This article throws light upon the three main phases of the negotiation process. The phases are: 1. Pre-Negotiation Phase 2. The Negotiation Phase 3. Post Negotiation Phase.

Negotiation Process: Phase # 1. Pre-Negotiation Phase:

The first and the most important step is the selection of the negotiating team. The outcome would be highly influenced by the members and their attitudes and approach towards the negotiation. As happens in any competitive game, the positive mind setup, collectively, is the first step towards successful negotiation.

The team members have to act as one body, supporting each other and trusting the leader. The leader to behave authoritatively and in the best interests of the team and the organization. The team must have members selected on their past performance and knowledge in given field (technical, commercial, legal, data, etc.).

Every member to realize that they can speak to nobody else but the leader. They have to show restrain not only of words but facial expressions as well so that what they say or show is not carried over to the other side, unless the leader wanted it to be so. No member to speak to the other side even if the opponent has addressed him; he can speak but only through his leader.

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The sitting arrangement is also important for the proper conduct and coordination of negotiation. The leader occupies the central position flanked by the commercial and technical members on either side. No member to face directly in the eyes of the opponent, rather the seat to be so arranged that it has inclination towards the leader.

The site of negotiation is again important. As far as possible have it at a neutral place away from the location of either party. But if it has to be at one of the party’s place/office/country, than select your office/country and make sure another similar back up team is lined up at a suitable place following up the minute-to-minute negotiations and is in consultation with the leader.

This back up team has access to each element of data and is linked to the highest person of authority. The two-way communication between the negotiating team and the back up team is smooth, secured, and functional at all the time negotiation is in progress. Should the communication fail due to any reasons, another back up channel should be ready to replace the defective one.

Back up data is the pre requisite for any negotiation (ref item 13: resources). The negotiation teams decide their strategy and line of approach before the start of the negotiation process. They prepare number of alternatives and do dummy runs on each to find out the most effective alternatives.

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They use numerous tactics (refer item no. 12) to deliver home advantage against the opponent. The opponent also does the likewise.

Define the purpose of negotiations in as few words as possible; the definition should be razor sharp. Let the other members try to read it in different ways, if they can, further reform the definition, till such time that it means one and only one meaning to every member.

The purpose of the negotiations must also be linked up with the targets to be achieved with well- defined minimum and maximum tolerances, meaning what must be achieved as the minimum condition and what can be aimed as the maximum achievable.

The selection of the targets must be very objective and practical. They must have some degree of consideration as to what the opponent can agree, he can be dragged a little bit farther from that limit but not very far least he should break up.

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Build up your own fortress as well, guard what cannot be negotiated and open doors to what can be thrown open to the opponent for negotiation, but take care to camaflouge your intentions, otherwise your opponent will hit you where your defenses are the strongest.

Rather you have to plan your strategy in such a way that what you want to throw open for negotiation must appear to be well guarded and show restlessness when touched upon those points.

On the other hand never ever come nearer to what you are guarding, directly and/or indirectly. In all these actions never appear to be stubborn or defensive because the moment you show these traits your opponent will put up his defense making more and more difficult for you to enter.

Collection of the data in itself is not sufficient, it is like raw diamond, it gets value only when you arrange it in a meaning full way aimed at the purpose of negotiation. Arrange the data in the order of preference for your negotiation strategy (price, specification, delivery, packing, payment etc.).

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Prepare various alternatives by using different combinations of the EON. Do the dummy run using the various alternatives and see their impact on the dummy opponent, or perceive the reactions of the real opponent. Re-arrange the various alternatives in the order of priority and make sure one man in the team has these on his fingertips, preferably the leader.

Remember small gestures of free gifts can win lots of hearts. These are social etiquette and are in our genes since generations. The business visits, meetings, and negotiations are not far away from these small tiny articles. You must keep up your sleeves some small concessions and use them at the most appropriate moments.

Their use at the beginning of the meeting is dangerous; their use at the end of a unsuccessful meeting is poisonous for the next meeting.

You have to wait and watch for the right moment during the course of the negotiations to offer them either to show your thankfulness for some big point of agreement accepted by the opponent, or to use them when negotiations seem to be heading for dead lock over a trivial and/or important issue.

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Never leave your concessions in the air or through them with an air of arrogance, if you do so than be sure they will boom rang on you with ferocity.

