes. This includes:

  • Editing specific words in a clause
  • Deleting what’s not acceptable
  • Adding what’s necessary

It’s not enough to say that a clause is unacceptable. You have to delete what’s unacceptable, propose alternative terms, and add a comment explaining why. Don’t rely on the other party to make these changes for you. 

For example, let’s say the contract has a clause that will limit the counterparty’s liability for any and all negligence. That’s too broad, so you want to adjust that clause.

One solution is to add the word “gross” to make it “gross negligence.” You could then explain in a comment, “Insurers won’t insure for mere negligence, so it represents an unacceptable level of risk. Gross negligence is the industry standard and a good compromise.”

When you make something difficult to say no to, it’s easy to get a yes.

Don’t Accept Your Own Changes

Each party is responsible for accepting the other party’s redlines. So when the other party makes a redline, it’s up to you to accept or reject it. If it’s acceptable, accept it. That removes the mark-up, so you only see what’s still outstanding.  With each turn, you’ll see fewer redlines. This is progress. You’re getting closer to an agreement.

Don’t Be Impatient or Passive Aggressive

Negotiations can be challenging. It’s important to be encouraging and collaborative through this process. This applies to your calls, cover emails, and redline comments.

Use phrases like, “We’re making great progress,” or, “We’re almost there.” 

Remember, how you leave the negotiation is how you’ll enter the contractual relationship. You wouldn’t want to start a new relationship on the wrong foot.

How to Handle Online Contracts

Some companies are now posting their contracts online. This creates a challenge because it doesn’t feel like you can redline those terms. 

But that’s the point. The counterparty is hoping you’ll just agree without redlining.

Here’s what you need to do:

  • Open their online terms and conditions.
  • Copy the entire document.
  • Go back into the agreement, add a new page, and paste it in.
  • Change the Statement of Work (SOW) to read, “Subject to and governed by enclosed terms” or “the below terms.”
  • Remove any references or hyperlinks to the online terms. 

Why is this important? Because online terms and conditions can be updated, changing the terms after you’ve signed. By copying those terms into your contract, you avoid being responsible for whatever future terms the counterparty creates. 

Also, you now have a document you can redline. And you can negotiate terms to create an equitable agreement.

What to Do When They Won’t Accept Your Redlines

When you negotiate terms in a big company’s contract, they may try to convince you that some terms can’t be changed. Here are two arguments they may use and how to respond.

1. “This is our policy.”

When a big company says this, what they’re really saying is that any deviation from that wording will need approval from someone else. They don’t want to escalate the issue to get those approvals. It’s more work for them, and going back to get approvals could make them look weak to their stakeholders (especially if they’re outside counsel).

But here’s the thing…

You should never accept terms because the other party’s representative doesn’t want to escalate the issue. Your job is to secure the best deal for you and your business, not theirs.

Try to argue your case, but if they refuse to escalate the issue, there is something you can do: take it to the commercial lead you’re contracting with (not the legal lead).

An attorney can’t do this, but you can. Simply reach out to your commercial contact. Tell them that negotiations are stalled and why you need the redline you’re asking for. 

Then ask them if there is something they can do to help. 

This gentle prodding may get everything moving forward, especially if your contact is someone with authority. Always remember, the procurement and legal departments are there to support the business you’re contracting with. They often don’t have the final say.

2. “This Is Just Standard Boilerplate” or “It Doesn’t Apply”

Boilerplate describes any terms in a contract that’s stock language and appears in all legal documents of that type. Trouble is, these terms aren’t usually favorable to you. 

Large companies love boilerplate clauses because they lure you into a false sense of security. They get you to move past red flag issues.

But most contracts have an “entire agreement” or “merger” clause that states if something isn’t written in the agreement or contract, it’s not a part of it. This means that any verbal agreement isn’t valid and won’t apply.

It also means that a term that’s in the contract does apply, even if it’s “just boilerplate” or they say it doesn’t apply. 

Never accept a term that doesn’t apply. Because once you sign the contract, everything applies. 

Here’s how to push back:

1. Ask for the term to be deleted

If something doesn’t apply, have the counterparty remove it. If they insist it stays, something’s up. Because if it truly doesn’t apply, it doesn’t need to be there.

2. Amend the term to limit it

If the counterparty insists on keeping the term, you can insert something to the beginning of that clause, like, “To the extent that [X] applies.”

For example, let’s say the contract states the supplier must comply with the payment card industry data security standards, PCI DSS. To fix this, you would add, “To the extent that supplier processes payment card information, the supplier will comply with the PCI DSS.”

Now this clause says that the PCI DSS requirement will only apply to the extent that you are actually processing credit card information. If you don’t process credit card payments, this clause doesn’t apply to you

3. Ask for proof that the term is required

What if you’re dealing with a regulated company like a financial institution, and they insist that the clause is required?

Ask them to identify the law that requires the term be included in the contract. If they can’t name the law or provide other proof, ask again.

If they still can’t (or won’t) give you this information, push to have it removed altogether. If they can’t provide the law, it isn’t really required.

Large Companies Are Great, But You Have To Be Prepared

Having contracts with large companies is every small business’s goal. They pay well and have interesting projects. And having their logo on your website doesn’t hurt, either!

But as valuable as this can be, it’s not worth betting your entire company on one contract with subprime terms.

Remember that they’re interested in working with you too. So if they won’t negotiate, ask them, “How am I supposed to accept that?”

Let them answer. Let them solve the problem. And be prepared to walk away if the risk outweighs the benefit.

Need Help Identifying Risky Terms?

Delino is a smart contract review software that helps you identify the terms that put you at risk. So you can weigh risks against opportunities and make better decisions for your business.

Whether you have a lawyer review your contracts, do it yourself, or use Delino, it’s vital that you understand the risks you’re accepting when you sign a contract and where you can push back to mitigate risks. 

Especially when negotiating with big business. 

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DISCLAIMER: Delino is not a lawyer and makes no warranties that its advice will protect your business from lawsuits or damages. Users rely on contract feedback at their own risk. Please consult your attorney for legal advice.