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Issue 27

How to agree on a contract

Claudia Jelea
Avocat & Consilier in domeniul marcilor
@IP Boutique
OTHERS

In the IT domain - as, in fact, in any business area - you will find yourself in the position of signing contracts with your partners (contracts for website development, software outsourcing or application development, etc.). But, sometimes, until you get to the moment of signing, you have to negotiate certain aspects of the contract with your partner, in order to reconcile your interests.

As you probably already know, contract negotiation does not necessarily involve applying a classical method or formula. But, most of the time, the process of reaching a common point, accepted by both parties, is different for each case.

This article only points out a few legal suggestions often encountered in practice. Its purpose is not to improve your negotiation skills and techniques - we leave that to the successful entrepreneurs, competent writers and trainers in the domain.

Key points of the agreement

The first step is to discuss with your partner and set the main points of the agreement you are planning, such as: commercial aspects regarding the price and terms of payment, the milestones, the period of accepting the deliverables, etc. The other details can also be discussed during or even after drawing the draft of the contract.

Also, pay attention to the moment you round the negotiations off on the key aspects and you shake hands on the deal; you will then have a compulsory contract for the parties, even if you do not have a signed document yet.

Understand your partner"s points of view

Try to understand what the goal and interest of your partner is and what it is he wishes to achieve following the negotiations. Rarely does it happen for you to have the same goals and interests; however, sometimes, you might be surprised to notice that your interests are not necessarily divergent.

For instance, a software developer may agree to grant his client, by contract, all the intellectual property rights on the application developed according to the client"s instructions (and most of the clients require it). On the other hand, in practice, there are also situations (pretty rare) when the client does not show an interest in the cession of the intellectual property rights; this thing may be to the advantage of the developer, who will prefer to be able to reuse, change or personalize the source code of the respective application for other clients or other purposes, too.

Negotiate!

Do not accept the classical line "this is the standard contract we use and it cannot be altered" right from the start, since - most often - this line itself may be one of the other party"s negotiation strategies. As long as there is no agreement of the parties, the contract is not concluded and it can be (and sometimes it is imperative to be) negotiated for you to protect your own interests. Of course, you cannot overlook the reality that sometimes there is an unbalance between how much the parties desire or need to clench the respective contract. Still, do not assume the other party"s lack of willingness and at least try to negotiate the clauses that interest you.

In addition, be cautious if, during negotiations, your partner is reluctant to offer you information about the company"s activity or about its associates or shareholders - especially in the case when this information may affect the implementation of the contract and the fulfilment of the obligations the parties are assuming.

Take your time to revise the contract and the amendments brought to it

In order for you not to overlook relevant aspects, do not make haste to analyse the contract and the amendments or the suggestions made by the other party; take your time to understand all the aspects and ask your lawyers when things are not clear.

It is possible for some aspects not to have been discussed right from the beginning. In this case, they should be reconciled through the provisions of the contract, and each of the parties will suggest contractual amendments which will be negotiated until a consensus is reached.

Signing

If the contract is an important one, ideally, you should leave it to your lawyers to deal with the process of signing. But if the contract is ordinary, you can take it upon yourself - provided that you do not omit the basic details - for instance, it should be signed by the person who has the legal authority to sign (contracts cannot be signed by any representative of a company, without a specific power of attorney); the right dating of the contract (especially if the signing of the contract takes place at a distance - for example, through e-mail), etc.

Turn to specialists

It is preferable to benefit from the help of specialists right from the beginning of the contractual discussions - specialised lawyers, but also accountants, tax consultants. In order for them to be able to assist you as efficiently as possible in every step of the drawing of the contract and during negotiations, you have to provide them with the necessary details and instructions, so that they understand your business interest and the points you are not willing to give up. Also, they may point out to you some possible risks (for instance, when the client asks the developer to create a website or a software solution which breaches certain laws) or they may try to minimize them through the way they draw up the contract (by introducing sections regarding the liability or the offered liens.

It is important to keep in mind the fact that it is you - and not your lawyer - who makes the final decision regarding the clauses of the contract. The lawyers will make recommendations and suggestions, but you know best which risks you are willing to assume.

And as a final note: trust your instinct!

VIDEO: ISSUE 97 LAUNCH EVENT

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