Negotiation and Contracts

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Negotiation and Contracts
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Contracts

• Why do we contract?
• Who is protected by a contract?
• Why is a contract even necessary?
• What constitutes a contract?
• As with accountancy it is not necessary to have
  detailed legal knowledge to work with contracts

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What will be covered by Contracts

• What will be done?
• How will it be done?
• By whom will it be done?
• Where will it be done?
• For whom will it be done?
• When will it be done?
• What compensation will be given?
• How will completion of task be agreed?

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Payment

• How much
• In what instalments
• In what currency
• How paid
• To whom
• By whom
• What will trigger payment
• Paper trail to justify payment
• Use payment schedule to control contract partner
• When setting a payment schedule try very hard to
  maintain the financial upper hand i.e you have
  had the show and you havent paid the fee in
  total.

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Why are Contracts Important?

• In the business world, the rearview mirror is
  always clearer than the windshield

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How Common are Contracts in Everyday Life

• Any formal agreement between two people is a
  contract
• Money does not have to change hands
• Buying a newspaper is a contractual transaction
• Travelling by train is a contractual transaction
• Buying a coffee at Starbucks is a contractual
  transaction
• Going on a course with FST is a contractual
  transaction

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You know the person you are working with, and you
trust them, so why bother with a contract?

• Many people are wary of written contracts and are
  concerned that having a contract could bring
  complexity and confrontation to an otherwise
  friendly working relationship
• Written contracts are proof of an agreement.
• Verbal agreements can have legal effect but when
  things go wrong it can be impossible to prove
  exactly what was agreed at the outset.
• A written document clarifies the terms of the
  agreement between the parties and helps to avoid
  disputes over what was intended.
• Negotiating a contract also highlights potential
  problem areas, and allows the parties to consider
  issues which may otherwise not have come to
  light.
• Additionally, the law can imply terms into
  contracts in the absence of express agreement.
  Written contracts often enable the parties to
  specifically exclude such implied terms.

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Protection

• If the terms of a contract have been agreed by
  the parties then, save for a few exceptions, the
  contract will have legal force.
• If the terms of the contract are breached and one
  party fails to do what was promised, the other
  party can force them to carry out the task or
  seek damages for losses suffered as a result of
  the breach.
• Contracts are used to limit the liability of the
  parties in the event of a breach.
• When negotiating a contract each side will
  typically seek to ensure that the risks involved
  are proportionate to the value of the contract.
• Without such negotiation it is possible to become
  liable for unlimited damages for a small value
  contract

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What constitutes a Contract

• Verbal
• Letter of agreement
• Detailed
• The key is for one side to make an offer which
  the other side accepts
• Anything which is signed by both sides is a
  contract irrespective of the format

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Heads of Agreement

• What can be done early in the process to
  demonstrate good faith without working through a
  detailed contract?
• Wikipedia says a Heads of Agreement is a
  non-binding document outlining the main issues
  relevant to a tentative agreement
• At the early stage of a project parties can sign
  up to documents which are agreements to agree
  at a later date.
• These are called Memoranda of Understanding or
  Heads of Agreement.
• These demonstrate commitment and can clarify, at
  an early stage, the basis for a future contract.
• However, they are not usually legally binding,
  and the parties generally cannot be held to the
  terms.

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REMEMBER!

• If you receive a contract and ignore it, or do
  not object to its terms, and you then start on
  the work to which it relates, you could be deemed
  to have accepted the contract and have legally
  committed to its terms.
• This applies even when the contract remains
  unsigned from your side!
• Get the contract signed!!

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Tendering

• Check what the legal limits are above which
  projects must be out out to tender
• Invitation to Tender
• Tender Document
• Response to Tender
• Fully met
• Partially met
• Not met at all
• Contract awarded on basis of response to tender
• Example procuring a box office system
• ITPD
• Invitation to participate in dialogue
• ITCD
• Invitation to continue dialogue

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Essential Attitudes of Mind when writing a
Contract

• PARANOID!
• PESSIMISTIC!!
• SELFISH!!!

