How may many times have you received a new contract to review, and for the most part it is completely one-sided in favor of the other party. In my 33 years of negotiation experience, I would say this approach has become the norm. Yes, there are those exceptions (which are glorious moments), but for the most part, the starting point for most contracts are designed to be significantly more beneficial to the drafting party. Have you ever stopped to ask yourself, why is this, and have you looked at your own forms lately to see where they fall? While such one sides drafting may seem like a smart strategy under the assumption that the end product will naturally be more favorable to the drafting party, the reality is that starting with an overly one-sided agreement often leads to unnecessary friction, delays, and, ironically, weaker deals for both sides.
Why a Balanced Approach Works Better
Faster Negotiations – If I were to sum up one of the most common requests of clients, at least relating to commercial deals, it would be, how do we get deals done more quickly with less friction? And from my perspective, it is exactly the right question to be asking.
If your contract is blatantly unfair, or just heavily one-sided, it is inevitable the other party will push back— generally pretty hard, and often proposing unbalanced terms back in the other direction. That means more redlines, more back-and-forth, more time (and legal fees) wasted, and more friction or contention.
Those that know me, know I advocate for an integrative negotiation approach - one where the ultimate result benefits both parties - versus a distributive approach, which is focused on winning and losing. Starting with overly one-sided redlines tends to project a philosophy of win and lose, rather than an approach that communicates that we are here to work together to come up with a beneficial deal for both parties that also addresses both parties’ risks. Start with a balanced form, and negotiations will inevitably move more quickly.
Stronger Business Relationships – Contracts should set the foundation for a successful partnership. If the first thing your counterparty sees is an unreasonable agreement, you’re signaling distrust from the start. There are of course always exceptions and unique circumstances, but in general in my experience an opposing party’s approach during negotiations will foreshadow how the relationship will go during the engagement, particularly during difficult times or a dispute. Starting the engagement then with a balanced and rational contracting approach tends to help create an environment of trust and collaboration, which will only help the business relationship after the contract is completed.
More Predictable Outcomes – When your contract is more balanced, there’s less risk of ambiguity and unpredictable court interpretations or regulatory scrutiny. As noted above, extreme positions on one side tend to result in extreme positions on the other side. This often results in some form of compromise, but which can lead to overly complicated provision and vague language as each side attempts to preserve the positions they want. I like to call this the frankencontract and it appears in several different situations (to be discussed more in later blogs). The parties force together two, sometime incongruous provisions in an attempt to preserve their positions, and the result can be, well a bit scary. This can lead to ambiguity that other parties, the courts or regulators have to later review in order to determine the real intent of the parties. It just creates additional friction and uncertainty which can be avoided by starting with a more balanced agreement.
Fewer Bottlenecks for Growth – If your business depends on high-volume contracting (e.g., SaaS deals, supplier agreements), using a fair and market-standard template can streamline execution and scale operations. As noted above, starting with a very one-sided or unfair agreement will slow down negotiations, deals and business growth.
By way of example, I recently reviewed a contract that was very one-sided and included some exceedingly broad provisions relating to use of data among other things. Indeed, the language was so broad, it did not make sense given the scope of the deal. After several exchanges of redlines, we were finally able to get on the phone and as I had anticipated, it turns out that the contract language was not really applicable, and in some cases represented a holdover from a previous agreement used in different circumstances. Once we were able to discuss this, we were able to reasonably narrow the language and progress much more quickly. If this had been addressed from the start in the contract form, the deal would have saved weeks in delays.
Key Takeaways
Being reasonable upfront doesn’t mean being weak or creating a disadvantage for your client. A well-drafted, commercially balanced contract results in smoother and quicker negotiations, reduces legal and business headaches, and ultimately supports better business outcomes and a stronger, more trusting business relationship. If your company’s standard contract is constantly triggering redline battles, it may be time for a strategic rewrite.
Want to know if your contract templates are working for you—or against you? Let’s talk.
Totally agree. Worst case sceneario are big enterprises negotiating contracts with SMEs which are awfully unbalanced to the SME´s disadvantage, abusing of the market power and sharing their contract templates with the instruction: take it or leave it. Such practice should even be illegal.