Top 5 pitfalls to avoid in business contract negotiations

Posted by Luke Mitchell on 17 April 2019
Top 5 pitfalls to avoid in business contract negotiations

Avoiding these major legal pitfalls during business contract negotiations, will save you a world of time, money and stress.

1. Authorised Representatives
It’s critically important to officially confirm the person you are negotiating with has full authority to do so. Make sure that they prove that they do.


2. Confidentiality
When negotiations need to be kept confidential, a non-disclosure agreements (NDA) should be signed before giving away any business sensitive information.

The agreement should clearly explain that the information given:

  • Is confidential.
  • Should only be used for a stated purpose.
  • Should not be shown to anyone else.
  • Should be returned or destroyed if the deal does not go ahead.

3. Business sensitive information
Before handing over any business sensitive information, take legal advice. It can be unlawful to hand over certain types of information, such as personal data about employees or customers.
A confidentiality agreement doesn’t always provide complete protection, either way it must be signed before anything is handed over.
Also, depending on the stage of your business dealings, it’s wise to consider whether the other party actually needs the information or whether they are simply on a fishing expedition.

4. Poaching employees or customers
If the success of the business relies on maintaining status quo with employees and obviously customers, then you need to have a non-solicitation agreement signed. This will stop one party from approaching the employees, customers or clients of the other party.

5. Entering a contract by mistake
During negotiations, mark all correspondence as “subject to contract” or “not legally binding”.

A contract does not need to be signed and in writing to be binding. For example, a business can enter into a binding contract over the phone or by e-mail, if the key terms are agreed.

This list certainly doesn’t cover absolutely everything you need to consider when negotiating a business contract but keeping these five  things in mind and addressing any concerns as they arise will definitely help you avoid major legal issues.

Ultimately, nothing can be better than getting trusted legal advise from the start. If you want to be ahead when entering the negotiation, we can help.

We are experienced contract lawyers who can assist you with the implementation of agreements, policies and forms to help you grow your business and give you peace of mind.