The Opposite Team:

This point is important when you are dealing with inter cultural groups and especially people from different countries. The behavioural pattern has some common characteristics, which the individuals display, in normal life and under stress conditions. A culture is like a finger print, no two cultures have identical profile.

It is the behavioural pattern under stress conditions that should interest you. Primary data collection in this topic is not possible so you have to rally on the secondary sources. In some cases the regional divide also brings character changes.

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Take the case of Indians and Pakistanis, both belong to one region and have more in common than the differences, yet the people exhibit different characteristics when confronted with stress situations.

On the other hand take the case of the Americans and the Japanese. People from these two countries exhibit totally opposite behavioural pattern especially when it comes under stressful conditions as one can find during serious negotiations.

Let us study the basic profile of these two people.

The Japanese:

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1. They are team people.

2. They have strong social and family ties which also govern their business activities.

3. They have collaborative nature.

4. They believe in long term associations.

5. They do not trust others (foreign nationals).

6. They take long time to become friendly.

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7. They take long time to start trusting others (foreign nationals).

8. They take short time to loose their trust if they feel the other person has betrayed them.

9. They indulge in lots of gossip.

10. They tend to believe adverse remarks against others if it helps them or their purpose.

11. They give high regard to seniority rather than the quality.

12. They show shyness for taking individual spot decisions.

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13. They tend to take long time for making a decision, but once a decision is made they follow it blindly.

14. They are very sensitive and egoistic.

15. They are very conservative and formal.

16. They believe in gift giving and taking.

17. They live in men’s world.

18. They are highly fond of night life (life after office hours).

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19. They are fond of outdoor life.

20. They are highly organized.

21. They take responsibilities very seriously, rather religiously.

22. They avoid being vocal in their statements.

23. They are highly communicative with in their group.

24. They are attentive.

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25. They are highly patient.

26. They are good listeners.

27. They do not show emotions, easily on their face, (keep mind and face separated).

28. They show lots of “silence” and periods of “outer inactivity”, but the fact is they are in serious mental permutation and calculations.

29. They are highly intuitive.

30. They are highly helpful, when they want to be.

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31. They do not like to drag the past to the present and future.

32. They will not take a second to forget you if they feel your importance to them is finished.

33. They like to play safe.

34. They shun risks, and if at all risks have to be taken they would take the minimum of it.

35. They do not like to over step their capability.

36. They have tendency to take long term views of anything they do.

37. They tend to show lots of ignorance when they are not so much ignorant.

38. They do not like “change”, if at all some change has to be introduced, at first they make sure it is acceptable to all concerned, if necessary they will have it modified for universal acceptability before actually introducing it formally.

39. They are highly innovative.

40. They meticulously make notes of what they said or discussed, and what you said or discussed.

41. They are very systematic in “reporting” and keeping “records”, of what interest them and concerns them.

42. They firmly believe and follow “protocol”.

43. They are extremely polite and highly nationalistic.

44. They are very innovative in creating delays when they do not want or like certain things, including national and international matters related to their interests.

45. They take pride in their language, sometimes reply in Japanese even when spoken in English.

46. They are not generous when it comes to business negotiation, they expect you to acknowledge even their slightest concession, and will not hesitate to skin you to the bones to extract the last possible advantage.

47. They hate free advice and open comments.

The Americans:

1. They are highly individualistic type.

2. They give importance to individual accomplishments.

3. They recognize merits and not seniority.

4. They give high emphasis to experience and abilities.

5. They are point blank in approach and do not waste time in formalities.

6. They are objective, systematic, and methodical.

7. They believe in hard facts.

8. They like spot decisions.

9. They do not hesitate from taking risks.

10. They are highly competitive.

11. They prefer direct and informal approach.

12. They do not hide emotions.

13. They are vocal.

14. They treat silence as waste of time.

15. They have the tendency of “take it or leave it”.

16. They are highly objective in arguments.

17. They tend to take decisions on the past records rather than the current situation.

18. They do not like mistakes, and there is no second chance.

19. They value their and your time.

20. They tend to view the present on the basis of past and have least concern for the future, unless it is an important issue.

21. They believe in solving problems rather than finding them.

22. Their strength is in their individual character and not in collective character.

23. They do not involve emotions in decision making.

I wish I could write something about the Indians, except that, generally; we involve too much of emotions in our decision making process, we generally do not value our and other’s time, we delay decisions, we tend to take things easily, we tend to dig well when we are thirsty, we tend to give reasons for not doing things, we tend to show too much concern, we are vocal, we are highly sensitive to human sufferings, we tend to show difficulties in data collection and dispersion, we tend to take pride in the past, we read too much between the lines, and we tend to show knowledge.

