ContractsCounsel Logo


Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 7,494 reviews
Home Blog Negotiation

Jump to Section

What Is Negotiation?

Negotiation is a strategic discussion between multiple parties, usually resolving issues or persuading one another to reach a favorable agreement.

Often, negotiation is used as part of a business transaction. Negotiating can help all parties reach a compromise. Ideally, this compromise leaves all parties satisfied with the final deal, but in some cases, negotiating may only leave one party at an advantage.

Depending on the contract or issue at hand, a negotiation can lead to mutual benefit or minimize damages to multiple parties.

Contract negotiation aims to reach an agreement rooted in mutual trust and best interest. Therefore, the final result should provide a collective positive outcome.

While one party may leave with a significant advantage, the other may still benefit through conflict resolution.

This article provides a detailed breakdown of negotiation and how the negotiating process works.

5 Stages of the Negotiation Process

Step 1. Issue Identification and Preparation

Before entering a discussion, all parties must agree upon the relevant negotiating topics. For example, in a business proposal, you should be clear about what advantage you pose and how the other parties can benefit from accepting your offer.

The issues at hand should be specified when resolving conflict, including their impacts, implications, and limitations.

If you enter a dialogue in hopes of compromise, you must also be able to recognize the other parties’ perspectives. Without openness and mutual understanding, building trust or reaching a resolution is challenging.

To prepare, compile a list of relevant facts and details about your topic. This should include:

  • All relevant parties and their level of involvement.
  • The issue(s) at hand and desired alternative outcomes.
  • An understanding of each parties’ own advantages and disadvantages, i.e., what they stand to gain or lose through compromise.
  • Any relevant policies, rules, or laws that can support your position.
  • A clear outline to delineate the conversation and prevent arguments.

The preparation stage is also when arranging an appropriate meeting point and time for all parties. If there is a contract involved, all documentation should be prepared ahead of time.

Additionally, you may wish to consult with a business lawyer and have them arrange a negotiation time.

Formal discussions for business transactions are more apt for large-scale organizations. However, small businesses are more likely to hold discussions internally and generally without legal supervision.

However, you may still decide to have a lawyer review an investment or service contract before your meeting.

Meet some lawyers on our platform

Emmanuel K.

1 project on CC
View Profile

Owen K.

7 projects on CC
View Profile

Sara S.

40 projects on CC
View Profile

Nicholas M.

7 projects on CC
View Profile

Step 2. Start Discussion on Neutral Ground

Everyone involved in a business transaction or other type of negotiation has a similar goal: to benefit the most and reduce any liability or damage.

Before stating your own argument, begin the discussion by establishing mutual trust. There are three critical communication skills to utilize during this process:

  • Asking clear questions.
  • Listening attentively to learn, not respond.
  • Clarifying and summarizing what’s been heard.

Equality is integral to a fruitful discussion and desirable outcome. Although you may not reach the compromise you desire, it will be impossible to find any resolution if any party is overly defensive or aggressive about their stance.

Step 3. Express Your Goals

You may enter the dialogue with a quid pro quo mentality: the intention to do something for the other party in exchange for a favor.

In this case, you must also be fully aware of and prepared to respond to any potential concessions. Concessions occur by asking one or more participating parties to cease a certain behavior. This is often seen in political negotiations, though it is also frequent in business.

To help reach a favorable outcome as quickly as possible, goals should be clearly expressed at the start of the conversation. Dialogue should not center around the legitimacy of any desired result.

Instead, it should focus on why the said outcome is favorable and what measures can be taken on both sides to resolve.

Step 4. Strive for a Mutually Beneficial Outcome

No party should be negotiating entirely for themselves. Instead, the goal is to reach a positive outcome for everyone. However, the extent of benefits may vary depending on the situation.

However, though a win-win solution may not happen in every case, all negotiating discussions can lead to peace and mutual agreement.

As seen with negotiations between business lawyers, all parties must be willing to listen, understand, and compromise. While multiple parties may have their own goals, they should all share the desire to reach a positive outcome.

To learn more about negotiation skills, you can review this article.

Types of Negotiation

There are several types of negotiation, all of which serve their own purpose depending on the circumstances. All involve some form of strategic discussion, but while some may intend to persuade, others seek to find a compromise or resolve issues.

Below are the two main types of negotiations that you might encounter.

Type 1. Distributive Negotiation

Distributive negotiation involves concessions and conflict resolution. This discussion centers around resolving a problem, such as the final price in a real estate contract or greater benefits from a business proposal.

In this type of discussion, both parties enter with a fixed desired outcome that they know will not be the final result. So, instead, they bargain for the most favorable alternative and, if the discussion succeeds, settle on a mutually beneficial arrangement.

Type 2. Integrative Negotiation

Interrogative or interest-based negotiations leverage advantage by respecting each party’s desire for a different outcome. Rather than settle on a specific outcome, this form of strategic discussion helps expand the potential of outcomes for all parties.