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You must

• Protect your own organisation or yourself
• Assume that the person who you like and trust
  will turn into an utterly unreasonable human
  being behaving worse than you could ever have
  imagined
• Best example is Marriage

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REMEMBER

• When writing a contract between two organisations
  have at the back of your mind that the contract
  may well be there after the individuals who have
  written the contract have left
• Protect yourself against the potential departure
  of your interlocutor

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But Remember

• Contracts cannot be enforced if they are
• Trifling
• Indeterminate
• Impossible
• Illegal

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Standard Clauses

• Event
• Rehearsal
• Travel
• Accommodation
• Fee
• Venue
• Publicity
• Broadcast
• Comp Tickets
• Sponsorship
• Assignation
• Royalties
• Exclusivity
• Withholding Tax
• Law

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Why Negotiate

• To get the best deal for yourself or your company
• To tease out all the issues in a project thus
  removing all grey areas
• To develop a working relationship with a
  collaborator

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The Jargon Page

• Two kinds of negotiation
• Distributive
• Integrative
• Two new acronyms
• BATNA
• Best alternative to a negotiated agreement
• ZOPA
• Zone of possible agreement

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Negotiation Basics

• There are no magic rules or techniques
• You can only negotiate as yourself
• You are often negotiating before you feel as if
  you are in a formal negotiation
• Do not worry about being liked
• Information is king
• Try to dictate the timetable

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Information and Preparation

• Negotiation is more about information than
  anything else
• On many occasions taking the time to prepare will
  put you ahead of the game
• Work out what is important to you
• Work out what is important to the person you are
  negotiating with

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In writing or verbal

• Once things get formal it is better to have a
  complete paper trail
• It may be necessary to refer back to previous
  correspondence
• The most recent communication on a file has a
  certain weight
• Personnel may change half way through a project
• Use contracts as a project management tool
• Well written contracts will ask all the questions
  which need to be dealt with during the
  negotiation
• If you are insisting on your contract this will
  psychologically give you a feeling of control as
  you will be driving the process

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The Role of Time in Negotiation

• Quite often time and timescales dictate who has
  the whip hand in a negotiation
• Always be aware how the passing of time affects
  the balance of power within a negotiation
• One of the axioms of pressure is not to allow the
  other side too long to think

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First Offers

• Often it is best to make the first offer in a
  negotiation as in most cases this will set the
  context
• Anchoring
• In order to anchor the first figure you will need
  to have a justification for it.
• Do not make the assumption that just because
  someone has quoted you a figure they are being
  reasonable.
• Do not let it sit there before responding as
  otherwise the other side will assume that there
  is a possibility that you might accept their
  offer and dig their heels in accordingly

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The See-Saw of Power

• In any negotiation always be conscious where the
  balance of power lies.
• The question will always be who needs who more?

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Recognise Negotiators Style

• IMG Tennis
• Win at all costs
• Too amiable

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Gambits

• Im not sure whether I can get my board to agree
  to that
• That doesnt seem unreasonable to me, but I will
  have to check with my colleagues
• Do not agree to something you are uncomfortable
  with because of time pressure from the other side

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What matters

• In every negotiation there will be things which
  are crucial to both sides and matters which are
  less so
• Oranges zest and juice
• The art comes in recognising where these are not
  identical on both sides
• This is particularly important when negotiating
  deals which are not just cash based
• A common example is where one side of the
  negotiation has a tight cashflow and the other
  does not.
• This is shown best in o finance deals

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Valuing in Kind versus cash

• When negotiating be careful to have a real view
  of the cash value of what you may be prepared to
  contribute in kind

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Issues Raised

• How to create a watertight contract
• What should be included in fees?
• How best is capacity of venue set yield?
• How not to be shafted
• How to hold your ground
• How to know how much to ask for
• What to have in mind for reciprocation
• Whats reasonable to accept or not accept?

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Negotiating with venues

• As a touring company what do I get for the money?
• What do I pay for?

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• Gaining confidence in negotiating deals and
  contracts
• Knowing how to pitch effectively
• Knowing what to ask for
• Managing international relationships
• When to say no

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• ENJOY THE THRILL OF THE CHASE