At the beginning of every year, the IACCM does a survey of the top negotiated terms of the previous year. And for the last three years, the top negotiated terms haven’t changed much. This is not a good thing, because the top terms are not what you should be focussed on. As of today, the top negotiated terms are the following:
- Limitation of Liability
- Indemnification
- Price / Charge / Price Changes
- Intellectual Property
- Confidential Information / Data Protection
- Service Levels and Warranties
- Delivery / Acceptance
- Payment
- Liquidated Damages
- Applicable Law / Jurisdiction
This is nuts. The most important things are:
- what products / services do you need,
- what quality and service levels are required,
- what quantities do you need,
- when and how do you need the products / services delivered, and
- how much can you / are you willing to pay?
And if you look at the top ten list, only three of these five key points make the top ten. Furthermore, if you examine the top thirty list of the negotiated terms, we see that
- scope and goals is 14,
- freight / shipping is 23, and
- information access and management is 29.
This is absurd. If you can’t verbally agree up front in the first five minutes that
- you’re liable for your actions (and your supplier is only liable for theirs),
- your IP is your IP (and your supplier’s is your supplier’s),
- you’ll take the utmost care to protect your supplier’s confidential information (in exchange for your supplier taking the utmost care to protect yours),
- each party will respect the laws in each country where they do business and the jurisdiction will be that of the buyer (or destination), and
- you’ll each respect all of the applicable import and export regulations,
trust each other on these points, and just go with standard clauses in the final agreement, then should you be negotiating in the first place? Because if you can’t get right down to what’s important, I’d argue that maybe you don’t trust each other enough to be doing business in the first place. It’s not about how many billable hours your lawyers can wrangle out of you on administrivia, it’s about getting down to business and making sure you can each profit on the transaction. I’m not saying these clauses aren’t important … I myself insure they are included in every contract I draft and / or sign … just that they’ve been written thousands of times, there are standards that capture reciprocal protections, and it’s not worth sacrificing your goals to try and wrangle out provisions that may be unfair to one party and inevitably destroy the trust that is needed for a successful relationship.