We review contracts daily at BioPharma Law Group. These range from simple CDAs to more complex licensing discussions. Below are some practices that I have encountered over the years that frustrate lawyers and their clients and can result in prolonged negotiations and can sometimes even jeopardize deals.
Make late-stage edits
At the beginning of negotiations, it is common for one party to mark up the other party’s contract template and send it back. These mark-ups are typically done through redlining. The other party then reviews the redline and returns it either having accepted the edits or proposed alternative ones. Eventually, the parties agree on language that is acceptable to both. A problem that can introduce a wrinkle in this process is when a party introduces new terms or last-minute changes in the third or fourth round of negotiations. Introducing last minute edits will not only slow down the negotiating process but will also frustrate the opposing party, thereby making it more difficult to reach a deal. If some terms need additional input or cannot be commented on in a first round, those should be highlighted with a comment saying that this language is “pending.”
Reintroduce previously-rejected terms
While it is frustrating when the opposing party introduces new edits late in the negotiating stage, it is even more frustrating when they try to sneak in terms that you had previously rejected. I have had situations where the other party reintroduced terms in a final version that I had previously rejected. They did so not in redline form hoping I would not catch the addition. Luckily, I did a comparison between the final version and the initial draft and caught the change. Not only does this tactic annoy the opposing party, but it shows a lack of good faith in completing the transaction.
Provide no reasoning for your changes
Communication is the most important aspect of any negotiation. When addressing the opposing party’s edits, it is not uncommon to find some of the opposing party’s requests unacceptable. When deleting or modifying the unacceptable language, it is extremely important to provide reasoning for your changes. This process not only helps the other party understand your position, but it also makes the negotiation process more amicable and streamlined. Simply deleting large portions of text provides little to no context for understanding your position and can lead to more contentious discussions.
Waste valuable live or in-person contact
Sometimes it is more effective to have a telephone conversation with the other party to discuss remaining issues in an agreement rather than exchanging documents with edits. Prior to this conversation, however, both parties should exchange a list of topics to discuss. It is important that during the meeting, the parties stick to the issues they agreed upon and not introduce entirely new ones. I once prepared for a discussion thinking that the main concern was IP ownership resulting from the collaboration but was surprised that the other party only wanted to discuss owning my client’s personal IP. Needless to say, it was an unproductive call. Phone calls should be reserved toward the end of negotiations to resolve the few remaining issues. Bringing up new issues during a phone call wastes precious time and makes the negotiation process unproductive.
Be fixed to your terms
When negotiating an agreement, a party should be willing to modify its terms. Certainly, a party could have points that they are not willing to concede, but there is usually some acceptable language that could be found. Simply saying that edits are "ridiculous" and refusing to even consider alternative language is a recipe for disaster. If there are terms that are non-negotiable, for whatever reason, a party should point those out at the onset of negotiations and provide reasoning. This allows the opposing party to know which terms cannot be changed, so they can decide whether they want to proceed with the negotiation. To reach an agreement, a party should be open to modifying language instead of simply refusing to negotiate.
Rely on “industry standard” terms
One of my biggest pet peeves in contract negotiation is when a party insists on terms saying they are “industry standard” and providing no other reason. While there are some terms that are generally considered “industry standard,” many others depend on the specifics of the negotiation – who are the parties to the agreement, what is being exchanged between the parties, and so forth. In a clinical trial, for instance, it may be proper to say that the sponsor indemnifies the site for problems associated with their drug, but in a consulting agreement, it may not be proper to demand that the individual consultant indemnifies the company. Merely saying that your terms are “industry standard” without anything else will not move the deal forward.
Not provide consideration for last-minute demands.
It is generally bad practice to make large asks in the final stage of negotiation. Substantial changes to a term can often jeopardize a deal but making substantial changes without providing additional consideration will almost certainly kill the deal. I once had the opposing party demand rights to all my client’s personal IP without additional compensation and without providing any reasoning beyond saying its “industry standard.” If something does require a late-stage demand, it should, at a minimum, be accompanied by additional consideration to show the opposing party that you are serious about completing the transaction. Simply asking or demanding for substantial changes with no additional payment displays a lack of good faith in completing the transaction.
Calling the opposing counsel names or unprofessional conduct
This should go without saying but under no circumstances should a party call the opposing counsel names or engage in unprofessional conduct. Calling the opposing counsel, and even the opposing counsel’s client, incompetent because she or he does not agree to your terms is not a good way to get that counsel to agree to your terms. In fact, this is a good way of killing a deal. Clients and attorneys are often under a lot of pressure to close deals but they should always remain professional in their interactions.
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