Negotiating a good contract

While many contracts are verbal or sealed with a 'handshake', it's much safer to have something in writing than to rely on memory. A written contract will give you and the hirer more certainty and minimise your business risks by making the agreement clear from the outset.

A written contract can clearly set out the details of what was agreed between you and the hirer. It can include details about materials, timeframes, payments and a procedure to follow if there is a disagreement.

If you prefer to have a verbal contract, you should keep any paperwork that confirms your verbal agreement, such as quotes, emails and lists of specifications. These documents will help you and the hirer know what was agreed if a problem occurs.

Negotiating doesn't come naturally to most people but with careful preparation and a basic understanding of what makes a workable contract, you will be better placed to negotiate a contract that works for you. Contract negotiation is not something that should be seen as an 'aggressive' exercise. If you approach a negotiation with your eye on a good outcome for you and the hirer, you will have a better chance of success.

Tip: Clear contracts make good business relationships because they help both parties understand their rights and obligations.

Prepare for contract negotiation

Good preparation is essential for successful negotiation. It will give you more confidence to negotiate and improve your chances of getting an outcome that works for you. Learn about the hirer's business before you begin negotiations. Their website, if they have one, is a good place to start. What does the hirer produce? Who is their market? What are their strengths and weaknesses? But most of all, make sure you have a clear idea of what you want from the contract. Be professional Be mindful of the way you present yourself and your business during negotiations and be respectful towards the hirer.

Being business-like in your approach helps to build and maintain good business relationships. It will also help you and the hirer address potential problems before they arise. Understand your rights Independent contracting arrangements are governed by commercial and contract law, not by employment law. This means that you and the hirer are free to choose the terms of your contract within the limits of the law. However, a court may be able to set aside a contract if it is considered to be 'harsh' or 'unfair'.

Make yourself clear

A well-drafted contract is an important risk management tool for your business.

A contract should clearly and accurately reflect what you and the hirer have agreed and set out exactly what you expect from each other. If you cannot agree about a matter, you may need to discuss it in more detail so you better understand each other's point of view. If you are not comfortable with a part or a word in the contract, then don't sign it. Do not enter into a contract hoping to sort it out later, because once it is signed the terms will be legally binding. A dispute is less likely if you and the hirer are happy with the terms of a contract from the start.

Write it down

It is good practice to take notes of all the negotiations and discussions you have with the hirer and record the dates they occurred. This should be done both before and after you sign the contract. If the contract has commenced, any discussions that change the terms of the agreement become a 'variation' to the contract or a new, separate contract depending on the content and the way it is agreed.

You should attach a copy of the agreed changes (or, for example, an email that confirms you both agree to the changes) to the original contract. Variations are discussed further on the What to include in a contract page.

Get advice before you sign a contract if you are unsure about the meaning of any terms or what you're agreeing to. If necessary, get advice from your business adviser, union, professional association or lawyer before negotiating or signing. A lawyer can also review your contract to make sure it is legally enforceable.

Tip: Get advice before you sign a contract. It can be too late to fix or change a contract once it is signed.

Seek language assistance if necessary

You may be in a better position to negotiate the terms of your contract if you can communicate with the hirer in your own language and understand the language used in the contract. Consider speaking to the hirer through an interpreter or paying for the contract to be translated by an accredited translator in your language.

Improve your negotiation skills

  • Contact your local Business Enterprise Centre to find out about workshops in your area.
  • Contact your local TAFE college to see what they offer in negotiation skills or small business management training.
  • Read books about negotiating in business.

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