Summing up this section, if you can know what type of people that you are going to deal with than you can organize your basic approach to the negotiation in a better way and also you can handle tense situation during negotiations much more tactfully than otherwise.

Negotiation Process: Phase # 2. The Negotiation Phase:

The initial phase:

This is the moment of truth for you as the negotiator and a real test of your negotiation powers. The out-come will depend on how you open the dialogue, how you build up the tempo, how you control the progress, how you provide diversions when necessary, how you use your powers of persuasion, how you make your point, and how you make the other party understand what you want them to understand.

At this juncture it is not only your negotiation skills that are on firing range but also your power of communication is also under grueling acid test.

Never open up abruptly, use the initial phase or time for getting to know each other. This is the time when your opponent is trying to read your mind and if possible just land into it. The Japanese use this time bracket to its maximum advantage. They open up slowly but so friendly that they make you believe that they are just for you and you only they have come all the way from Japan.

On the other hand the Americans are just the opposite, they are right bang on dot and they want to open up the issues as if the last flight to USA is about to leave. Both are successful in their own ways, the Japanese by being tactful and Americans by being frank and open. During this opening phase many management writers prefer to call it as “relationship building phase”.

“Relationships” are built on mutual trust, empathy, continuity, care, responsibility, and give-and-take attitude and not across the negotiation table unless the parties approach the table with these factors in mind, their attitude towards negotiation would be totally different, it would be something like finding “amicable solutions”.

There are situations to find amicable solutions, but those should be outside or after the business negotiations. Unless you make up your mind “to win” you would find yourself and your team members lacking the fire and desire to win. The American approach business negotiation in similar ways, they do their homework very methodically and create the mental framework required to safe guard their interests.

They think of their interests as the prime job, their attitude is that I am minding and protecting my interests, but I am not forcing you not to protect your interests. Generally he approach towards the negotiating table is with firm determination to win at all costs, and all the relation building exercises are left in the hotel room.

It would be better to understand the purpose of this phase and act accordingly. The purpose is to create conducive environments to do hard bargaining. And for this the party that is calling the other party for negotiation or even both the parties have to create such conditions so that negotiations can take place.

The best way is to let the other party get started, make them feel at home, feel comfortable, feel the feeling of being wanted here, and also let them feel strongly that you are all ears open up to listen to them. From your side simply and plainly let them know that you are here to discuss on some issues of mutual interest and you intend to cooperate to your best ability to find solutions.

The outcome of the meeting could than become the cause of a lasting association of mutual cooperation and progress (which of course would depend on the other party’s attitude and approach to the negotiation).

There are many cases where such environments are not created or if one party tries to create the other party doesn’t reciprocate in a manner appropriate to such situation, than such meetings tend to be or can be presumed to be concluded before getting even started.

Once you are satisfied that both the parties have settled down comfortably (at least make sure your team is at the places where they should be), pass on your paper containing the purpose of the meeting and if it is customary hand over the agenda for discussions. This will be promptly reciprocated by the other party, but if they don’t than ask for it.

If it happens (the other party has no agenda for meeting/ negotiation) than it will give two signals to you, may be the opponent has come to the meeting for negotiation in a way not expected from a professional negotiators, or they are smart enough not to open up their mind. As far as possible you have to try to break these links let them prepare their paper and hand over to your side.

Presentations: Give the first chance to the opponent to make their presentation and explanation. Encourage them to talk more and more, ask logical but frequent questions and make mental notes or on a piece of paper (but surely someone in your team, who is selected for this task, is making full notes on the presentation by the opponent).

This will give you enough time for re-adjusting, if necessary, your own presentation. When you make your presentation it must not appear to be recoiled action of the opponent, even if it is, make sure it doesn’t look like so.

A word of suggestion here. If your opponent happens to be a Japanese party, than if possible let someone in your organization who knows the Japanese language be the part of your team, but this information must be strictly kept confidential from the other party.

The Japanese are famous to use lots of time in consultations and conferring with team members, this they do not only to gain time but also to make sure of what they have understood from your explanation and to make up their response to you.

They will discuss this “response” text very minutely. You will notice their faces are expressionless while they are discussing or consulting, for they make sure their faces do not talk what they want to hide. They may also consider what to offer and what not to offer, what to offer and how much to offer and when. This tactics not only helps them to gain time but also indirectly helps them to make the other party to lower their defences.