While there may be some concessions, they are more likely to adopt a quid pro quo structure that ultimately benefits each party through a series of trade-offs.

4 Most Important Elements of Negotiation

Before entering a discussion, you should know the four key elements of any successful negotiation.

Element 1. Trust

All negotiating parties must have mutual trust. Otherwise, there is little hope for a successful outcome. While trust may not exist immediately, it can be built by offering different advantages and trade-offs for a shared arrangement.

Element 2. Understanding

Every party has to understand the other’s vantage point. Rather than argue the rightness or wrongness of an argument, parties must recognize that each one has its own reasoning. Through listening, respectful dialogue can lead to greater understanding between all parties.

Element 3. Open-mindedness

No matter what you hope to achieve, you must enter a conversation with an open mind. Willingness to consider alternatives and even make some sacrifices can lead to the healthiest compromise for everyone involved.

Element 4. Scope

A narrow scope can limit opportunities for resolution. Conversely, with a larger scope, the negotiating parties may achieve even more excellent outcomes with a larger scope than they initially anticipated.

Negotiation Examples

These examples can help showcase the different types of negotiation and how employing understanding and mutual trust can help reach desirable outcomes.

Example 1. A Real Estate Contract

A homeowner wishes to sell their property for $500,000 and net a profit of $150,000 after paying all the respective costs. They receive an offer for $450,000, but they are not willing to settle for that price. Instead, they propose an alternative price to the buyer for $480,000, which receives a counter-offer of $470,000.

Ultimately, both parties agree to meet in the middle of their offers. As a result, the homeowner sells their property for a final cost of $475,000.

Example 2. A Business Transaction

Using an investment contract and service contract, a business decides to expand its supply chain and find a new manufacturer for its products.

They meet with several potential suppliers who offer different price points and advantages.

Through negotiation, the business successfully manages to acquire two new suppliers. The first will provide double the initial supplier’s inventory for 10% less.

The second will provide a more significant discount for a marginally smaller output, ultimately bridging the gap between suppliers.

The business can expand its inventory, save money and provide more goods to its customers without increasing operational expenses.

This article provides even further detailed examples of negotiation strategy.

Tips To Develop Negotiation Skills

Developing negotiation skills takes time, but it does get easier with practice. So before you enter any dialogue, these tips can help you improve your communication skills.

  • Practice clearly stating your arguments, speaking with facts and details over emotion.
  • Learn how to listen to others and ask specific follow-up questions.
  • Take turns in real-life conversations, noticing when you are more likely to talk over someone or put your opinion before theirs.
  • Build confidence in your arguments, but recognize that your ideal outcome will not always happen.
  • Be open-minded, and accept reasoning with others to reach alternative solutions.

This article can teach you more about negotiating, including what to do when your efforts do not pay off.

Get Help with a Negotiation

Do you need help with a negotiation? Post a project in ContractsCounsel’s marketplace to receive quotes from lawyers for negotiation support. All lawyers in our network are vetted by our team and peer-reviewed by our customers for you to review before hiring.

Meet some of our Lawyers

Sarah E. on ContractsCounsel
View Sarah
5.0 (4)
Member Since:
June 19, 2023

Sarah E.

Free Consultation
Los Angeles
19 Yrs Experience
Licensed in CA
Loyola Law School

Meet Sarah Shabanie, an exceptional transactional attorney with a stellar track record in corporate law. Sarah graduated with top honors from Loyola Law School, where she consistently demonstrated her outstanding legal acumen and dedication to excellence. With close to 20 years of experience, Sarah has honed her expertise while serving as an in-house counsel for major corporations, including AT&T and T-Mobile. Throughout her tenure, she has successfully navigated complex transactions, providing strategic guidance and meticulous attention to detail in all her work. Sarah’s comprehensive understanding of corporate law and her ability to negotiate advantageous deals have consistently garnered praise from clients and colleagues alike. Sarah holds esteemed memberships in both the California State Bar and the California Department of Real Estate, maintaining licenses in good standing in both regulatory bodies With a reputation for her unwavering commitment to client success, Sarah Shabanie is a trusted legal advisor who consistently delivers exceptional results. Her exceptional legal skills, honed through years of experience and academic achievement, make her an invaluable asset to any organization or individual seeking top-tier transactional representation.

Diane D. on ContractsCounsel
View Diane
4.9 (6)
Member Since:
August 25, 2020

Diane D.

Free Consultation
Mount Dora/Orlando, FL
20 Yrs Experience
Licensed in FL
Nova Southeastern University

I am the Founder and Managing Attorney of DMD Law, PA. and have 20 years' experience. I also am a business-oriented, proactive, and problem-solving corporate lawyer with in-house experience. My firm's practice focuses on ensuring the legalities of commercial transactions and contracts. I am adept at reviewing, drafting, negotiating and generally overseeing policies, procedures, handbooks, corporate documents, and contracts. I have a proven track record of leading domestic and international companies by ensuring they are functioning in complete compliance with local, federal and international law. The firm's goal is to simplify the law and provide clients with the confidence and information necessary to make their decisions.

