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Survey reveals most negotiated contract terms in 2020

| Feb 1, 2021 | Contracts |

In 2020, businesses confronted the pandemic and changing economic conditions. A report on the most negotiated contract terms for that challenging and unpredictable year was recently released by Icertis, a provider of contract lifestyle management technology. Its findings may help manage and negotiate business contracts.

Unexpected findings

The report was based upon a survey of 8,000 negotiators and their most negotiated contract terms. It emphasized findings about commercial and contracting professionals and the need to meet unpredictable business interruptions.

It was anticipated that clauses excusing contract compliance because of unforeseeable circumstances, force majeure clauses, would be at the top of that year’s list. But force majeure was the 27th most negotiated term.

Most important and most negotiated

Most important terms are different than most negotiated terms. Important terms usually address a company’s mission or values. Most negotiated terms are focused on anticipating failure and liability. The most negotiated terms in 2020 did not change much from earlier year.

Last year’s most important term was a contract’s scope and goal clause. The most negotiated term was the contract’s terms on limitation of liability. These liability terms were more widespread among businesses involved in aerospace and defense, retail, food and beverage, manufacturing and industrial products, technology and hardware and transportation and logistics.

Terms that were considered important were structured to anticipate changes. This involves adjusting the frequency or method of communications or clarifying the need for data exchange.

The report also recommended improvements to contract negotiations by emphasizing that contracts should deliver value to a business, have clear terms, and contain ways to manage change and supplement risk areas. Negotiators should also actively approach disagreements by anticipating disagreements and dealing with contract terms that do not work.

Force majeure

When the pandemic first arrived, businesses reviewed and considered force majeure clauses and determined which contracts and operations were affected. Now, companies are assuming there will be ongoing major events such as a pandemic or storm.

Instead of negotiating the terms of a force majeure clause, according to an expert, business should assure that contracts help companies deal with and mitigate uncertainty or risk. Negotiations should cover risk consequences such as limited liability, termination, and indemnification. Additional clauses may prevent disputes and the dissolution of contracts by working through sudden events.

Other terms can cover better communication and supporting change management. Business continuity and technology that monitors risk by following the parties’ contract performance can also be included.

An attorney can help negotiate a contract that meets your needs and deal with contingencies. They can also help you deal with disputes.