On the other hand if you are negotiating with the other extreme the Americans, than not only they are open minded and expect openness from the other side, besides they also expect similar response from you as well for free flow of correct, confirmed, clear, and concise information.

When you make your presentation, make sure it is precise, direct, and clear, there are no loops and open-ended statements. If supporting data is required for qualification of your statement, than have it prepared during the pre-negotiation stage, very meticulously which informs what must be informed and not a word extra.

Also you must be well prepared for counter actions from the other side; explanations to such reactions must be prepared before coming to the negotiation table. However if due to any reason you find that some points that require clarifications from the other side are not available immediately than admit and make sure to respond to them later.

This time gap will give enough leverage to your team to come up with explanations later during the course of negotiation. But if the other party does not raise the issue again than let the lion sleep.

Arguments:

Once you are satisfied that proper presentations have been made, the time will come for making arguments, each party has time to justify their stand, it is in your favour to listen to the arguments rather than to defend them.

Remember the party which tries to defend their stand tend to divulge more information in their defences which otherwise might not have been made public, so listen to the arguments, put questions, let them furnish explanation, ask for clarifications, let them come out with clarifications. But do not over do this exercise.

Do it so long it appears to be productive and responsive. The moment you get the feeling the other party is intending to raise their defences or the explanations are coming in short sentences or in simple “yes and no”, is the time that you must change gears.

You must remember that to argue is a positive trait so long it does not get the colours of arrogance; the slightest smell of arrogance can sometimes mean the end of negotiation or discussion. So use this tool for negotiation very tactfully and judiciously.

Persuasion:

The beginning of the argument session gives smoke signals for bargaining. When one party is justifying their stand with associated arguments the other party is making preparations for the bargaining. The beginning of the bargaining process is indicated when one party starts the process of persuasion.

Persuasion is a very delicate issue, you may be right in your arguments but if you cannot persuade the other party than your arguments are useless. Persuasion in simple terms means the ability of one party to steer the other party into their line of thinking, or in other words it means to move the other party away from their line of thinking into your lane, willingly.

The best way to persuade a tough nut is to put up proper and reasonable explanations supported with authentic data in more than one way, and sometimes add a little bit of hint of concessions that can come in their way (the other party). Never use the concessions as means of persuasion otherwise they will fall in the trap of bribery.

The Japanese are famous for being one of the best listeners, they will pay full attention to your arguments, will never interrupt during the time you are making your arguments. They will always respond to your arguments with a positive statement, but that is half of what they want to say. The other half is total or partial rejection of your arguments.

They tend to counter your arguments with authentic sounding and sweetened persuasions. They will try level best to give you reasons that your stand is devoid of reality and then they persuade you of what the reality is really. This will be the time when you will notice some expressions on their faces (all the members show similar expression).

It is not only the facial expression that you notice, but they use lots of body language as well. Like shifting postures, getting up and sitting again, showing suffocation, some of the members turning red faces and appear to be collecting his papers and folding up his brief case. All these actions (tantrums) are but for one cause and that is to soften you.

Many Indian negotiators break down at this stage and start showing concern for their inconvenience, and, they (Indians) fall in the trap. The best thing for you and your team to do under such situations is not to react, show little bit of consideration and let the emotional tide roll over, do not reject their stand right away, show some degree of concern, and then rephrase your statement.

The Japanese always probe you in many different ways, but if you stand on your ground firm and respond with cool, collected, and controlled tone they (Japanese) will understand that what you are saying is what you want to say and are not using any fat pads in between your statement.

Also when you are making some concessions and the other party do not respond to your concessions promptly, do not jump on the conclusion that what you offered is, perhaps not enough. Just wait and watch the reactions, if possible change the topic marginally for little diversion, come back to what you stated as concession in a modified version, but never modify the extent of the concession.

The moment you state a concession, the other party gets the feeling that you have started melting down, they will keep up the heat to let you melt more.

In a very similar case in Pune, India, the Japanese and the Indian parties were negotiating. The price offered by the Indian party was very attractive, but the Japanese did not jump up to grab it, they still kept their still-face. The Indian party realizing that the Japanese are not showing interest in the offer, they lowered price further by 10%. This was very shocking.

