Lawyers as Negotiators: Hitting the Wrong Targets?

Tim Cummins, Executive Director and CEO, IACCM - International Association for Contract and Commercial Management

The annual IACCM study of the most frequently negotiated terms in business-to-business contracts once again reveals a strong focus on the provisions that deal with risk allocation and the consequences of failure. Those who negotiate these deals confirm that their focus is often in the wrong place. Indeed, one General Counsel observed: “Having studied this issue, I realize that much of our negotiation is more driven by functional positions than it is by broader business interests”. In other words, business negotiations can result in the negotiation team fighting for things that undermine the interests of their own organization. This is vividly illustrated when we look at the behavioural impacts of terms and conditions. For example, onerous risk allocation forces defensive approaches to innovation and stifles good communication. Ill-considered performance measurements can lead to cost-cutting that jeopardises quality and outcomes. The inclusion of liquidated damages may result in a culture of blame that undermines cooperation and threatens key issues such as health and safety.