Joseph L. on ContractsCounsel
View Joseph
4.8 (15)
Member Since:
July 26, 2021

Joseph L.

Free Consultation
40 Yrs Experience
Licensed in CT
Southwestern University School of Law

Mr. LaRocco's focus is business law, corporate structuring, and contracts. He has a depth of experience working with entrepreneurs and startups, including some small public companies. As a result of his business background, he has not only acted as general counsel to companies, but has also been on the board of directors of several and been a business advisor and strategist. Some clients and projects I have recently done work for include a hospitality consulting company, a web development/marketing agency, a governmental contractor, an e-commerce consumer goods company, an online ordering app for restaurants, a music file-sharing company, a company that licenses its photos and graphic images, a video editing company, several SaaS companies, a merchant processing/services company, a financial services software company that earned a licensing and marketing contract with Thomson Reuters, and a real estate software company.

Rhea J. on ContractsCounsel
View Rhea
Member Since:
July 21, 2023

Rhea J.

Attorney at Law
Free Consultation
Evansville, IN
9 Yrs Experience
Licensed in IN
University of Illinois at Urbana-Champaign

I am a graduate from Wittenberg University and University of Illinois at Urbana-Champaign. I have been admitted to the Indiana bar since 2013. I have collaborated on several writing projects for the Indiana State Bar.

Mark P. on ContractsCounsel
View Mark
Member Since:
July 21, 2023

Mark P.

Free Consultation
Lee's Summit, Missouri
8 Yrs Experience
Licensed in KS, MO, NE
University of Missouri - Kansas City

I represent a diverse mix in a vast array of specialties, including litigation, contracts, compliance, business and financial strategies, and emerging industries. Credit for this foundation of strength goes to those who taught me. Skilled professors and professionals fostered my powerful educational and professional background. Prior to law school, I earned dual Bachelor’s degrees in Business Administration & Accounting from Peru State College. I received a Master of Business Administration degree from Chadron State College. My ambitions did not stop there. While working full time as a Senior Accountant for the University of Missouri, Columbia, I achieved the lifelong goal of becoming a licensed Certified Public Accountant (CPA). Mizzo provided excellent opportunities and amazing experiences. Managing over $50M in government and private research funding was a gift. As a high ranking professional in the Department of Research, I was given priceless insight into the greatest scientific, journalistic, medical, and legal minds in the world. My passion for successful growth did not, and has not stopped. I graduated summa cum laude (top 3%) with a Doctorate in Law, emphasizing in urban, land use and environmental/toxic tort law from the University of Missouri, Kansas City. This success lead to invaluable experiences of serving as Hon. Brian C. Wimes' judicial clerk for the U.S. District Court for the W. D. of Missouri, as a staff editor/writer for UMKC Law Review, and as a litigation and transactional attorney with Lathrop GPM (fka Lathrop & Gage). My professional and personal network is expansive, with established relationships throughout the U.S. and overseas. Although I engage in legal practice all over the country, I maintain law licenses in Missouri, Kansas, and Nebraska. Federally, I hold licenses in the W.D. and E.D. of Missouri and the District of Nebraska. To offer extra value, efficiency, and options, I maintain a CPA license and am obtaining a real-estate brokerage license.

Karen H. on ContractsCounsel
View Karen
Member Since:
July 23, 2023

Karen H.

Former Division General Counsel
Free Consultation
42 Yrs Experience
Licensed in IL
Loyola University Chicago School of Law

During my tenure as VP & Division General Counsel of PepsiCo Inc. in Chicago, I built upon my diverse career overseeing legal matters for both the domestic and international businesses of PepsiCo and The Quaker Oats Co. My extensive practice areas included M&A, contracts, competition, NDAs, regulatory compliance, consumer product & protection, environmental, patents, and advertising regulations. Throughout my professional journey, I navigated legal complexities associated with an eclectic range of products, spanning juices, sports drinks, cereals, snacks, needlepoint kits, canned goods, eyeglasses, men's suits, car seats and toys. For further information, see my LinkedIn:

John W. on ContractsCounsel
View John
Member Since:
July 23, 2023

John W.

Strategic Business Partner
Free Consultation
Brookline, MA
37 Yrs Experience
Licensed in DC, MD, VA
Georgetown University Law Center

I am a business lawyer with 30+ years of experience, with a specialization in the life sciences industry. I have been general counsel at 5 different companies - both large and growing, as well as small and emerging. I have built legal teams and have extensive experience with Boards of Directors.

Find the best lawyer for your project

Browse Lawyers Now
Learn About Contracts
See More Contracts
other helpful articles

Need help with a Business Contract?

Create a free project posting

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city