I was really taken back by this unjustified revision; there was no logic. But there was further shock in the waiting, the Japanese showed first sign of reaction, they nodded their heads sideways and kept twisted face for a long time, apparently thinking. The Indian party was feeling the heat, they again came forward and made a last offer of further 15% discount!!

This was too much even for the Japanese, still without showing any happiness on their still twisted faces they said in a very flat tone that though the price is still very high as against their expectations but if the Indian party can guarantee to maintain the quality delivery and price valid for one year, they can sign the minutes of meeting, which they did. Had the Indian party persisted on their original offer they would have signed the contract and even forced the Japanese for an escalation clause for yearly delivery, but this was not to be.

Dealing with Dead Ends:

It is very common to have dead ends during the course of negotiations, don’t be afraid of them rather face them for they can be broken or opened up. Every dead end means diversion of routes. Like in a heavy traffic you divert and take alternative road to reach destination similar application of mind is required to open up the dead ends or dead locks as are generally referred to in business negotiations.

The best solution is to pin point the issue causing dead locks. In business negotiations the dead locks are mainly caused by price factor. The other party can stand up and say “at this price sorry we cannot do business because we will be putting money from our pockets to satisfy you”. Accept this statement on its face value. May be what they are saying could be correct, but may be they do not know the solution.

Break up the price into individual heads. Study the individual head and find out where the party has price control and where they do not have. Generally the out sourced items fall under “out of control” and in-house items fall under “control”. Take up the items with heavy price’ tag for further study and leave out the items with low price tag.

Heavy price tag items:

Separate the items into “in-house” and “out-sourced” category.

(a) For out sourced items;

(i) If you can handle the out sourced items yourself, delete them from the scope of supply.

(ii) If you cannot than suggest change of the current supplier, or

(iii) Create two suppliers for creating competition.

(iv) If you can supply some of the out sourced items at much competitive prices than offer them and get them included in the scope of supply.

(b) For in-house items;

(i) Study material usage and wastage

(ii) Study the rejection level

(iii) Study the cost of processing

(iv) Study the inspection costs

(v) Study the packing and packaging costs

a & b are the areas where prices can be rationalized, in most of the cases one of the above items/ points shows the way for price reduction. If you assist your supplier with above knowledge you are going to get not only the price that you were looking for but also a dedicated supplier who will stay with you for a long time and as far as the current negotiation is concerned the dead lock will be opened for signing the contract.

Take it or leave it situations: Some times when the resources availability is not a limiting factor with one party but the second party has reached the breakup point, the negotiations still can be carried out successfully by taking recourse to secondary or supplemental actions. These actions need not be directly related to the process of negotiation but act as a supportive action.

For example if one of the party insists upon certain price and creates a situation of “Take it or Leave it”, the other party can offer supplementary concessions in the form of say credit and or counter purchase, of products/services not related to the products/services under negotiation, for opening up the dialogue and breaking the shackles of “Take it or leave it”.

Bargaining: The phase during which the opposing parties use various tactics and indulge in consultation, conferring and negotiations, is called the bargaining phase. During this phase each party tries its best to gain maximum economic advantage out of the other party. Both the parties know exactly what they are giving in and what they can afford to give in to gain the required minimum advantage.

What they manage above that minimum limit would depend on the strength of their negotiation skills. In the process of negotiation the consultation and conferring are used as tools for gaining time to evaluate the direction and contents of negotiation.

This tool has to be used judiciously; some of the situations, which warrant its use, are like:

i. When opposite party puts forward their point of view,

ii. When they propose a solution,

iii. When they bring into play diversions in the form of new points not anticipated or expected,

iv. When the negotiation seems to be drifting in their side,

v. When you feel you are losing ground or grasp on the progress,

vi. When you want to slow down the negotiation tempo,

vii. When you want to create diversion,

viii. When you want to roll back,

ix. When you want to bring new points for negotiation,

x. When you want to counter the opposite side’s proposal,

xi. When you are in doubt,

xii. When you want to get additional data, and

xiii. When you do not want to conclude the negotiation either due to your pre negotiation decision not to conclude the negotiation or during negotiation something happened for which you want to go back to your base camp or head quarter to recondition yourself for the next round.

These are some of the points needing delicate handling and a good negotiator uses them to gain what he intended to or to gain somewhat better advantage as compared to the opposing side.

Factors affecting the bargaining:

There are four basic items that affect the negotiation during bargaining process;

i. Resources,

ii. Primary concern,

iii. Basic interests, and

iv. Relationships.

These four items would guide us during the process of negotiation.

The availability of resources is known factor when the negotiations started, each party knows what they have and what they can part with. What one party gains is the loss to the other party so naturally the losing party offers resistance but they also know that if the deal has to be struck than how much they are prepared to loose and if the loss is within the acceptable limits they will willingly or unwillingly agree to part with.

However if the part they are expected to lose is beyond their acceptable limit than it would mean breakup of the negotiation. This breakup point is kept under guard and it is upto the other party to try to fathom it or perceive it.

The other party after having realized the bottom line of the other party will settle at a point with marginal gain just above the breakup point. In negotiation it is good strategy not to disclose or hint the bottom line and if you do than it is not going to be accepted by the other party as being true and you will be pressed on for further concessions.

Another point to consider is the type of association expected out of the negotiation. In the cases of spot businesses the tendency is to get as much as possible and give out as little as possible. This is hard bargaining. The parties know the association is limited to the current sales only, and as such they try to skin the other party to the bones.

However if the association is expected of long term in nature with repetitive actions, the total outlook of the negotiating parties changes. They try to accommodate each other. Here the party with upper hand tries to give concessions to the other.

In the earlier case it was “skin to the bones” but now the approach is to leave enough or ample skin for survival of the other party so that they survive to continue the association. The approach is like that of mutual benefit and trust building.

Negotiation Process: Phase # 3. Post Negotiation Phase:

Concluding the Negotiations:

At the conclusion of the bargaining phase, both the parties reach mutual agreement on what is acceptable and what is not acceptable. They then draw up the Minutes of Meetings (MOM). These are drafted immediately the negotiations are over and both the parties put up their signatures to authenticate the document.

This is the most crucial part of the negotiation process. Many a good negotiations sour up during implementation stage mainly because they were not properly concluded. In fact the concluding part starts right from the start of the negotiation in the sense that points negotiated and agreed upon stage wise are noted down as the negotiation progress.

At the conclusion all such points on which agreement was reached are written down with comments on unsettled issues for later consideration or on which no agreement was reached and thus left out from the scope of current agreement.

The golden rule in negotiation is “No assumptions but discussions”. If we follow this simple rule than there is no chance that the negotiations cannot be positively concluded meaningfully binding on both the parties.

At the beginning of the negotiation process it is always advisable to write down the format of negotiation. (fig. 12). It is the guideline for the content and progress of the negotiation. It also has indicators to point out when the objective is reached and the time to close the negotiation.

The safest method is to have two copies of a standard checklist of the items to be negotiated. Use one copy for on line marking, that is, mark the item as YES which have been negotiated. As the negotiations progress most of the items on this checklist will have YES mark.

There may be some on which agreement could not be reached, mark them NO and on the margin mention the reasons for keeping it pending. At the conclusion of the meeting, let the leader fill up the second copy for what has been negotiated and what is pending. Then match both the lists, if they tally then proceed for drafting the minutes of the meeting, agreement and finally the contract as explained above.

A sample of a standard checklist is given below; the contents can be modified depending on the requirements of the negotiations.

The document (MOM) is transported on either company’s letterhead with signatures of both the parties to convert it into an agreement. This agreement ensures that both the parties agreed to work together on specified terms as contained in the mom.

This document is then converted into a legal document with additions of various terms and conditions and the applicable laws governing the agreement. This final document with signatures of both the parties is called the contract.

The whole process of winding up passes through four stages, the consensus, the MOM, the agreement and finally the contract. Except for contract, if there is any disagreement amongst the parties they go back to the negotiating table to sort out the differences, but if there is disagreement after the contract is signed than there is no way but to seek legal solution to be initiated by the party facing discrimination of problems.

Performance of the Contract:

Once the agreement is signed than it is obligatory on part of both the parties to honour their mutual commitments. Any party which defaults faces the penalties and/or legal proceedings by the other party.

Here I would like to add one point that under the current international laws governing the global trade, there is provision for a request for re-negotiation of the contract if one party puts up the defences under a special clause called the “hardship clause”.

If one party can prove that unknowingly they have entered into the contract without realizing the impact on their capacity and capability to honour the contract without jeopardizing the very survival of their organization than they can invoke the “hard ship clause and request the other party for re-negotiation.”

But during this period they have to continue to service the contract, pending the other party’s decision. If the other party refuses to accept the hard-ship conditions than the affected party have no other alternative but to seek legal protection in a court of law.

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